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Users can open a CDP(Collateralized Debt Position) at Kokoa by depositing Klay as collateral. With the collateral assets, users can borrow KSD at 0% interest. There is no fixed duration for the loan, so users may repay the KSD on their preferred date. Users can withdraw the collateral assets after the repayment.
KSD Savings Rate is a risk-free base interest rate of the Kokoa money system. Users can earn this yield by simply depositing their KSD into the Kokoa Savings Account.
(Important Disclaimer - The term 'risk-free rate' does NOT mean that there is no risk, and no party is guaranteeing such property. The term is a financial terminology that refers to the expected yield of a very safe investment such as a 3-month US government Treasury bill. Because KSD is backed securely by the collateral assets and the KSD Savings maintains a 100% reserve rate, the KSD Savings theoretically has a relatively low risk, and this property is what the term 'risk-free' refers to in this document)
KSD is a cryptoasset-backed stablecoin, and the value of which is soft-pegged to USD. Every KSD is backed by collateral assets, and the sum of the dollar value of the collaterals should exceed the amounts of KSD issued. This way, the Kokoa Money System secures the value of KSD.
When the demand for KSD increases, the price of KSD may rise over its peg price in the short term. Since anyone can mint new KSD through Kokoa CDP, arbitragers would have incentives to mint new KSDs and sell them on premium. Through this mechanism, the price of KSD will return to its peg.
On the other hand, if the demand for KSD decreases, the price of KSD may fall under its peg price in the short term. In such cases, those who borrowed KSD will have incentives to buy KSD and pay back their debt. This way, the price of KSD will again return to its peg.
Kokoa Treasury Fund is a treasury fund governed by the Kokoa DAO, the purpose of which is to maintain the stability of the KSD Money System. The treasury fund can mint non-collateralized KSD — aka ‘Naked KSD’ — under certain conditions predetermined by its ‘policy.’ Note that this ‘Naked KSD’ is not backed by the collaterals in the CDPs, it is still backed by other stablecoins and high-quality assets, so this does not undermine the soundness of the KSD money system at all.