Kaia Chain: Layer 1 Innovation Practice for the Asian Web3 Ecosystem
In August 2024, Kaia Chain was officially launched, the result of a merger between South Korea’s Kakao (Klaytn) and Japan’s LINE (Finschia), marking a new phase of integration and expansion for Asia’s Web3 ecosystem. As an Ethereum Virtual Machine (EVM)-compatible Layer 1 public chain, Kaia centers its competitive edge on “high performance, low entry barrier, and strong interoperability,” aiming to accelerate blockchain adoption at scale through a finely-tuned tokenomics model and the user base of Web2 giants.
Tokenomics Model: Balancing Inflation and Burn
The total supply of KAIA tokens is 60.05 billion, with a post-merger circulating supply of 58.05 billion. Value equilibrium is achieved through a dynamic inflation and burn mechanism. The initial annual inflation rate is set at 5.2%, with 9.6 KAIA issued per block—positioned between Ethereum’s deflationary model and Solana’s high inflation strategy.
Inflation Distribution
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50% of newly minted tokens go to validator incentives
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25% to the Kaia Ecosystem Fund (KEF) for dApp development
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25% to the Kaia Infrastructure Fund (KIF) for technical upgrades
This distribution ensures validator participation while reserving resources for long-term ecosystem growth.
Deflationary Pressure
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Transaction Fee Burn: A portion of gas fees is automatically burned to curb dilution.
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MEV Profit Burn: 30% of Maximum Extractable Value (MEV) profits are burned to prevent validator monopoly.
This design reduces Kaia Chain’s net annual inflation rate to below 3%, offering investors a stable outlook. As of April 2025, KAIA’s circulating market cap reached $632 million, with price volatility 15% lower than comparable Layer 1 tokens.
Technical Architecture and Ecosystem Layout
Kaia Chain is built on the PBFT consensus mechanism, achieving 1-second block confirmations and 4,000 TPS throughput, with transaction costs just 1/10th of Ethereum. Key technical features include:
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Cross-chain Interoperability: EVM compatibility with planned support for CosmWasm, seamlessly connecting to the Cosmos ecosystem.
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Smart Contract Optimization: Utilizes sharding to boost parallel processing, suitable for high-frequency trading scenarios.
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Web2 User Migration: Integrates KakaoTalk (54 million users in Korea) and LINE (194 million users globally), using Mini Dapps to lower Web3 entry barriers.
On the ecosystem side, Kaia Portal has launched over 25 million unique wallets, spanning DeFi, NFT, and gaming use cases. Its Mini Dapp ecosystem aims to expand to 1,000 lightweight applications by the end of 2025, including social platform Cattea and blockchain game Bombie.
RWA and Institutional Collaboration: Asia’s Tokenization Path for Traditional Assets
Kaia Chain excels in the tokenization of real-world assets (RWA):
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Real Estate and Energy: The ship tokenization project “Galactica,” in collaboration with an Indonesian shipping firm, completed its first round of financing, unlocking over $20 million in liquidity.
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Compliance Architecture: Through Hong Kong Monetary Authority’s Ensemble sandbox, Kaia pilots tokenization of new energy assets, with annual returns ranging from 8% to 12%.
Future attention should be paid to whether major exchanges like Binance and JuCoin will list KAIA pairs, providing accessible liquidity channels for investors.
Challenges and Outlook
Despite Kaia’s rapid ecosystem growth, it faces two main challenges:
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Validator Centralization Risk: Validators must stake at least 5 million KAIA (~$650,000), significantly higher than Ethereum’s 32 ETH requirement.
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Regulatory Uncertainty: Regulatory standards for stablecoins and RWA vary across Asian countries, potentially hindering ecosystem expansion.
Looking ahead, Kaia Chain plans to integrate staking and liquidity mining via the Consensus Liquidity (CL) protocol and to launch a native stablecoin. If its RWA strategy succeeds, analysts predict KAIA could break the $0.50 mark, emerging as a dark horse among deflationary Layer 1 chains.
Neason Oliver
