[KGP-9] Adding KLAY Liquidity Provider

1. Summary
Klaytn Foundation is proposing a loan of 15,000,000 KLAY to a qualified liquidity provider for a period of up to 24 months. While not increasing circulating supply, this loan will help maintain liquidity for KLAY and create a more robust centralized and decentralized exchange market, improving the overall functionality of KLAY on and off-chain.

2. Background
As Klaytnโ€™s native coin, KLAY, is currently listed on various centralized exchanges, the Foundation is committed to listing it on additional exchanges globally.

On the other hand, Klaytn Foundation made a contract with a global liquidity provider firm in the first half of 2022, and with the contract terminated in the fourth quarter in 2022, the Foundation has kept the loan amount unused until now.

3. Proposal
Liquidity providers play a crucial role in offering deep liquidity on both sides of a market, which helps prevent an illiquid order book, leading to a poor user experience and potentially deprioritizing or delisting the asset on an exchange.

Without a liquidity provider, an order book of CEXs tends to become illiquid, which could in turn lead to a poor user experience when interacting with the asset on that exchange. This can lead to an exchange deprioritizing or delisting that asset. Many of the largest centralized exchanges actually encourage an active liquidity provider as a point of reference.

Liquidity providers typically require a loan of assets. Assets being loaned are important to a liquidity provider because it allows them to service both sides of the market. A liquidity provider needs to narrow bid-ask spread around current price to ensure market participants have enough liquidity to suit their desires around accumulating or divesting an asset.

Liquidity providers typically adhere to certain service level agreements (SLAs) covering a range of obligations such as spread, quote depth, uptime and other metrics to continually ensure a smooth functioning market.

In exchange for these services, liquidity providers are usually either paid a fee for services rendered or compensated by a structured โ€˜callโ€™ option that keeps them aligned with the asset theyโ€™re liquidity providing. For the latter, they will either return the asset borrowed for liquidity providing or a cash equivalent at a predetermined strike price.

The Foundation has communicated with highly reputable firms that have references for cryptocurrency liquidity providing, and several firms have expressed interest in collaborating with the Foundation. Once the proposal is passed, interested firms will submit their proposals, and the Foundation will choose the best partner aligned towards Klaytnโ€™s long-term success and sign a contract carefully but quickly.

In conclusion, Klaytn Foundation seeks to introduce a liquidity provider in order to achieve several objectives: broaden the range of exchanges and regions where KLAY can be well traded, establish a system of checks and balances among LPs, and maintain an appropriate level of liquidity within the ecosystem, taking into account the current amount of KLAY in circulation.

4. Execution
To ensure KLAYโ€™s market is functioning smoothly, the Foundation proposes providing a loan of 15,000,000 KLAY to a qualified liquidity provider who will support free-flowing liquidity of KLAY across multiple venues, especially for major CEXs and Klaytn Network DeFi ecosystems. This service will not have any fees, but the liquidity provider will have an option to buy KLAY after the term expires at predetermined prices, aligning their upside for services rendered with Klaytn.

The loan will not be more than 24 month period and this proposal will not increase the circulating supply of KLAY differently than new KCF/KFF disbursements as the 15,000,000 KLAY used for the contract is the exact volume of last yearโ€™s repaid loan. After the term, KLAY would be returned to Klaytn Foundation or an equivalent amount of USDC at a price per KLAY that will be determined at contract time.

5. Voting Schedule
The on-chain voting system Klaytn Square will be utilized for the first time next week to conduct the voting process for this governance proposal.

We encourage you to support this proposal as it will lead to a more robust market for KLAY, benefiting all market participants.

1 Like

The on-chain voting on KGP-9 started today. Please visit Klaytn Square to see the progress of the voting.

I addressed the communityโ€™s inquiries regarding KGP-9 and would also like to provide a comment here.

KGP-9 background:
KLAY is listed on multiple CEXs, and weโ€™ve observed that relying on a single liquidity provider leaves some CEXs without sufficient coverage.

While our current liquidity provider is effective in enhancing the order book on most active exchanges for KLAY, weโ€™ve noticed their limitations in areas where we aim to expand.

To address this, weโ€™ve decided to add more liquidity providers to reduce untouched areas and introduce some competition, thereby reducing market inefficiencies.

Suitable quantity:
Based on discussions with liquidity providers and insights from other chains, weโ€™ve determined that utilizing approximately 3% of the circulating volume(3.093 billion), which amounts to approximately 92.8 million KLAY, is appropriate for LP purposes.

By adding 15 million KLAY to the existing liquidity providing amount, we will approach the desired 3% ratio. We have no plans to exceed this amount through additional agreements.

Any KLAY loaned that is not exercised through the call option by the end of the contract will be returned to the Foundation. Our disclosures already show the loans and returns, with 27 million out of a total of 1.06 billion loans returned in the 1H22 disclosure.

Additional Comment:
While these liquidity-providing contracts may be repaid to the Foundation, distributing excessive amounts can be inefficient instead of fulfilling its purpose on CEXs. However, we have a lot fewer assets to leverage after burning the reserve, and itโ€™s an important KLAY asset for us as well. We present this proposal after careful consideration to minimize outflows.


์•ˆ๋…•ํ•˜์„ธ์š”. ์Šค์™‘์Šค์บ๋„ˆ ํŒ€์ž…๋‹ˆ๋‹ค.

์Šค์™‘์Šค์บ๋„ˆํŒ€์€ KGP-9 ์•ˆ๊ฑด์— ๋Œ€ํ•˜์—ฌ ์ฐฌ์„ฑ ํˆฌํ‘œ ํ•˜์˜€์Šต๋‹ˆ๋‹ค.
์ „์ฒด ํˆฌํ‘œ๊ถŒ์˜ ์•ฝ 8.84%์— ํ•ด๋‹นํ•˜๋Š” 13ํ‘œ๋ฅผ ํ–‰์‚ฌ์˜€์Šต๋‹ˆ๋‹ค.

๋ง์”€ ์ฃผ์‹ ๋Œ€๋กœ, ๋งŽ์€ CEX์— ์ƒ์žฅ๋˜์–ด ์žˆ๋Š” KLAY์—๊ฒŒ MM์€ ํ•„์ˆ˜์ ์ž…๋‹ˆ๋‹ค.
๋‹ค๋งŒ ๋‹จ์ˆœํžˆ MM์„ ํ•œ๋‹ค๊ฐ€ ์•„๋‹Œ, ์ •๋ง ๋ฏฟ์„๋งŒํ•˜๊ณ  ์ž˜ ํ•˜๊ณ  ์‹ ๊ฒฝ ์จ์ค„ ์ˆ˜ ์žˆ๋Š” ์—…์ฒด์™€ MM์„ ์ง„ํ–‰ํ•ด์•ผ ํ•ฉ๋‹ˆ๋‹ค.

:exclamation:์ด์— ์ถ”๊ฐ€๋กœ ์žฌ๋‹จ์— ์š”์ฒญํ•ฉ๋‹ˆ๋‹ค.

:pushpin:๊ณ„์•ฝ์„ ์ง„ํ–‰ํ•˜๋ ค ํ•˜๋Š” MM์—…์ฒด๊ฐ€ ์ •๋ง ๋ฏฟ์„๋งŒํ•œ ์—…์ฒด์ธ์ง€, ์ „๋žต์€ ์–ด๋–ป๊ฒŒ ๋˜๋Š”์ง€ ์ตœ์†Œํ•œ GC๋“ค์—๊ฒŒ ํ•œํ•ด์„œ๋ผ๋„ ํ”„๋ผ์ด๋น—ํ•˜๊ฒŒ ๋” ๋งŽ์€ ์ •๋ณด๊ฐ€ ๊ณต๊ฐœ๋˜์–ด์•ผ ํ•ฉ๋‹ˆ๋‹ค.

์‹œ์žฅ์— ๋Œ€ํ•œ ์ดํ•ด๋„๊ฐ€ ๋†’์€ ์Šค์™‘์Šค์บ๋„ˆ์™€ ๊ฐ™์€ ์ „๋ฌธ GC๋“ค๊ณผ ํ•จ๊ป˜ ๋ฏฟ์„๋งŒํ•œ ์—…์ฒด ์„ ์ •์— ์ ๊ทน์ ์œผ๋กœ ์ฐธ์—ฌํ•˜๊ฒ ์Šต๋‹ˆ๋‹ค.
(๋งค์ˆ˜๋ฅผ ์œ„ํ•œ Fiat์— ๋Œ€ํ•œ ๋™์› ์ „๋žต๋“ฑ์— ๋Œ€ํ•œ ํ•„์ˆ˜์ ์ธ ๋‚ด์šฉ๋“ค์— ํ™•์ธ์ด ํ•„์š”ํ•ฉ๋‹ˆ๋‹ค.)

:pushpin:๋ฉ”์ด์ €ํ•œ CEX์— ์ง‘์ค‘์ ์œผ๋กœ MMํ•˜๋Š”๊ฒƒ์ด ํ•„์š”ํ•ฉ๋‹ˆ๋‹ค. ๊ทธ๋Ÿฌ๋‚˜, 1500๋งŒ๊ฐœ์˜ KLAY๋กœ๋Š” ์˜๋ฏธ์žˆ๋Š” MM์„ ํ•  ์ˆ˜๊ฐ€ ์žˆ๋Š” ์ˆ˜๋Ÿ‰์ด ์•„๋‹™๋‹ˆ๋‹ค.

๊ณผ๊ฑฐ๋ถ€ํ„ฐ ์ด๋ฏธ ๋‚˜๊ฐ€์žˆ๋Š” ํ›จ์”ฌ ๋งŽ์€ ๋ฌผ๋Ÿ‰์˜ KLAY๋ฅผ ํ™œ์šฉํ•œ MM์€ ๊ฒฐ๊ณผ์ ์œผ๋กœ ์‹คํŒจํ•˜์˜€๊ณ , ์ œ๋Œ€๋กœ ์ผ€์–ด์กฐ์ฐจ ๋˜๊ณ  ์žˆ์ง€ ์•Š์Šต๋‹ˆ๋‹ค.
์ด๋ฏธ ๋งŽ์ด ๋‚˜๊ฐ€์žˆ๊ณ  ์˜์ง€๊ฐ€ ์—†๋Š” MM๋ฌผ๋Ÿ‰์ด ํ˜„์ €ํžˆ ์ ์€ ์‹ ๊ทœ MM๋ฌผ๋Ÿ‰๊ณผ ํ•จ๊ป˜ ํ•œ๋‹ค๋ฉด MM๊ฒฐ๊ณผ๊ฐ€ ์˜๋„๋Œ€๋กœ ํ˜๋Ÿฌ๊ฐ€์ง€ ์•Š์„ ์ˆ˜ ์žˆ์Šต๋‹ˆ๋‹ค.

๊ธฐ์กด์— ๋‚˜๊ฐ„ MM๋ฌผ๋Ÿ‰์— ๋Œ€ํ•œ ๊ณ„์•ฝ๊ธฐ๊ฐ„ ๋ฐ ์กฐ๊ฑด์„ ํ™•์ธํ•˜๊ณ  ์กฐ๊ธฐ ์ƒํ™˜์‹œํ‚ค๊ณ ,
์ด๋ฒˆ์— ์‹ ์ค‘ํ•˜๊ฒŒ ๊ฒ€ํ† ํ•˜์—ฌ ์„ ์ •ํ•˜๋Š” ์‹ ๋ขฐ์žˆ๋Š” MM์—…์ฒด์— ์กฐ๊ธฐ ์ƒํ™˜๋œ ๋ฌผ๋Ÿ‰๊นŒ์ง€ ํฌํ•จํ•˜์—ฌ ๋” ํ˜„์‹ค์ ์ธ MM ํ”Œ๋žœ์„ ๊ณต์œ ๋ฐ›์•˜์œผ๋ฉด ํ•ฉ๋‹ˆ๋‹ค.

:pushpin:ํ”„๋กœ์ ํŠธ ์žฌ๋‹จ๊ณผ MMํŒ€์ด ํ•ฉ์„ ๋งž์ถ”๋Š”๊ฒƒ์ด ๊ต‰์žฅํžˆ ์ค‘์š”ํ•ฉ๋‹ˆ๋‹ค. ์ข‹์€ ๋กœ๋“œ๋งต๊ณผ ๊ฒฐ๊ณผ๋ฌผ์ด ์ž˜ ํ™œ์šฉ ๋˜์—ˆ์œผ๋ฉด ํ•ฉ๋‹ˆ๋‹ค.

์žฌ๋‹จ ๋ฐ MMํŒ€ ๊ทธ๋ฆฌ๊ณ  ์ •๋ณด๋ฅผ ๋“ฃ๊ฒŒ๋˜๋Š” GC๋“ค์— ๋Œ€ํ•œ KLAY ์ •๋ณด ๋ณด์•ˆ ๋ฐ ๊ฑฐ๋ž˜๊ด€๋ จ ๊ณ„์•ฝ์„ ์ฒ ์ €ํ•˜๊ฒŒ ์ฒด๊ฒฐํ•˜๊ณ  ๊ฐ•ํ™”ํ•˜์—ฌ, ์ด๋Ÿฌํ•œ ์ „๋žต์„ ๊ฐ•ํ™”ํ•˜๊ธธ ์š”์ฒญํ•ฉ๋‹ˆ๋‹ค.

ํ•ญ์ƒ ๊ณ ์ƒ์ด ๋งŽ์œผ์‹ญ๋‹ˆ๋‹ค.


Hey Jay. Thanks for sharing your view. Could you post in English again so that it can be shared with other non-Korean community members?

Also, could you help us understand the rationales of your assertion which is โ€œMMs that utilize the much larger amount of KLAY already out there from the past have failed and are not being properly maintainedโ€?

We are in favor of this KGP-9 proposal.
However, due to the follow-up process related to the staking tracker address change, we will not be able to participate in this vote.
This is the first on-chain voting, and I wonder what it would have been like if all the GCs were ready.

And It would be great if the Foundation could elaborate a bit more on this matter. (Overall history and status of MM, information on new companies currently under review, etc.)
Of course, since this is a sensitive issue, there must be mutual trust in security if necessary.

With this decision, we hope that KLAY will be traded more soundly and the ecosystem will expand.

We will always support you and contribute to the development of Klaytn.

thank you