Article source: https://spinner.cash/report/2023-06-04-kinic.html
Recommendation
Vote: No
Proposal
SNS (“Service Nervous System”) public sale on IC (“Internet Computer”) requires 2 NNS (“Network Nervous System”) proposals. User apotheosis announced Kinic’s plan to launch SNS in a post published on DFINITY’s Developer Forum on April 22, 2023, to solicit community’s feedback. On May 12, 2023, Kinic submitted the first NNS Proposal #122277 to create the SNS canisters, which received 50.159% Yes votes and 0.039% No votes when the voting ended on May 15, 2023, totaling 223 million voting power or 50.1% out of total NNS voting power of 445 million. On June 3, 2023, Kinic submitted the second NNS Proposal #122749 to create an SNS-DAO. Its voting window will end before June 7, 2023.
Context
Given that the first NNS proposal was already adopted, if the second NNS proposal is also passed, Kinic’s SNS will commence, which means that the Kinic team will start a public sale for its token $KINIC, raise funding from ICP holders (and Community Fund controlled by NNS), create a DAO (“Decentralized Autonomous Organization”) owned by its token holders, and transfer the ownership of its product Kinic to this newly created Kinic DAO.
If this decentralization sale goes through, Kinic would become the second IC project team after OpenChat to adopt SNS, an innovative fund-raising method in the IC ecosystem to issue tokens, create a community-owned DAO, and transfer DApp’s ownership to this DAO in a major step toward decentralization. OpenChat completed its SNS sale in a span of 5 hours on March 3rd, 2023, raised 1 million ICPs (at roughly $5.5 million) from 2,375 investors. Based on June 4 price from ICdex.io, OpenChat’s token $CHAT is now traded at 0.0615 ICP, with a market cap of roughly $29.6 million1, or roughly 34% over its initial post-SNS valuation.
Before Kinic, Sonic was the first team after OpenChat to attempt an SNS sale, as we evaluated in this report on May 18, 2023. Sonic’s second NNS proposal was rejected by the community on May 19, 2023, with 3.7% Yes and 27.6% No.
Background
Kinic supports two login methods, Internet Identity and NFID. Upon login, new user can do three things: Claim Site and Ad Auction from user’s profile menu, and Search text or Canister ID from the search bar. Searching on a canister ID will return the URL link and its subnet ID.
Sale
As explained in the tokenomics section in its whitepaper, with a total supply of 6 million $KINIC tokens, Kinic plans to sell 25% of its tokens or 1.5 million by raising 1.5 million $ICP, of which 1/6 (250,000 ICP) would come from the Community Fund controlled by NNS. At June 05’s price of $ICP of $4.82, its SNS sale plans to raise roughly $7.23 million, valuing $KINIC at roughly $28.9 million post-SNS. If either of the below two scenarios appears, the SNS sale will be called off and deemed incomplete: 1) less than 500K ICP are raised; 2) fewer than 300 investors participate in the sale. For each investor participating in the SNS sale, he/she needs to buy at least 1 ICP and can purchase up to 100K ICP.
Highlights
It won 1st place in the Blue Sky category of Supernova Hackathon in the summer of 2022.
Concerns
Hypothetically there are probably four ways Kinic can claim to have a clear advantage over competitors:
- Web2 search engines such as Google have become so untrusting that the world calls for a challenger to replace it.
- For the sites that can be indexed by both Kinic and its competitors, Kinic extracts information of higher quality.
- For the sites that can be indexed ONLY by Kinic and NOT its competitors, Kinic does a plausible job as a search engine and this is a fast growing market.
- The traditional ad-based revenue model has run its course and could be disrupted by new ways of monetization that becomes possible with blockchain/Web3 technology.
For an early-stage startup, we don’t expect Kinic to knock those out of the park, but we need to at least see early signals for a proof-of-concept. We’re not seeing sufficient evidence from the current Kinic service. There was very little discussion on the business prospect of Kinic’s search service in its whitepaper, which casts a shadow on the long term viability of such a DAO, should its SNS decentralization become successful. Kinic’s roadmap is vague and doesn’t offer an exciting vision for a fast-growing segment of the Internet that is underserved by the incumbent.
Also, It appears that Kinic search service has had little update since June 2022. The product is buggy/incomplete in features. We tried to “Claim Site” with several different canister IDs but the app returned error message saying “Something went wrong” with console error message “Failed to parse”. The “Ad Auction” button returned the same “Something went wrong” error message. The product doesn’t return the most relevant information. In several cases we’ve tested, the search function did not return the meta information in the <title> correctly, but some other text that is not meant to explain what the site is. It does not seem to handle non-English text well and would return gibberish string. Information from popular meta tags (e.g. Twitter Cards) that would contain creator, title, description and cover image is low hanging fruit for any search engine but Kinic does not capture that.
Kinic has open sourced both of its frontend and backend canisters on GitHub, which will be handed over to the SNS upon successful decentralization. Upon cursory examination, it appears that the code base was fairly basic as the bulk of the work (i.e. search database) was implemented by CanDB, a 3rd party product that Kinic has licensed. Kinic also relies on an off-chain crawler to scrap site contents on a regular basis in order to keep its on-chain searchable index up-to-date, but this wasn’t open sourced at the time of this report. As the quality of a search service heavily depends on the how data is gathered and processed, it is unclear who will control it since it is not part of its proposed SNS decentralization or its future DAO.
Last but not the least, Kinic has not disclosed any user traction data publicly. It only mentions in the whitepaper, “Kinic is fully functional and averages thousands of unique monthly searches.” If this is all there is, it’s too little. Many much more mature IC projects have consistently shared their user growth data publicly, such as OpenChat, DSCVR, Sonic and Dmail.
We would expect a project that tries to raise >$7 million from retail investors to have a more polished product, unlock a proven underserved market and have achieved admirable user growth. That doesn’t seem to be the case for Kinic, yet.
