We had the pleasure of hosting EZ Yi, our Head of Strategy, and Colin Kim, Klaytn Core Development Team Leader, for an informative AMA session where they answered the community’s questions about Klaytn’s plans to increase the gas price to combat arbitrage bots. Listen to the AMA session below or read on for our recap!

Note: Some of the text have been edited for grammar and clarity.

Date & Time: Feb 18th at 1pm SGT / 2pm KST
Platform: Twitter Spaces
Speakers:
EZ Yi and Colin Kim from Klaytn Foundation
Host: Sofy, Community Manager at Klaytn Foundation


Introduction

Sofy: Good afternoon and Happy Friday everyone! Hope everyone is all ready for the weekend. Welcome to another AMA session with us. I am Sofy, the Community Manager for Klaytn and I will be the host for today’s exciting session. Thank you all for being here today with us. Once again, let’s welcome EZ, and this time, we have Colin who will be joining in. Together, they will both discuss the recent talks about the gas price adjustment.

Please kindly introduce yourself to the community and share with us about your place in the Klaytn network.

EZ: Good afternoon! I am EZ, the Head of Strategy of Klaytn Foundation, covering Klaytn 2.0 implementation, new opportunities identification, and token economy innovation. The focus of today’s topic—the gas price adjustment—is within a broader context of token economy innovation. I know how important the gas price adjustment is for the entire community and I will try my best to answer your queries as clearly as possible.

Colin: Hi, thanks for having me. I have been working with Klaytn for three years. I was involved in developing various products such as the Klaytn core, Klaytn API service, and KlipDrops, which is an NFT marketplace for digital art. Currently I’m leading the Klaytn core development team to achieve Klaytn 2.0’s technical goals.

Sofy: Thank you for the introduction guys, and really looking forward to hearing more about your thoughts and Klaytn’s approach to the gas price adjustment. We will also be sharing the results of 2 surveys that were sent out recently to both our community and our Governance Council towards the end of our AMA. Let’s get on to our community questions then.

Questions

Q1
Sofy: What is the motivation for the gas price adjustment?

Colin: When the mainnet first launched, we aimed for our gas fees to be 10% of Ethereum’s. However, currently, it is about 10,000 times less than Ethereum’s due to various reasons. This worked fine when the Klaytn network was not that busy. But recently, we found many arbitrage transactions operating in an inefficient manner. Most of these transactions are actually doing nothing, but they are able to remain profitable because the transaction fee is relatively low.

We tried some technical approaches to reduce these transactions. Some of them are effective to some degree, but not that much. Since the main reason for this kind of transaction surge comes from low transaction fee, this gas price increase is inevitable to reduce the transaction surge.

Q2
Sofy: What happened exactly with the bots?

Colin: There are many bots on the Klaytn network. The problematic bots are mainly arbitrage bots trying to capitalize on the tiny rate differences between exchanges that happen when a user buys a token using another token. The arbitrageurs all submit transactions when this happens, but only the first arbitrageur whose transaction is executed first will succeed.

Unlike Ethereum, Klaytn does not have a fee-based transaction prioritization mechanism. Klaytn’s gas price is fixed, which is good for service providers because they do not need to think about dynamic transaction fees. But it’s not good for arbitrageurs because they don’t have a method to execute their transaction faster than the others. To compensate, they submit many transactions to increase the probability of success. This is why there are so many transactions flooding on the network.

And since Klaytn’s transaction fee is low, they can afford to submit many transactions and still remain profitable.

Q3
Sofy: Klaytn’s TPS is around 4,000, however the bots’ TPS appears to be around 2,000, as shown in Klaytnscope. Are bots really a problem or is Klaytn’s TPS not actually 4,000?

Colin: Like many other blockchains, Klaytn’s peak TPS is measured based on simple token transfer transactions. Because an arbitrage transaction is a more complicated transaction that executes several token transfers in a single transaction, we will not see a chain’s peak TPS when executing a large number of these transactions.

Bots are problematic because they fill up the processing capacity of a block, preventing other transactions from executing normally. If arbitrageurs take a large portion of the network capacity, it will not be good for the entire community.

Q4
Sofy: Are the bots evil? Aren’t they just one of the users of the Klaytn network?

Colin: I don’t think bots are evil. As you said, they are also Klaytn users. But it would be better to implement bots more efficiently. They are creating a large amount of inconvenience for other users in exchange for the tiny benefits of arbitrage trading. Since the Klaytn network is a common resource to be shared among all Klaytn users, it is not good to make such large number of meaningless transactions on the network. This is the problem we are facing, and we need to solve it.

Q5
Sofy: What has the Klaytn team done to tackle the bots problem?

Colin: First, we analyzed what was happening with the large number of transactions. We found some small number of contracts being used for arbitrage bots, and that most of the transactions are just reverted. Only 1% of the transactions submitted by bots succeed.

So we tried to throttle transactions based on the contract addresses. If many transactions are reverted on certain contract addresses, we can limit the transaction propagation of those transactions. It had some effect, but in turn some of the bots responded by changing their behavior to execute normally without reverting.

This made it impossible to differentiate between normal transactions and these kinds of bot transactions. So in this case, we were left with only two solutions, but neither were meaningful—fair scheduling and prioritization of transactions based on age. So we concluded that we need to increase the transaction fee to effectively reduce the number of bot transactions. If you are interested to learn more about this in detail, please check out our two of blog posts where we detail our analysis and conclusions:

Bot Transaction Analysis Report

Technical Solutions Against Transaction Surges

Q6
Sofy: Is the gas price adjustment the only option? Can we just identify who are the bots, make a blacklist and penalize them?

Colin: This can be another solution, but it has several problems. Firstly, identifying the bots isn’t that easy. If we use a threshold to identify bot transactions, it creates a chance that a normal service will hit the threshold and end up wrongly classified as a bot.

If we implement blacklisting, it can be misused to block a legitimate service’s success. In addition to this, blacklisting will not be effective because deploying a smart contract to change the address is so easy.

Q7
Sofy: Gas price adjustment can help solve spam transactions caused by a small number of users, but it is disadvantageous for the majority of ecosystem participants. Is there a solution for this?

EZ: I think it’s the other way around. Adjusting the gas price will give the bot traders a disadvantage as it will be harder for them to make a profit. On the other hand, the majority of ecosystem participants will enjoy a less congested network. In addition to that, the Klaytn team will come up with an enhanced gas fee policy and token economy plan to make up for the gas price adjustment. For example, we are exploring dynamic gas pricing and a gas burning mechanism. Under the dynamic pricing, gas fee becomes cheaper when the network is not congested.

Colin: I agree with that opinion, but it is kind of a conflict. If we keep the gas price at our current level, more spam or bot transactions will inevitably flood into our network, causing ecosystem participants and KLAY holders to suffer when their transactions are not processed well due to the spam transactions. That’s why we are also thinking about how we can give other advantages to ecosystem partners such as through a gas fee burning mechanism, incentive systems, and grant programs funded by the gas price adjustment. We are trying hard to offset the impact of the gas price adjustment for normal users.

Q8
Sofy: Instead of discussing the pros and cons of the decisions made by the Klaytn team, I think it would be better to discuss the direction with the developers participating in the GCs and KIR. Please comment on this.

Colin: We published several blog posts to communicate the gas price adjustment proposal, including a survey we conducted with our GC members as well as a second survey for the broader Klaytn community. We are trying to gather as much feedback as we can, so please feel free to share your thoughts through any channels you can access. We are open to hearing.

EZ: The Klaytn team didn’t make a decision, but a suggestion. We are in the process of building a consensus of the community through various communication channels.

Q9
Sofy: What is the rationale behind the Klaytn team’s proposal of 500 ston or 750 ston as potential gas price adjustment levels?

EZ: 500 ston is a level from which Arbitrageurs’ costs will outweigh their benefits if they maintain their current transaction volume even after the adjustment. Thus, we can call 500 ston a ‘threshold’ price level. Arbitrageurs could then try to reduce the transactions to a level where they can have a similar level of yield as before, which is 900%. In this case, the transaction volume could be reduced to less than 5%.

Although this is quite an impressive reduction of transactions, we went further to check the expected transaction volume with yield less than 900%. From our analysis, arbitrageurs still can enjoy about 60% yield, which is not that low, with transaction volume reduced to about 30%. Considering that it is likely that bot algorithms will evolve in the future to bring marginally higher yields, we think that taking a more proactive and prudent approach is the more desirable option by adjusting the gas price to one of the higher-level options.

If you wish to learn more about the analysis that led to these two gas price levels, please read our post here.

Q10
Sofy: Will DApps need to be modified for this gas price increase?

Colin: Unfortunately, yes. Klaytn employs a fixed gas price policy, so it only accepts transactions having a gas price of 25 ston. If we increase the gas price to, for example, 750 ston, then the Klaytn network will only accept transactions with a gas price of 750 ston. So DApps will need to be modified to set gas price to 750 instead of 25 ston. If you do not do this, the transaction cannot be submitted into the network. Also, the transaction pool will be flushed when the gas price change is effective on a node. More information on this will be published soon on our blog—stay tuned.

Q11
Sofy: When calling a smart contract function, who gets paid and how much does the caller pay?

Colin: In general, when you call a smart contact, you are using a network of computers. So you need to pay for their use. This is the basic concept of the transaction fee. The transaction fee is calculated based on how many instructions you executed on EVM. When an instruction is executed on EVM, the amount of gas used is added. The amount of gas is multiplied by the gas price, and the result is the transaction fee.

This transaction fee is normally charged to the transaction sender. But with the fee delegation feature implemented at the platform level on Klaytn, this transaction fee can instead be directly charged to the fee payer. This is one key difference between Klaytn and Ethereum. Ethereum also has a fee delegation mechanism on a smart contract, but it requires some special care when you implement it in your smart contract.

Q12
Sofy: What is difference between “gas” “gas price” and “fee”?

Colin: “Gas” is the value of how much a transaction uses the blockchain network resources. Every time you execute a smart contract it takes numerous EVM opcodes, and each opcode takes some determined gas. The value of the determined gas is defined in the platform source code. So “gas” is just a number that represents how much resource the transaction uses. “Gas” is then multiplied by the “gas price”to get the “gas fee”, which is the final value to be subtracted from the sender’s balance.

Q13
Sofy: Are GCs ok with the gas price adjustment?

EZ: Yes. There was a survey for GC members around early January. 12 entities responded and they supported the Klaytn Team’s active engagement for both technical measures and gas price adjustment. In regards to the approach, they preferred a permanent adjustment initially up to the threshold level. You can see the results of our GC survey here.

Q14
Sofy: How about the overall community?

EZ: They are also with the Klaytn team, based on our community survey results. Network availability is the factor that has the highest ratio of respondents who answered as important, followed by transaction speed, on-chain data integrity, and finally low gas fee.

It is interesting to see the gas fee ranked as the lowest. 60% of respondents also chose 750 ston as the more appropriate level of gas price compared to 500 ston.

Lastly, 76% of respondents preferred an immediate increase to a gradual one.

Q15
Sofy: When will the gas price adjustment and deflation take effect? It’s important to implement the burn mechanism for the increased tx fee transparently, to maintain and enhance the value of Klaytn.

EZ: We will start with the Baobab network first. The announcement will be on Feb 22nd and activation on Feb 28th. For the Cypress network, the announcement and activation will be in March and is subject to change depending on how the Baobab test turns out. The incremental gas fee from the gas price adjustment will be burned, and you will be able to check it through a publicly open channel.

Concerning deflation, I would regard the question as asking about ‘deflationary measures’ such as gas fee burn, etc. The Klaytn team is working hard to introduce the gas fee burning mechanism as early as possible. And just as how we are doing for gas price adjustment, the Klaytn team will share an initial idea with the community, gather feedback, and build consensus before execution. It won’t be long.


Many thanks to EZ Yi and Colin Kim for taking time out of their busy schedules for our AMA! To find out more about Klaytn and join our growing global community, please follow these links below:

Website | Twitter | Discord | Telegram


We had the pleasure of hosting EZ Yi, our Head of Strategy, for an informative AMA session where we answered the community’s questions about the recently-released Klaytn 2.0 Lightpaper and what it means for the Klaytn ecosystem. Listen to the AMA session below or read on for our recap!

Note: Some of the text have been edited for grammar and clarity.

Date & Time: Feb 11th at 1pm SGT / 2pm KST
Platform: Twitter Spaces
Speaker:
EZ Yi, Head of Strategy at Klaytn Foundation
Host: Sofy, Community Manager at Klaytn Foundation


Introduction

Sofy: A very good afternoon to everyone, and happy TGIF! Welcome once again to another AMA session with us. I am Sofy, Community Manager for Klaytn and I will be the host for today’s session. Thank you for taking time to be here and I am sure that most of you are looking forward to today’s session as our amazing guest speaker, EZ, will be sharing more details about Klaytn’s lightpaper. Unfortunately, Stefan, Klaytn’s Blockchain Gaming Lead is unable to join us today as he is not feeling too well. Get well soon, Stefan!

Today’s session will be divided into two parts. We will begin with an introduction from EZ, followed by questions from the community that we have compiled.

Without further ado, let’s welcome EZ!

EZ: Good afternoon everyone! I am EZ, and I’m in charge of strategy at Klaytn Foundation. Prior to joining the team, I founded an art business startup, and then I spent many years in the strategy consulting industry where I served various financial and technology clients globally.

As the Head of Strategy at Klaytn Foundation, my objective is to help Klaytn move to the next level, namely Klaytn 2.0, as well as identify market opportunities and innovate crypto economics so that Klaytn can be one of the top chains in the world. As one of the core members involved with the production of our recent Klaytn 2.0 lightpaper, I am greatly honored to have a chance to share with our community our amazing blueprint, which is a chain-rebuilding endeavor encompassing technology, governance, treasury, and so on.

Sofy:Thank you EZ! Wow, I learn something new about my colleagues everyday. Interesting to know that you have an entrepreneur streak in you, EZ. And we are honoured to have you working in the Klaytn team with us.

So, are you ready for some community questions, EZ? The community is super excited to sit in for today’s session!

Questions

Q1
Sofy: What was the inspiration to build Klaytn? What are some of the real-world issues/pain points that Klaytn seeks to address?

EZ: When Klaytn was launched around June 2019, I would call it the Klaytn 1.0 era, we aimed for mass adoption of blockchain, a goal that was naturally inherited from the DNA of Klaytn’s founder, Kakao, a successful Web2 giant backed by massive mass adoption of key services. Ever since, we’ve built a business-friendly development platform to help entrepreneurs and enterprises in various sectors build highly usable blockchain applications for a wide range of end-users regardless of their level of crypto-literacy.

Today, with Klaytn 2.0, we are embarking on a chain-rebuilding initiative with the aim of becoming the metaverse blockchain for all—as in the title of our lightpaper. We believe that the metaverse should be based on a scalable and interoperable public blockchain platform, that is governed by platform participants who are the creators and builders. As an EVM-equivalent layer 1 blockchain, Klaytn wants to be the trust layer of the metaverse that respects the participation and contributions of all communities, bringing them together in the new world and empowering them.

Q2
Sofy: Deflation will be much more helpful for ecosystem growth at this point. What are your thoughts on this?

EZ: Great question. From our perspective, KLAY’s main purpose is to be used in the right place and at the right time to make our ecosystem thrive. In terms of the right place, the Klaytn ecosystem has many areas that require cooperative development with partners and builders around the world. We have been identifying and funding such opportunities, and many exciting projects are on their way. In terms of the right time, as we gear up to implement our Klaytn 2.0 plan, the timing couldn’t be more perfect to invest in our ecosystem.

However, make no mistake that we are also very serious about enhancing KLAY value for our KLAY holders and ecosystem participants. We have been closely watching the circulation of KLAY so we can understand what measures would be effective for our community. Please be a bit more patient with us!

Q3
Sofy: Do you have any plans to stop inflation and apply deflation?

EZ: We are well aware of our community’s voices over the proper token economy plan. We have been working on every aspect of token economy, from a KLAY burning mechanism, adjustment of the minting plan, listing in more global exchanges, and so on. Once we have come up with the right plan, we will share it with the community.

Q4
Sofy: What is the most significant competitive advantage that you believe will propel Klaytn to the top of the market?

EZ: The next meta in the blockchain industry is, withouta doubt, the metaverse. Our goal is to become the metaverse blockchain of choice for builders, and our value proposition for metaverse builders gives us a very strong position in the race to become the top of the market.

Our value proposition is materialized in our one-stop offering, which includes an open source developer infrastructure package, our high performing mainnet, community co-building programs, and management and financial support, all of which address the needs of metaverse builders around the world.

Q5
Sofy: What makes Klaytn unique enough to be the go-to blockchain for metaverse building?

EZ: Firstly, the 1-second finality and fee delegation function make Klaytn unique and attractive for metaverse and gaming projects. Gaming projects need a platform where massive transactions can be processed quickly, and Klaytn delivers on this with our immediate and irreversible transaction finality. Gaming projects also need a continuous stream of new users onboarding their platform, which the fee delegation function will help greatly. New users who want to participate in gaming events do not have to go through the hassle obtaining tokens because the gaming project builder can pay on behalf of the users, which is a great advantage in providing a positive gaming user experience.

Secondly, we already have a set of good use cases. MIR4 is one of the major P2E games internationally, with over 1.3 million concurrent players in less than three months since its official release in 170 countries. Not to mention other cases such as Pocketful of Quarters, and so on.

Thirdly, many global gaming and entertainment companies and projects are already in talks with us for onboarding or integration with Klaytn. What this means is that Klaytn will soon have the most vibrant metaverse ecosystem. In addition to that, our one-stop offering for metaverse builders will get much more attractive as we continually calibrate it through real cases with our various partners.

Q6
Sofy: The Klaytn 2.0 light paper mentions Ethereum equivalence. What’s the implication of it?

EZ: From a practical viewpoint, it means that EVM-based DApps can be onboarded onto Klaytn without any modifications. There are currently more than 4,000 open-source developers working on Ethereum every month, out of a total number of 18,400 developers across all chains. Not many L1 chains, however, are compatible with Ethereum like Klaytn is.

This is an important competitive edge for Klaytn because Klaytn can leverage the vast pool of Ethereum developers for its ecosystem growth, by providing the right incentive for them such as our metaverse package, our massive $1 billion eco fund, and the like.

Then you may ask what the difference is between compatibility and equivalence. Simply put, equivalence is the highest degree of compatibility. From the Ethereum developers’ viewpoint, equivalence means you need minimal effort to onboard Klaytn with your DApp, whereas you may have to amend many lines of code to onboard other compatible chains.

Q7
Sofy: I can’t find Klaymore Stakehouse in the Klaytn 2.0 Litepaper. Is there any particular reason it’s missing?

EZ: Due to space limitations in the lightpaper, it was impossible for us to include every ecosystem participant. However, we are already preparing an update of the lightpaper with some minor adjustments, and we will also be building an interactive ecosystem list on our new Klaytn Foundation website that will showcase many more ecosystem participants.

Q8
Sofy: Solana and LINE are advancing to the retail payment market through Solana Pay and LINE Link respectively. Are you aware of that?

EZ: Yes, we are aware. Increasing the utility of our tokens is also one of the most important items on our agenda. Making the Klaytn ecosystem vibrant is the key to achieving this goal, and we are actively co-working with many project teams and companies on various topics, including retail payment. Even at this moment, numerous new projects are taking off in the ecosystem and we will work hard to keep the momentum and help interesting projects grow further.

Q9
Sofy: Do you have any plans to list KLAY in the global major exchanges?

EZ: Due to the confidential nature of the listing process, we are unable to reveal our upcoming or planned listings. What I can say is that just like other chains, we are actively working on KLAY listings.

Q10
Sofy: How are you going to attract more users to the ecosystem, which is the key driver to have more developers at play?

EZ: We do understand that to attract more developers, we need to have strong user base in the ecosystem. One of the key initiatives to achieve this ambition is to integrate with major projects in the global crypto space. There are various projects which are taking a multi-chain approach, so why not Klaytn? Another potential initiative is to support new open source projects with attractive value propositions for users. Open source is very important to Klaytn, and is one of the prerequisites for expanding our user base globally.

Q11
How is Klaytn governed? Will there be any changes in Klaytn 2.0?

EZ: We will continue to have a stable governance structure, but with more inclination towards decentralization. Most of Klaytn’s Governance Council (GC) members are currently established enterprises, but as we progress towards a more metaverse-centric world, the influence of non-traditional entities such as DAOs will continue to grow and we will bring them into Klaytn’s Governance Council.

A stake-based governance model will be introduced to enable governance participants who can gather more support from Klaytn communities to shape Klaytn in line with their preferences. The Gini Coefficient will also be discontinued soon, so that successful decentralized metaverse entities will have more influence in the Klaytn GC.

We believe that DAOs and builders will lead the scene in the future. In the longer term, Klaytn governance will become fully decentralized with its community of DAOs and builders. Ultimately, Klaytn will evolve into a DAO of DAOs, and a platform for DAOs to communicate the voices of Klaytn communities through on-chain mechanisms.

Q12
Sofy: Can you tell us more about the eco fund?

EZ: Klaytn’s eco fund is differentiated in its size and content. At a combined total of $1 billion, it is one of the largest in the blockchain industry, which shows our determination to grow the ecosystem.

The fund consists of various programs ranging from grants to investments and rewards. Like the grant and investment programs common in the industry, we provide subsidies to promising projects and investing in early-stage projects that would have a positive impact on Klaytn. What’s different from before is that we lowered the bar for approval and streamlined the process for our builders. We have also recently launched a reward program for the builders of smart contracts that contribute to the growth of on-chain activities on Klaytn.

Q13
Who are Ground X, Klaytn Pte. Ltd., Klaytn Foundation and Krust, and how are they different?

EZ: This is one of the frequently asked questions. It can be a little confusing, so I will try to make it as brief as possible. Firstly, Krust’s former name is Klaytn Pte. Ltd., and Krust is the one who created the Klaytn platform by placing an order of development with Ground X. In other words, Ground X developed the Klaytn platform for Krust (formerly Klaytn Pte. Ltd.). Ground X was previously responsible for Klaytn’s operation as well, but is now a ‘service studio’ for Klip, a custodial wallet; Klip Drops, a digital art and collectibles gallery; and more.

Eventually, we saw the need for an independent organization to focus on Klaytn’s growth, so Krust established the Klaytn Foundation — a non-profit entity devoted to the Klaytn network and its ecosystem. Currently, Krust is an incubator of the Klaytn platform until it can be independently run by the foundation. Krust is also an investment company focusing on global blockchain services.

In a nutshell, Krust and Klaytn Foundation are sharing responsibility for operating the Klaytn platform and invigorating its ecosystem.

Q14
Sofy: Who are in the Klaytn team?

EZ: We are a strong team that consist of blockchain OGs and the brightest minds from top-notch global blockchain companies, technology companies, financial services companies, and so forth, with strong back-up from Kakao advisors. The team is also globally stationed with key offices in Singapore, Seoul and Tokyo. As we are growing our ecosystem further and realizing our Klaytn 2.0 ambition, we are hiring more talents all around the world. Do contact us if you are interested!

Q15
Sofy: If you were to summarize Klaytn 2.0 in one word, what would it be?

EZ: The Metaverse Blockchain for All.


Many thanks to EZ Yi, our Head of Strategy, for taking time out of his busy schedule for our AMA! To find out more about Klaytn and join our growing global community, please follow these links below:

Website | Twitter | Discord | Telegram