Introduction

Let's discover Kelp.

Abstract

Increasing number of people are catching the digital currencies’ awareness bug due to the promises and possibilities they hold. If private currencies, which the cryptocurrencies represent, are to challenge government issued legal tenders as the preferred medium of exchange, then they must be compellingly better than the fiat currencies in their design and implementation; presently, this cannot be said to be the case. Although, cryptocurrencies, riding on the back of the revolutionary blockchain technology, bring instant global settlement, lower transaction costs, greater efficiency, higher security, universal accessibility and global uniformity to the table, their inability to act as true store of value due to the extremely high price volatility, militates against any possibility of supplanting fiat as the currency of choice.

Welcome Kelp, the first cryptocurrency governed by monetary policy through a blend of technologies, on-chain data, and monetary theorem that combines the best attributes of the digital and fiat currencies. Using the principles and tools of monetary policy, Kelp makes predictions about what the circulating supply should be in order to bring price stability. This algorithm, called the Kelp Protocol, utilizes multiple monetary theorems and levers and adjusts ecosystem variables to influence market behavior, ultimately aiming to achieve a particular desired objective. This unique approach to stability is based on a combination of algorithmic indicators and market-based mechanisms. The algorithmic indicators are designed to provide insight to changes in demand and supply, while the market-based mechanisms are designed to respond to those changes in market conditions.

The Kelp stabilized currency provides the foundation on which the Kelp platform use-cases are built. By harnessing the unique attributes of the platform, Kelp will offer merchants lower transaction costs through a payment gateway, provide access to loan products at reasonable interest rates, particularly in the developing markets, facilitate global funds transfer and render decentralized exchange services where fiat and digital currencies, as well as the derivatives of the Kelp ecosystem are traded.

Introduction

The fixed supply of most cryptocurrencies today leads to value being driven more by speculation than utility, introducing volatility that undermines their role as a stable medium of exchange. This volatility, compounded by the challenge of maintaining the right balance of scarcity and availability, hampers cryptocurrencies' acceptance for transactions.

Current designs, with their predetermined supply rates, fail to adjust to demand fluctuations, making it difficult for digital currencies to preserve capital and achieve mainstream adoption. The loss of capital in volatile markets can devastate projects before they even begin, pushing many towards immediate conversion to more stable fiat currencies, which only postpones the broader acceptance of digital currencies.

For cryptocurrencies to serve effectively as both a medium of exchange and a store of value, they must incorporate mechanisms that ensure exchange stability and adapt supply to meet demand changes. This paper argues for the adoption of proven monetary policies and tools that have ensured stability in traditional markets, as a blueprint for cryptocurrencies to achieve widespread acceptance and utility beyond mere speculation. This approach underpins Kelp's philosophy, emphasizing the importance of learning from established economic practices to avoid repeating past mistakes in the digital currency space.