TBW - How Kaito proposes to redefine the attention economy

In the attention economy, value converges on those who know how to capture and direct the public's interest. An ancient principle, but one that takes on a crucial dimension on the cryptocurrency markets, where attention conditions liquidity and dictates trends. Even projects with solid fundamentals struggle to emerge without sufficient visibility. Faced with this reality, founders are focusing their efforts on two essential levers: liquidity and attention.

Or, traditional strategies for capturing attention in the crypto ecosystem are showing their limits. The use of Opinion Leaders (KOLs), via intermediary agencies, feeds an opaque market where substantial marketing budgets translate into artificial engagement metrics. These campaigns favour volume over quality, resulting in diminishing returns and uncertain ROI. The result: in-depth analysis and genuine community engagement remain marginalised.

This dysfunction highlights a major flaw: the lack of effective mechanisms for evaluating and redistributing information. While crypto markets excel at token price formation, they fail to structure a genuine market for attention. It is to address this shortcoming that InfoFi is emerging, a new paradigm that views information as a tradable asset in its own right.

InfoFi: when information becomes an asset

InfoFi - or Information Finance - aims to solve a key problem of crypto markets: the valuation and efficient distribution of information. Like DeFi for financial instruments and GameFi for gaming assets, InfoFi treats information as a class of tradable assets. Vitalik Buterin, co-founder of Ethereum, defined it as "info finance", a discipline seeking to structure markets optimised to extract accurate information from participants.

The first experiments with InfoFi took various forms. Arkham Intelligence launched an on-chain marketplace, monetising portfolio identification and entity tracking via an ARKM token auction system. Polymarket, meanwhile, uses predictive markets to assess the probabilities of real events. These platforms have demonstrated the feasibility of monetising information, but their approach remains fragmentary.

Kaito takes the idea a step further by proposing a model where market forces determine the veracity and circulation of information. This vision is based on three phases:

- Phase 1: dispersed information

Today, valuable information circulates in a disorganised way through social networks, newsgroups and databases. The signal is drowned in noise, making it complex to evaluate.

- Phase 2: AI as a filter

Kaito relies on artificial intelligence algorithms to structure and prioritise information according to its relevance. A promising solution, but still imperfect, due to the biases and time required for reliable signals to emerge.

- Phase 3: market-led distribution

In the long term, information flows will follow economic incentive logics, rewarding sources of quality insights rather than traditional intermediaries. This approach is based on innovative tools such as Kaito's Yaps system (see below), which makes attention and influence monetisable.

Kaito: an AI for structuring crypto information

Kaito is a crypto data analysis platform that centralises access to fragmented information in the Web3 ecosystem. Founded by Yu Hu, an ex-trader at Deutsche Bank and Citadel, it raised $10.8 million in 2023 from investors including Dragonfly Capital, Sequoia Capital and Spartan Group.

Kaito's goal: to structure the flow of information, attention and capital in the crypto universe using artificial intelligence. The platform offers several tools to respond to information overload and the dispersion of market signals:

A premium subscription is required to access the full range of features, with a cost of $1,099 per month, reduced to $833 for an annual commitment and $750 for two years.

Kaito's first product is relatively traditional, but it is on the side of its information tokenisation project that we should look. It needs to address these issues:

1. Excessive fragmentation of information

Market signals, project updates and community trends are scattered across a multitude of platforms, making exhaustive analysis difficult. Kaito aims to make this access more fluid.

2. A lack of metrics to measure community engagement

Crypto projects recognise the importance of communities but struggle to assess their real impact. In the absence of precise metrics, resource allocation and strategy optimisation remain approximate.

3. Ineffective influencer marketing

The use of Opinion Leaders (KOLs) via intermediaries leads to high costs and a lack of transparency. A report by Polkadot revealed large budgets for limited return on investment, highlighting the lack of optimised mechanisms for acquiring attention.

In response to these challenges, Kaito is positioning itself as an infrastructure capable of organising information and streamlining the way it is captured, analysed and redistributed.

Here it is

YAPs foreshadow an attention tokenisation system

Since early December 2024, Kaito has been offering its users a new interface for earning "YAPs". What sets this mechanism apart is that it is based not on on-chain activity, but on users' influence on X (formerly Twitter). To start accumulating YAP, all you have to do is connect your X account and interact with other members of the crypto community registered on Kaito.

Each YAP represents a unit of tokenised attention, and their accumulation reflects a user's real influence in the crypto ecosystem.

The system is based on three fundamental pillars:

Proof of Work: This metric assesses the quantity and relevance of crypto content. Unlike traditional social metrics, it focuses exclusively on crypto discussions, discarding irrelevant content such as lifestyle publications or motivational quotes.

Proof of Exchange: This metric assesses engagement through a reputation-weighted impact analysis. It is based on "Smart Followers" - accounts that are particularly influential on Twitter. This system creates a natural filter where the engagement of established members of the community carries more weight than that of casual participants.

Proof of Insight: This dimension evaluates content according to its relevance, informational value and originality. It distinguishes content that generates engagement through emotional triggers from genuinely substantial contributions to the crypto discourse.

The implementation of the YAP system reveals several key design choices. Firstly, the scoring algorithm remains private to prevent manipulation. This opacity, although controversial, protects against systematic exploitation. Farming attempts over the Christmas period proved this necessity - users seeking to manipulate the system not only failed to earn YAPs but also compromised their reputations.

The accumulation of YAPs deliberately encourages certain behaviours. Engaging with the "Inner Circle" and discussing popular protocols generates more YAPs. The "Inner Circle" refers to influential individuals on the platform - not those with the most followers, but those who have built up a solid social reputation.

Notably, the system works without requiring discussion on Kaito itself, instead favouring constructive contributions over general crypto discourse.

An airdrop was conducted mid-February among early Kaito users with the KAITO token issued on the Base blockchain (an L2 Ethereum).

>> Read also - Fundamental analysis of Base

The KAITO token

Kaito has reached a new milestone with the launch of its native token, $KAITO, designed to embody its vision of InfoFi. This token plays a key role in the platform's ecosystem.

Holding KAITO opens up a number of opportunities for users:

- A lever of influence: By staking and voting for projects (see below), holders participate in the distribution of attention on the platform, guiding the highlighting of projects and content.

- An exchange currency: KAITO serves as a means of payment for various interactions within the network and could eventually be used for new services.

- A governance tool: Holders have a say in how the protocol evolves, particularly through votes on major algorithmic adjustments.

Here is its initial distribution:

Contrary to popular belief, the number of Yaps is not the only criterion for awarding tokens. Kaito relies on an artificial intelligence system that evaluates several factors:

- Alignment of values with the Kaito ecosystem.

- Long-term loyalty, analysed over a history of up to three years.

- Participation in Pro and Yaps platforms.

- Involvement in voting on the Yapper Launchpad.

- Geographical location, to ensure a balanced distribution.

- On-chain activity, including ownership of Genesis NFTs.

What mechanisms support the token's valuation?

The economic dynamics of the KAITO token are based on several levers designed to promote its long-term valuation and adoption.

A scarcity effect via staking

To encourage token retention, 5% of the total supply is dedicated to liquidity incentives. This mechanism encourages holders to stake their KAITOs, thereby removing them from active circulation and reducing selling pressure. Currently, the annual rate of return (APR) for staking is 34.98%. Once deposited, tokens can only be withdrawn after 7 days, limiting immediate market fluctuations.

A utility at the heart of the InfoFi ecosystem

Beyond staking, demand for KAITO is directly linked to its utility within the InfoFi ecosystem. The token acts as the main medium of exchange on the platform, serving in particular to pay for premium analyses, provide access to advanced features and facilitate interactions between users. As Kaito gains adoption, demand for KAITO is expected to grow in parallel.

Future governance to strengthen retention

Eventually, KAITO holders will also have a role in ecosystem governance, with voting rights on key protocol decisions. While this mechanism is not yet active, its introduction should strengthen the incentive to keep tokens over the long term.

To date, however, we can note the absence of a mechanism for burning or buying back the token by the protocol. Without such mechanisms, the medium-term economic equilibrium remains uncertain. For the time being, the appreciation of the token is mainly based on the innovative aspect of the project.

Yapper Launchpad: A community platform to showcase crypto projects

The Yapper Launchpad embodies Kaito's vision of market-led information distribution, applied to project launches before they launch their tokens (pre-TGE).

In contrast to traditional processes, this decentralised system implements a transparent voting mechanism, where the influence of the community directly determines the visibility of projects. In other words, it's a weekly vote in which crypto projects compete for users' attention.

The Yapper Launchpad is based on two distinct voting systems:

- Yapper Votes, awarded according to two criteria: each Yap held generates 100 votes and additional votes are awarded according to the number of Smart Followers (accounts recognised as influential by Kaito's proprietary algorithm). For example, a user with 100 Yaps and 100 Smart Followers has 10,100 votes (10,000 from Yaps and 100 from Smart Followers).

- Holder Votes, awarded to NFT Genesis holders. Their voting power is dynamically calculated to maintain a 50-50 balance between votes from Yappers and those from NFT holders. A cap of 0.5% of total votes per NFT is set to avoid excessive concentration of power.

A structured voting process

Voting is part of a continuous cycle, with ballots closing every Monday, Wednesday and Friday at 12:00 UTC. The project with the most votes at the end of a cycle gains access to a Leaderboard spot one week later.

During this seven-day lock-in period, votes cannot be withdrawn or reassigned. If a project wins the election, the votes allocated to it are automatically returned to users. If not, they become available for new use after the deadline expires.

An ecosystem based on engagement and transparency

The projects in the running have to appeal to voters by focusing on transparency, community engagement and uncertain but promising incentives. Although some offer direct rewards, the aim is above all to encourage a research-based approach: voters are encouraged to explore emerging projects before making up their minds.

On the user side, there are several levers to influence voting:

- Social impact, via Smart Follower status.

- Accumulation of Yaps, which increases voting power.

- Ownership of NFT Genesis and on-chain assets, including the new KAITO token.

With a seven-day vote lock, participants must develop an allocation strategy and effectively manage their voting power.

The Yapper Launchpad interface provides detailed project data, such as Smart Follower growth, engagement and team activity on X, enabling voters to make informed decisions. It also displays the status of votes (available, locked, and retrievable), simplifying their management over time.

By balancing social influence and token ownership, this model maintains ongoing competition while offering multiple opportunities for projects to gain prominence. However, its effectiveness relies on the level of voter participation and the quality of the projects selected.

Challenges and criticisms

While Kaito offers an innovative approach to structuring the attention economy in crypto, several structural and operational challenges could hinder its long-term viability and limit its impact.

Algorithmic opacity and risk of bias

The Yaps rating system relies on an algorithm whose parameters are not public, a choice designed to prevent attempts at manipulation. However, this opacity prevents users and projects from understanding the real levers behind the accumulation of Yaps, making it difficult to interact strategically with the platform.

This lack of transparency also raises concerns about algorithmic bias. Without access to ranking criteria, certain types of content or certain communities could be unintentionally favoured or marginalised, threatening the objective of fair distribution of information.

"Inner Circle" bias and bubble effect

The weight given to Smart Followers and established reputations creates a bias in favour of a small circle of influential users. These could capture a disproportionate share of Yaps and direct attention towards projects they support, to the detriment of other initiatives.

This information bubble effect risks stifling innovation and excluding valuable contributions from new communities or emerging players. Although this influence is theoretically deserved, it leads to a centralisation of power within an ecosystem that is supposed to encourage decentralisation.

Overdependence on X (ex-Twitter) and centralised data

The Kaito ecosystem relies heavily on X to track interactions and collect data. This dependency makes the platform vulnerable to changes in X's policies, API restrictions or a possible decline in the social network's popularity.

This link to a centralised infrastructure introduces a major point of failure and opens the door to potential censorship, in contradiction with the principles of decentralisation that Kaito seeks to promote.

A commoditisation of voting rights

The Yapper Launchpad, which is supposed to be a community curation tool, unintentionally encourages the monetisation of voting rights. Structures such as YapTrade DAO are already emerging to enable the buying and selling of votes, creating a secondary market.

This phenomenon calls into question the legitimacy of community voting, as projects with significant financial resources or organised groups could manipulate the results to their advantage.

A lack of burn or buy-back mechanisms for the KAITO token

A notable point in KAITO tokenomics is the absence (for now) of burn or buy-back mechanisms by the protocol. Many projects incorporate these strategies to reduce the supply in circulation and thus create upward pressure on the token price. However, in the case of KAITO, no supply destruction is planned, which raises questions about how the protocol intends to maintain an economic equilibrium in the medium and long term.

Long-term viability still uncertain

While Kaito AI offers a promising model, its long-term effectiveness remains to be proven. The success of the Yaps system depends on its ability to maintain a delicate balance between incentivising engagement, preventing manipulation and ensuring a fair process.

Many similar initiatives have failed to strike this balance, and it remains to be seen whether Kaito can rise to this challenge.

Conclusion

Kaito tackles a very real problem in the crypto ecosystem: the difficulty for emerging projects to capture the attention of the right people. By offering a platform where popularity can be tested directly with the most experienced figures in the sector, Kaito provides a novel way of measuring the impact and traction of an initiative. This is all the more relevant given that engagement on social networks is often skewed by superficial metrics and opaque marketing campaigns. Here, evaluation is based on a more organic signal, carried by those who really shape market trends.

Beyond this functional contribution, Kaito also plays on a powerful psychological lever with its gamification system. The ranking of the most relevant influencers, materialised by the accumulation of YAP, gives a competitive dimension that makes it addictive. The idea that attention can be monetised and structured as a scarce resource is part of a wider trend in crypto, where every activity potentially becomes an asset to be exploited. This approach gives rise to a new playing field for insiders, who can have their influence validated and measured in real time.

However, the enthusiasm surrounding this innovation should not overshadow certain limitations, particularly when it comes to the risks of manipulation. The Yapper Launchpad voting system, which is supposed to be a community mechanism for selecting the most promising projects, has an obvious vulnerability: players with a high concentration of YAPs could be encouraged to monetise their influence. Today, there is nothing to prevent a project from paying the most influential YAP holders behind the scenes to steer the vote in their favour, thereby distorting the principle of democratic selection. If such a practice becomes widespread, Kaito could quickly tip towards a model where access to attention no longer becomes an issue of quality or merit, but simply a question of funding.

Beyond these concerns linked to the governance of the vote, the economics of the KAITO token also raise questions. The lack of burn or buyback mechanisms for the token raises questions about its long-term sustainability, while selling pressure could build up over time. For the Kaito ecosystem to deliver on its promise, it will need to demonstrate that the token dynamic is based on genuine utility and not just speculative incentives.

Kaito is a bold bet, both on attention structuring and on InfoFi as a new paradigm. Its success will depend on its ability to guarantee the fairness of the mechanisms it puts in place. If it manages to contain potential abuses and adjust its business model, it could well redefine the way in which projects stand out in the crypto universe. Conversely, if it fails to regulate the games of influence that emerge in the background, it risks reproducing the same failings as the systems it seeks to overcome.

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