The Kowala Protocol defines a method for constructing a family of distributed, self-regulating, asset-tracking cryptocurrencies called kCoins. Each kCoin is designed to be traded on open exchanges and to maintain a close to one-to-one value relative to any widely traded asset such as a currency (USD, EUR, JPY, etc.) or other asset. Each kCoin is identified by a symbol consisting of the letter ‘k’ followed by the symbol of the underlying asset. For example, the kCoin of USD is kUSD, that of EUR is kEUR, and so forth. kCoins constantly gather market information from endorsed sources and regulate their value through three core mechanisms: variable block rewards, variable fees, and an active and well-informed trading market. These mechanisms are designed to return each kCoin to parity with its underlying, tracked asset. The expectation that a kCoin will eventually return to parity, in turn, creates arbitrage opportunities for traders seeking to profit from slight fluctuations in kCoin market prices around the peg. Because every kCoin needs a robust exchange market to function properly, each kCoin is implemented as a distinct independent blockchain with its own tokens, smart contracts, mining community, etc.