Klatyn (KLAY): The Hybrid Smart Contract Blockchain
Introduction
You do not have to look far to see that competition amongst Smart contract platforms is hot, and rightly so, they are what facilitate the programable DeFi and NFT infrastructure that can flourish and function.
It is a highly competitive area of the market. To define what separates them would consist of several comparables; these are important to users or developers who would like to optimally choose an innovative contract platform that is best for them.
Many of them have in common that they use the Ethereum Virtual Machine (EVM), which is Ethereum’s software platform that developers can use to create decentralised applications (DApps) using the coding language Solidity. Klaytn is one of the Layer 1 Blockchain networks that utilises precisely this.
Klaytn It is described as a public blockchain utilising (Byzantine Fault Tolerant) with the central aim of meeting enterprise-grade reliability. Klaytn is securing this ‘reliability’ through a hybrid model that mixes between private and public blockchain networks. This structure is actually bridged crypto and legacy business infrastructures.
History of Klaytn
Klaytn was created by GroundX, which is the blockchain division of one of South Koreas largest conglomerates; The Kakao group. This group includes South Korean Digital-first mobile bank, KakaoTalk, Kakao Games, Kakao Music, KakaoPay.
Kakao saw an opportunity for crypto and thus set the wheels in motion to create its cryptocurrency in 2018. Its journey, however, has not been an easy one. It had to overcome significant hurdles, as the Kakao group was levered with substantial legal & regulatory issues in Korea. The group eventually resolved these issues and relocated its blockchain projects to Singapore, which is subsequently Goverend by the Klaytn foundation.
Fast forward to 2021 Klaytn has pushed its international expansion efforts with strategic partnerships across Asia and even had its own public offering on the Binance launch pool, where a small allocation was up for grabs (0.1%) to Stakers.
In more recent times, Klaytn has rebranded to become ‘The Metaverse Blockchain’ and even partnered with Animal Concerts, a project that looks to connect celebrities and artists to organise and promote concerts in the Metaverse.
Klaytn has had to evolve as the times have changed in crypto. The rise of DeFi & NFTs, DAO’s & the Metaverse have all meant Klaytn has is losing ground to other Smart contract platforms. In addition to the metaverse, Klaytn sees DAOS as a big part of the future and will aim to evolve into one in the future.
How does it work?
Klaytn’s blockchain operates on the Klaytn Virtual Machine (KLVM) that derives from Ethereum Virtual Machine (EVM), which is designed for integrating the language Solidity for developing Smart contracts. Its consensus model utilizes Permissioned Proof of Stake, similar to the proof of stake. The difference is that the ‘permissioned’ element means it has a limited number of validators. These validators are also members of its Governance council. This alternative structure makes Klaytn a hybrid model between public and private blockchain, as it renders qualities from both.
Klaytns Hybrid model largely comes from 19 corporations worldwide from Klaytns Governance Council; these are the only entities that can operate consensus nodes. More than 50 initial service partners have committed to launching Blockchain Applications on Klaytn. However, there are around 30 live and operating; this is according to Klaytn scope, Klaytns Block explorer.
In terms of Klaytns’ blockchain, the mainnet is called cypress, which went live in June 2019. Some specifications of this blockchain are listed below:
- Block generation and confirmation time at 1 second
- 4,000 transactions per second (Tps)
- Low gas price that is almost 1/10 of Ethereum
Design of the Klaytn Ecosystem
The diagram above is a depiction that shows the Klaytn ecosystem is made up of 3 subnetworks:
- Core Cell Network (CCN): Is responsible for verifying and executing transactions submitted by Endpoint Nodes then distributing blocks across the network.
- Endpoint Node Network (ENN): It creates transactions and processes data requests from the service chains.
- Service Chain Network (SCN): Klaytn service chains are subnetworks that run independently by blockchain applications (BApps) — connected with the main chain via Endpoint Nodes
Klaytn’s public chain (CCN + ENN), also known as its main chain, runs Blockchain applications. These applications can also run on one of the Private chains (SCN). Utilizing private chains or subnetworks (SCN) enables a structure that can cope with the higher transaction speeds for specific projects.
How does Klaytn expect to scale?
Klaytn actually names their scaling solution to be their unique layer 2 environments.
AKA Klaytn’s Service chains or subnetworks (SCNs) can be used to help scale and provide a separate execution environment for applications that would be less feasible to run on the main chain.
Scaling becomes useful utilizing SCNs because there are qualities like, Special node configurations, Customized security levels and High throughput ( higher transactions per second).
This approach is not so dissimilar to actions by other Layer 1s like Avalanche with subnets or Polkadot with its Parachains. * See Below*
Klaytns Trilema
A common struggle across blockchains is the blockchain trilemma. Klaytn’s trades off decentralisation to focus on Scalability and Security. Klaytn sees these as much better to prioritise high performance, with high throughput, which can improve users’ usability.
Can the Devs do something..?
As Klaytn is built on top of Ethereum blockchain stacks, these developers using Klaytn can leverage the tooling, documentation & apps used to run on Ethereum and operate in Klaytns’ ecosystem.
The benefit here is that Klatyn takes full advantage of the open-source codebases of the EVM, the supporting libraries, APIs and a pool of developers who already program using Solidity. Developers can even migrate from their Ethereum environment App to Klaytns if they want to.
The KLAY Tokenomics
KLAY is the native utility token of the Klaytn Network. It is used to pay transaction fees when creating or executing smart contracts or transferring KLAY.
Every block is created, resulting in minting 9.6 KLAY being minted. Meaning approximately 300 million KLAY will be minted annually, which means there is a 3% annual inflation from the 10 billion KLAY issued at genesis.
Klaytn’s funding structure runs continuously with Klaytn network’s block generation. So, after every block is issued, it results in a newly issued KLAY. The block reward or sum of transaction fees is used in the block is then distributed across the network.
Where do Block rewards go?
- Klaytn Growth Fund (KGF): 54%
This contributes to the Klaytn economy by providing grants and investing in various organisations and individuals.
KGF will fund a number of initiatives to increase Klaytn adoption across all industries, including rewarding those who demonstrate on-chain proof-of-contribution and investing in early-stage dApps.
- Klaytn Governance Council Reward (KGC): 34%
By becoming a Council member, you first need to undergo a qualification review by the Klaytn Governance Process. Once that’s passed, you need to stake at least 5 million KLAY.
Governance Council Rewards are structured to incentivize the Council members and prevent the monopolization over claim of Klaytn Governance Council Rewards by a section of highly invested Council members.
The Gini coefficient is used to adjust the adequate amount of staked KLAY concerning the rewards received
This unique application of this formula helps maintain this distribution of the rewards fairly.
G = Gini coefficient of Governance Council’s KLAY staking distribution
Adjusted staking amount = (Council member’s staking amount)^(1/1+G)
- Klaytn Improvement Reserve (KIR): 12%
Klaytn has its own future fund; as the Crypto industry changes fast, this fund accounts for such change by thinking about the future. Through research and development for better technology.
Proposals can be put forward can be created by any participant in Klaytn’s ecosystem, where KIR spending proposals will be processed per KIR Governance Process.
Governance into the future (ROADMAP)
Klaytns approach to governance is unique and reasonably progressive because they understand the crypto environment around them is evolving.
Firstly, Klaytn acknowledges the looming meta-versification coming to the industry and sees this as a highlight to expand in the future. So, it’s expanding its funding and projects linked to NFTs to adjust for this.
Additionally, as they note, they’re witnessing the emergence of the DAO. So Klaytn, too wants to evolve into becoming a ‘DAO of DAOs’. Klaytns governance council, however, which makes the decisions, is currently formed of many traditional enterprises, except a few crypto native representatives like Binance & MakerDAO. This doesn’t fit with how DAO structure typically is governed by individuals, not organisations.
Considering this, it has opened its Membership to the Klayton Governance Council to non-traditional entities. As a move towards a DAO in the future, they see this as the industry’s future direction in the long term.
Recent developments for Klaytn
General
- Integrated with some Kakao companies, such as KakaoTalk, where users can activate a Klip wallet inside their app where they can hold KLAY tokens & NFTs. Klip has more than 1,000,000 active users and is integrated with KakaoTalk
- Partnering with ConsenSys to win the Bank of Korea Central Bank Digital Currency Project. This will entail a joint relationship to design a CBDC for Korea.
Game-Fi & the Metaverse
Klaytn has plans to launch a game developer package that includes a set of Klaytn L2 solutions, a curated list of open-source tools, and a Software Development Kit (SDK).
NFTS
Klaytn aims to develop a stronger presence in the NFT market by integrating with existing marketplaces. It is one of the few Blockchains with a partnership with OpenSea — where the migration happened on January 6th, 2022.
Users will be able to list, buy, and sell KIP-37 based NFTs, implement royalties, and enable distribution across Klaytn assets. Where it will be ranging from game items characters to digital arts.
KIP37 is the equivalent of an ERC1155 token on Ethereum. It allows you to bring together multiple token types and accommodate various users or recipients in a single deployed contract and transaction. Users can connect to OpenSea accounts with a Kaikas Wallet.
KrafterSpace currently allows users to easily create & mint NFTs and digital items with minimum effort and low gas fees.
Competition
Klaytns model did draw stark similarities with Metas project Diem (now dropped), where multiple organisations came together to form the council with a supporting token.
However, competition for Klaytn would be Layer 1 & 2 blockchains and, more specifically, competing against other chains utilising the Ethereum Virtual Machine (EVM).
Using DeFi, TVL growth on Klaytn isn’t extreme when we see it relative to other chains. It ranks 14th for TVL according to DeFi Llama across all smart contract platforms and 9th when compared to EVMs, roughly 0.59% of total TVL in DeFi.
KlaySwap; currency has around 950 + million Total Value Locked (TVL) representing 80% + of total TVL in Klaytn. Currently, this is the most prominent DApp for DeFi on Klaytn.
Risks & Challenges
- Weak international community with poor response in discord and telegram.
- Volume dominated on 1 Korean based exchange.
Concluding Remarks
Klaytns’ new direction will be able to leverage the benefits from being EVM compatible. This will contribute towards the easier implementation of DeFi & Metaverse initiatives.
Klaytn’s resources & well-designed blockchain should be a catalyst to lure in a new era of developers to the platform, especially if there is funding from their KIR.
Lower performance on comparative metrics, such as relatively low levels of TVL. It is a reflection of the lower levels of adoption that is currently being experienced at the benefit to other Layer1 and Smart Contract projects
Additionally, accessible SDKs will help to enable projects to be built on Klaytn Layer 2s that will help Klaytn be the blockchain of choice in the future.
