Klaytn Overview: The Metaverse Blockchain for All


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Key Takeaways

  • Klaytn is a network implemented by Kakao Corp. in 2019 to develop the metaverse and GameFi. The aim is to bring young minds to create unique projects on Klaytn and populate the ecosystem with them.
  • Klaytn has raised $90 million to grow its ecosystem by bringing in giants like IDG China, whose investments include Ripple, as well as Peter Thiel-backed Crescendo Equity Partners and TransLink Capital.
  • Klaytn is a branched network consisting of a Core Cell Network (main network) and Service Chain Networks (secondary networks), solving the problem of scalability.
  • Klaytn set up interoperability with Ethereum.
  • Klaytn has attracted 271 projects to its ecosystem, most of which are DEXes/DeFi, gaming/NFT, and CEXes/payments.
  • The Klaytn team has extensive experience in both the institutional business and the crypto space.
  • Klaytn has excellent potential thanks to its robust community, as well as technological advancements and an easy-to-join ecosystem.

Introduction

Many blockchains and established ecosystems are fighting for the market, offering various options for solving the issue of scalability, programming, integrating the metaverse, or simplifying the usage of their protocols. This race is gaining momentum every day. Klaytn is one of these blockchains. So what makes this project worthy of competing with the strongest and most established companies? What are its features and differentiators? What has it achieved so far, and how does it plan to develop further?

Read on, and you’ll find out.

History and fundraising

Klaytn, a public blockchain platform developed by internet giant Kakao Corp., is a leading mobile platform in South Korea. The platform was deployed on Monday, May 13, 2019, at the fifth annual CoinDesk Consensus Blockchain Technology Summit at New York’s Hilton Midtown Manhattan hotel.

Klaytn completed its $90 million exclusive seed funding round in March 2019 to spur mainstream blockchain adoption. It garnered the attention of numerous respected venture capital funds, including IDG China, whose investments include Ripple in 2013, as well as Peter Thiel-backed Crescendo Equity Partners and TransLink Capital. Other notable investors included Alameda Research, Hashed Fund, and Chain Capital. Klaytn also successfully recruited key consulting partners with significant influence in their respective regions around the world:

  • Widus, a technology-focused consulting firm, matches potential partners for Klaytn among leading firms in both the technology and business sectors of the US, Hong Kong, Singapore, and Indonesia.
  • Hashed, Korea’s most powerful blockchain accelerator, supports Klaytn in developing its token economy and building a community through its network of top global venture capital and cryptocurrency-focused partners.
  • Ledger Capital, a blockchain consultant, supports Klaytn in expanding its ecosystem with global unicorn startups and enterprises with significant influence in Asia.
  • Ground X brings third-party services to Klaytn, including games and travel applications. As of now, GroundX has brought on board 26 companies that agreed to run their apps on Klaytn, such as game development company Wemade Entertainment Co.

The first service partners that started working with Klaytn include the following: Content Protocol, Atlas, BORA, SPIN protocol, Cloudbric, INSUREUM, Knocknock, and Antube.

Blockchain and ecosystem

Uniqueness and implementation

Klaytn is a highly optimized, service-oriented public blockchain that aims to give the metaverse space to evolve and make it robust and progressive. It intends to open up opportunities for outsiders, creative minds, and youth who can bring fresh and bright ideas to the precious ecosystem. Simply put, Klaytn is a public blockchain focused on the metaverse, GameFi, and creator economy.

How does Klaytn intend to follow and achieve the goal?

Klaytn provides metaverse developers with integrated solutions. The list is long and includes “L2 Solutions,” SDKs, smart contract libraries, wallets, chain explorers, oracles, distributed storage, bridges, DAOs, NFT marketplace, DEXes/DeFi, and development tools. The platform enables running any development tool designed to run on Ethereum so that it works seamlessly in the Klaytn ecosystem, making the Klaytn tech stack equivalent in terms of interface and execution to the existing Ethereum stack. New tools created in the Klaytn ecosystem can also be adapted to the Ethereum ecosystem. All of these are ‘packaged,’ making them easy to use in the Klaytn ecosystem so that developers don’t struggle to bring their ideas to life.

Secondly, Klaytn blockchain manufacturability provides a high-performance solution, namely high throughput of 4000TPS, immediate finality (~1 second), and seamless interoperability with other blockchains (including Klaytn L2 chains), wallets, bridges, and explorers.

However, one thing truly differentiates Klaytn from other ecosystems: community building. What makes the platform attractive to so many minds and projects is that they can count on the help of the community and the Klaytn team itself. Game guilds, investment DAOs, DAO communities, launch pads, and alliances built with global players are what make such a complex and large machine as the Klaytn ecosystem work as seamlessly as it does.

The team behind Klaytn also realizes it is difficult to bring in new users to the Web3 solutions, and so they’re bringing them into the world of Web2 in hopes of future mass adoption. “Even though it’s hard, adapting Web3 technologies to Web2 platforms could be a way to bring mass adoption,” Klaytn Foundation director Sam Seo told CoinTelegraph.

Klaytn also offers extra support to young projects that might need a guiding hand. There is financial, management, and consulting support, including treasury advisory, Klaytn Growth Fund, IP Oriented Investment Fund, Performance Incentives, and GC Invitation. This provides projects with security and guards them against financial instability. Their inexperience does not stand in the way of developing new businesses.

All the young conquerors of the metaverse need are a great idea and a rough plan for its implementation, and they can start on their journey. Klaytn and its multidimensional community will help with the rest.

“To build the infrastructure for this Web3 collaborative playground, Klaytn will combine our strong community with powerful infrastructure technologies to unlock new opportunities and accelerate innovation. As a public and open source blockchain project, Klaytn is designed to be a fundamental layer of trust for the metaverse, respecting the participation and contributions of all communities, empowering and bringing them together.”

Klaytn.

Technological aspects

Now let’s talk more about the technological aspect of the ecosystem. Klaytn can be divided into three logical subnets based on their roles and purposes. The figure below shows a general view of the Klaytn ecosystem.

Figure 1: General view of the Klaytn ecosystem. Source: Klaytn.

Core Cell (СС)

It plays a role in generating blocks in the Klaytn blockchain network.

Endpoint Nodes (EN)

Endpoint Nodes play a role of an endpoint of the blockchain network to handle RPC API requests.

Core Cell Network (CCN)

The CCN consists of core cells (CCs) that validate and execute transactions sent through endpoint nodes (ENs). The CCN is responsible for creating and distributing blocks across the network.

Endpoint Node Network (ENN)

ENN consists of endpoint nodes (ENs) that create transactions, process RPC API requests, and process data requests from service chains.

Service Chain Network (SCN)

SCNs are subnets of Klaytn, made up of sub-chains independently managed by dApps. Service chains are connected to the main chain via EN. Through service chains, Klaytn solves scaling issues.

Core Cell Network and Endpoint Node Network form the main chain of Klaytn, that is, the mainnet. Blockchain applications can run on the main chain of Klaytn, Cypress, or on their own blockchain called Service Chains. When a creator sets up their project, they can choose between the two chains. In general, if they want to have a defined runtime for their protocol that guarantees a high TPS value and custom network policies, the logical choice for them is to use Service Chain. However, if the Cypress settings suit their needs and they do not have any special requirements for their protocol, then nothing stands in their way of building their project on the main chain.

The price of gas is another crucial issue. GameFi, DeFi, and finally, the integration of the metaverse all require a lot of transactions. For the set gas price of 250 ston, a KLAY transfer would incur a fixed cost of 0.00525 KLAY. (21,000 Gas for KLAY transfer x (250 x 10^-9) = 0.00525 KLAY). Considering the price of KLAY today, the price of gas is sparing.

“We’re smart enough to know that people are still hesitating about using this platform because anyway, they have to pay something right. So we believe that gas fees should be as low as possible. So they can have the people enter this area. That’s our thought. And that’s why we are trying to reduce the gas prices,”

Klaytn Foundation director Sam Seo said.

Transparency, security, and decentralization

  • Anyone can request transactions and receive and confirm the results of transactions on the blockchain.
  • Klaytn is a decentralized network in which no malicious node can violate the integrity of the data.
  • The Klaytn IBFT consensus algorithm ensures that the data written to the blockchain is correct and will never be changed to ensure the data reliability and consistency needed for large-scale applications.

While typical Blockchain platforms provide one type of transaction, Klaytn offers several to enhance transaction capabilities and optimize memory footprint and performance: Legacy, ValueTransfer, ValueTransferMemo, SmartContractDeploy, SmartContractExecution, AccountUpdate, Cancel, and ChainDataAnchoring.

Two features are of particular interest:

  • The first, the one that was mentioned in passing earlier, is Wrapped Transactions. Klaytn provides wrapped transactions to support interoperability with Ethereum. Ethereum transaction types in Klaytn have the same RLP attributes and encoding schemes as the Ethereum design, except for a one-byte type delimiter called EthereumTxTypeEnvelope. Thus, users can successfully deploy transactions generated by Ethereum development tools to Klaytn.
  • The second one is Block Archiving. Klaytn’s high throughput should lead to high storage costs, so Klaytn plans to do block archiving to lighten the load on participating nodes. With block archiving enabled, ENs can delete stale block bodies, keeping only a certain number of recent blocks. Klaytn provides a feature called State Migration that helps reduce the amount of disk space required. State migration aims to attempt the state that contains most of the data in the chain, removing state tree nodes that are not required to process new blocks and leaving only those state tree nodes that are accessible from the root of a particular block’s state tree. After state migration, you are left with only the latest data needed to synchronize nodes, consisting of the target block’s state tree nodes and newly added blocks.

It is also vital to mention Klaytn’s Governance Council (GC) decentralized governance path. The Governance Council is a council that has the right to decide various governance matters, and to secure its reliability, the early members of the Governance Council have been limited to trusted organizations. This was chosen for the sake of efficiency in the platform’s development and stabilization stage. Klaytn reached the stage by joining hands with 31 Governance Council Members and a seamless operation of the Klaytn Mainnet.

What has Klaytn achieved so far?

Since Klaytn is an ecosystem, it is essential to look at how many projects it has been able to attract. Let’s go through the sectors of the projects of this network:

  • DEXes/DeFi – 52 projects are involved in the Klaytn ecosystem; some, like KLAYbank and KLAYfi, are authentic protocols.
  • Gaming/NFT – perhaps the most significant areas for Klaytn because they help the platform achieve the original goal: “To build the infrastructure for this Web3 collaborative playground…” So far, 62 projects have joined the ecosystem. There are a lot of AAA-worthy projects,  such as A3: Still Alive, Age of Zen, and Ni no Kuni: Cross Worlds.
  • There are other branches of the ecosystem like entertainment, enterprise, governance council, tools/infrastructure, wallets, oracles/bridges, dapps, and CEXes/payments. In total, the Klaytn ecosystem has 167 projects in these areas, including 52 CEXes/payments protocols.

Also, speaking of recent partnerships, as part of the ongoing pursuit of a crypto-centric governance strategy, Klaytn has announced the addition of two new Governance Council (GC) members: 1inch and Krosslab, bringing the GC membership to 35. As crypto-native companies, 1inch and Krosslab will actively participate and contribute to the Klaytn ecosystem: 1inch through the recently completed Klaytn integration and Krosslab through infrastructure and service development.

Figure 2: Klaytn’s ecosystem infrastructure. Source: Klaytn.

Now for the numbers and metrics, let’s start with TVL:

Klaytn’s TVL is $363M at the time of writing (08/18/2022) and $1.34B at its peak—while the figure is huge, the network is extensive but a little short of a giant network. In April, as the recession worsened, TVL went down, falling by 44% from $1.06 billion. With the Terrovsky fall, TVL went down by another 20%. Both falls seemed to be a sharp reaction to the general trend. After a short recovery period until June 8, there was another fall largely due to the backdrop of a sale in bitcoin. The boom in TVL occurred from June 24 to June 25, the conclusion of important partnerships with OpenSea and NFTb, TVL grew by 17%, then experienced a rollback of -6%. Nowadays, it oscillates between $340 and $380 million.

Figure 3: Klaytn’s TVL. Source: defillama

Diversification of TVL is also pleasing. KlaySwap dominates at 57.67%, followed by other dexes, landings, liquidities, “Yield-generating Stablecoin” like Dai, “decentralized reserve currency protocol,” staking, etc. There are many interesting projects, and these are projects related directly to operations on and for Klaytn (anything other than games and metaverses built into the ecosystem).

Market cap and underlying indicators

  • MARKET CAP (1M) = $820.59M
  • VOLUME (1M) = $1.21B
  • CIRCULATING SUPPLY = 2986285141

From the first two indicators, it can be statistically concluded that, on average, each holder of a $1 KLAY token made transactions in the amount of at least ≈$1.47 per month. This says a lot about the place in the crypto market and the interest of users.

An important indicator is TVL / Market cap = 0.443. The amount placed in the protocols takes 44% of the market capitalization, that is, the market value of the network. It can be argued that a significant share of the value, more than two-fifths, belongs to the network itself. This means attraction for engagement, given that we have been following this project for several weeks and have seen the activity of the on-chain explorers.

Trading volume (24H) = $40.42M at the time of writing. This constitutes 3.3% of the monthly trading volume. This is considered normal as, at this level of daily trading without much news, $1.21B per month is accumulated. That is, the ratio Volume (24H) / Market Cap ≈ 0.05 (i.e., 5%) for a developing network focused on constant purchases in games and metaverses, not to mention a fairly developed DeFi sector within the network, one could and better. Year low by volume (24H), $18.5M remains a good minimum range (2.3% of the Market Cap).

Clayton Tokenomics

The total KLAY inventory is 10.7 billion, and the circulating inventory is 2.84 billion KLAY. Clayton mints 9.6 KLAY per new block, which is 300 million KLAY minted annually. Thus, Klaytn’s inflation rate is 3% per year. Klaytn generously allocates two-thirds of its total emissions to the development of its ecosystem. Block rewards are distributed as follows:

  • Klaytn Board of Management Award: 34%
  • Klaytn Growth Fund (KGF): 54%
  • Klaytn Upgrade Reserve: 12%

KLAY is also a governance token, and to join the Klaytn Governance Council, validators must stake at least 5 million KLAY. Council members are confirmed every 86,400 blocks, and their term can be reduced in case of bad behavior.

Intranet activity

The number of transactions is very impressive: During a 14-day period, there were 2,839,126 transactions in total and 202,794 on average. Four transactions per second may not sound impressive, but if this is enough for the current state of the network, then everything is in order. We need to see how activity within the network will develop further and how developers can optimize the TPS for current needs. The average transaction price tag is $199 (at the time of writing). The speed of transaction processing also affected the good indicators of activity within the network.

Figure 4: Time-to-finality and block generation possibilities comparison. Source: Klaytn Medium.

The Sharpe ratio leaves much to be desired compared to classic investments since it approaches the normal (good) value of 1 only in three years. However, this indicator is not too bad when compared to other crypto projects, especially considering how risk-prone crypto projects are, given the risk-free rate in crypto is negative and sometimes can venture deep into the negative territory.

Who is behind all these achievements?

Even without taking into account the backers from Kakao Corp, the team looks very strong. People behind the project have a great experience with crypto (Groundx, Tezos, Bitcoin.com, Huobi, etc.), come from top universities (Oxford, Korean University, MBA, Colombian, Cambridge), and worked at leading firms (Samsung, City Bank, Barclays Investment Bank, etc.). Advisors, naturally, are from Kakao, but their track record is no less impressive.

TEAM

  • Dr. Sangmin Seo
    Director, Klaytn Foundation
  • David Shin
    Global Adoption
  • Younho Lee
    Klaytn Strategy & Treasury
  • Junghyun Kim
    Core development
  • Terry Wilkinson
    Ecosystem Solutions
  • Neo C.K. Yiu
    Technology advocacy
  • Dr. Carolina Rios Florez
    Director of Partnership
  • Jerry Won
    Head of Partnerships

ADVISORS

  • Jiho Song
    Representative, Krust Universe (Founder & CFO, Kakao Corp.)
  • Junyear Kang
    CEO Krust Universe, CEO Bass Investment, CSO Kakao Corp., Board of Director Dunamu (Upbit)

Looking into the future

As mentioned earlier, Klaytn solves the problem of scalability of its network through the creation of service chains, or as they call it “hub and spoke model,” their ‘spokes’ are Service Chains. They use this model to develop their branched ecosystem to not limit the projects on it. However, this model is not yet perfect and requires further development, and Klaytn developers have further plans to enhance Klaytn:

  • The creation of support for the integration of service chains to ensure seamless interaction between participants in our ecosystem.
  • Expanding Klaytn’s interoperable network with more service chains and supporting infrastructure.
  • Implementation of nested service chains, allowing service chains to act as hubs for other service chains, exponentially increasing scalability.

Also, Klaytn plans to work on the TPS by increasing it (as we discussed earlier, 4 TPS is not impressive), so Klaytn will be working on optimizing the consensus mechanism to increase the TPS of the chains.

Scalability can be seen not only in terms of increasing TPS and throughput but also in increasing the number of developers, making the environment more friendly and convenient. Klaytn is planning to create a stack of open source tools and platforms:

  • A comprehensive metaverse package that includes a library of standardized contracts.
  • Open source IPFS gateway for Klaytn games/metaverse/NFT data management.
  • Ecosystem chain explorer to extract and visualize blockchain data.
  • Open source DEX and NFT marketplace for easy activation and asset trading.
  • SDK for connecting to the blockchain and other various components of the
  • ecosystem
  • An open-source mobile and browser wallet for securely storing digital assets and interacting with dApp components.

As mentioned earlier, decentralization of governance is one of the main prerogatives of Klaytn, so developing a decentralized council is one of the ways to build the ecosystem. Therefore, Klaytn plans:

  • Having 30% of its Governance Council made up of DAOs—Organizations of the Future—to create DAOs from DAOs to spearhead the core development of Klaytn.
  • Removing the Gini coefficient in our voting algorithm to give DAOs in its Governance Council more influence as they grow.
  • Changing the requirements of our Board of Management to prioritize candidates committed to actively developing and expanding the Klaytn ecosystem.

Also, to increase the decentralization of councils, scale it, and develop partnerships and the ecosystem as a whole, Klaytn wants to:

  • Growth of our Governing Board to 50 members with a focus on onboarding leading DAOs.
  • Network upgrades to double the maximum number of Governance Council members to 100.

Klaytn has also committed $20 million over the next four years towards blockchain research. Together with two major universities–Korea Advanced Institute of Science and Technology (KAIST) and the National University of Singapore (NUS)–Klaytn is going to “host and operate its Blockchain Research Center (BRC) Program.” BRC is working towards advancing “cutting-edge research for blockchain technology,” as well as broadening blockchain capabilities and supporting industry growth.

“In line with Klaytn’s vision to be the bridge from Web2.0 to Web3.0, bridging the latest findings in blockchain between the research community and industry leaders is key for successful real-world applications in DeFi or the metaverse. Through our BRC program, in collaboration with leading minds from KAIST and NUS, we are delighted to take the next step in bringing our vision to life.”

said Dr Sangmin Seo, Representative Director, Klaytn Foundation.

Conclusion

Klaytn is a fast-growing blockchain. Thanks to the development of its ecosystem, the introduction of new technologies, and the main “aggressive” attraction of new developers and projects, may soon take its place among network giants, such as Ethereum, Binance, and Avalanche. Klaytn has all the chances, opportunities, and indicators to join the battle with the strongest.

Team? Klaytn has a brilliant team with experience in both the institutional business and the crypto space, backed initially by Kakao Corp. In terms of funding, they were able to raise $90 million by bringing in giants like IDG China.

Implementation of its main idea? Klaytn has made it as easy as possible to enter their ecosystem, creating an extensive network, attracting increasingly more gaming and NFT products, and providing easy metaverse implementation.

Is it ecosystem-wide? Klaytn has attracted 271 projects to its ecosystem, both crypto industry giants and budding businesses.

Indicators? The TVL of the network is holding at the support level of $340-380 million after a dramatic fall from the $1 billion mark and is clearly preparing to climb because, judging by the fact of oversold on the market. The size of the trading volume for the KLAY coin at $1.21 billion per month, Klaytn TVL has the growth potential, just like the token itself.

Is the network alive from within? The average number of transactions in 14 days is 202,794, and 2,839,126 in total. The community is active not only financially: constant Twitter posts, discord activity, and articles on the main site and on Medium. Just now, Klaytn is hosting a hackathon with a prize pool of $1 million, attracting partners such as Chainlink, GroundX, and BlockPi, to develop its already vast ecosystem.

Looking at all these indicators, it is easy to see the potential and driving force of Klaytn.

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Disclaimer

Any data, text, or other content on this page is provided as general market information and not as investment advice. Past performance is not necessarily an indicator of future results.

Cryptomeria Capital

Cryptomeria Capital is a crypto fund backed by blockchain industry experts. The firm believes decentralized projects, cryptocurrencies, and Web 3.0 will dramatically reshape economic relations and focuses on ventures, tokens, and projects related to blockchain technology and crypto assets. Cryptomeria Capital supports transformation by providing early-stage financing for ambitious projects in a rapidly developing industry.

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