KannaCoin Whitepaper

KannaCoin DeFi Banking & Lending

Author: Nathaniel Dodson

Abstract:

This article is an in-depth solution to the current banking bias experienced in the legal cannabis industry. This paper outlines the solution to this problem, as well as provides a solution to the second bias within this industry, and that is payment processing.

Section One: Executive Summary

The medical and recreational cannabis market doesn’t have a banking system to utilize as it is still unfairly classified as a Schedule 1 narcotic and banks aren’t allowed to do business within the cannabis industry. Equally, most payment processors will not touch merchants in this industry because they are deemed high-risk. This creates a massive issue with common commerce and needs to be addressed. The global legal marijuana market size was valued at USD 9.1 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 26.7% from 2021 to 2028 (1). Enter KannaCoin DeFi Banking & Lending.

KannaCoin (KNCN) DeFi Banking& Lending: A decentralized banking platform in which merchants and other members within the legal cannabis industry have access to: funding when needed in the form of collateralized loans; the ability to stake their KNCN into the platform and earn an annual yield (similar to traditional banking); the ability to accept and process digital payments, through its native KannaCoin wallet.

The expected timeline for KannaCoin to be launched will be set out in the roadmap in Section Five, but it is anticipated to be launched within Q1, or Summer 2021.
KannaCoin will be blockchain agnostic and will be deployed on many chains, including the Binance Smart Chain, Harmony One blockchain, Ethereum, and others. This is so that KannaCoin may be used by many different users across many different platforms.

Section Two: Core Team

The only current member of the team is Nathaniel Dodson. Mr. Dodson is a self-taught programmer who writes in Solidity, Python (as well as some SmartPy contract development) and is currently working on Reach and TEAL as well as PyTEAL through Algorand’s developer documentation. Eventually there will be more developers added to this project, but for now, it is being developed and coded by one person, including all research.

Section Three: Problem Description

The problem that KannaCoin addresses is the undeniable industry bias the legal cannabis and hemp industry faces and has endured for years, since the first medical cannabis dispensaries opened in California in 1994. Since then, banks have outright refused to do business with these dispensaries and other associated shops and merchants within the industry. This is largely due to the fact that cannabis is still federally prohibited as it is listed as a Schedule 1 substance (2) through years of unfair and uneducated propaganda and political lobbying. As a result, many law-abiding citizens are still prosecuted for using cannabis, despite having proper medical certification from a licensed doctor, and businesses that are properly licensed, are unable to have access to banking services and struggle with payment processing as the industry is considered high-risk due to the nature.

Section Four: Solution Approach

The way KannaCoin will solve this major banking problem is through overcollateralized lending, as in the case of other lending Dapps, such as Aave, Maker, and Compound. A borrower must deposit their KNCN tokens into the lending pool at a Loan To Value (LTV) of 150%, and if the loan becomes undercollateralized, it can be liquidated to prevent further loss (this is when the cost of the collateral drops below the threshold and no longer covers the amount of the loaned assets).

The second solution that was developed was a multi-asset wallet and a physical payment processing device, that would be linked to the digital wallet, built on Raspberry Pi.

How it works:

The KannaCoin DeFi Banking platform is a smart contract based DApp, cross-chain interoperable (blockchain agnostic), utilizing smart contracts built in the Solidity programming language, as well as PyTeal and Reach. Participants within the DApp will be able to stake their KannaCoin (the native token for the blockchain and DApp) to support the platform in liquidity and lending pools, earning them staking rewards, while also utilizing that staked asset as collateral for loans.

Merchants and customers alike are able to utilize banking tools within a trustless decentralized platform, earning them higher annual yields than traditional banking. Moreover, with the KannaCoin platform, there is no denying use of access or services based on the nature of business operated by the merchant. There are also no more application fees and exorbitant processing fees, removing the unnecessary label of “high risk” business.

The multi-asset wallet would be able to accept multiple cryptocurrency assets as payment for the merchants products and services. Likewise, the physical payment processing device would be built on the Raspberry Pi platform, offering an extremely low-cost alternative to current high-risk credit card processing fees, which can be more than 3% of the transaction, plus an additional swipe fee of half a dollar or more. These physical wallets would be linked to the merchants digital wallet for streamlined payment processing and storage of assets.

The market:

The legal cannabis industry exceeded over $17.5b in sales in 2020, with a projected increase to over $41b by 2026. This is at the current rate with the current legal climate. If new states adopt legalization of any kind within that time frame, that could boost those numbers even more. Especially with the now recreationally legal state of New York, which will soon be implementing a legal sales market and advisory board. With this ever evolving and expanding market, the need for a banking system has never been greater. A trustless, decentralized banking system supported by the community within the ecosphere, along with a payment processing system that doesn’t discriminate against the services of the cannabis industry. All transactions are secured through a public blockchain, ensuring no fraudulent transactions may take place and that the validator nodes are all fairly given a chance to proof each block before attaching it to the chain.

Tokenomics:

The KannaCoin token has a fixed supply of 420 million tokens, with deflationary measures in place. There will be periodic token burns to keep supply at or below 100M. From this supply, a portion of each of the total tokens will be issued across different blockchains either as a wrapped token, or the original BEP20 token. 100M of the total supply of 420M have been minted on the Binance Smart Chain as BEP20 tokens, as this is the first blockchain that the project is being launched on, and where the initial liquidity will be provided. On the Binance Chain, the rewards are 20 KNCN tokens per block, divided amongst the farms and stake pools. In V2, with added governance, these rewards may be reduced through community proposals and voting.

Once the project reaches V2, it will be launched on at least on Harmony One blockchain and Algorand, and another 200M tokens will be minted into circulation, per chain. The total capped supply will never reach above 420M tokens, and once the project has been launched on all the blockchains it will be launched on, there will be multiple bridges in order to send over the tokens to other networks. There is already a Binance bridge built into the protocol, to assist in bridging tokens, however, at this stage of the project, KNCN tokens can’t be bridged as of yet.

Utility:

The KannaCoin token is used primarily for adding liquidity to lending pools within the protocol. When users add liquidity, they are given an LP token coinciding with the size of the pool they have contributed. They can stake these tokens to receive rewards from the transactions within each lending pool. Each transaction has a 3% fee, 0.5% of which is burned, and 2.5% of which is distributed evenly among LP providers, proportional to their stake in the respective pool.

The other purpose of the KannaCoin is to act as a governance token, allowing the community to propose and vote on potential upgrades to the protocol.

Governance:

Holders of KannaCoin will be given the ability to propose new changes to the protocol, and to also vote on new proposals created by other members of the community. The community will be given a 51% governance over the protocol to ensure complete openness and allow the community to further improve on the platform through a fair and just system. This also will ensure that the developers, nor miners, will be able to defraud the platform, and create any sense of fear or doubt.

Distribution:

The first 10% of the KannaCoin token will go to the owner wallet, which will be locked into the LP for a minimum of 2 years, to help support the protocol. The next 5% will be locked in a wallet dedicated to the improvement of the KannaCoin app, including hiring new developers, expanding the team, and marketing to create awareness within the cannabis industry and the crypto space. The next 15% will be given out to the first partners of the app who will be committed to the protocol by means of staking their shares into the liquidity pools, and also be the beta testers for the KannaCoin wallet for their payment processing needs.
The next 10% will be set for private investors in the KannaCoin DApp, which will be used to help provide liquidity into the pools, and as a way to help maintain and expand the protocol.
The rest of the token supply will be available to the public through an IDO launchpad before the site goes live, and then the DEX itself. The funds raised from the IDO will be used to hire a second and possible third developer to the protocol and to create the first marketing campaign.

Section Five: Roadmap:

The current roadmap of the KannaCoin Banking & Lending platform is as follows:

Q1:

• Problem identified and solution created. This is the core of the platform. The KannaCoin platform aims to tackle the largest hurdle in the legal cannabis industry through decentralized banking and payment processing
• Start writing the smart contracts and running them on the Binance test net, the Ethereum test net, the Algorand test net, and the Harmony One test net (contracts are written in Reach/PyTeal and Solidity)
• Launch the token on the first public blockchain, the Binance Smart Chain, and the 1st version of the DApp, including IDO through dwebox.com
• Provide 5% of the total supply to liquidity pool on PancakeSwap to allow for trading, swapping, and purchasing of the token
• Hire new developers to the project

Q2:

• Introduce the Aave LendingPoolContract, an open-source fully audited smart contract, turning the V1 liquidity pools into the 1st Lending Pools
• Deploy full version of KannaCoin on Binance Smart Chain, Algorand, and Harmony One (V2)
• Deploy full version of KannaCoin on Ethereum (after EIP1559 release to ensure low txn fees)
• Start development of multi-asset wallet capable of communicating with multiple public blockchains

Q3:

• Launch multi-asset wallet and continue development for payment processing hardware (running on Raspberry Pi)
• Launch KannaPay (payment processing devices) and give them out to early partners for Beta testing
• Make changes to KannaPay according to information gathered during Beta testing
• Launch version 2 of the KannaPay devices

1 — Legal Marijuana Market Size, Share & Trends Analysis Report By Marijuana Type (Medical, Adult Use), By Product Type (Flower, Oil), By Medical Application (Chronic Pain, Mental Disorders), And Segment Forecasts, 2021–2028

2 — https://www.dea.gov/drug-information/drug-scheduling