Klaytn

What is Klaytn (KLAY)?

Klaytn is an open-source public blockchain for anyone who wishes to build, work, or play in the metaverse. Aiming to bring some of the world’s most popular forms of entertainment to the blockchain, Klaytn is one of Asia’s top blockchain platforms.

Klaytn’s focus on the metaverse has seen it develop into a one-stop-shop for metaverse developers, offering bespoke solutions from layer 2 to SDKs and oracles along with a wide ecosystem of supporting services.

Named Klaytn to symbolize handling clay and unlocking the creativity inherent to playing with the malleable substance, Klaytn empowers developers and puts a premium on network performance.

Klaytn also deploys an optimized Byzantine Fault Tolerant consensus mechanism to achieve absolute transaction finality of just one second, creating a responsive system with next-generation technical capability.

Not only that, the dominance of Ethereum in the existing Web3 and metaverse industries is something Klaytn has chosen to embrace rather than contest. Klaytn’s technological stack is being made equivalent to Ethereum’s, and the Ethereum Virtual Machine is also embraced completely by Klaytn.

When Was Klaytn Launched?

Klaytn was launched in 2019 by a company called Ground X, the blockchain arm of South Korea’s biggest mobile platform, Kakao. With a vision of “making a better world through people and technology,” Klaytn’s mission is to become the preferred trust layer that connects people everywhere.

Kakao established Ground X to venture into cryptocurrencies, having identified the blockchain industry as an area of interest during the bull run of 2017. Designed as a layer 1 EVM-compatible blockchain, Klaytn is attempting to be a part of the Web3 revolution that reshapes the modern internet.

As a matter of fact, Klaytn’s ties to EVM and Ethereum go right back to its launch, as it began as a fork of Ethereum in June 2018. After being developed by Ground X for a year, it became an open-source project at the mainnet launch in 2019.

What is a Fork?

A blockchain fork is a change in the protocol of a blockchain network that sees the chain itself diverge into two. This is usually done in order to upgrade the network. Sometimes, however, it happens as a result of a community divide or a team creating a copy of a blockchain to develop differently.

Ethereum has carried out many forks to upgrade the network. Ethereum Classic is another notable cryptocurrency to emerge from a hard fork of Ethereum.

Bitcoin has also seen forks that created new cryptocurrencies. The most notable of these was the emergence of Bitcoin Cash following a community dispute over scalability and block size. Bitcoin Cash then had a hard fork from which Bitcoin SV was created.

Who are the Founders of Klaytn?

Klaytn’s founding entity is Kakao, a top brand in South Korea reputed for diverse services and an extremely large market share in the country. Kakao entered the blockchain industry via the incorporation of its subsidiary Ground X.

After founding Klaytn, Ground X eventually established the Klaytn Foundation, a non-profit entity to look after the interests of Klaytn. The Foundation’s headquarters are in Singapore.

The Klaytn Foundation manages the Klaytn Growth Fund and works hand-in-hand with Krust Universe. The latter is another subsidiary of Kakao that invests in Klaytn-based projects to take the Klaytn ecosystem to a global scale.

Aside from the Klaytn blockchain network, Ground X has also built Klip, a widely-adopted messenger built-in wallet, and Klip Drops, an NFT marketplace for fine art.

The Klaytn Foundation is directed by Ground X CTO Dr. Sangmin Seo. Ground X is further represented by Klaytn Business Lead Younho Lee and Klaytn Development Lead Junghyun Kim.

Also on the Klaytn Foundation team are Tezos Head of Asia David Shin, Polytree Founder and CEO Terry Wilkinson, and De Beers Group Blockchain Lead Neo C. K. Yiu. Kakao Founder and CFO Jiho Song and Krust Universe CEO Junyear Kang are advisors to the Klaytn Foundation.

How Does Klaytn Work?

Klaytn focuses on an integrated service offering for metaverse developers that comprises four main pillars:

• Open source dev infra package. This includes Layer 2 Solutions, SDKs, smart contract library, wallets, chain explorer, oracles, distributed storage, bridges, DAOs, NFT marketplaces, and DEX/DeFi. This package provides every service that developers need to build a compelling metaverse project.
• High-performing mainnet. This mainnet consists of high throughput of transactions per second, immediate finality under one second, and seamless interoperability with other blockchains, including Klaytn Layer 2 chains, wallets, bridges, and explorers.
• Community co-building. Featuring game guilds, investment DAOs, community DAOs, launchpads, and alliances with global players.
• Management and financial support. This includes treasury advisory, the Klayton Growth Fund, IP-centric investment fund, performance incentives, and Governance Council invitations.

Thanks to the ability to offer developers bespoke sets of individual tools or the complete package of all of the items listed above, Klaytn offers metaverse builders a comprehensive toolset to realize their creations.

For now, Klaytn remains compatible with Ethereum and EVM-based decentralized applications (dApps), but upon the deployment of Klaytn 2.0, the network will achieve technical equivalence with Ethereum. This will allow EVM-based dApps to onboard to Klayton without any modifications to their code.

Any tool that can run on Ethereum can also do so on Klaytn thanks to equivalence from an interfacing and execution perspective. New tooling created in the Klaytn ecosystem could then be reciprocally adopted within Ethereum as well.

By building atop existing Ethereum stacks, Klaytn inherits improvements made to the open-source codebases of EVM and its libraries.

This also means that the majority of Ethereum Improvement Proposals (EIPs) could be migrated to the Klaytn development agenda, and Klaytn Improvement Proposals (KIPs) can reciprocate and contribute to Ethereum and the EVM.

What Makes Klaytn Unique?

Klaytn can be considered unique for its focus on metaverse developers and the customization of tools for the development of metaverse-based projects.

Klaytn’s “Metaverse Package” delivers a primary infrastructure, including tools for end-to-end blockchain integration and development, and a secondary infrastructure that fills out an ecosystem of supporting products and services.

The primary infrastructure includes customized layer 2 solutions, SDKs and smart contract libraries, wallets and chain explorers, distributed storage solutions, oracle support, and bridges.

The secondary infrastructure, meanwhile, features integration and abstraction services, stablecoin integration, DAOs, NFT marketplaces, DEX and DEFI, and even traditional finance interfaces.

What are Smart Contracts?

Smart contracts are the key innovation that Ethereum brought to the blockchain industry, making it programmable money.

Smart contracts are pieces of code that execute an action when predefined conditions are met. Smart contracts are deployed on the blockchain, and in Ethereum’s and Klaytn’s cases, they cannot be changed once deployed.

This immutability and the transparent nature of the blockchain allow potential users of the smart contract to fully read and audit the code, thereby knowing whether they can trust it to execute properly. This allows smart contracts to replace trusted third parties when transactions are made.

Using these smart contracts, developers are able to create decentralized, immutable applications on the blockchain. Therefore, smart contracts are integral to the metaverse.

How is the Klaytn Network Secured?

Klaytn uses a hub-and-spoke model for scale, maintaining performance as the ecosystem grows.

Referred to as "Service Chains," the “spokes” in the architecture can be tailored for individual dApp requirements and can be anchored into the main Klaytn blockchain for greater security.

Klaytn’s consensus layer provides for three possible algorithms. The one it uses is called the Istanbul BFT algorithm. This is a proof-of-stake (PoS) consensus mechanism that uses economic incentives for node behavior and can remain resilient despite the failure of a high threshold of nodes.

The others, Clique and proof-of-work, are not in use or even maintained by Klaytn. Nonetheless, they are present since they were used in Ethereum, which Klaytn once essentially was a copy of.

Alongside Istanbul BFT, Klaytn derives its security, fast data verification, and transaction authentication from a cryptography system based on the ECDSA secp261k1 curve used by Ethereum and Bitcoin, among others.

What is the Use of KLAY?

KLAY is the native cryptocurrency of the Klaytn network. It is used to pay transaction fees when making transactions on the blockchain or creating and executing transactions.

Much like ETH on Ethereum, KLAY functions as fuel for the Klaytn network. The payment of transaction fees represents a form of payment made by users of the platform to consensus nodes that execute the requested operations.

KLAY’s smallest unit is the peb, with 1 KLAY being equal to 1018 peb. Another common and more convenient unit is the ston, which is an alias for the Gigapeb (Gpeb), meaning that 1 ston equals 109 peb.

KLAY itself has higher denominations, going all the way up to TeraKLAY (TKLAY), one of which equals 1030 peb.

As per Klaytn’s documentation, new KLAY is issued with each block. These new KLAY and the sum of the transaction fees used in the block, together known as the “block reward,” are distributed as follows:

• Klaytn Governance Council Reward: 34%
• Klaytn Growth Fund (KGF): 54%
• Klaytn Improvement Reserve (KIR): 12%

Between the share of block rewards claimed by the KGF and the KIR, Klaytn sees 66% of newly minted KLAY being reinvested into ecosystem growth.

9.6 KLAY are minted every block, meaning an issuance of around 300 million KLAY per year, or an approximate 3% annual inflation against the 10 billion KLAY issued at genesis.

However, these rates, as well as the distribution of block rewards, are subject to change via the Klaytn governance process.

Who Controls Klaytn?

Klaytn is controlled by the Klaytn Foundation, which consists of representatives from Ground X and Kakao as well as several industry experts. The platform has a Governance Council that oversees the Klaytn network.

Currently represented on the Klaytn Governance Council are entities like Binance, Ground X, Kakao, Hashkey, Gumi, AhnLab, Korea Economic Daily, and LG Electronics. These entities are also known as "Core Cell Operators" (CCOs) and operate like approved validators.

To become a CCO, an entity must stake at least 5 million KLAY and undergo a qualification review. Each block has one CCO assigned as the block proposer, while the others function as validators.

Like in any other PoS network, a CCO has a higher chance of being a proposer and earning the block reward if they stake more KLAY. The Gini coefficient is currently in use to prevent undue power from being wielded by a limited number of highly invested CCOs.

However, Klaytn 2.0 is set to redefine Klaytn’s governance structure. The Klaytn Governance Council is set to take over the management of the platform, with representatives from traditional enterprises in addition to decentralized autonomous organizations (DAOs).

The Governance Council is intended to evolve into a DAO of DAOs, a platform for DAOs to communicate the voices of Klaytn Communities through on-chain mechanisms.

30% of the Governance Council is set to be made up of DAOs, and the Gini Coefficient in the current voting algorithm is set to be abolished to give DAOs more influence. Candidates committed to actively developing and growing the Klaytn ecosystem will also be prioritized.

With an initial membership aim of 50, the Governance Council will double in size with further network upgrades to 100 members in total.

How Much KLAY Is In Circulation?

The Klaytn network had a 10 billion KLAY supply at genesis, but there is no supply cap since it is an inflationary token. New KLAY tokens are generated with every block, and the supply is inflating at a rate of approximately 3% per year.

While the KLAY token is inflationary, the Klaytn team has begun burning a portion of the gas fees used on the Klaytn network. In an official blog post in March 2022, the team announced that gas would be adjusted to 750 ston, out of which 725 ston would be burned.

There are currently just over 3 billion KLAY in circulation.

How Do You Buy KLAY?

KLAY is a popular cryptocurrency and can be bought on a variety of top centralized exchanges as well as on decentralized exchanges hosted on the Klaytn blockchain network.

If you’re buying KLAY on a centralized exchange, you can expect to see a lot of liquidity when using USDT, but trading with other stablecoins is available on select exchanges. Fiat trading is also available on some centralized exchange platforms, especially against the Korean won.

Is It Possible to Buy KLAY Instantly?

Transaction speed when purchasing KLAY on the Klaytn network’s decentralized exchanges depends on blockchain congestion. That said, Klaytn is an extremely fast network and finalizes transactions in no more than a few seconds.

Purchasing KLAY on a centralized exchange (CEX) may seem just as fast, but the actual settlement of your KLAY won’t happen until you withdraw it to a private wallet.

This may be a slow process because CEXs may not initiate withdrawal transactions immediately, often having to complete KYC (Know Your Customer) and AML (Anti Money Laundering) procedures first.

How Do You Store KLAY?

There are two main kinds of private wallets that you can store your KLAY in:

• Cold wallets. Cold wallets keep private keys offline and out of the reach of potential attackers. They could be electronic devices not connected to the internet, paper, or some other physical copy of the private key.
• Hot wallets. Unlike cold wallets, these need to be online in order to be used. They could be desktop clients or online wallets that store credentials with the online wallet provider rather than the user’s hardware.

Klaytn Energy Consumption

Klaytn is a proof-of-stake blockchain network. As such, it relies on economic incentives to make sure that the key participants in the protocol—the Core Cell Operators—behave according to the protocol.

Each CCO has to stake a minimum of 5 million KLAY, which they stand to lose via slashing if they misbehave. Proposing and validating transactions as per the protocol, meanwhile, is incentivized via the block reward.

This sort of system is a far cry from energy-intensive proof-of-work systems such as Bitcoin which are responsible for the consumption of hundreds of TWh every year. Bitcoin is a proof-of-work network that relies on a massive number of computers devoting their computing power toward the blockchain’s security.

In terms of actual nodes, Klaytn 2.0 is aiming in the long term for a 100-member governing council, meaning a maximum of exactly that many CCOs that need to run machines 24/7. Even if these nodes are high-powered computers, running 100 machines isn’t a lot in the grand scheme of things.

Is KLAY a Good Investment?

Klaytn is a blockchain with considerable ambition and a track record of performance.

In a blog entry, the Klaytn team published a study of the Klaytn network’s performance characteristics in comparison to some of the other top smart contract platforms. The study found that Klaytn could outperform the likes of Polygon, Avalanche, and Solana by several seconds.

This level of performance, which was clocked at 4000 TPS with finality in one or two seconds, puts Klaytn right in the upper echelons of the blockchain industry. Not only that, Klaytn has only experienced two major outages, a consensus delay in March 2020 and a transaction bug in November 2021.

However, Klaytn’s performance comes at a cost. While Klaytn is attempting to evolve into a decentralized system with a “DAO of DAOs” as its governance council, it is currently very much in the hands of a limited number of centralized entities.

Becoming a CCO is not just permissioned, it is also subject to an extremely steep barrier of entry of 5 million KLAY, which excludes most individuals.

However, this enterprise base does allow Klaytn to provide a solid product for developers and build connections with other large businesses. This, along with the existing market share of Kakao, could result in significant adoption in a short time if the platform can serve up attractive metaverse offerings.