Network

【Network Introduction】Klaytn

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Network Detail

Brief Introduction

Klaytn (KLAY) is a public blockchain designed for the metaverse, gaming, and the creator economy. It was launched in June 2019 and has a large share of the South Korean blockchain market. The business is expanding globally and is supported by the Klaytn Growth Fund. This fund is managed by the Klayn Foundation, a non-profit organization based in Singapore. As of April 2, 2022, KLAY crypto (the native coin of the Klaytn network) is the 47th largest crypto by market cap. The KLAY network uses a unique combination of three blockchains in one, theoretically allowing it to scale easily. Klaytn is designed to be a launching platform for real-world metaverse solutions that can function in real-time.

Community

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Establishment

The Klaytn blockchain has been developed, launched, and managed by several organizations that are tied to a single business entity. KLAY crypto was created by GroundX, a subsidiary of Kakao, which is the largest mobile platform in South Korea. After several years of successful operations in Korea, the Klayn Foundation was started to aid in the global expansion of the Klaytn blockchain. The Klaytn Foundation is a non-profit organization created with the goal of accelerating the worldwide adoption of Klaytn and the development of its ecosystem. The foundation oversees the Klaytn Growth Fund and works with Krust, a subsidiary of Kakao Corp, a large internet company in Korea.

Key Design Goals

Immediate finality.

High TPS that meets real-world use cases.

Lower the cost of running Blockchain Applications.

Lower the barriers to entry for end-users. Ease the technology adoption process for industry.

Mainnet Specifications

1-second block generation and confirmation time.

4,000 transactions per second.

Low gas price that is almost 1/10 of Ethereum.

Runs EVM (Ethereum Virtual Machine) and supports the execution of Solidity contracts.

19 reputable corporations worldwide initially formed Klaytn Governance Council to operate consensus nodes.

More than 50 initial service partners have committed to launch Blockchain Applications on Klaytn.

Value

If the metaverse continues to grow, developers could find the tools provided by Klaytn to be useful, increasing the adoption of Klaytn and KLAY crypto. One point in its favor: Klaytn relies on a hub-and-spoke model that is considered a leading scalability solution. Klaytn’s service chains, the spokes in this model, can be customized for specific dApp requirements, including high throughput, custom node configurations and custom security levels. In a best case scenario, support for nested service chains could provide the exponential scalability needed for metaverse-scale adoption.

Ecosystem

Logical Subnetworks

Core Cell Network (CCN)

CCN consists of Core Cells (CCs) that verify and execute transactions submitted through Endpoint Nodes (ENs). CCN is responsible for creating and propagating blocks throughout the network.

Endpoint Node Network (ENN)

ENN consists of Endpoint Nodes (ENs) that mainly create transactions, handle RPC API requests, and process data requests from service chains.

Service Chain Network (SCN)

SCNs are Klaytn subnetworks composed of auxiliary blockchains independently operated by blockchain applications (BApps). Service chains are connected to the main chain via ENs.

Core Cell Network and Endpoint Node Network form a Klaytn main chain or mainnet. Blockchain Applications can run on the Klaytn main chain, Cypress, or can operate on their own blockchains called Service Chains.

Projects

Projects Classifications include: ✨DEXES / DEFI ✨GAMING ✨NFT ✨ENTERTAINMENT ✨ENTERPRISE ✨GOVERNANCE COUNCIL ✨TOOLS / INFRASTRUCTURE ✨WALLETS ✨ORACLES / BRIDGES ✨DAPPS ✨CEXES / PAYMENTS

More project lists can be checked here.

Team

Funding

Funding Rounds

Klaytn has raised a total of $90M in funding over 1 round. This was a Initial Coin Offering round raised on Dec 15, 2018.

Investors

Klaytn is funded by 3 investors. Crescendo Equity Partners and IDG Capital are the most recent investors.

Technolgy

Unique Features

Klaytn crypto has a variety of unique features. The network offers a metaverse package that comes complete with customized layer-2 solutions, smart contract libraries, blockchain explorers, crypto wallets, bridges and oracles, in addition to an ecosystem of supporting services like NFT marketplaces, stablecoin integration, and more. These tools make Klaytn a sort of one-stop-shop for those looking to build something in the metaverse, like play-to-earn crypto games, for example.

Consensus Algorithm

Klaytn uses something called Istanbul Byzantine Fault Tolerance (IBFT) as its consensus algorithm, allowing transactions on the network to be completed within one second. This allows for use cases where near-instant finality of transactions can be helpful, like minting NFTs in real time for item drops inside video games.

Development Plan

✨ SUPPORT FOR ETHEREUM EQUIVALENCE

The metaverse and Web3 will rely on coordination and open source standards. Ethereum equivalence offers a path for what is clearly emerging as the standard of many blockchain ecosystems — the EVM. To that end, Klaytn will be adopting the EVM specification by:

  1. Making Klaytn’s technical stack equivalent, from an interfacing and execution perspective, to the existing Ethereum stack;
  2. Building on top of existing Ethereum clients and interfacing libraries to inherit any improvements made to their open-source codebases;
  3. Enabling Ethereum Improvement Proposals (EIPs) and Klaytn Improvement Proposals (KIPs) to contribute to both ecosystems.

✨ SCALING UP THROUGH SERVICE CHAINS

Klaytn uses a hub and spoke model as their scaling solution to maintain performance as our ecosystem grows. Their ‘spokes’, which they call Service Chains, can be tailored for individual dApp requirements, and just like other L2 solutions, they can be anchored to their main chain for greater security. They will be scaling up by:

  1. Building support for Service Chain bridging to enable seamless interoperability between participants in their ecosystem;
  2. Sizing up their interoperable network with more Service Chains and supportive infrastructure;
  3. Implementation of nested Service Chains, allowing Service Chains to act as hubs for other Service Chains, exponentially increasing scalability.

✨ CONSENSUS OPTIMIZATION

  1. TPS improvements act as a performance multiplier in a hub and spoke architecture — that’s why they will be simultaneously working on the optimization of our consensus mechanism to boost the TPS of their chains.

Developing Tool

Klaytn supports the Ethereum Virtual Machine (EVM) as part of its work in developing the metaverse and Web3. The network adopts the EVM specification by making its technical stack equivalent to the Ethereum stack, building on top of existing Ethereum clients, and enabling Ethereum Improvement Proposals (EIPs) and Klaytn Improvement Proposals (KIPs) to contribute to both ecosystems.

✨ AN OPEN AND DEVELOPER-FRIENDLY ENVIRONMENT

In line with their roots as an open source public blockchain project, they will be dedicating resources to create a stack of open source tools and platforms along with an end-to-end package for blockchain and metaverse developers to simplify onboarding.

  1. An end-to-end metaverse package including a library of standardized contracts;
  2. An open source IPFS gateway for Klaytn gaming / metaverse / NFT data management;
  3. An ecosystem chain explorer for fetching and visualizing blockchain data;
  4. An open source DEX and NFT Marketplace for simple assetization and asset commerce;
  5. SDKs for connecting to the blockchain and other various components of the ecosystem;
  6. A mobile and browser based open source wallet for secure storage of digital assets as well as interaction with dApp components.

Economy

Overview

Klaytn’s token economy is designed to create sustainable funding structures for powering its ecosystem operations, growth initiatives, and strategic investments. Many public blockchain projects have monetary systems that solely incentivize their node operators (miners or block producers), focusing only on the technical aspect of network maintenance. However, such designs miss out on the importance of incentivizing other types of participants who contribute to the growth of the network’s token economy or invest in long-term growth prospects. In contrast, Klaytn’s token economy is designed to compensate more diverse forms of contributions from a wider range of participants, and has built-in funding structure to procure sustained resources to fuel future growth initiatives and strategically sourced investment projects in addition to maintaining its blockchain nodes.

Native Coin-KLAY

KLAY is the main internal transferable cryptocurrency of Klaytn and is used to pay transaction fees when creating or executing smart contracts or when transferring KLAY.

KLAY is a necessary element — a fuel — for operating the Klaytn distributed application platform. It is a form of payment made by the clients of the platform to the consensus nodes (CNs) executing the requested operations. To put it another way, KLAY is an incentive; it ensures that developers write high-quality applications (wasteful code costs more) and that the network remains healthy (CNs and RNs are compensated for the resources they contribute).

Token Function

The token (KLAY) is mainly used for metaverse-related software.

  1. Developers can use Klaytn to build things in the metaverse. This can include marketplaces for virtual goods, virtual reality universes, play-to-earn crypto games, and other related activities.
  2. Traders may use their KLAY tokens to participate in governance of the Klaytn network and to earn interest on their KLAY.

Funding Structure

Klaytn’s funding structure runs continuously with Klaytn network’s block generation. With every new block, newly issued KLAY and the sum of transaction fees used in the block (collectively called “block reward”) are aggregated and distributed to the following three destination accounts in accordance to the predetermined ratio:

Klaytn Governance Council Reward: 34%

Klaytn Growth Fund (KGF): 54%

Klaytn Improvement Reserve (KIR): 12%

At the time of Klaytn mainnet launch, 9.6 KLAY will be minted per block. This implies that approximately 300 million KLAY will be minted annually, which is equivalent to 3% annual inflation against the 10 billion KLAY issued at genesis (the annual inflation rate is subject to change through the Klaytn Governance Process). Transaction fee is charged per OPCODE and is metered according to the transaction fee table.

Governance

Overview

Klaytn crypto has a unique governance structure called a Governance Council (GC). Made up of enterprises and decentralized autonomous organizations (DAOs) from around the world, members of the GC form a validator network that can provide the benefits of a decentralized public blockchain while also sustaining the performance of a centralized, permissioned blockchain. Klaytn has plans to become more decentralized by adding additional DAOs in the future.

Klaytn Governance Council Reward

Klaytn Governance Council is the collective group of Core Cell Operators (CCOs). Council members are responsible for maintaining Core Cells (CCs), which makes the Council an essential body in the Klaytn ecosystem responsible for providing the underlying infrastructure. To become a Council member, the candidate must undergo a qualification review by the Klaytn Governance Process and must stake at least 5 million KLAY. The Klaytn Governance Council Reward is a structure for incentivizing Council members to continue to provide a stable foundation for the Klaytn ecosystem.

Klaytn Governance Council Reward Mechanism

For every block, a Committee composed of randomly selected Council members is formed. Each Committee has one member assigned the role of Proposer; all other Committee members assume the role of Validators. When a block is successfully created and added to the Klaytn blockchain, the Proposer of the said block is rewarded with 100% of the block reward. The probability of a Council member being selected as a Proposer is proportional to the amount of KLAY staked by the member; that is, the more KLAY a member stakes, the more likely that the member will be selected as a Proposer and potentially claim the block reward.

As long as the minimum 5 million KLAY staking requirement is met, Klaytn Governance Council members can freely stake or unstake his or her own KLAY. Staking information is updated every 86,400 blocks, and newly staked KLAY comes info effect two update cycles later from when the staking is completed. Withdrawing staked KLAY requires one week of delay to prevent malicious members from immediately exiting.

To prevent monopolized claiming of Klaytn Governance Council Reward by small groups of highly invested Council members, Gini coefficient may be used to adjust the effective amount of staked KLAY. The application formula is as follows, where G stands for gini coefficient of Governance Council’s KLAY staking distribution: Adjusted staking amount = (Council member’s staking amount)^(1/1+G).

Governance Topics

The main topics that can be decided through the governance structure include the following three areas, and proposals that require additional decision making may be introduced in a regular meeting or temporary meeting for review. The Klaytn Governance Council must make decisions that are best for the growth of Klaytn.

✨ Technology

Matters related to the technical update of the platform. Here the issues on the blockchain’s basic structure (e.g., Account Structure), new features (e.g., L2 solution), or software update schedule are included.

✨ Economy

Issues relating to additional issuance of KLAY and its distribution structure, changes in transaction fees, and Klaytn Improvement Reserve spending approval etc. are included in this category.

✨ Governing Rule

The governance subjects and processes, as well as the rules for the responsibilities and rights of governing bodies, are included in this category.

Process

The KIR Proposal review will be decided through the voting of the Governance Council members, and the proposal will be rejected if half of the committee or more vote against(rejected) the proposal.

Governance Roadmap

The bodies participating in governance must act in consideration of Klaytn’s long-term benefits rather than just for their personal interests, and they must actively participate in the governance process. Additionally, all participants that contribute to the network as Klaytn Governance Council members must secure computing resources that are greater than the platform requirements and stake a set amount KLAY of their own or from third parties. For smooth operations in development and stabilization of the platform, Klaytn Foundation will take on many roles in governance related matters in the initial development phase. In the future, however, other bodies will gradually take on greater roles in the decision-making process, and they will have the right to participate independently.

✨ Development Phase: The initial development phase after the mainnet launch must quickly see parameter adjustments, new feature developments, etc. For this to be possible, many issues will be decided through gathering the opinions of the Klaytn Governance Council members, service providers, and community members. To secure initial stabilization, Klaytn Foundation will lead the decision-making process. Additionally, all decided matters will be transparently shared with the public.

✨ Stabilization Phase: The Klaytn Governance Council has governing rights on many proposals and this phase will gradually begin starting Jan 2021. For special matters such as those concerning platform development, and matters that directly affect the overall Klaytn ecosystem, Klaytn foundation may facilitate the discussion and execution.

✨ Decentralization Phase: Following the stabilization period, to gather additional opinions, more service providers and other bodies may be brought into the decision-making process. Decentralization phase may be gradually achieved through multiple stages with different governing rules and participants.

Development Plan

✨ SHIFT TOWARDS DECENTRALIZATION

Decentralization is a core tenet of the metaverse and future economy. Klaytn firmly believes in this shared global vision and will be updating core elements of their governance strategy as part of their gradual move towards decentralization by:

  1. Having 30% of their Governance Council comprising of DAOs — the organizations of the future — to create a DAO of DAOs to lead Klaytn’s core development;
  2. Abolishing the Gini Coefficient in their voting algorithm to give DAOs in our Governance Council more influence as they grow;
  3. Shifting their Governance Council requirements to prioritize candidates that are committed to actively developing and growing the Klaytn ecosystem.

✨ EXPANDING GOVERNANCE COUNCIL

Beyond their governance changes, they will also be increasing the number of Governance Council members as part of their push towards greater decentralization of the Klaytn network.

  1. Increasing their Governance Council to 50 members, with a focus on onboarding leading DAOs;
  2. Followed by network upgrades to double their maximum number of Governance Council members to 100.

Advantages and Disadvantages

Advantages

  1. Klaytn could make it possible for people to build things like play-to-earn crypto games at scale. These games could involve item drops that could be minted as NFTs in real-time. Players could perform all blockchain-related actions in the game without delay and with little to no fees.
  2. KLAY is Ethereum Virtual Machine (EVM) compatible. This makes it easy for Ethereum developers to build on KLAY.
  3. KLAY could lead to increased adoption of many developments inside the metaverse, leading to new innovations.

Disadvantages

  1. Klaytn is still relatively small and faces a lot of competition.
  2. At this time, most metaverse-related activities are being built on more well-known networks like Enjin or Decentraland.
  3. While Klaytn’s compatibility with the Ethereum Virtual Machine is intended to help speed up adoption, it remains to be seen whether or not that will be the case.

Validator (Node)

A tiered network architecture with role-based node types is implemented in Klaytn to optimize the network performance.

Role-based Node Types

✨ Core Cell (CC): Consensus Node (CN) + Proxy Node (PN)

A Core Cell (CC) is composed of a single Consensus Node (CN) and two Proxy Nodes (PNs). Consensus Nodes are participating in the block generation process, while Proxy Nodes provide the interface to the network. PNs transmit the transaction requests to the Consensus Nodes, and propagate the blocks down to the Endpoint Nodes.

✨ Endpoint Node (EN)

ENs serve as endpoints for Klaytn network handling RPC API requests and processing data sent to and from service chains.

✨ Bootnode

Bootnodes are special-type nodes operated by Klaytn to help newly joining nodes register to the network and to discover other nodes to connect with. CN bootnodes reside within the CNN and are not exposed to the public, while PN and EN bootnodes are publicly visible. PN bootnodes only allow permitted PNs to be registered, and let eligible PNs connect with ENs. EN bootnodes provide ENs with information on which PNs to connect to.

Tiered Networks

CNs, PNs, and ENs form logical networks, Consensus Node Network (CNN), Proxy Node Network (PNN), and Endpoint Node Network (ENN), respectively. Below figure shows the overall topology of Klaytn mainnet, where Core Cell Network (CCN) is further broken down into Consensus Node Network (CNN) and Proxy Node Network (PNN). Endpoint Node Network (ENN) is also shown as the surrounding network connected directly to PNN.

✨ Consensus Node Network (CNN)

CNs form a full-mesh network among themselves called CNN. CNN applies BFT over a WAN (wide area network) and requires each CN to satisfy stringent hardware and network resource requirements to carry out BFT consensus at a sufficient performance level.

✨ Proxy Node Network (PNN)

PNN consists of PNs. Typically, PNs maintain just one connection with a PN in a neighboring Core Cell. The number of peer connections is subject to change depending on the network configuration.

✨ Endpoint Node Network (ENN)

The outermost subnetwork, ENN, is solely composed of ENs connected to each other and also to a number of PNs.

Public Disclosure and Open Validation

Service providers and end-users on Klaytn network can freely validate block generation results and check if the CN committee has generated the block according to proper procedures. Such validation includes checking if the block header contains more than two-thirds of the committee signatures. All CNs must support open validation and are required to post their public keys (used to sign blocks) in a publicly accessible space (e.g., block headers). Open validation promotes transparency, deter censorship, and prevents malicious behaviors.

Block Rewards

For each round, block reward (which is the sum of 9.6 newly minted KLAY and transaction fees paid to process the block) will be distributed to the network participants according to preset distribution ratios. The proposer of the newly created block will receive 100% of the reward to be awarded to CNs, whereas the committee will receive none. Note that the probability of being selected as the proposer is influenced by the amount of KLAY staked by the CN, implying that a CN with more KLAY invested in the platform will probabilistically receive more rewards.

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