KLAY is the native utility token of the Klaytn ecosystem, a blockchain platform developed by Ground X. ^[1]

Overview

KLAY is used to pay transaction fees when creating or executing smart contracts. It is also used as a form of payment to compensate the consensus nodes (CNs) responsible for executing the requested operations. ^[2]

KLAY also serves as a governance token, and to enter the Klaytn Governance Council, validators must stake at least 5 million KLAY. Council members are confirmed every 86,400 blocks and can have their stake slashed in case of misbehavior. ^[3]

Tokenomics

The total supply of KLAY is set at 10.7 billion. With each new block, Klaytn mints 9.6 KLAY, resulting in an annual circulation increase of 300 million KLAY. This indicates an inflation rate of 3% per year for Klaytn. To support the development of its ecosystem, Klaytn allocates a significant portion of its total emissions. ^[4]

Specifically, 66% of the emissions are dedicated to this purpose. The distribution of block rewards is divided as follows: ^[4]
- Klaytn Governance Council Reward: 34%
- Klaytn Growth Fund (KGF): 54%
- Klaytn Improvement Reserve (KIR): 12%

Klaytn Governance Council Reward

The Klaytn Governance Council comprises the Core Cell Operators (CCOs) who collectively oversee the maintenance of Core Cells (CCs). To become a Council member, candidates must undergo a qualification review through the Klaytn Governance Process and stake a minimum of 5 million KLAY. The Klaytn Governance Council Reward is designed to incentivize Council members to consistently contribute to a stable foundation for the Klaytn ecosystem. ^[5]

Mechanism

For each block in the Klaytn blockchain, a Committee is formed consisting of randomly selected members from the Klaytn Governance Council. One member of the Committee is designated as the Proposer, while the remaining members become Validators. The Proposer of a successfully created and added block receives the entire block reward. ^[5]

The likelihood of a Council member being chosen as the Proposer is proportional to the amount of KLAY they have staked. In other words, members who stake more KLAY have a higher probability of being selected as the Proposer and earning the block reward. ^[5]

Council members have the flexibility to stake or unstake their own KLAY as long as they meet the minimum requirement of 5 million staked KLAY. Staking information is updated every 86,400 blocks, and newly staked KLAY takes effect two update cycles later. To prevent malicious actions, there is a one-week delay for withdrawing staked KLAY, ensuring that members cannot immediately exit the staking commitment. ^[5]