Kaia (KAIA) Coin Review: Use Cases, Technical Features, and Limitations

If you knew KLAY as "the coin made by Kakao" and now see it under the name Kaia, you're probably wondering whether only the name changed. Kaia is a blockchain launched through the merger of Klaytn and Finschia, and KAIA is the coin used on this network. Since the merger, there's a lot more to look at than Kakao as the starting point.

The key to evaluating Kaia is how easily blockchain apps can be built and used on it. Its compatibility with Ethereum and features that reduce the fee burden tie into this goal. That said, a technology being convenient and earning a profit by holding KAIA are two separate things.

How Kaia Relates to Klaytn and Finschia

Klaytn is a blockchain developed by Ground X, a Kakao subsidiary. Its main goal was to make blockchain apps as easy to use as ordinary web services. After merging with Finschia, the Kaia mainnet launched on August 29, 2024.

A mainnet is the blockchain network where real assets and transactions move. Kaia is a Layer 1 that runs its own network, not the name of a single token issued on top of another blockchain. It's easier to understand if you separate Kaia, the network, from KAIA, the coin used within it.

The merger was built on the existing Klaytn network. Because of this, KLAY holders on that network didn't need to do any separate swap for the merger, while a separate conversion process was set up for FNSA on the Finschia network. Even though the two coins became one, the steps holders went through weren't the same.

KAIA Coin Use Cases and Staking Structure

When you send or deposit assets in a blockchain app, the network processes that transaction. The transaction fee involved is called a gas fee, and on Kaia, KAIA is used for this kind of network usage. In other words, beyond being something you buy and sell on exchanges, it has a role within the network.

KAIA is also used for staking, which supports network operations. You delegate the coins you hold to take part in operations and receive rewards. The fees you pay while using apps and the rewards you get for delegating coins serve different purposes.

Receiving staking rewards doesn't mean the value of your assets in Korean won also goes up. Even if your coin count grows, the total value can shrink if the price falls. That's why, when reviewing KAIA, it's hard to explain profitability by the reward rate alone.

Kaia's Ethereum Compatibility and Fee Delegation

Just as it's convenient when the apps you used run as-is on a new phone, it's easier for developers to move services if they can use familiar tools and code. Kaia is compatible with the Ethereum Virtual Machine (EVM). This means the way apps run on Ethereum can also be used on Kaia.

This compatibility helps developers when building or expanding services. However, it doesn't mean every Ethereum app is also available on Kaia. You need to distinguish between the technical ability to move an app and the range of services actually operating.

From a user's perspective, the feature worth noting is fee delegation. Just as operators of ordinary services cover payment processing fees, this feature lets the service side pay users' fees for blockchain transactions. When applied, it saves users the hassle of preparing coins separately for transaction fees.

That doesn't mean every app on Kaia is free to use. Supporting the delegation feature is different from an individual service actually covering the cost. Kaia's advantage lies in making this kind of usage possible to implement.

Kaia DeFi vs. Simply Holding

Holding KAIA in a wallet and depositing it into decentralized finance (DeFi) differ from the very way your assets are managed. Staking and liquidity pools in particular look similar because both can earn rewards, but the purpose your assets serve is different. A liquidity pool is a structure where you supply assets so other users can swap tokens.

Back in the Klaytn days, you could join the KLAY·KSP pool on KLAYswap by depositing only KLAY. This was because part of the KLAY was converted internally into the KLAYswap token (KSP), and the two tokens were deposited together. Just because you put in only one coin on screen didn't mean you kept holding only that coin.

In a liquidity pool, the ratio between the two tokens can shift as trades happen. Impermanent loss can also occur, where your assets end up worth less than if you had simply kept the same tokens in your wallet. So rather than looking only at deposit rewards, you need to include the composition and value of the assets you get back to understand your gains and losses.

If your goal is simply to hold KAIA, joining a liquidity pool is a separate decision. In the process of earning more rewards, you may also take on the price changes of another token. Connecting a wallet is only preparation for starting such a deposit; connecting alone doesn't deposit your assets.

Strengths and Limits in Evaluating Kaia Coin

Kaia's strength lies in technology that reduces the hassle of building and using apps. An Ethereum-compatible execution environment helps developers reuse existing code, and fee delegation can cut down users' preparation steps. This is where you can see the mass-adoption goal carried over from Klaytn as concrete features.

However, these features alone can't tell you how widely Kaia is used or what KAIA is worth. Even if apps are easy to build, there need to be services people keep using, and even if service usage grows, profits for coin holders aren't guaranteed. Rewards paid by issuing new coins are also different in nature from revenue coming in from outside.

You can understand Kaia by focusing on the background of the Klaytn–Finschia merger, its Ethereum compatibility, and its fee delegation feature. Holding KAIA, staking it, and depositing it into a liquidity pool are each different choices, so the starting point for your decision is not bundling deposit products together with your goal of simply holding the coin.