Changes to the policies of Staking and Voting
Hello KLAYswap community!
First of all, we would like to thank you for your interest and participation in “Staking & Voting”, the first step to allow KLAYswap to operate on a completely trustless basis. Currently, the percentage of KSP staked is about 42%, with more than 4,300 wallets participating and this is growing at a tremendous rate in the Klaytn network.
Despite this rapid exponential growth, we are monitoring the staking system (vKSP) in a cool-headed manner so that Klaytn’s one and only AMM-based DeFi protocol, KLAYswap, can evolve into a truly decentralized and sustainable model. In particular, we are closely monitoring the minor issues that have arisen since the application of vKSP, and we have focused on staking APY and the phenomenon of mining saturation of certain pools due to voting.
Before the introduction of a governance model that can be fully autonomous, the KLAYswap team wants to build a solid foundation by supplementing a few things for the benefit of KLAYswap. In today’s post, we would like to inform you of the post-vKSP model launch changes.
Summary of Changes
Increased KSP mining distribution for staking
White Listing of KSP Mining-possible Pools through Voting
Adding a time-lock to the KSP mining rate
1/ Expanding Mining Distribution for KSP Staking
In order to secure the competitiveness of the staking model and to ensure that KSP’s lock-up effect acts as a factor that supports the APY of general liquidity pools, the role of voters who support the KLAYswap system and token economy is very important. In particular, as we explained in a previous post, KSP holders and specifically voters who support the ecosystem through KSP staking are at the center of the KLAYswap ecosystem. Participants who give up the time value of their KSP to support KLAYswap decide the incentives given to liquidity pools and end users.
Therefore, incentives should support and encourage more active participation by those who promote economic flows on the network. As such, KLAYswap raises the KSP mining distribution rate for voting right holders to 40%. This was initially set to 20%.
This will boost KSP’s value by increasing substantial rewards for participants who have staked KSP for a long period of time in line with KSP’s long-term vision and value increase, thereby creating a sustainable environment where liquidity providers are guaranteed real APY.
Expected APY from the changed mining distribution:
2. White Listing of KSP Mining-possible pools through Voting
The core design of KLAYswap is systematized based on smart contracts so that anyone can easily create pools and provide liquidity to those pools. However, if significant liquidity is not provided or a particular individual or group can have a significant impact on a liquidity pool, it can lead to a decline in the willingness of end users to participate, eroding the path to the full decentralization originally pursued by KLAYswap.
Prior to the official launch of the DAO, which would allow everyone to vote on these vulnerabilities and select them fairly, the KLAYswap team wants to resolve them by whitelisting pools based on liquidity and token distribution. This change will be an update that will accelerate the inflow of diverse, new liquidity pools, and we believe it is definitely a perfect time to proactively prevent vulnerabilities prior to the DAO’s opening.
3. Adding a Time Lock of KSP Mining Rate set by vKSP Vote
Currently, the mining rate distribution of KSP by vKSP voting is applied in real time and distributed to liquidity providers and voters. Real-time application has served as a strong motivation for individual participants to supply liquidity, providing a liquidity-rich environment and encouraging users with diverse trading objectives to participate. However, since this structure has the potential to transform into a structure that is favorable to individuals or specific groups rather than the entire ecosystem of KLAYswap, a one week time lock will be applied to the KSP mining rate set by vKSP vote so that KLAYswap’s economic system can operate in a wider range.
The previous real-time application model allowed for the instantaneous inefficient allocation of KSP mining regardless of overall market flow, which can lead to market distortions. With this time lock, we want to create an environment where users can more securely provide liquidity and experience why providing liquidity to KLAYswap is the most effective and efficient way to utilize tokens.
*Applied Time Lock is only limited to the KSP mining rate, and transaction fee distribution is maintained as it was.
When the Changes will be Applied
Among the changes mentioned above, the distribution expansion and whitelisting for KSP staking will begin to be applied on Wednesday, April 7, 2021 at 11:00 a.m. UTC+9, and the update schedule of the Time Lock will be informed separately through the community channel. Therefore, KLAYswap users, including KSP voting participants, should be aware of the changes before continuing to use Klaytn’s only decentralized swap service.
In summary, KLAYswap is building a liquidity-rich environment based on the KSP token economy with the aim of becoming a completely decentralized connection point of liquidity. Because it is based on the token economy, there are long-term proponents of KLAYswap at the center of the ecosystem and their role is very important. Therefore, we are going forth with this update because we would like to provide a more efficient mining environment for KSP voters who are expanding the ecosystem by voting for important parameters of KLAYswap, and to make it so that other participants receive the value of the growing ecosystem.
In addition, we would like to apply a time lock to the KSP mining rate, which is changed by voting, along with the whitelisting of liquidity pools that can have mining allocated to them. These updates will eventually prevent the KLAYswap ecosystem from temporary market distortions, allowing all participants to enjoy the economy fairly.
Please refer to the changes and continue to participate enthusiastically. We will continue to grow and expand our network to enable continuous growth in line with the flow of a decentralized ecosystem.