By: Lynn, CGV FoF Research Fellow
Foreword: Currently, South Korea is actively exploring virtual asset-related laws and preparing to formulate copyright policies on NFTs, which will lay a solid foundation for developing blockchain Web3.0 in South Korea. Klaytn intends to be a scalable and interoperable public blockchain platform as a trustable metaverse blockchain. CGV Research believes that with the clear trend towards virtual asset compliance in South Korea, Klaytn can leverage its strengths to become the infrastructure of the ecologically prosperous metaverse.
1. Basic introduction to Klaytn
1.1 What is Klaytn
Klaytn is an enterprise-class distributed blockchain platform centered on services. Developed by Internet giant Kakao Corp in 2019, Klaytn 1.0 aims to become a blockchain for mass use, building usable blockchain programs for enterprises in various industries.
Klaytn is backed by Kakao, a South Korean social networking giant, and has received extensive support from the government and banks in South Korea. In addition, the project deploys the global ecosystem through more than 30 strategic partners such as Binance, LG Electronics, SK Telecom and MakerDao. In 2021, Klaytn integrated with OpeaSea, bringing its NFTs into the largest NFT market.
In 2022, Klaytn 2.0 is actively shifting to serve as the infrastructure of the metaverse, with an emphasis on the metaverse, GameFi and the creator economy. Recently, it has stimulated projects on web 3.0 and the meta-universe. For example, the Klaytn Foundation and F10 (a global fintech incubator) selected 5 startups from more than 100 applicants to participate in the inaugural Klaytn Incubation Program. These companies will make innovations in gaming, social and content to become part of the metaverse.
1.2 Klaytn’s strategic partners and cooperative institutions
The Klaytn Governance Council, a consortium of multinational corporations and organizations, is responsible for operating a network of consensus nodes and promoting the development of the ecosystem. Currently, the Council has 31 members, such as KaKao, Binance, LG Electronics, Hashkey, with industries covering blockchain, social networking, digital assets, gaming, and entertainment.
Klaytn has established partnerships with blockchain platforms in traditional fields, including entertainment, games, social media, and other industries to create industry-wide platform ecological services. It has 42 cooperative institutions such as Wemade tree, Hint Chain, Humanscape, Sportsplex, and Atlas.
Since August 2021, Klaytn has signed strategic partnership agreements with five foreign companies: 1) It works with GMO Internet Group, a Japanese tech giant, to explore the Klaytn-based blockchain application scenarios, including the issuance of the stable coin pegged to the Japanese yen; 2) It partners with the Digital Innovation Factory, subordinated to the Sanlam Group in Indonesia, to create blockchain-based applications, including asset management solutions, supply chain traceability, and the use of NFT in gaming and entertainment; 3) It cooperates with East NFT, an Asian NFT trading platform, to strengthen the cryptocurrency economy of the global LGBTQ community and expand its collaboration with major art, music and entertainment sectors worldwide through NFT; 4) It joins forces with Animal Concerts, a US entertainment group, to create NFTs for top celebrities, with the first round of collaboration starting in the first quarter of 2022; 5) It has set up an incubation program with F10, a global fintech incubation center, to nurture blockchain startups in Singapore.
2. Klaytn Ecology
DeFi applications are the underlying facilities of the blockchain. Klaytn 1.0 has built a decentralized exchange based on the AMM mechanism and a lending protocol with basic financial functions. Klaytn2.0 focuses on the development of the metaverse ecology, and NFT is the cornerstone of the metaverse. Klaytn is one of only four chains currently available on OpenSea, the world’s largest NFT trading platform. The other three chains are ETH, Polygon and Solona. There are nearly 600 projects listed by OpenSea on Klaytn, but most projects have low transaction volume and small number of holders. Therefore, CGV selects excellent projects for analysis through the three dimensions of transaction volume, number of holders, and activity.
2.1 DeFi infrastructure
Klayswap is a decentralized exchange for the AMM mechanism on Klaytn. During February 2022, Klayswap had more than 39,000 users (wallets related to DAPP’s smart contracts) and made more than 333,000 transactions regarding DAPP’s smart contracts, generating more than $678 million in revenue.
ClaimSwap is a decentralized exchange on Klaytn, targeting Sushiswap. ClaimSwap allows on-chain exchange of various cryptocurrencies in the Klaytn ecosystem. With a current TVL of 62.39 million, it is the second largest DEX on Klaytn.
KlayBank is Klaytn’s first Flashloan Lending protocol. Klaybank provides deposit, lending, bond, staking, and flash loan digital asset services. The current asset size of KlayBank is nearly US $ 46 million, mainly including Klay, KUSDT, KETH, KDAI, KWBTC, and other mainstream assets. KlayBank’s token is KBT, which is mainly used in liquidity supply incentives, ecological incentives, governance, etc.
2.2 Metaverse and NFTs
Klayland aims to be a blockchain-based communication platform that supports the free migration and establishment of communities for Klaytn-based NFT projects. Community participants own land or engage in productive activities, and a portion of the profits generated by market transactions is distributed to the holders. Klayland is currently in its early stages and will build 3D virtual spaces in the future.
Meta Kongz is a Klaytn-based PFP project that aims to create a MULTI UNIVERSE that combines multiple worldviews through NFTs. The total number of Meta Kongz is 10,000. Its current floor price on OpenSea is 14,200Klay, with the transaction volume reaching 2.61 million Klay. Meta Kongz has its own token MKC (MEKONG Coin), which can be obtained by holding Meta Kongz for mining, and can be used for breeding offspring in demand scenarios. Baby Kongz (a total of 20,000) can be reproduced using two Meta Kongz and consuming a certain amount of MKC. Besides, Meta Kongz has its stories. Similar to MAYC derived from BAYC, Mutant kongz and G.rilla kongz are both variant styles, with a total number of 20,000, and the current floor price is 1590Klay.
2.3 GameFi project
KlayCity is a game where players can own and upgrade lands in a virtual world. KlayCity is a P2E game developed based on the Klaytn network, which takes place in 2080 and replicates the scene of the earth. Players can use NFTs, LAY tokens and ORB tokens to participate in various activities, including scavenging, exploration and upgrading. It has obtained the support of KAKAO, the Korean version of WeChat.
The investment was led by Krust and Animoca Brands, with participation from Naver Z, FriendsGames, A&T Capital, OKX Blockdream Ventures, Genesis Block Ventures, Kyros Ventures, ROK Capital, StableNode, PlayDapp, HG Ventures, Exnetwork Capital founder Eric Zoo, and Kwon Do. StableNode, PlayDapp, HG Ventures, Exnetwork Capital, Kwon Do, etc.
MetaToyDragonZ is a P2E game based on the pixel, and the NFT characters are toy dragons. At present, 9,999 MTDZs have been issued. In OpenSea, the floor price is 1630Klay, and the transaction volume has reached 1.69 million Klay. It plans to make games and develop metaverse. MTDZ will be the credential to govern the DAO and enter the metaverse.
SlimeFarm is a P2E mini-game with the image of Slime as its theme. At present, the total number of Slimes is 10,000. Its transaction volume on OpenSea is 1.7 million Klay, with a floor price of 157 Klay. Slime can be used to mine Pluton, the game’s basic token, for consumption in future game scenarios. Slime can also be upgraded to more advanced forms through synthesis for faster mining. Two Slime synths can be upgraded up to level 5. SlimeFarm has launched farms, with a total of 1,000 farms. Holders can choose to mine by themselves or rent them out. The current floor price of Slime Land on OpensSea is 3000Klay.
3kingdom is a strategy game based on the Three Kingdoms. It plans to integrate various elements such as skills, items, and skins with NFTs to seek a true balance between NFTs and games. 3kingdom has multiple mode, normal mode, war mode, default mode, and reward mode for users to play for free or hold NFTs for incentives and increases. The game is expected to launch in the fourth quarter of 2022.
CGV believes that the long-term logic for the future blockchain construction lies in the metaverse, and Klaytn aims to be builder’s preferred metaverse blockchain, making it in a favorable position in the competition. Under the leadership of Kakao Corp, it may be an innovative way to develop by concentrating superior resources to create a metaverse ecology.
Currently, the application protocols on Klaytn are homogeneous, with DEX and Lend having lower TVLs compared to other public chains. Additionally, it has developed NFT cultural content innovations such as MetaKongz to build the Klayland metaverse with Korean characteristics. GameFi is an important part of the metaverse concept, but good games on Klaytn need to be developed.
Klaytn’s ecological construction relies more on the form of “centralization”, which is the main reason for its lack of ecological content at present. With the further implementation of regulations on virtual assets in South Korea, more traditional enterprises will enter the metaverse, ecological content will be more prosperous, and the alliance chain may play to greater advantages.
Note: This article is a CGV FoF research paper and is for reference only. It does not constitute any investment proposal.
About CGV FoF: Cryptogram Venture FoF(CGV FoF) is an Asia-based Fund of Funds (FoF) that focuses on investments in Crypto Fund and Crypto Studio. CGV FoF is composed of family funds from Japan, Korea, and China’s mainland and Taiwan, with headquarters in Japan and branches in Singapore and Canada.