Decentralization is one of the first things that comes to mind when most people hear the phrase “blockchain”. After all, blockchain technology is defined as a distributed ledger that’s permissionless, public and transparent, meaning anyone can access it and use applications built on it, without any restrictions.
The open nature of blockchain is great for accessibility, but the most decentralized networks, such as Bitcoin and Ethereum, aren’t always the best fit for organizations that want to move business processes onto a DLT network. The priority for enterprises is not a high level of decentralization, but rather a blockchain that delivers high performance and throughput, with low transaction fees, high customizability and a seamless onboarding experience.
According to a recent report by Messari, the South Korean blockchain project Klaytn is increasingly looking like the perfect network to meet these requirements, while providing additional benefits for the largest enterprises to run their applications and accelerate adoption of distributed ledger technology.
What Is Klaytn?
Klaytn is not one, but three separate networks that work in tandem. Developed by the South Korean internet conglomerate Kakao, it consists of the Core Cell Network and the Endpoint Node Network, which together comprise its mainnet, along with the Service Chain Network, which plays host to numerous enterprise-grade sidechains that can host independent decentralized apps.
The Core Cell Network consists of independent cells, including a consensus node and at least two proxy nodes, operated by a permissioned group called the Klaytn Governance Council. These consensus nodes perform consensus, creating new blocks, verifying and executing transactions. The proxy nodes meanwhile serve to relay information to the Endpoint Node Network, which in turn are used to communicate with the Service Chain Network and all of its independent sidechains. These Service Chains are key part of Klaytn’s design, enabling enterprises to create their own dedicated and customizable blockchains for specific dApps. With them, enterprises can tailor their networks to meet the needs of their dApps, whether that’s a focus on data privacy or higher transactions per second or throughput.
Slick Network Performance
The Messari report reads like a glowing recommendation of Klaytn’s network architecture. It makes clear that for enterprise dApps, TPS is just one consideration. Equally vital for network performance is latency (the time it takes for a transaction to be submitted to the network) and finality (how long it takes for a transaction to be verified and made irreversible), and it’s here that Messari says Klaytn really delivers.
Not only does Klaytn’s network deliver a TPS that leaves Ethereum in the dust, but it also provides extremely low latency and almost instantaneous finality. Klaytn’s unique network architecture does this by sacrificing a degree of decentralization, with a limited number of Core Cell Network nodes. It’s a trade-off that seeks to appease the vast majority of business users, who are used to Web2-like transaction speeds, Messari explains.
“Beyond its base-layer architecture, Klaytn offers enterprises the option of deploying their own Service Chain, allowing them to easily create custom blockchain solutions anchored to Klaytn’s mainnet,” the report noted.
One of the keys to Klaytn’s high TPS is its novel consensus mechanism, which is based on Proof-of-Stake and uses an optimized Istanbul Byzantine Fault Tolerance model. Klaytn’s IBFT is designed to enable higher scalability by randomly selecting a fixed number of nodes to perform consensus for each block. With it, a single Cell Network is chosen at random to propose each new block, while 30 others are chosen as validators to form a committee for the round. Consensus is reached when two-thirds of this committee agree on the proposed block.
Messari explains that this is a unique model that makes it possible for Klaytn to add new nodes without increasing communication volume. However, it notes that because the nodes communicate with each other to arrive at consensus, the possibility for collusion does exist. That said, the rapid time to finality provided by the model makes it ideal for enterprise blockchains where consensus nodes are operated by trusted validators.
Growing DeFi Ecosystem
Although Klaytn is more centralized compared to some other blockchains, the model hasn’t prevented it from achieving stunning growth over the last couple of years. At the time of the report, Messari said Klaytn’s DeFi protocols had a combined $317 million in total value locked, ranking 14th overall in the entire blockchain industry. Like most chains, it has seen its TVL dip significantly since April, when the wider DeFi market was knocked sideways by the sudden and shocking collapse of the Terra blockchain ecosystem.
Even so, Klaytn’s TVL is still up by around 73% compared to one year ago, meaning that it has shown high resilience amid one of the most severe crypto winters the market has yet seen.
One of the main reasons for Klaytn’s strong DeFi ecosystem is the Klap (Klaytn Lending Application) protocol that launched in June. Within days of its launch, Klap accumulated millions of dollars in TVL, rapidly becoming the number one overcollateralized lending protocol on Klaytn with an impressive $18 million in TVL (this has grown to $32 million since Messari’s report was published).
Despite launching just a few months ago, Klap has already become one of the flagship projects on Klaytn. It’s a decentralized, non-custodial liquidity market protocol that allows anyone to participate as a depositor or borrower. With Klap, depositors provide liquidity in return for passive income, while borrowers can take out over-collateralized loans on a perpetual basis, or under-collateralized loans for short periods of time.
There are high hopes that Klap will help to boost Klaytn’s DeFi ecosystem in the long run. As a fork of Aave, it’s modeled on one of the most popular and successful DeFi protocols in the industry. However, it goes further than that, blending additional functionality such as veNFTs from Solidly, yield boosters from Platypus, voting escrow governance from Curve and penalties for mercenary capital, which was first introduced by Geist. In this way, Klap is attempting to merge the most popular capabilities of DeFi’s leading protocols into one mega project, built on top of Klaytn’s high-performance, enterprise-grade blockchain infrastructure.
Messari’s report notes that, despite its early success, Klaytn’s plans to become the most enterprise-focused blockchain in existence are not yet complete. By introducing improvements to its consensus mechanism, Klaytn is aiming to increase its TPS from 4,000 to more than 10,000 by the end of this year. In addition, there are plans to add more Service Chains to the network to reduce congestion on its mainnet. To encourage more service providers to build these Service Chains, Klaytn is planning to enable more seamless bridging between them and the mainnet. It will also introduce the concept of nested Service Chains, which will have the ability to act as a hub for other Service Chains and scale them to greater heights.
That’s not all though, for Klaytn is also making efforts to appeal to enterprises that still place a premium on the idea of decentralization. To do this, Klaytn is working to onboard more Klaytn Governance Council members. At present, the network can only support a maximum of 50 GC members, but the project is also working to increase this to 100 in total.
Finally, there are plans to introduce more transparency to Klaytn’s overall governance process, Messari said. The idea here is to transfer governance processes to an on-chain portal, instead of the current practice of using Web2 tools such as Slack and Google Forms
Ready For Adoption
For enterprises, there’s clearly lots to like about Klaytn. Organizations have become increasingly aware of blockchain’s potential to improve business processes, decrease operational costs and create more value for users.
The problem for enterprises is not so much the concept, but rather the implementation. High transaction costs can harm their ability to compete with rivals and attract new users, while complex management, onboarding and a lack of customizability can lead to greater friction than what’s found in traditional, centralized infrastructure.
By solving these problems and with its focus on enhanced developer, enterprise and user-experiences, Klaytn provides a solid framework for running global-scale dApps that can serve millions of users simultaneously. If Klaytn is able to deliver on its promises of boosting TPS and reducing network congestion, it could arrive at just the platform the enterprise has been looking for – and one that can accelerate mass adoption of blockchain in the business world.
To date, Klaytn has already made huge progress with its incredibly ambitious blockchain infrastructure and has secured numerous business partners along the way. Klaytn is headed in the right direction, and it’s unlikely to take a wrong turn anytime soon.