State of Klaytn: July 2022 and Onward

Thank you to the Klaytn Foundation for feedback on this article.

Klaytn is an EVM compatible blockchain launched in 2019. Over the past 3 years, the Klaytn Foundation and its partners have truly solidified and put into practice a vision of a chain that is focused on true, long term retail and user adoption. Fundamentally, the goal of every legitimate blockchain (away from technological abstractions), is decentralizing the internet, and Klaytn has made enormous strides in allowing this for average users. Their focus on the expansion of their architecture, foothold in the burgeoning Korean Web3 market, and impressive early progress on the NFT and metaverse front all contribute to a strong long-term thesis for the protocol and its users.

This piece aims to review the state of Klaytn from an analytical perspective and its subsequent future potential as a chain with a behemoth of retail adoption. Our thesis on Klaytn remains similar to the Foundation. As Web3 begins to play an increasingly prevalent role in our everyday lives, through technologies such as blockchain gaming, NFTs, and the metaverse, the integrity of the movement’s infrastructure will be paramount. Klatyn is ready to provide that infrastructure as a true market leader

Overview

Starting from a high level technical overview, Klaytn is a highly optimized, BFT-based public blockchain. The Klaytn design architecture aims to achieve:

• 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.

In a production environment, mainnet — the Klaytn Cypress chain exhibits the following performance:

• Handles 4,000 transactions per second.
• Immediate transaction finality.
• One-second block generation time.
• Over 50 consensus nodes can participate in the consensus process.

Network Performance

The Klaytn ecosystem is rich with data provided by tools built by the foundation and other developers. Looking at Network performance from [https://scope.klaytn.com/] we see there are 32 Consensus Nodes participating in block production, a number that has increased over time. The average block time is 1.0s, as set out in Klaytn’s technical ambitions and the average TX per block is approximately 4.

From a Klaytn block explorer, we observe the average daily transaction count to be ~200,000 over the past month. For comparison, this is almost exactly on par with Avalanche mainnet which also does approximately ~200,000 transactions per day. While these chains have a different focus, it is fascinating to see the level of usage that Klaytn has whilst remaining relatively under the radar to date.

The Klaytn Foundation recently did an extensive study on various chains latency through block generation, and time to finality simulation and data gathering. Note: Time-to-finality is the time it takes for a block to be finalized after a transaction is included in it. Klaytn, among all other major chains, boasts a 1s block generation time which is only lower than Solana, but it offers immediate finality which only three other chains here have.

From the results: Klaytn had the lowest transaction latency, averaging ~2.1 seconds.Coming in second is NEAR Protocol, which had an average latency between 2 to 5 seconds, but periodically reaches up to 10 seconds.

Governance Council [source: https://scope.klaytn.com/gcinfo/council]

L2 Scaling on Klaytn

Layer 2 scaling solutions operate on top of a chain, handling transactions through separate validators/block producers, to improve efficiency and user experience. L2 scaling can increase transactions per second and lower transaction cost. For example, on the Ethereum mainnet Arbitrum and Optimism serve as Layer 2s and have seen significant traction since their respective launches. Klaytn plans to implement a series of network upgrades and Layer 2 solutions to allow it to handle a much greater volume of transactions. Not only is this incredibly important to scale verticals like on-chain gaming (which can produce a massive amount of transactions from high user activity) but it is a vital step in lowering the user cost and time barriers for DeFi apps.

A preview of how distinct chain scaling could work on Klaytn

Klaytn developers are also working on the following technological enhancements:

• Enhancements to token management tools and oracle function
• More reliance on bridges for interoperability with other blockchains
• Integrating an IPFS (Inter-Planetary File System) gateway for decentralized storage
• Implementing a smart contract library
• Supporting Ethereum equivalence in Q2 2022 so EVM-based dapps can onboard without any modification

These advancements will improve ease of development, allowing for the smoother onboarding of more Klaytn developers from other EVM chains, as well as increasing the pace of existing production.

NFTs

One of the most exciting infrastructure developments of NFTs on Klaytn was the partnership announcement between OpenSea and Klaytn during the June 2022 NFT NYC event.

This partnership between Klaytn and OpenSea will extend to conference and ecosystem collaboration, and grants focused on education and promotion of NFTs from primarily Asia to a global audience. OpenSea has been very selective on which chains they integrate with,which makes this partnership particularly strong. OpenSea will likely invest in the South Korean NFT market to aid with mainstream adoption. Aside from Klaytn, only Ethereum, Polygon, and Solana have been added to OpenSea.

On the partnership, David Shin, the head of global adoption at the Klaytn Foundation said: “We’re excited to partner with Opensea on this critical step toward our vision of building a blockchain for the metaverse, GameFi and the creator economy [and] through these partnership initiatives, our goal is to draw out innovative use cases and support the growth of the Klaytn ecosystem in Asia.” Out of curiosity, we took a snapshot of the Top 5 Klaytn NFT collections by volume on Opensea — of all time.

The most popular collection, THE META KONGZ KLAYTN, has had over 37 million KLAY in volume on OpenSea since launch!

Blockchain Gaming Hackathons

Hackathons are perfect for attracting talent and bootstrapping an ecosystem with fresh developers and applications. Many of the top applications on Solana, NEAR, Avalanche, etc. came from their respective Hackathons. The $90,000 cash plus $2m in investment allocations will go far in attracting gaming builders to Klaytn. The willingness to host these events suggests that future hackathons are on the agenda, and it’s a great step in fostering organic growth of the ecosystem.

Klaytn Gaming

The Klaytn Foundation has had a lot of time to think about gaming models, given gaming applications’ importance on the chain as well as the gaming background of team/governance members. Especially interesting are their recent thoughts on P2E business models, which NFTs heavily rely upon.

The Foundation noticed that traditional gamers have largely shunned the recent NFT integration attemps. The core adoption and acceptance issues boil down to the high barriers to entry, and inadequate gaming alternatives that exist on-chain in comparison to current mammoth game titles. To address these criticisms, they suggested that Blockchain-based game developers should focus on creating use cases, and more robust standards. Further, Klaytn has developed a gaming package focused on accelerating P2E games.

The Klaytn Gaming Package, developed in the past few months, contains:

• An L2 side-chain solution and accompanying tooling for large projects to build
• An ecosystem chain explorer for fetching and visualizing blockchain data
• Various SDKs for connecting to Klaytn, managing game engine integrations, and connecting to other large ecosystem pieces
• An open source DEX and NFT marketplace for simple assetization and asset commerce, and more.
• Community co-building efforts to promote user growth of individual projects and management and financial support for projects with high global potential

Sangmin Seo, a Director at the Klaytn foundation recently stated that: “Given the popularity of video games within Korea and the strength of K-culture globally, Klaytn’s vision to be the blockchain of choice for games, especially AAA games, is not impossible.”

We also compiled a list of popular Klaytn games, their publishers, and web sites for general reference .

Gas Fee Burn

A lesser known fact about the Klaytn chain is that a certain portion of gas fees (paid in the native KLAY token), are burned each quarter, reducing the inflationary pressure of the network. In Q2 2022, the third scheduled gas fee burn was completed.

Klay Burned: 356,815 $KLAY

Blocks: 92150380 to 94739202

In the future, as network activity picks up, it is likely that the amount of KlAY burned will proportionally increase, which will help keep the network healthy in the long term

Governance Council Improvements

The Klaytn Governance Council is responsible for operating consensus node networks, and driving ecosystem growth. Undertaking the platform ownership, the Council members participate in key decisions related to business and technical updates. As of July 2022, Klaytn posted these updates about the council:

• Klaytn will focus on onboarding more crypto-first organizations into our Governance Council
• In line with this new governance strategy, Worldpay and Amorepacific will be stepping down from the Governance Council by the end of July
• NFTBank and Jump Crypto will be joining the Governance Council on 22 July 2022

NFTBank and particularly Jump Crypto are incredibly strong institutional partners to have on the governance council.

• NFTBank is a NFT portfolio management service and a reliable NFT price feeds provider to decentralized oracles such as ChainLink, which can be used to power NFT collateralized loans, swaps and indexes on Klaytn in the future.
• Jump Crypto has made many contributions to DeFi across chains and platforms in codebase contribution, decentralized governance posts and proposals, and thoughtful articles and data analytics. A truly Web3 native firm, it’s expected that Jump Crypto will positively impact the Klaytn ecosystem by taking its wealth of knowledge gained from activities on other chains and applying it to Klaytn.

The current list of governance council members is below. Notably, Binance, Kakao, netmarble, Maker, Hashed, Hashkey, and LG electronics participate in Klaytn governance.

Integrations

Ensuring that users have access to the most up to date tools and technology has clearly remained a priority for the Klaytn team. The list of Q2 integrations include:

• Snapshot
• Crypto.com DeFi Wallet
• BlockPi
• Krystal Defi
• Synapse Protocol

Snapshot, a voting tool based on the IPFS decentralized storage system, will enable the increased decentralization of protocols on Klaytn and ease of access of protocol community members to participate in decentralized governance.

Crypto.com’s DeFi wallet integration will onboard more users from the Crypto.com platform and simplify on chain DeFi operations.

The decentralized RPC network BlockPi will work on reducing congestion on chain from centralized RPC node clusters unable to meet data requests by its distributed RPC network that automatically evaluates and balances RPC request load throughout the network to deliver stability, reliability, and performance.

Krystal DeFi permits better multi chain DeFi portfolio management of assets on Klaytn. Finally, the partnership with Synapse protocol opens up a large amount of new assets from 15 EVM chains that can be bridged over to Klaytn.

Synapse assets have had impressive traction on Klaytn so far with tens of millions of Synapse assets on chain.

Kakao Talk and KLIP Wallet

When it comes to retail adoption, and the thesis of ‘which people are actually using these services on a day-to-day basis, Klaytn is poised to succeed. In a nod to the strong Korean adoption of Klaytn, Kakao Talk (Korea’s WhatsApp with a $32.2B USD market cap) has already built an in-app wallet service, KLIP, which is used by millions of people.

KLIP has more than three million registered users. These are real, unique people too, as you require a social security number in Korea to register.

This is a clear indicator as to how much potential there is for mass retail adoption. For context, Kakao is based out of Korea (which is where most of their mobile users live).They have a strong foothold on payment apps like KakaoPay, which have real life use-cases. With this in mind, it is worth noting that Klaytn is hand-in-hand with Kakao, and all Kakao users are literally a click away from being able to interact with Klaytn blockchain. The apps and use cases being built on Kakao are already established, and will only continue to scale. Messaging, in-app payment services, gaming and more are all being fleshed out, with the surface only beginning to be scratched.

Once DeFi is built on Klaytn, any user will be able to move money in, and earn better yields than a standard bank account can offer. In addition, it is also EVM compatible, so the barrier to onboarding developers and users from outside of Korea (Metamask compatible) is low.