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Unallocated Storage

Real-World Assets • Bullion • Custodial Risk

custodial risk

Unallocated Storage refers to a custody arrangement in which a client holds a general claim to a quantity of precious metal, such as gold or silver, but does not own specific, identifiable bars. The metal is pooled and may be used by the custodian for other purposes, including lending, trading, or collateralization.

Use Case: Gold ETFs like GLD and SLV operate on unallocated storage — offering price exposure without giving investors legal claim to any specific bullion.

Key Concepts:

  • General Claim — Client does not own specific bars; only a share of pooled metal
  • Counterparty Risk — Custodian can lend or repurpose assets, affecting redemption
  • No Redemption Rights — Users cannot request delivery of actual bullion
  • Exposure vs. Ownership — Allows price tracking without asset control or sovereignty
  • Allocated Storage — Segregated custody where specific metal is assigned to the owner
  • Bullion Vault — Secure facility for storing physical precious metals
  • Physical Collateral — Tangible backing that underpins tokenized asset value
  • Redeemable Asset — Holdings convertible to their underlying physical form on demand
  • $KAG — Silver-backed digital currency with full allocation and redemption
  • $KAU — Gold-backed digital currency with full allocation and redemption
  • Kinesis Money — The monetary platform backing $KAG and $KAU with allocated metals
  • Digital Bullion — Blockchain-native precious metal ownership
  • Metal-Backed Tokens — Digital assets collateralized by physical precious metals
  • Resource-Backed Wealth — Capital anchored in physical assets with enduring value
  • DeFi Risk — Exposure to smart contract, custodial, and protocol failures
  • Self-Custody — Holding assets without third-party intermediaries

Summary: Unallocated Storage offers ease of access and price exposure, but comes with significant custodial risk. It lacks transparency, legal title, and redemption options — making it unsuitable for investors seeking true ownership, security, or sovereign wealth preservation.

Feature Allocated Storage Unallocated Storage
Legal Ownership Direct — Specific bars held in your name Indirect — Claim on pooled reserves
Redeemability Yes — Physical delivery guaranteed No — Redemption not available
Usage by Custodian Not permitted May be lent, pledged, or traded
Counterparty Risk Low — Asset remains segregated High — Based on custodian solvency
Examples KAU, KAG, private vault storage GLD, SLV, pooled ETF reserves

Unallocated Storage — Hidden Risk Reference

what you lose when you own a claim instead of the metal

Risk Category Unallocated Exposure Allocated Alternative
Custodian Bankruptcy You become an unsecured creditor — metal is part of estate Metal is yours — not part of custodian’s bankruptcy
Rehypothecation Your metal may be lent to short sellers or leveraged traders Prohibited — metal sits idle for you alone
Redemption Failure No obligation to deliver physical metal on demand Specific bars deliverable on request via Kinesis
Audit Opacity No assigned inventory — pooled totals only Serial numbers and bar lists tracked per owner
Yield Erosion Storage and management fees subtract value over time $KAG/$KAU earn yield from commerce — value grows
Seizure Vulnerability Pooled assets easier to freeze or confiscate in bulk Segregated metal harder to target individually

Key Insight: Unallocated storage was designed for institutional convenience — not for individual sovereignty. Every risk above exists because the metal is not yours. It belongs to a pool, managed by a custodian, governed by their solvency. The moment you move to allocated — via Kinesis $KAG/$KAU or private vaulting — every risk in the left column disappears. The cost of convenience is ownership.

Unallocated Exit Framework

four steps from pooled exposure to sovereign metal ownership

Step 1 — Identify Unallocated Positions
– Audit all gold and silver holdings
– Check custody terms: pooled, unallocated, or general claim
– ETFs (GLD, SLV) are unallocated by default
– If you cannot request specific bars — it is unallocated
If you cannot name the bar, someone else owns it
Step 2 — Quantify the Risk
– Calculate total capital exposed to custodian solvency
– Review custodian’s rehypothecation and lending policies
– Assess: what happens to your claim if the custodian fails?
– Unallocated holders rank below secured creditors
The risk is invisible until the custodian makes it visible
Step 3 — Transition to Allocated
– Open a Kinesis account for $KAG/$KAU
– Each token = specific metal in audited, insured vaults
– Redemption rights included — physical delivery available
– Yield earned from commerce — not subtracted by fees
Moving from unallocated to allocated is moving from claim to ownership
Step 4 — Build Above the Metal
– Layer Cyclo liquid staking above the metal foundation
– Add SparkDEX dividends and Enosys lending
– Store crypto positions in Ledger or Tangem
– Document all allocated positions for heirs
Once the metal is real, the architecture above it can grow

Unallocated Storage Risk Checklist

audit every metal position for hidden custodial exposure

1. Exposure Identification
☐ All gold/silver holdings reviewed for custody type
☐ ETF positions flagged as unallocated by default
☐ Pooled accounts identified and quantified
☐ Total capital at custodian-solvency risk calculated
☐ No position assumed allocated without documentation
Assume unallocated until proven otherwise
2. Custodian Assessment
☐ Rehypothecation policy reviewed per custodian
☐ Lending and collateralization terms understood
☐ Custodian bankruptcy scenario assessed
☐ Creditor ranking confirmed for unallocated claims
☐ Insurance coverage (or lack thereof) documented
The custodian’s health is your metal’s health
3. Migration Plan
☐ Kinesis account opened for $KAG/$KAU transition
☐ Unallocated positions scheduled for liquidation
☐ Capital routed to allocated metal with redemption rights
☐ Yield activation confirmed on new allocated position
☐ Fee comparison: unallocated storage fees vs allocated yield
Every day in unallocated is a day without true ownership
4. Architecture & Legacy
☐ All metal now in allocated custody — zero unallocated remaining
☐ Crypto layers secured in Ledger or Tangem
☐ Allocated documentation included in estate plan
☐ Heirs understand allocated vs unallocated distinction
☐ Physical redemption path noted for emergency access
Leave heirs metal they own — not claims they must fight for

Capital Rotation Map

unallocated exposure becomes most dangerous exactly when you need metal most

Phase Capital Flow Unallocated Risk Level
1. BTC Accumulation Fiat/Stables → BTC Low visibility — unallocated risk dormant but present
2. ETH Rotation BTC profits → ETH Still dormant — custodians solvent during expansion
3. Large Cap Alts ETH → XRP, FLR, HBAR Rising — metal demand increases, pool strain begins
4. Small/Meme Rotation Alts → Memes/Microcaps Elevated — speculative exits pressure custodian liquidity
5. Peak Distribution Crypto → Stables/RWA Critical — mass redemption attempts expose pool shortfalls
6. RWA Preservation Stables → $KAG/$KAU Maximum — unallocated holders discover they own nothing
Ownership Reveals Itself in Crisis: Unallocated storage feels identical to allocated — until the cycle turns. When capital rushes toward metal in Phase 5 and 6, pooled reserves face redemption pressure they were never designed to survive. That is when unallocated holders discover their claim is just a line in a spreadsheet. The exit from unallocated is not a rotation — it is a correction. Move to Kinesis $KAG/$KAU where every gram and ounce is allocated, audited, and redeemable. Build above with Cyclo for liquid staking, SparkDEX for fee-backed dividends, and Enosys for demand-driven lending. Secure crypto in Ledger or Tangem. Own the metal — or own the lesson.
 
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