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Klaytn Aims at Sustainability With Tokenomics, Governance Update

The Klaytn Foundation has submitted a tokenomics optimization proposal to its Governance Council to help Klaytn become a sustainable decentralized network.

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Klaytn Foundation, which runs South Korea’s leading Layer 1 blockchain Klaytn, has submitted a tokenomics optimization proposal to its Governance Council (GC) aimed at developing a sustainable decentralized network.

The proposal includes short-term tokenomics improvements, as well as a long-term plan to establish KLAY, Klaytn’s native token, as a deflationary asset, according announcement published on Klaytn's blog on Wednesday.

Sustainable tokenomics

The short-term tokenomics improvements aim to optimize KLAY’s supply by burning over 5 billion KLAY that has remained unused in the last three years and eight months, which amounts to around 48% of the current total KLAY supply. The remaining 2 billion KLAY will be designated as the KLAY Value Creation Reserve and will only be used to facilitate deflationary KLAY tokenomics, with approval of usage lying with the GC. Any decision making regarding the use of the KLAY Value Creation Reserve will be conducted via on-chain governance through the Klaytn Square governance portal.

In addition, the Klaytn Foundation plans to establish KLAY as a deflationary asset in the long-term by implementing management models that allow ecosystem participants more visibility into KLAY emissions in the medium to long term. The foundation also aims to increase KLAY demand by increasing on-chain interactions, securing infrastructure services that are necessary for the ecosystem, and creating a structure where KLAY can be burned in the process of using these services.

The changes were based on blockchain industry trends, as well as discussions with stakeholders, and community feedback, Klaytn said. "We expect that our optimized tokenomics, as well as the proposed burning of 5.28 billion KLAY, will result in greater stability and trust for the Klaytn ecosystem," Sangmin Seo, representative director of the Klaytn Foundation, said.

Ecosystem resources

The proposal also includes plans to enhance transparency in information disclosures and modify the management structure of ecosystem resources. The Klaytn Foundation aims to merge the Klaytn Growth Fund (KGF) and Klaytn Improvement Reserve (KIR), and reorganize the combined funds into the Klaytn Community Fund (KCF) and Klaytn Foundation Fund (KFF) at a 60:40 ratio.

KCF funds will be used to foster ecosystem services, infrastructure, as well as the developer community, while providing gas fee support to existing Klaytn projects with significant on-chain contributions and making indirect mid-to long-term investments via the Klaytn Eco Fund. KFF funds will be used to cover Foundation operational expenses, attract new GC members, and provide liquidity. Both KCF and KFF funds will be managed transparently through the Klaytn Square governance portal and executed only with the approval of the GC.

The proposal will be voted on by the Governance Council from February 22-28. If approved, the proposal will be implemented through the Kore hardfork, which is currently under preparation.