Protocol Overview

Introducing KLAYswap's AMM-based Instant Swap Protocol

AMM is an innovative trading mechanism that evolved from order book-based DEXs to change the way we trade cryptocurrencies on-chain. Instead of buy/sell order books, liquidity pools created by liquidity providers allow traders to trade freely, and liquidity providers share any generated pool usage fees as revenue in proportion to their individual liquidity contributions. In addition, any holder of KCT (Klaytn Compatible Token) can become a liquidity provider.

The AMM mechanism of KLAYswap is based on the formula x * y = k where x = KLAY, y = KCT , and k = Constant Function. The token price range is set according to the quantity of each token when the corresponding liquidity pool is created. For example, if the liquidity supply of x (KLAY) increases, the supply of y (KCT) decreases to maintain the constant function, k. In this way, the supply of each token in the liquidity pool is designed to fluctuate with prices set accordingly.

PARTICIPANTS:

In other words, KLAYswap is an instant swap protocol that operates with an on-chain liquidity pool, where liquidity is guaranteed by automated market-making (AMM) mechanisms. It is an on-chain swap service that allows anyone that has any KLAY or KCT-type cryptocurrency to become a liquidity provider and earn income from pool usage fee commissions.

• Single Pool Participant: By supplying a single asset to the pool, participants can receive the supply reward (APR) for the respective token and KSP rewards. Single pool suppliers will receive aToken, a proof of supply, in their wallet when they supply assets to the pool (contract), and they will be distributed various rewards based on their aToken share ratio within the pool.

• V2 Pool Participant: By supplying two assets to the V2 pool, participants can receive KSP rewards and additional airdrop rewards. V2 pool suppliers will receive LP (Liquidity Provider) Tokens, a proof of supply, in their wallet when they supply assets to the pool (contract), and they will be distributed various rewards based on their LP Token share ratio within the pool.

• V3 Pool Participant: By supplying two assets to the V3 pool, participants can receive pool usage fee rewards, KSP rewards, and additional airdrop rewards. V3 pool participants will receive LP (Liquidity Provider) NFTs, a proof of supply, in their wallet when they supply assets to the pool (contract), and they will be distributed various rewards based on their share ratio within the pool.

• Traders: Tokens listed in the protocol can be traded with KLAY or KCT within the scope of the respective pool. The transaction price is based on the existent number of pairs of the respective tokens.

• Staker: Stakers can stake KSP and receive KSP inflation rewards. The longer the staking period, the more vKSP (voting rights) they acquire. Based on their share ratio in the total protocol vKSP, they will automatically receive 10% of the pool usage fee rewards from KLAYswap along with the KSP rewards.

*Note that slippage (a difference in the estimated price at the point of transaction and the actual price at time of transaction) may occur in AMM-based swap protocols. In addition, a liquidity provider may experience Impermanent Loss (change in price of supplied assets compared to when they are supplied) as token prices in pools are adjusted by an AMM mechanism after the point of supply.

Please keep these risks in mind when providing liquidity or conducting transactions.