Klaytn’s Gas Price Adjustment Plan and Future Direction

The Klaytn Team plans to introduce a gas price adjustment plan based on our findings from the Technical Solutions Against Transaction Surges and Klaytn GC Survey Report on Gas Price Adjustment. We would highly appreciate feedback from the community, please share your thoughts with us in the survey linked at the bottom.

Gas Price Adjustment Plan

We are currently contemplating an adjustment between 250 ston — 750 ston for the gas price for KLAY transactions (assuming that KLAY = $1.20, a KLAY transfer would then cost approx. $0.006 — $0.018). Based on the gathered data, we have already estimated the anticipated results for three different price points at 250 ston, 500 ston, and 750 ston:

Assuming that arbitrageurs will maintain their transaction level even after the adjustment:

• 750 ston: Arbitrageurs’ cost will outweigh their benefits
• 500 ston: Arbitrageurs’ cost will outweigh their benefits
• 250 ston: Arbitrageurs’ cost will almost equal their benefits

Assuming that arbitrageurs will seek to secure 100% yield rate even after the adjustment:

• 750 ston: Arbitrages using bot transactions will be forced to reduce their transaction levels to 15% of the current amount
• 500 ston: Arbitrages using bot transactions will be will be forced to reduce their transaction levels to 25% of the current amount
• 250 ston: Arbitrages using bot transactions will be forced to reduce their transaction levels to 50% of the current amount

Assuming that arbitrageurs will seek to maintain their current yield rate (900%) even after the adjustment:

• 750 ston: Arbitrages using bot transactions will be forced to reduce their transaction levels to 3% of the current amount
• 500 ston: Arbitrages using bot transactions will be forced to reduce their transaction levels to 5% of the current amount
• 250 ston: Arbitrages using bot transactions will be forced to reduce their transaction levels to 10% of the current amount

It can be seen from these estimates that an adjustment to 250 ston would not be sufficient to stop spam transactions, as the arbitrageurs would not face any losses for keeping their current volume of transactions sufficiently, since the forced reduction of transactions by half would still give them high yields. A 500 ston adjustment, however, is where the arbitrageurs will start to become dissuaded from sending out bulk bot transactions. But even at this increased adjustment level, the transaction volume is only reduced down to 30% while relatively high yields (ca. 60%) can still be generated, which ensures that at current level this activity will still occur even without considering that it is likely that bot algorithms will evolve in the future to bring marginally higher yields. Therefore, it is our conclusion that to adequately bring down transaction volume and lower network congestion, taking a more proactive and prudent approach is the more desirable option by adjusting the gas price to one of the higher level options.

For the actual implementation of the price adjustment, we considered taking an immediate or an incremental approach. The former would have the gas price increase directly to 750 ston or 500 ston, whereas the latter would increase the price in steps over a longer period of time, for example from 100 ston, to 200 ston and then 300 ston. The advantages of each option can be summed up as follows:

• Immediate increase: More effective solution against spam transactions
• Incremental increase: Less burden caused by drastic gas price increases

An incremental adjustment is going to put less pressure regarding the gas price, but it may not be a strong enough solution against the spam transactions in the short term. Another point of concern is the confusion and inconvenience to the Klaytn community should there be multiple implementations of the gas price increase. Considering these aspects, we believe an immediate one-time increase seems to be the more desirable option.

The gas price increase will be accompanied by the gas price policy as defined below:

Gas Price Policy Direction

The Klaytn Team is reviewing various possibilities to let more contributors to the network and ecosystem benefit from Klaytn’s growth.The following are points that we think will best serve the community moving forward.

All of the newly adjusted gas fees will be burned.

Only the gas price calculated with the existing 25 ston will be used as KGF, KIR resources as well as GC rewards. Any portion of the adjusted amount exceeding this base fee pricing will be 100% burned. We want to thereby emphasize that the goal of the price increase is “promoting the fair and effective use of the Klaytn network”.

A fee burning mechanism to maintain KLAY’s value will be put in place soon.

The Klaytn Team is firmly convinced that our ecosystem is going to expand and flourish, and we are doing our best to realize this. In the process of the ecosystem’s growth, the total gas fee is bound to increase, so a deflationary mechanism to maintain and support KLAY’s value is necessary. We are thankful for the community’s patience with us on this matter. We want this mechanism to be accurate, stable and accomplish our shared goals. We promise to bring you a proper burning mechanism that best serves the ecosystem once it is ready.

We want a dynamic and deterministic fee policy in the long term

Dynamic Fee Policy
The network stability is highly undermined during transaction surges. Most of the transactions are initiated by a few entities, but the consequences are borne by the vast majority of unsuspecting users, who would have to wait longer for one transaction to be processed. To reduce the incentives for creating bursty volumes of transactions, we want to put in place a dynamic fee policy whereby the prices change in accordance with the transactions. In addition to this, organic transaction volume can create the same issue in the future. If we have a mechanism which incentives processing transactions that “need to be given priority even at the cost of high gas fees, the spam transactions generated by bots and other less priority transactions are likely to decrease at those times. Later, as less transactions compete for network resources, the gas price will return to its previous level naturally.

Deterministic Fee Policy
If developers within the Klaytn ecosystem cannot reliably estimate the gas price, it could become a source of great inconvenience for developers and users. The Klaytn Team wants to solve this via retaining a Deterministic fee policy. For example, the gas price for a block could be determined based on the total gas used for the X number of blocks in the previous month. (Example: If the total gas used for the last 10 blocks exceeds 90% of a certain threshold, the gas price of the next block increases by the square root of 1.5). In addition, we will include measures (e.g. a certain level of randomness) to prevent any abusive cases that could occur with a 100% deterministic policy.

The Klaytn Team is actively seeking additional measures to raise the value of KLAY from a token economy standpoint and is always happy to hear of new and valuable solutions from the Klaytn and wider blockchain community.

Please share your opinions on the Klaytn Team’s gas price adjustment plan in this link. Thank you in advance for your participation.