Asset-Backed Supply Model

Asset-Backed Supply Model

Real-World Assets • Bullion • Physical Collateral

collateral-minted token framework

Asset-Backed Supply Model is a token supply mechanism where new tokens are minted only when real-world collateral is deposited, and tokens are burned when that collateral is redeemed. Unlike fixed-cap, inflationary, or algorithmic models, this framework ties token supply directly to verified physical assets held in custody — typically precious metals, real estate, or commodities. The result is a supply curve that expands and contracts based on genuine market demand rather than emission schedules, speculation, or algorithmic rebasing. This model eliminates the inflation risk of perpetual minting and the fragility of algorithmic pegs.

Use Case: A user purchases $KAG on the Kinesis platform, which mints new tokens backed 1:1 by physical silver stored in allocated vaults. When another user redeems $KAU for a gold bar, those tokens are burned permanently. The circulating supply always reflects the actual metal held in custody — no more, no less.

Key Concepts:

• Mint-on-Demand — New tokens created only when collateral is deposited
• Burn-on-Redemption — Tokens destroyed when underlying asset is withdrawn
• Physical Collateral — Real-world assets backing each token in custody
• Allocated Storage — Segregated vault storage with auditable proof of reserves
• Token Redemption — Process of exchanging tokens for the underlying asset
• Redeemable Asset — Tokens that can be converted to physical form on demand
• Metal-Backed Tokens — Digital assets collateralized by gold, silver, or other metals
• Bullion Vault — Secure storage facility for precious metal reserves
• Digital Bullion — Tokenized representation of physical precious metals
• Depegging — Risk eliminated by 1:1 physical backing and redemption rights
• Algorithmic Stablecoin — Contrasting model that relies on code rather than collateral
• Tokenized Gold — Gold represented as blockchain-native digital assets
• Tokenized Silver — Silver represented as blockchain-native digital assets

Summary: Asset-Backed Supply Models represent the most economically sound tokenomics framework — supply expands only with real demand, contracts only through redemption, and maintains 1:1 collateralization at all times. This eliminates the inflation, dilution, and peg fragility risks found in other models, making it ideal for long-term wealth preservation and cross-cycle durability.