Klaytn is an enterprise-focused permissioned (as of 2-2023) blockchain and has customizable Service Chains.
"South Korean messaging giant Kakao’s “klay” token – the native cryptocurrency of its recently launched Klaytn blockchain – is soon to make its first official exchange listing on Upbit’s platform." Ground X, the firm set up by Kakao to develop the Klaytn network, announced the news in a Medium post.
The auction will run for 12 hours, or until a yet-to-be-determined hard cap is hit. Subsequently, successful bidders will receive their klays on Sept. 19. A klay/bitcoin trading pair will be enabled at a future date.
The exchange added that Upbit and Klaytn won’t profit from the auction and Upbit will “redistribute all proceeds” to users in the future.
Kakao has not responded to questions from CoinDesk regarding how it plans to redistribute the proceeds and how much klay cryptocurrency it will make available for the auction. The exchange did say a total of 10 billion klay will be distributed through to 2021 in monthly tranches ranging from 29 million to 278 million tokens."
Audits & Exploits
- Bug bounty program can be found [insert here].
- Klayn patched DoS and remote code execution vulnerabilities in their nodes’ RPC interfaces thanks to a responsible disclosure by ChainLight (2-5-2023).
- Border gateway Protocol hack lost KLAYswap $1.9M (16-2-2022).
- HasStableNode as some of their professional delegates (30-11-2022).
Klaytn Governance Council (GS)
"Klaytn was founded by leading South Korean internet and messaging corporation Kakao via its blockchain subsidiary Ground X. Ground X formed a group of 19 global companies to operate consensus nodes, known as the Klaytn Governance Council (GC). They are working on transferring governance to an on-chain portal by the end of the year. At the moment, the governance process is all off-chain, using Web2 tools like Slack and Google Forms."
"Ten billion tokens were originally minted at genesis, with no total fixed supply. The token has a target annual inflation rate of around 3%, which can be changed by governance, as prescribed by the GC. A recent protocol update enacted a burning mechanism for half of all transaction fees."
It has 18% of the initial tokens going to the private sale, 5% to the team but also 8 and 16% to BD and R&D respectively. Together this makes for 47% of the initial supply going to insiders. 53%, named protocol reserves, will go towards;
"investing in the Klaytn ecosystem. Investment operations are managed by Kakao subsidiary Krust which works alongside the Klaytn Foundation. From Q4’21 to the end of July 2022, Krust made 26 investments, mainly in the DeFi and Gaming sectors."
"Klaytn’s native token KLAY is used for transaction fees and for securing the network via validator staking."
- Whitepaper or docs can be found [insert here].
- Code can be viewed [insert here].
"The Klaytn Virtual Machine (KLVM) was EVM-compatibility upon launch, and after a series of updates in Q1’22, it is now EVM equivalent."
- Capacity (TPS): Through consensus mechanism improvements, the team hopes to increase network TPS from 4,000 to 10,000 by the end of the year (1-9-2022).
- Latency: 2.1 seconds
How it works
"Centralization is Klaytn’s main drawback; its group of validators are permissioned and consist mainly of Kakao subsidiaries and other Web2 organizations. Klaytn is a Proof-of-Stake network that uses an optimized version of Istanbul Byzantine Fault Tolerance (IBFT).
The Klaytn blockchain is composed of three networks: the Core Cell Network (CCN), Endpoint Node Network (ENN), and the Service Chain Network (SCN). The CCN and ENN work together to comprise Klaytn’s Mainnet, while the SCN consists of auxiliary blockchains (i.e., sidechain) independently operated but connected to the mainnet through Endpoint Nodes (EN). Each Core Cell in the CCN consists of one Consensus Node (CN) and at least two Proxy Nodes (PN). The set of CN operators is a permissioned group known as the Governance Council (GC). They perform consensus, creating blocks with transactions that they verify and execute. PNs serve as a relayer for transaction and block information between CNs and ENs. Core Cells are split into CNs and PNs to shield CNs from adversarial network attacks like DDoS attacks. ENs connect the CCN with users, applications, and Service Chains. They create transactions, handle RPC API requests, process data requests from Service Chains, and broadcast block information to all Klaytn network participants. Service Chains allow applications and enterprises to have their own dedicated, customizable execution environment. Service Chains can connect to Klaytn Mainnet through data anchoring and multi-sig wallet token bridges.
The committee allows an IBFT-based blockchain to add new nodes without increasing communication volume. Although nodes publicly broadcast consensus results, there is a possibility for collusion since they communicate for consensus. Thus, IBFT is only an attractive design for enterprise blockchains whose consensus nodes are operated by corporations and other trusted organizations. Ultimately, IBFT sacrifices some decentralization for instant transaction finality, a necessity for enterprise services."
"A recent protocol update enacted a burning mechanism for half of all transaction fees. Un-burned transaction fees don’t only go to validators (the GC), but they also funnel to other network contributors through reserve funds. Each block, half of all transaction fees, and the newly minted 9.6 KLAY per inflation are distributed as follows:
- Klaytn Governance Council (GC): 34%
- The GC is the collective group of entities that operate Core Cells. In each round, one member of the GC is randomly chosen to be the block proposer, and they receive the entirety of the GC reward for that block.
- Klaytn Growth Fund (KGF): 54%
- The KGF serves as an ecosystem fund, providing grants to and investing in projects or individuals building on Klaytn. The Klaytn Foundation manages the KGF. It has distributed over 200 million KLAY since launch to 77 projects, 95% of which has come since the beginning of 2022. The Fund currently has around 300 million KLAY (~$70 million at the time of writing).
- Klaytn Improvement Reserve (KIR): 12%
- The KIR generally funds R&D for Klaytn, including infrastructure, audits for protocol updates, analytics reports and dashboards, and education initiatives. KIR proposals are voted on by the GC, with each member receiving one vote. To receive funding, successful proposals still need to meet their stated milestones and deliverables. The Reserve has deployed over 10 million KLAY and currently has around 100 million KLAY (~$23 million at the time of writing)."
"A combination of cheap fixed gas prices and random ordering of transactions in the mempool led to bots spamming the network in hopes of winning arbitrage opportunities, which caused network congestion. As the number of transactions exceeded what nodes could process in normal time, users experienced delayed transaction speed. In Q1’22, Klaytn switched to a time-based ordering mechanism for transactions among other technical solutions, but more needed to be done to combat the issue.
On April 3, a hard fork increased Klaytn’s fixed gas price from 25 to 750 ston ($0.00012 to $0.0035 at the current KLAY price of $0.23). Ston is Klaytn’s gas unit equivalent to Ethereum’s gwei. Although the increase successfully reduced network congestion, it was unpopular within the community, despite burning all excess gas fees above 25 ston. Just as network value increased following the spike in transaction volume in Q4’21, network value sharply declined following the decreased transaction volume in Q2’22. At the end of August, a network hard fork included a more permanent fix by switching to dynamic gas fees. With an initial range set from 25 to 750 ston, half of all gas fees will be burned."
"Consensus is reached when more than two-thirds of the committee’s members agree on the proposed block. The probability of being selected is proportional to the amount of KLAY staked. Klaytn’s rounds last approximately 1 second. Entities need to stake a minimum of 5 million KLAY and be approved through the Klaytn governance process to join the GC. Consensus node operators also need to meet the system’s hardware requirements."
"The GC currently consists of 35 participants. Together, they are staking roughly 1.5 billion KLAY, almost half of the token’s circulating supply. Four of the top six validators are Kakao Corporation and three of its subsidiaries, together controlling over 33% of the network."
As of 5-9-2022 there are 36 validators according to their block explorer.
- As of 5-9-2022 there are 36 validators according to their block explorer.
- From Messari (1-9-2022):
"The GC currently consists of 35 participants. Together, they are staking roughly 1.5 billion KLAY, almost half of the token’s circulating supply. Four of the top six validators are Kakao Corporation and three of its subsidiaries, together controlling over 33% of the network. Since its inception, the number of Web3-focused GC members has grown from 2 to 13, with additions such as MakerDAO, Alameda Research, NFTBank, and Binance. Although the percentage of GC members focused on Web3 has increased over 6x from 6% to 37%, their combined share of block production has only grown by 3x. Recently, the Klaytn Foundation announced that two more Web3-focused entities will be joining the GC: DEX aggregator 1inch and blockchain infrastructure builders Krosslab. Additionally, Kakao Space and fintech company Worldpay will be stepping down from the GC. Lastly, Kakao Corp, Kakao Pay, Kakao Entertainment, and Ground X plan to reduce their individual stakes to the minimum 5 million KLAY. They are four of the top six validators, staking a combined 655 million KLAY.
Their Other Projects
- From Coindesk (20-2-2023), in which Klayton claims to move to a permissionless blockchain in the future:
"The Foundation will aid Klaytn blockchain's transition to a wholly permissionless validator structure, provide opportunities to the general public to participate as block validators, and introduce a communication channel for Klaytn's community members to participate in decision-making processes."
"In Q1’22, the Klaytn Foundation announced a revamped Klaytn 2.0 litepaper. The new roadmap features many improvements, but they all center around the goal of building a blockchain suited for the metaverse and mass adoption. The three main areas of focus are on improving scalability, decentralization, and infrastructure. Currently, the Klaytn network can support a maximum of 50 GC members. While the Foundation is working on onboarding new members to reach that maximum, it will also work to optimize the consensus mechanism to sustain 100 GC members."
"After launch, initial adoption came through integration with KakaoTalk, Kakao’s free mobile instant messaging application with over 45 million users. Ground X’s wallet Klip allows KakaoTalk users to easily send and receive digital assets on Klaytn. Klip obfuscates complex wallet addresses and seed phrases, providing a more friendly onboarding experience for Web2 users. To date, Klip has over 3 million registered users.
There is currently $317 million total value locked (TVL) in Klaytn DeFi protocols, ranking it 14th among all chains, according to DeFi Llama. Over half of Klaytn’s TVL resides in KlaySwap, an automated market-making decentralized exchange (AMM-DEX) developed by OZYS. Although it uses the constant product market-making technology popularized by Uniswap, it has several additional features. Klap is Klaytn’s leading overcollateralized lending protocol, with around $18 million TVL not including the $18 million amount of borrows. Klap originated as an Aave fork, but it also blends together many other protocols like Solidly (veNFTs), Platypus (yield boosters), Curve (voting escrow governance), and Geist (penalties for mercenary capital).
In Q2’21, OpenSea integrated with Klaytn, making it the first blockchain outside of Ethereum to support the marketplace. The top 10 projects have accumulated a combined 145 million KLAY in volume on OpenSea."
Projects that use or built on it
- The Bank of Korea and several of South Korea’s largest gaming companies (1-9-2022). More than 50 initial service partners committed to launching applications.
- DeFi Kingdoms; at the end of August 2022, DeFi Kingdoms announced that its Serendale world will migrate from the Harmony blockchain to the Klaytn network.
- Klap Finance; launched mainnet on 24-6-2022
"Klaytn’s accounts have several distinctions from Ethereum’s account-based model that enable a better user experience. In typical blockchains, a user’s address is closely tied to the public key and private key key pair. Klaytn users, however, can have addresses that are decoupled from the key pair.
This setup has several advantages, including:
- Users can connect multiple key pairs to their address to increase security.
- Users can change their key pair if it has been compromised (rather than having to generate a new address and key pair and migrate everything over).
- Users can choose the addresses they want.
The last point will have a bigger impact once Klaytn implements human-readable addresses, which is currently under development. The development will allow addresses to be a 20-byte text string mapped to the typical 20-byte address in the backend."
Pros and Cons
- Had investment from bankrupt Alameda Research/FTX, which came out (11-11-2022) during the FTX crash. This could mean fall-out risk.
Team, Funding and Partners
- Full team can be found [here].
- HasStableNode as some of their professional delegates (30-11-2022).
- Raised around $150 million in two private rounds (1-9-2022).
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