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Last updated: Aug 16, 2023
KlaySwap is an Automated Market Maker protocol built on the Klaytn Network which supports immediate swapping between tokens through on-chain liquidity pools created by liquidity providers, avoiding buying/selling order books.
KlaySwap was developed by Ozys Pte Ltd — a fintech company based in Singapore.
The protocol’s ecosystem is suitable for various users, be it long-term investors willing to hold assets for a long period, investors planning on earning income through commission fees, or miners wishing to take part in the KlaySwap governance.
The protocol’s swapping feature works just like other DEXes. KlaySwap has liquidity pools for trading pairs that provide the supplied tokens to users. The token price is set automatically by the protocol depending on how much of the two tokens are in the liquidity pool in proportion to each other. In exchange for access to liquidity, users are required to pay a 0.3% transaction fee.
The KlaySwap platform supports three types of deposits: single side deposit, pair deposit, and plus deposit.
Single side deposit is a simple method allowing users to deposit just one asset and earn rewards according to the real-time deposit rate without the risk of impermanent loss. Currently, single side deposit supports ETH, XRP, KLAY, KSP, BORA, USDT, and ORC assets.
The deposit interest of a single depositor generates as a result of interaction with the plus depositors willing to utilize more assets than they already possess. Plus depositors pay interest in return for using single pool assets and distribute a certain portion of the interest back to a single depositor. The more actively plus depositors utilize the single pool assets, the higher the deposit yield single depositors get.
In addition, KlaySwap has a separate Safety Fund which is used as a backup reserve to ensure the safety of the single side depositors’ assets. It accumulates the fees from the Plus depositors and in case a utilized asset from a single pool cannot be returned promptly, the Safety Fund covers the shortage.
In the case of Pair deposit, users can deposit assets in any type of pool of choice and become Liquidity Providers (LP). By sourcing liquidity to the pool, users receive Liquidity Pool Tokens (LP) in return. The number of LP Tokens granted reflects the user’s share in the entire pool. In case of assets withdrawal from the pool, the LP Tokens are returned automatically. During the asset deposit period, users can receive KSP mining rewards and transaction fees commissions according to their LP stake.
Plus Deposit allows users to take additional assets from a single deposit pool. Plus depositors earn more rewards than by using the existing pair deposits. Plus depositors are required to pay an interest fee for single pool asset utilization.
When depositing, Plus depositors are not limited by the current exchange ratio of two assets. Smart contracts automatically swap and deposit assets from a single pool into pairs with an optimal ratio. Users can determine the volume of a Plus deposit through plus multiplier settings. In case of volatile price fluctuations, plus depositors might have difficulty returning the assets they are utilizing if its utilization rate exceeds 85%. In such situations, the protocol automatically returns the deposited funds and charges the user a 20% fee. Users can also stake their KlaySwap tokens, in order to earn rewards and voting rights on the protocol’s direction and policies. The longer the staking duration is, the more voting power (represented in vKSP tokens) is given to the token holder. Each vKSP holder can support the liquidity pool that is more advantageous to them. The pool that has more votes may receive more KSP tokens as rewards.
Before starting using the KlaySwap app, a Klaytn Network-supported wallet has to be installed, currently, they are Kaikas (web-based), Kl ip (Mobile), and MetaMask. Users also need to have some KLAYs or other cross-chain assets supported by KlaySwap in their wallets.
KLAY is the Klaytn blockchain’s native token and it is used as a means of payment and exchange for applications operating under the Klaytn ecosystem. KLAY can be purchased on Binance and KlaySwap.
Users can also transfer assets from other blockchains like Ethereum, BSC, and Ripple. Such assets can be imported through Orbit Bridge and converted into Klaytn compatible format. Orbit Bridge is a multi-asset hub blockchain that stores, transfers, and verifies information and assets existing on various public blockchains through decentralized Inter Blockchain Communication.
For swapping, the user has to navigate to the Swap tab, choose a trading pair, enter the trading amount and confirm.
To provide liquidity, the user needs to navigate to the Pool tab and select the desired liquidity pool. Currently, there are 20 pairs and one single-sided deposit available. After choosing the amount of one of the tokens in the pair, the corresponding amount of the other token will be filled automatically and shown in the pop-up box, along with the exchange rate and daily reward. Then the Deposit transaction has to be confirmed. If the pool user wishes to add liquidity that does not exist, it can be created by choosing a pair of tokens. Creating a new pair requires a minimum of 100 KSP tokens in the wallet.
KSP is the native token of the KlaySwap protocol, which is used for governance, as a reward for depositors, and to pay a KlaySwap fee for creating a new token pair. 50% of the transaction fees generated are also used to buy back and burn KSP tokens. The Total Supply of the digital asset is 126,144,000 KSP and the Initial Starting Supply volume is 0 KSP.
From the beginning, KSP is distributed only through liquidity mining and to KlaySwap liquidity providers as compensation. The total daily mining quantity of KSP is 86,400 KSP and the daily mining volume is halved every two years. 50% of the total supply will be issued during the first two years after launch, starting from November 2020.
The KSP tokens are to be distributed in the following proportion: 5% is earned by Single side depositors, 55% goes to Pair and Plus depositors, and 40% of the supply is earned by KSP stakers. Distribution ratios can be adjusted through governance voting.
Development & Stabilization Commission fee of 15% is charged on all minted tokens during the first two years, then this fee is to be decreased to 7.5%
As reported by the KLAYswap team, a malicious external attack occurred on February 3, 2022, due to the infection of SDK files from external sites. More specifically, a suspicious transaction was detected, in which tokens were sent to a specific wallet when executing token-related functions, as a result of which malicious code files were downloaded by a user. This happened because the user has connected to a third-party server built by an attacker.
Based on the old version of the KlaySwap code, the attacker changed all transaction requests from users directly to their contracts and changed the SDK script loaded on the KlaySwap site, and created malicious code to disrupt the operation of the existing KlaySwap code.
To prevent the transfer of stolen assets to other platforms, as soon as the incident was detected, all operations on KlaySwap were blocked and restricted and the contaminated file was removed. The team is now working with various exchange platforms and security audit companies to identify the main cause of this incident.
The team also gives the following general recommendations to its users before they start using the platform. Before taking part in trading users must do their own research on tokens, as all assets shown in the interface of the KlaySwap app are Klaytn-based tokens and have not gone through a separate verification process.
The number of assets resulting from a swap may vary depending on the size of the swap, the availability in the pool, and the real-time status of the deposits. A loss may also occur due to the price impact or price fluctuation.
Klayswap’s integration with Metamask has been one of the recent major milestones faced by the company, as it made the platform more accessible for various users. It has also partnered with Kronos DAO DEX, integrating Kronos into the KlaySwap ecosystem via Orbit Bridge.
The team is working on having more integrations with other blockchains through the Orbit bridge and adding more assets from the already compatible blockchains. The company is also in the process of getting a security certification with Certik.