Intermediate

Token Economy

Welcome to our tutorial on the token economy of Klaytn. In the world of blockchain, token economics is the study of how different tokens, such as KLAY, interact within the network, how they are issued, and what their functions are. In Klaytn, the token economy plays a crucial role in the functioning of the network, from incentivizing node operators to pay for computational resources required to validate and execute transactions. In this tutorial, we will explore the token economy of Klaytn in detail, including how it is structured, the different token types and their use cases, and the impact of the token economy on the Klaytn ecosystem. Whether you are a developer, researcher, or simply a blockchain enthusiast, this tutorial will provide valuable insights into the inner workings of the token economy of Klaytn and how it plays a role in the functioning of the network.

In Klaytn, the token economy plays a crucial role in the functioning of the network. The main token in the Klaytn ecosystem is KLAY, which is used to pay for the computational resources required to validate and execute transactions on the network. The token economy of Klaytn is built around KLAY and it’s designed to incentivize node operators to validate and process transactions, as well as to ensure that the network has sufficient resources to process all the transactions.

In Klaytn, there are different token types with different use cases and functions. The main token types are:

• KLAY: The native coin of the Klaytn network, used to pay for the computational resources required to validate and execute transactions on the network.

• Governance tokens: These tokens are used to participate in the governance of the network and make decisions about the network’s future direction.

• Service Chain tokens: These tokens are used to pay for the computational resources required to execute transactions on service chains, which are specialized sub-networks within the Klaytn ecosystem.

KLAY is issued through a process called “token issuance.” This process is used to distribute KLAY to users in exchange for their participation in the Klaytn network. The token issuance process can include a variety of methods such as mining, staking, and airdrops.

The token economy of Klaytn is designed to encourage a balance between the incentives for node operators to validate and process transactions, and the cost of using the network for users. The value of KLAY is determined by the market, which is in turn influenced by the usage and adoption of the Klaytn network.

In summary, the token economy of Klaytn is built around KLAY, its main token, which is used to pay for the computational resources required to validate and execute transactions on the network. Other tokens such as Governance and Service Chain tokens also play a role in the ecosystem. The token economy of Klaytn is designed to incentivize node operators and ensure network resources while balancing the cost for the users.

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: 50%

• Klaytn Growth Fund (KGF): 40%

• Klaytn Improvement Reserve (KIR): 10%

6.4 KLAY will be minted for every new block. This implies that approximately 200 million KLAY will be minted annually, which is equivalent to 2% annual inflation against the 10 billion KLAY issued at genesis (the annual inflation rate is subject to change through the Klaytn Governance Process). The transaction fee is charged per OPCODE and is metered according to the transaction fee table.

Klaytn Growth Fund

Background

Klaytn’s token economy operates and develops through the activities of Klaytn’s economic entities. The growth of the economy will help improve the stability of the platform and help the ecosystem last. Therefore, Klaytn has an incentive system that fosters the economic entities’ activities in order to help maintain and strengthen the economic growth of Klaytn.

General Concept

The Klaytn Growth Fund (KGF) aims to bring the Klaytn economy forward by providing grants and investing in various organizations and individuals that contribute to the Klaytn economy. Klaytn’s technology provides enormous opportunities for people to store, transfer, and exchange data and value globally with ease and at a minimal cost. And since it is an open network, anyone can join to build an application without obtaining any permissions. However, wider adoption of blockchain has been hindered because the technology is still in its early phase, and most of the values and data are still being managed in traditional ways in the form of legal contracts, local storage, etc. And KGF is intended to solve these problems. KGF will support various programs for promoting the adoption of Klaytn across all industries, such as rewarding those who show proof of contribution on-chain and investing in early-stage dApps. It will be constantly financed through a certain percentage of block reward

Klaytn Improvement Reserve

As technology continues to improve and the needs of users change over time, our platform must have the ability to quickly adapt to any new circumstance that arises. To respond to such changes, we must not only work on services but also undergo various activities to maintain Klaytn’s ecosystem. For instance, research and development for better technology, or projects that contribute to the overall growth of the ecosystem may be part of these activities. These activities are necessary for Klaytn to progress continuously. Klaytn Improvement Reserve (KIR) will be deployed for activities that improve the Klaytn ecosystem such as: