Hello, KlayFi community. This is KlayFi Lab.
Our team would like to explain how KlayFi interacts with the KLAYswap ecosystem and how it positively impacts further.
It is also explained in our official Docs v2, but official Docs are quite complicated to understand for regular users or newcomers. Thus, we wrote this article to help you to understand KlayFi’s architecture.
KlayFi and the KLAYswap ecosystem
Fundamentally, most KlayFi Vaults (except for KlayFi Staking Pool) utilize LP tokens of KLAYswap for managing users’ assets. When users deposit in a particular pool of KLAYswap, the pool’s LP tokens are generated.
Then by re-depositing in the matching vault of KlayFi, KlayFi provides its convenient feature, auto-compounding, to users based on KlayFi’s asset management strategies. Moreover, to maximize profits for users, $KFI will be distributed as a reward for the Performance Fee.
KlayFi is unique because KlayFi utilizes the vKSP system of KLAYswap at a level that a regular user can’t access. The result will bring more benefits to users and the protocol.
As shown above, KlayFi exists because of KLAYswap, and they are closely connected. We can easily find many similar cases in the DeFi sectors of Ethereum and Binance Smart Chain. These connections among DeFi protocols become core elements for ecosystem expansion. For example, we witnessed the following cases, ‘Curve Finance — Yearn Finance/Convex Finance’, ‘Uniswap — Harvest Finance’, ‘PancakeSwap — PancakeBunny’. The DeFi sector plays a significant role in ecosystem expansion for Ethereum and Binance Smart Chain since 2020.
A positive impact of the Performance Fee architecture of KlayFi on $KSP
When users deposit in KlayFi’s Vaults (except for KlayFi Staking Pool and KLAY-KFI Vault), 50% of $KSP will be auto-compounded during the deposit period. The other 50% of KSP will be used as the Performance Fee, and in return, KlayFi distributes $KFI to users at the ratio of 1 $KLAY to 10 $KFI. (*Performance Fee is 50% in the early launching stage but eventually decreases down to 30%)
Summary for Users
- Depositing in KLAYswap: KSP rewards (100%)
- Re-depositing in KlayFi: Re-deposit 100% before user claims, after claiming (KSP rewards 50% → auto-compounding(LP)) + (KSP rewards 50% → convert to KFI and distribute to users.)
$KSP as Performance Fee will be used in the following ways. 20% out of 50% KSP will be used as rewards for $KFI Staking Pool users, and the rest of 30% will be staked in KLAYswap and converted to vKSP. In the long-term strategy, the amount of $KSP converted to vKSP increases.
Additionally, as KlayFi acquires more users, the Performance Fee will increase, and more $KSP converted to vKSP. When the KlayFi ecosystem expands, the supply of $KSP constantly decreases, which positively impacts the price upwards pressure of KSP.
Due to the essence of being a Yield Aggregator, there are constant trades while converting $KSP to LP. Moreover, part of trading fees and staking profits from voting the pools with vKSP that KlayFi holds will be converted to vKSP. This will support the overall KLAYswap ecosystem.
Positive effects of vKSP system(Governance Model & Token Economy of KLAYswap) on KLAY-KFI Pool and $KFI
As mentioned before, 30% ($KSP) out of 50% Performance Fee will be converted to vKSP and constantly voted for KLAY-KFI Pool in KLAYswap (Once white-listing is completed). In the long-term, KlayFi’s voting power will grow by holding significant numbers of vKSP.
This leads to an increase in the pool and becomes a great incentive for engaging liquidity providers. To provide liquidity, we expect more users to buy $KFI in KLAYswap, which causes price upwards pressure of $KFI.
KlayFi will use part of the Trading Fee and Staking profits for buy-backing $KFI and additional rewards for $KFI Staking Pool users. By doing so, we expect the growth of the KlayFi ecosystem.
As we all reviewed, KlayFi is closely connected to the KLAYswap’s governance model and token economy and designed to bring synergy between two protocols. KlayFi Lab will continue to modify and enhance our model and apply it to the protocol. Hopefully, KlayFi can contribute to the DeFi sector in the Klaytn ecosystem.
Thank You.
