Kernel Points

Upon the launch of Kernel Protocol, holders of any Kernel Protocol LRT asset (for example, ksETH, krETH, kUSD, and, in due course, kINDX) will be entitled to earn Kernel Points on top of any Karak XP that they may earn through interacting with Karak via Kernel Protocol and a share of the inherent yields generated by the underlying assets. Points have proven to be an optimal method of building and engaging a community and bootstrapping protocol TVL.

Kernel Protocol x Karak

Firstly, it is important to note that Kernel Points are distinct from Karak XP. Holders of any Kernel Protocol LRT assets (ksETH, krETH, kUSD, kpETH, kINDXetc.) will be earning Karak XP from day one. A user’s Karak XP will be displayed on the Kernel Protocol dashboard. Please note that whilst we will endeavor to display points as accurately as possible, they should be treated as an estimation due to the nuances of the multiple assets that Karak accepts, and XP programmes that Karak operates, but variance should be minimal within a 1 to 10% range.

What Are Kernel Points?

Kernel Points are distinct from Karak XP. They are run and operated by Kernel Protocol and act as a bonus on top of Karak XP to incentivize users to deposit into Karak via Kernel Protocol for boosted yield. Ultimately Kernels will be able to be redeemed for KERN, the native governance and utility token of the Kernel Protocol. A user’s Kernels will be displayed on the Kernel Protocol dashboard.

Why Not Just Distribute KERN?

This is designed to balance helping Kernel Protocol to become a dominant force for aggregating LST, LRT (or other) yield on Karak, without emitting an excessive amount of tokens that could lead to heavy sell pressure before the protocol has achieved product market fit and substantial baseline TVL and growth.

How To Earn Kernel Points?

The specific seasons are detailed in following sections, but in summary, the primary way to earn Kernel Points is to deposit an accepted asset into Kernel Protocol to mint one of the Kernel Protocol assets (ksETH, krETH, kUSD, kpETH, kINDX etc.). You may also earn additional boosted Kernel Points by depositing your Kernel Protocol assets into a set of relevant LPs (e.g. ETH/ksETH or krETH/kUSD etc.). As Kernel Protocol assets gain further utility through integrations with partner protocols we will ensure that users will still accrue Kernels when interacting with these protocols. There may even be opportunities to earn boosted Kernels Points! Please note that Kernel Points are non-transferrable prior to the airdrop seasons, but users will ultimately be able to redeem kernels for liquid KERN.

How Are Kernels Calculated?

The calculations for each season are detailed below, but in summary, Kernels are calculated based on holding periods for the asset. The wallets holding the relevant assets of LPs will accrue points, i.e. if you mint and sell an asset then you will no longer receive further points post sale. The simplest way to accrue Kernel Points is, as above, to mint Kernel Protocol assets and hold them in your wallet. You can choose to further boost your Kernels by LPing them.

Note there is only one singular type of Kernel Point. As the Kernel Protocol assets are denominated in different currencies (initially ETH and USD) we denominate the Kernels formula in USD, taking the daily “closing” price of ETH at 00:00 UTC each day as the USD value for ETH denominated assets. As such a user’s Kernel balance is calculated and updated on the UI once every 24 hours. The rules and formula for each season are detailed below. To avoid excessive gaming of the system, the specific dates for each season are not disclosed.

Season 1 Rules and Formula:

Season 1 $KERN rewards will be based on the rules and formula outlined below.

1x Points for Minting Kernel Assets: The baseline formula is $10 staked = 1 Kernel / day. As above for ETH denominated assets the dollar value is calculated once per day based on the “closing” price at 00:00 UTC.

For example, let’s assume a user deposits 5 stETH to mint 5 ksETH and holds this ksETH in their wallet for 3 days. To simplify this example, let’s assume the “closing” price of ETH on days 1 to 3 is $3,000, $3,010, $3,020. In this case; ((5 * 3,000) + (5 * 3,010) + (5 * 3,020)) / 10 = 4,515 Kernel accrued by this user.

1.5x Points for LPing Kernel Assets: To encourage deep liquidity for Kernel Protocol assets, and as the initial utility for these assets, users may LP their Kernel Protocol assets in approved pools displayed on the Kernel Protocol dApp (e.g. ETH/ksETH or krETH/kUSD). Applicable pools will be displayed on the dApp UI.

Taking our above example with the same user, they decide to immediately pair their ksETH with a matching amount of ETH and deposit into the ETH/ksETH LP. With the multiplier this gives the following; ((5 * 3,000 + 5 * 3,010 + 5 * 3,020) / 10) *1.5 = 6,772.5 Kernel accrued by this user. An attractive boost.

Note that the balance of assets in LPs can vary from point to point which impacts the USD associated value of the assets in the pool which are entitled to points. Points are given to the pool based on the ratio of Kernel Protocol assets vs. the paired token.

For example, let’s assume the ETH/ksETH LP has a total value of $1,000,000, with a weighting of 60% ETH to 40% ksETH. Therefore 1,000,000 * 40% = $400,000 value that is eligible for points, and divided accordingly amongst ksETH LP participants.

If a user deposited at a point where the ratio was 50/50 they may technically “lose out” but the boost is designed not only to counteract this but also to offer a significant increase in points for LPing. In addition, users will also have the option to LP in pools 100% denominated in Kernel Protocol assets, such as ksETH/kUSD, which mitigates this factor. Also note that users will earn trading fees and any additional liquidity incentives when LPing.