This October 23, Klaytn, a metaverse and gamefi-focused public blockchain, announced a governance proposal to reduce its block rewards.

According to an official statement, the new Q3 updates submitted to the Klaytn Governance Council (GC) seek to optimize the issuance level of KLAY tokens through a governance proposal that lowers block rewards by ⅓.

An ongoing proposal by our GC recommends reducing existing block rewards by ⅓ in order to optimize the level of $KLAY emission.

Results of the governance vote will be in by 25 Oct 2022.

More details here:https://t.co/wkC9WEOrzq

— Klaytn (@klaytn_official) October 23, 2022

The reduction aims to address the volatility currently seen in the macro markets, which has led to the collapse of several projects and bankrupted several crypto companies.

“The current macroeconomic landscape is causing unprecedented volatility in the crypto markets, and the current level of token emissions is not optimal in facilitating value accrual for KLAY.”

What Would Tokenomics Look Like If The Proposal is Approved?

Per Klaytn, the block rewards would go from 9.6 KLAY to 6.4 KLAY, distributed 50% to the GC, 40% to the Klaytn Growth Fund (KGF), and 10% to the Klaytn Improvement Reserve.

The proposed reduction was calculated based on the current circulation of the tokens vs. their demand. The team expects to reduce KLAY inflation making it more appealing to new investors and boosting its competitiveness while ensuring the sustainability of Klaytn’s tokenomics.

Last October 20, Phemex, a cryptocurrency exchange based in Singapore, announced the listing of KLAY/USDT on the spot market. Within the next day, the token increased by 26% from $0.12 (which has been the annual bottom of the price) to $0.15.

As Cryptotato reported, despite the crypto winter and the crypto market downturn, crypto gaming projects and metaverse-oriented platforms are registering higher growth in terms of adoption and investment. Moreover, in 2022, over $4 billion have already been invested in crypto games, metaverses, and incubators to boost this new industry.

Klaytn Goes to The Moon

This October 23, the KLAY governance token increased 106% from $0.1387 to a peak of $0.2865, following news of the new token reduction proposal. At the time of writing, the token is at $0.1865, reflecting a daily increase of 34.64%.

Although the proposal has not yet been approved, the price increase is a good sign of acceptance and bullishness by the community. It is also a breath of fresh air for the token, considering it has fallen more than 97% from its all-time high of $4.40 on October 09, 2021.

That is why Klaytn indicated that the best way to recover the project’s economics is to “adjust the amount of KLAY minted,” taking into account the actual market demand and the current needs for the growth of the ecosystem.

They even said that the supply should be reduced to 2/3 of the current rewards so that they may come to implement new proposals and consensus mechanisms that are more beneficial to the project in the future.