FAQ

Why do we need Karma DAO in the first place? Dollar-pegged stablecoins have become an essential part of crypto due to their lack of volatility as compared to tokens such as Bitcoin and Ether. Users are comfortable with transacting using stablecoins knowing that they hold the same amount of purchasing power today vs. tomorrow. But this is a fallacy. The dollar is controlled by the US government and the Federal Reserve. This means a depreciation of the dollar also means a depreciation of these stablecoins. Karma DAO aims to solve this by creating a free-floating reserve currency, KARMA, that is backed by a basket of assets. By focusing on supply growth rather than price appreciation, Karma DAO hopes that KDAO can function as a currency that is able to hold its purchasing power regardless of market volatility. Is KDAO a stable coin? No, KDAO is not a stable coin. Rather, KDAO aspires to become an algorithmic reserve currency backed by other decentralized assets. Similar to the idea of the gold standard, KDAO provides free floating value its users can always fall back on, simply because of the fractional treasury reserves KARMA draws its intrinsic value from. KDAO is backed? KDAO is backed by our current treasury that is mainly supported by our RFV (risk free value) and liquidity pool. The protocol will do buybacks and burns in function to these last parameters trying to keep a price over 1 MIM. You might say that the KDAO floor price or intrinsic value is 1 MIM. We believe that the actual price will always be 1 MIM + premium, but in the end that is up to the market to decide. How does it work? Buy tax and sell tax generate profit for the protocol, and the treasury uses the profit to mint KDAO and distribute them to stakers. With our trade taxes, the protocol is able to accumulate its own liquidity. What are the main actions on protocol? Auto staking and taxes are considered beneficial to the agreement. Buying and selling will also cause price changes, while taxes will provide liquidity to our protocol adding value on our liquidity pool, risk free value and treasury. (14% buy tax and 19 % sell tax). Why is PCV important? As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer term because more funds are available in the treasury. Why is pool important? KDAO owns most of its liquidity thanks to its buy and sell fees mechanism. This has several benefits: -KDAO does not have to pay out high farming rewards to incentivize liquidity providers a.k.a renting liquidity. -KDAO guarantees the market that the liquidity is always there to facilitate sell or buy transactions. -By being the largest LP (liquidity provider), it earns most of the LP fees which represents another source of income to the treasury. -Liquidity pool and RFV can be used to back KDAO. The LP tokens are marked down to their risk-free value for this purpose.