• Cryptoasset Report
  • August 15, 2019

Developed by Kakao subsidiary GroundX, Klaytn is a hybrid public/private enterprise-focused blockchain intended to support certain types of decentralized applications.


KaKao is a Korean mobile instant messaging platform notable for its large global user base. Developed by Kakao subsidiary GroundX, Klaytn is a hybrid public/private, enterprise-focused blockchain intended to support certain types of decentralized applications. Klaytn intentionally trades off degrees of decentralization for features intended to promote mass adoption, such as greater comparable scaling, business friendly developers’ tools, and a web of service and enterprise partners. Klaytn’s governing members and partnerships have included: LG, KaKao, UnionBank, PUBG Corporation, Pearl Abyss, Shinhan Bank, Celltrion, IDG Capital, and Netmarble, among others.

GroundX was founded by Jaesun Han (CEO), who previously co-founded FuturePlay Inc and holds a Ph.D in electrical engineering & computer sciences from KAIST. GroundX’s Head of Technology, JunHo Cho, previously held a senior position at SK Planet, an online-services focused subsidiary of SK Telecom, South Korea’s largest wireless carrier. GroundX raised funding via a private token sale, raising $90 million as of March 11th, 2019.

Protocol Details

A central thesis informs Klaytn’s protocol design and feature set: that businesses will drive mass blockchain adoption. Klaytn aims to support what it calls BApps (Blockchain Apps), a type of centralized application that utilizes blockchain technology for properties like security, immutability, transparency, and traceability but does not seek to decentralize its core business model or significant components of its architecture—what it argues DApps (Decentralized Applications) aim to do. A hypothetical BApp might be run by a venture-backed startup, based on traditional centralized application architectures, and only use a blockchain to hash results of off-chain transactions. In Klaytn’s view, ‘BApps’ will be a significant offshoot of blockchain technology.

Klaytn describes its offering as ‘a public blockchain that retain[s] robust security and transparency while delivering enterprise-grade performance.’ Specifically, the protocol utilizes Istanbul BFT for consensus, with a small set of consensus nodes (CNs) performing consensus on a private network (so to capture the efficiencies gained through private blockchain designs), while also enabling a larger permissionless network of endpoint nodes (ENs) to assess and verify block generation results (so to retain the transparency and security found in public blockchains).

A diagram illustrating Klaytn's network topology.

Entities aiming to contribute as a ‘Core Cell’, a set of two proxy nodes and a consensus node, must stake 5 million KLAY and undergo a qualification review by the project’s governance council—which is composed of existing core cells. Core cells connect to each other via proxy nodes to form a full-mesh ‘Consensus Node Network’ (CNN). Consensus nodes are required to participate in governance, follow block production standards and operate reliable hardware. Proxy nodes also connect the private CNN to a permissionless ‘Endpoint Node Network’ (ENN) that is composed of ENs who create transactions, handle RPC API requests, and process data requests from service chains.

Klaytn intends to realize a one block per second target propagation time; its network is claimed to be 150x as fast as ethereum. Consensus nodes are randomly selected to serve as block producers, with selection made more probable through higher quantities of staked KLAY. A committee of CNs approves new blocks, with a two-thirds majority required for finality; block headers publicize the block producer’s and committy’s signatures. Through such publicized information, end users and service providers can validate block generation. For even higher throughput needs, Klaytn supports servicechains (sidechains), a second-layer scaling solution. While not a novel technology—Loom Network uses a similar system— servicechains will allow Klaytn to support token transfers between chains.

Such high throughputs and propagation times are intended to enable new and novel BApps and blockchain services. Like many DApps, Klaytn’s BApps will be written in Solidity, the language of Ethereum; Klaytn intends for BApps made with development toolkits such as Remix and Truffle to be compatible with its virtual machine, so to improve developer experience, though is considering supporting more languages in the future. The project’s virtual machine, KLVM, is largely based on the Ethereum Virtual Machine, but with two significant departures: KLVM will use a platform-defined value as gas price rather than accepting user defined prices, and execution costs will be paid with KLAY rather than ETH. (Klaytn intends to stabilize smart contract execution costs through such a metered pricing model; justification for the approach is offered in the computation documentation.) Smart contracts can be embedded and executed (called) on the Klaytn chain as transactions; CNs are responsible for executing smart contract code.

Asset Details

Klaytn’s cryptoasset, KLAY, confers governance and contribution rights, as well as functions as ‘gas’ for smart contract execution. At the blockchain’s genesis, Klaytn issued 10 billion KLAY, with 9.6 new KLAY minted per block produced (i.e. 3% annually of the genesis sum, or ~300 million KLAY.) The annual emission rate will be subject to change via Klaytn’s governance processes. Block rewards are distributed to three groups:

  • Klaytn’s governance council (CNs) receives 34% of block rewards (which include transaction fees.) The randomly selected block producer collects 100% of block rewards, with selection made more probable through staking additional KLAY; 5 million KLAY must be staked by CN operators. Unstaking staked KLAY takes one week; the delay is added to prevent malicious CN’s from exiting, with CNs subject to (unspecified) penalties for omitting transactions, creating more than one block in the same height, or failing to validate a proposer’s block. Penalties for misbehavior are subject to further revision through Klaytn’s governance process.
  • Klaytn’s ‘Improvement Reserve’ (KIR) receives 12% of block rewards. The reserve essentially functions as a treasury to fund research and community initiatives proposed by any ‘ecosystem participant’ and approved through the KIR governance process.
  • Service providers, BApp developers and end-users are eligible for 54% of block rewards, as allocated by Klaytn’s ‘Proof of Contribution’ mechanism. Minimum requirements for eligibility include completing an application, meeting thresholds for daily active users, and paying a certain portion of user transaction fees. BApps that exclusively use KLAY as means of payment are eligible for additional rewards.

BApp, service, and smart contract use represent areas where end-users are expected to acquire and spend KLAY, either as part of smart contract utilization or KLAY exclusive services.