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Token Redemption

Real-World Assets • Bullion • Physical Collateral

exit mechanism

Token Redemption refers to the process of exchanging a digital asset — such as a tokenized commodity or currency — for the physical asset it represents. In the context of precious metals, token redemption allows the holder to convert blockchain-based tokens like KAU or KAG into real, deliverable gold or silver.

Use Case: Kinesis users can redeem KAU and KAG for physical gold and silver, providing a rare digital asset that maintains real-world convertibility and ownership.

Key Concepts:

  • Physical Settlement — Converts digital tokens into tangible bullion or delivery receipts
  • Fully Allocated Backing — Requires 1:1 metal reserves held in audited vaults
  • Legal Ownership — Tokens confer direct claim to the underlying physical asset
  • Exit Flexibility — Allows movement between digital convenience and physical protection
  • Redeemable Asset — Tokens that can be converted to physical form on demand
  • Allocated Storage — Segregated vault storage with auditable proof of reserves
  • Metal-Backed Tokens — Digital assets collateralized by gold, silver, or other metals
  • Physical Collateral — Real-world assets backing each token in custody
  • Digital Bullion — Tokenized representation of physical precious metals
  • Bullion Vault — Secure storage facility for precious metal reserves

Summary: Token Redemption is the ultimate trust mechanism for asset-backed tokens. It ensures users can not only trade and store value digitally, but also reclaim real gold or silver at will — reinforcing financial sovereignty and tangible wealth in a digital age.

Feature Redeemable Token Non-Redeemable Asset ETF or Synthetic
Physical Delivery Yes — By request or jurisdictional pickup No No
Backing Type Fully allocated metal reserves None or abstract token model Unallocated pooled reserves
Ownership Structure Direct legal claim Symbolic or contractual Shares in a trust
Sovereignty High — Can reclaim physical asset Low — No tangible fallback Low — No redemption rights
Examples KAU, KAG, PaxG BTC, DAI, most crypto GLD, SLV, COMEX contracts

Redemption Process Flow

how physical delivery works step-by-step

Step 1: Request
User initiates redemption in platform
Selects metal type (gold or silver)
Chooses delivery or vault pickup
Confirms minimum threshold met
Submits KYC if required
Receives confirmation and timeline
Step 2: Verification
Platform verifies token ownership
Confirms allocated metal availability
Matches tokens to specific bars
Calculates redemption fees
Locks tokens during process
Prepares legal transfer documents
Step 3: Burn & Transfer
Tokens permanently burned
Metal title transferred to user
Vault updates allocation records
Blockchain records destruction
Supply decreases accordingly
Audit trail preserved on-chain
Step 4: Delivery
Metal shipped via insured courier
Or scheduled for vault pickup
User receives tracking info
Signature required on receipt
Physical possession complete
Full sovereignty achieved
Key Point: Redemption is what separates real asset-backed tokens from paper promises. The ability to walk away with physical metal in hand is the ultimate proof of backing — and the foundation of financial sovereignty.

Redemption Strategy Guide

when to redeem vs hold vs sell

Scenario Best Action Rationale
Want passive yield Hold tokens Redemption ends yield — keep digital for monthly income
Need liquidity fast Sell on market Instant exit — no shipping delays or fees
Distrust digital systems Redeem physical Full sovereignty — metal in your hands
Building generational wealth Partial redemption Keep some digital for yield, redeem some for legacy
Geopolitical uncertainty Redeem to secure jurisdiction Physical metal outside banking system
Tax optimization Consult advisor first Redemption may trigger taxable event
Balance Strategy: Most Kinesis users hold for yield and only redeem when they want physical possession for legacy, security, or sovereignty reasons. The option to redeem is the trust anchor — you don’t have to use it to benefit from it.

Sovereignty Ladder

levels of ownership from digital to physical

Level 1: Exchange Custody — Tokens held on CEX (Coinbase, Binance) — Not your keys, not your crypto — Zero sovereignty
Level 2: Self-Custody Digital — Tokens in personal wallet — You control keys — Still digital, no physical claim
Level 3: Redeemable Asset — $KAG/$KAU with redemption rights — Digital convenience + physical option — Trust anchor in place
Level 4: Vaulted Physical — Redeemed metal stored in allocated vault — Your name on specific bars — Insured, audited, accessible
Level 5: Personal Possession — Physical metal in your hands — Home safe, buried, or secured — Maximum sovereignty, zero counterparty
Climb Strategically: Most investors sit at Level 3 for yield and convenience. Move to Level 4-5 when preservation outweighs income. The ladder exists so you can choose your sovereignty level based on life stage and risk tolerance.
 
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