On August 31, CMC Marketing's Min Park hosted CMC Live in Korean with Dominic Jang, Head of Business Development & Head of Korea at Oasys, Woosuk Kim, Director at LINE Next, and Olivia Song, Korea BD Lead at Ava Labs, to discuss the current state and future of adoption by Web2 companies in Korea and Japan. Below is the full transcript of the CMC Live.
*Some sentences have been edited for clarity and conciseness.
0. Opening
Min: Today, we're back with our second CMC Korean Live session after last month, teaming up once again with Xangle, a Web3 data intelligence and research company. Our topic for today is "Web3 Adoption in Korea and Japan." James Kim of Xangle, please introduce yourself and today’s CMC Live session.
James Kim: Hello, I'm James Kim, one of the co-founders and co-CEOs of Xangle, which is the largest Web3 data intelligence and research company in Korea. Today, we're diving into the topic of Web3 adoption in Korea and Japan. So far, the Web3 ecosystem has largely been driven by players in the Western world, like the U.S. and Europe. However, regulations are tightening over there, and many Web3 native projects are struggling to find meaningful success. On the flip side, Asia, including countries like Korea and Japan, is seeing a more favorable regulatory environment, and big corporations are actively getting involved in the Web3 market, exploring new opportunities. As a result, there's growing anticipation that Asia might produce some truly remarkable Web3 services. So we’ve invited Avalanche, Oasys, and LINE that are developing Web3 businesses with Web2 companies in Korea and Japan, to discuss the current state of the Web3 market and its future direction in our region.
1. The Panelists
Min: Today, we’re joined by Olivia, Business Development Team Leader of Avalanche Korea, Dominic, Head of Oasys Business Development and Head of Korea, and Woosuk, Business Director of LINE Next. Olivia, could you please start by introducing yourself?
Olivia: Hi, there. I'm Olivia, and I lead the business development efforts for Ava Labs in Korea. I joined the Ava Labs team in June of 2019 and am currently responsible for the overall business development in the Korean market. We're a tech company based in New York City, focused on developing the Layer 1, Avalanche blockchain mainnet. Our vision is to “digitize all the world’s assets," and we're making strides toward that goal with innovations like our fast finality-oriented Snowman consensus algorithm and horizontally scalable subnets. Our ecosystem is expanding, thanks to partnerships with enterprises like AWS, Alibaba Cloud, private equity firm KKR, and WisdomTree, which applied for a Bitcoin spot ETF, and these partners are helping us create real-world use cases.
Min: Thank you, Olivia, for joining us today. Next, we have Dominic. Could you tell us a little bit about yourself?
Dominic: Hi, I'm Dominic Jang, leading the Business Development efforts at Oasys. Oasys is a blockchain ecosystem tailored specifically for the gaming industry. We've separated the functions of L1 and L2 to enhance the gaming experience for both players and game companies. And we have top global game companies such as SEGA, Square Enix, Bandai Namco, and Ubisoft as node validators in the Oasys blockchain. And in Korea, companies like Com2uS, Nexon, Netmarble, and Neowiz are actively participating. In Oasys, the L2 Verse layer, built and operated by each game company is on the L1 Hub layer. Each game company operating the Verse layer will onboard and run their own titles or titles from third parties they have sourced, and through this design, we aim to provide key ecosystem participants with scalability and stability of the entire blockchain network, scam prevention, free gas, speedy game transactions, and IP protection. And at the Oasys Special Event held in June at Nijo Castle in Kyoto, Japan, we’ve announced blockchain game titles that will run on Oasys. Among them are "Battle of Three Kingdoms," which utilizes SEGA's IP, Ubisoft's first blockchain game "Champions Tactics: Grimoria Chronicles," Bandai Namco's "," and "Summoners War: Chronicles" from Com2uS.
Min: Thank you for taking time out of your busy schedule to join us. Last but not least, Woosuk, could you tell us a bit about yourself?
Woosuk Kim: Hello, I'm Woosuk Kim, responsible for the Web3 business at LINE Next, and I also serve on the board of the Finschia Foundation. Our blockchain journey began in 2018, and in response to market dynamics, we expanded our investments, securing strategic backing from 10 companies like Naver and Softbank to establish LINE Next. With over 300 members spanning Korea, Japan, and the U.S., we're dedicated to building our mainnet, platforms, and applications to drive mass adoption of blockchain. LINE believes that the existing blockchain business and service models have failed in mass adoption. envisions a future where blockchain becomes a widely-used mass service. Our NFT market, DOSI, launched in September last year, has seen remarkable success, boasting over 5 million wallets and 500,000 transactions within 10 months of its launch. Which makes it the No. 1 market in serving users in South Korea, Japan, Taiwan, Thailand, and Indonesia. As for our mainnet, we've been developing it as a private mainnet, soon to be launched as a public mainnet through the Finschia Foundation established in Abu Dhabi in March this year.
2. Korean/Japanese Web3 market situation
Min: Now, let's dive into our first topic for today, which is the "Web3 market situation in Korea and Japan." We have Olivia and James to talk about the state of the Korean Web3 market, and then Dominic will share insights into the Japanese Web3 market. Olivia, please kick us off.
Olivia: Currently, interest in the Korean Web3 market is steadily on the rise. Given the overall macroeconomic situation, where interest rates remain high, there is limited liquidity in the crypto market. However, traditional Web2 companies are increasingly looking to adopt blockchain technology. For instance, Avalanche has been in discussions with numerous enterprises and financial firms in Korea, exploring ways to integrate blockchain into their business operations. Compared to last year when the focus was on whether to adopt blockchain, this year, companies are honing in on how to practically apply blockchain to their products and services. While challenges remain, especially given recent economic shifts, various sectors are showing a growing interest in Web3. Individuals, too, are continuing to show a great deal of interest in crypto, centered around investing in tokens.
Min: Thank you for sharing your insights with us. Now, let's hear from James regarding the regulatory environment.
James: Yes, I’d like to talk about the regulatory environment of the Korean Web3 market. More Web2 companies are entering the Web3 space, and the government is responding with quicker regulatory adjustments. While there may be a difference of opinion on “quick,” the government's regulatory direction is a positive thing as it seems to be aimed at resolving institutional uncertainties rather than banning Web3 activities. In February of this year, the Financial Services Commission allowed the issuance and distribution of STOs to bring them into regulatory fold, and in July, it issued the Digital Asset Accounting Supervisory Guidelines and the Mandatory Disclosure of Notes. The latter point is of particular interest to us, as listed companies have been struggling with the lack of clear accounting guidelines for the issuance and holding of digital assets, but now that specific guidelines are available, the accounting uncertainties are alleviated to some extent. While this is a welcome development for Web2 companies, the challenge now is navigating the complexity of accounting for crypto assets. We unveiled our service for the first time at Xangle's Adoption event in July, and we plan to help the Web3 market grow alongside regulations, so we are preparing a Web3-specific accounting solution that incorporates real-time transaction labeling and reporting that complies with international accounting standards.
Min: Even in the midst of the crypto winter, we've seen that interest in the Korean Web3 market has continued, and that the government is responding with regulatory overhauls in earnest to cope with the changes, so let's turn to Dominic to talk about the state of the Japanese Web3 market. Dominic, please share your insights.
Dominic: I'd like to discuss the Japanese Web3 market from two angles, starting with the government's actions. Currently, the Japanese government is gradually moving toward deregulation to foster the Web3 industry. While many countries are still in the early stages of establishing regulations, Japan had already established a regulatory framework in the past and is now looking to further improve it. Japan was once a major hub for digital assets, accounting for more than half of the world's Bitcoin trading volume. However, due to various hacking incidents, regulations were tightened to protect investors and a taxation system was introduced, which caused many individual investors to leave the market. However, with the government's recent policies to support the Web3 industry and moves to improve the taxation system, interest from individual investors is expected to rise once again. Secondly, large enterprises are entering the Web3 space, driven by government support. For example, in the case of game companies, which are our main partners, more than 90% of Japanese listed companies are developing actual products, and are not just in the review stage. Not only the gaming sector, but other large companies that can have an impact on the Web3 ecosystem as a whole are also making active moves in the Web3 space.
Min: It turns out the Japanese government is also trying to support the Web3 industry by improving the past regulatory framework, and Japan’s Web2 conglomerates, especially game companies, are also entering the Web3 market. As the three of you mentioned, Web2 companies in both Korea and Japan are increasingly interested in the Web3 market. So let’s talk more about what Korean/Japanese Web3 companies that entered Web3 have achieved next. We’ll hear from Dominic, Woosuk, and Olivia.
3. Examples of Korean/Japanese Web2 companies entering Web3 and their performance
Min: Dominic, let's first delve into the cases of Japanese Web2 companies venturing into the Web3 realm and their accomplishments.
Dominic: The Japanese government's support for Web3 business and regulatory overhaul, which began in earnest last year, spurred numerous Web2 companies to explore the Web3 space. In Japan, the entry into the Web3 market is particularly prominent in the game sector, with more than 80% of listed game companies and major IP companies having already started to develop content business in Web3. Most of these ventures have moved beyond the planning phase and are actively developing Web3 games, attracting growing public interest. While there isn't a proven Web3 game model yet, many Web2 companies are viewing the Web3 market through an R&D lens. Consequently, they often enter partnerships with specialized blockchain businesses rather than venturing into Web3 on their own. Oasys, along with major players in the Oasys ecosystem, is a prime choice for many Japanese game companies seeking partnerships. Oasys has blockchain titles such as “Battle of Three Kingdoms,” which utilizes SEGA's Battle of Three Kingdoms IP, Bandai Namco's "Den-On-Bu,” and other blockchain titles such as DMM, Enish, and Klab, which will be released throughout the second half of this year and early next year. Furthermore, we've observed a substantial increase in collaborations with international companies targeting the Japanese market. For many major game companies, the Japanese market is very attractive due to the regulatory clarity that they do not enjoy in their home countries. Some of the most exciting examples of global partnerships include Ubisoft's “Champions Tactics: Grimoria Chronicles” in France and Com2uS' “Summoners War: Chronicle” in Korea.
Min: Thank you for sharing your valuable insights. I'm looking forward to seeing Japanese game companies enter Web3 in earnest. Woosuk, let's talk about how Web2 companies in Korea and their foray into Web3.
Woosuk Kim: Let me share the case of LINE and our partners. First of all, LINE is also a typical Web2 company, and we’ve been growing rapidly by creating a new mass-oriented NFT market platform called DOSI, which I mentioned earlier. And I think one of the biggest factors was the complete redesign of the NFT user experience. With LINE's DOSI wallet, users can enjoy a free download and receive airdrops directly from the web or app with a social login, and it’s the first in the world to integrate Naver Pay and LINE pay that allows users to trade dollar-denominated NFTs seamlessly. And it also accepts payments in Ethereum and Finschia tokens, creating a killer experience from a general service/user perspective. Based on this infrastructure, various services within the LINE Group are conducting NFT-based PoCs. Pilot projects such as distributing and using NFT items in app-based games like “LINE Rangers,” wearing and trading NFT avatars on LINE messenger profiles, and selling and trading LINE stickers as NFTs are underway. SoftBank has also conducted multi-million airdrops across Japanese telecom branches, and Naver is pushing to create new memberships in sports and entertainment. We've partnered with JYP, YG, and others to create new entertainment fandom community services and are collaborating with KOTOBUKIYA and SEGA in Japan on game projects that prioritize Web2 gameplay and cross-border item trading. Additionally, we're conducting PoCs with promising startups in Asia like GoodGang Labs, CNP, Sneakers, NALBI, and more, to raise funds and expand our user base through NFTs.
Min: I think the way LINE is building on its success in Web2 to provide convenient services in areas where users are inconvenienced will be a good example for other Web2 companies to follow when they enter Web3. Finally, let's hear from Olivia.
Olivia: In Korea, several Web2 companies from established industries have been exploring entry into the Web3 space since 2022, and we're now beginning to witness their results one by one this year. A noteworthy example involves Avalanche's key domestic partner, SK Planet. SK Planet has introduced its own blockchain, UPTN Subnet, harnessing Avalanche's scaling solution, Subnet. Within the UPTN project, SK Planet transformed its OK Cashbag membership, the largest loyalty program in Korea with 20 million users, into dynamic NFTs. Presently, approximately 130,000 KYC-verified users have set up UPTN wallets and are actively engaging in various activities involving NFTs. Furthermore, in the latter half of this year, we're planning to launch several NFT ticketing ventures for events like performances and exhibitions. Additionally, we've observed a growing interest among domestic financial firms in STOs, especially after the Token Securities Overhaul Plan announcement in February this year. And they are leveraging public blockchain mainnets like Avalanche, recognizing the limitations of private blockchains discussed previously.
Min: Over the past year, we've certainly seen a lot of Web2 companies enter the Web3 market. Many Web2 companies including game companies, platform companies, and data companies are looking to enter the Web3 market. So let’s look into the reasons why Web2 companies are entering the Web3 market. Let's hear from Woosuk and Dominic.
4. Why Korean/Japanese Web2 companies are entering the Web3 market
Min: Woosuk, please explain why Web2 companies are entering the Web3 market. Why do they choose Web3 for their new business?
Woosuk Kim: Realistically, I think that until recently, for many companies, doing Web3 was more of a marketing PoC. The same is true for LINE's internal services and partners, but the more established your existing users or fans are, and the clearer your business model is, the scarier it is to introduce blockchain technology and Web3. But where we see promise is that the Web2 and Web3 boundaries are disappearing, and we're seeing examples of companies adopting Web3 and blockchain to essentially do business better. For example, when we're in sales, we remove the words "blockchain," "Web3," "NFTs," and "token economy" and emphasize its function as a marketing tool while maintaining the existing business plan. When we suggest NFTs to companies, they react negatively, but when we tell them that they can do app funding, item trading better with their current business plans, they are interested. Also, essentially, the value of blockchain from a business and user perspective is 1) cross-border funding, 2) reselling, 3) digital authentication. We talk a lot about how that helps the business. If there's a business ROI or a value from a user perspective, I think it's inevitable that large enterprises or startups will adopt blockchain properly, not just marketing. Already, I’ve seen teams starting to realize that. The mass service market that Line is targeting is one example. There's a statistic that there are less than 30,000 DApps that are working properly right now. Instead of 30,000 DApps, we need a blockchain, market, and wallet that can accommodate more than 4 million apps. This way, existing apps and businesses will increasingly leverage Web3, bringing the market into the mainstream.
Min: Thank you for sharing your valuable insights. Dominic, why are Web2 companies entering the Web3 market?
Dominic: Traditionally, gaming companies have been the earliest adopters of new technologies. Along with new technologies such as AI and new devices like VR/AR, blockchain is being recognized as a technology that offers users new gaming experiences. While many game companies are already generating significant cash flow in the Web2 space, competition is already driving up production and marketing costs, making it harder to succeed. Web2 game companies are adopting blockchain technology as a way to find new business avenues. This is one of the biggest trends in Japan's Web3 market, as many major game companies are rushing to get a head start on the blockchain game market and accumulate expertise. This is similar to how game companies were entering the Web3 market in South Korea 2-3 years ago. Unlike Korean game companies, which are taking a two-track approach to blockchain and content, Japanese Web3 game companies tend to rely on partnerships with companies that specialize in blockchain technology and focus on their own game content. Japanese game companies are also more focused on initiatives to onboard existing users to Web 3, rather than developing services that target users who are Web 3 natives. They tend to focus on things like linking wallets with existing user IDs, developing UX for credit card payments, spending more time on terminology and creating educational content, and building a game economy that Web2 users won't find confusing. At the end of the day, the main reason game companies are embracing Web3 is that they see blockchain as a technology that they can introduce in their games to offer fresh content and experiences to cater to their existing core gamers.
Min: Thank you. Ultimately, it seems that the anticipation of mass adoption, where blockchain technology is embedded in services embraced by a large user base and leads to new business opportunities, is motivating Web2 companies to venture into Web3. Finally, let's turn our attention to the sectors that will lead the Web3 market in the coming years. This time, let's hear from each of our panelists.
5. Sectors that will lead the Korean and Japanese Web3 market in the future
Min: Olivia, could you share your insights on the areas that will drive the Korean Web3 market?
Olivia: Sure thing. While we've got some gaming experts here, I'd like to talk about the financial sector. I mentioned earlier that AvaLabs is on a mission to digitize all assets worldwide. Right now, the financial market has a lot of inefficiencies due to cumbersome procedures, and assets that individual investors can access are limited due to regulatory and procedural issues. If we bring blockchain technology into play for various assets that remain less accessible, it could open up a market where individual investors can invest in such assets. In this regard, Ava Labs is working on various technologies and services for this purpose. Of course, we still need more user-friendly services and apps to make Web3 more accessible. To get there, there are things to be done, such as improving UI/UX and clearing up regulatory uncertainties.
Min: Thank you for sharing your valuable insights with us. James, how do you foresee the sectors that will drive the Korean Web3 market?
James: Absolutely. We believe that gaming is going to be the driving force. In March this year, our research team, together with CMC, published a report titled “Asia: The Heart of Blockchain Games," which dives into this topic. In short, Korea’s gaming scene is all about MMORPGs, and they mesh well with blockchain technology. Big players like Nexon, Netmarble, Com2uS, and NPIXEL, and WeMade are committing significant resources to blockchain games. Now, consider the cases of PC and mobile devices. When new tech comes in, there is unfamiliarity and discomfort in the early stages of new technology. But games that grab users’ attention and keep them hooked have the upper hand and can thrive despite the unfamiliarity and discomfort. It is difficult to predict when exactly the Korean blockchain game market will explode, but as quality games continue to hit the market, we are hopeful for some success soon. In the meantime, traditional game companies have a system for monitoring and managing in-game data and deriving insights from it post-release. However, in Web3 games, it is very difficult and inefficient to monitor all transactions and derive insights from them, similar to accounting for cryptocurrencies. That’s why we are working on a tokenomics service that allows businesses to effortlessly analyze the performance of their games and keep track of the circulation of in-game goods. Our service is expected to meet the needs of various stakeholders, including game companies, gamers, and investors, and help facilitate the growth of the blockchain gaming market.
Min: Thanks for the great insights. Dominic, earlier you also mentioned the entry of Web2 game companies into Web3. How do you see the sectors that will drive the Japanese Web3 market in the future?
Dominic: I’ve also got my eyes on the gaming sector as a big driver for the Japanese Web3 market, especially when it comes to how blockchain games will be distributed. To date, unlike Web 2 games, blockchain games lack a direct route to reach the user base. In many countries, regulatory uncertainties are holding back mainstream distribution platforms from jumping into Web 3. But in Japan, things are getting clearer, and the big players are showing real interest in Web 3 game distribution. What’s also noticeable is the increasing combination of blockchain and loyalty points. Currently, in Japan, loyalty points from mobile operators and e-commerce platforms are linked to convenience stores and franchise restaurants and are often used as actual payment methods. Recently, services have been launched to allow people to manage stocks and even bitcoin through these points. We are seeing a surge of ideas about leveraging cryptocurrencies as a way to tap into these points. Once these business models start to materialize, retail users will have greater access to cryptocurrencies.
Min: Thank you for those great insights. On a final note, Woosuk, what’s your outlook on the matter?
Woosuk Kim: I’d like to steer a bit away from gaming since it’s been discussed extensively. I see significant potential in cross-border funding, membership, and reselling. First of all, I believe many companies will embrace Web3 regardless of their industry. Already, ICOs and NFTs have essentially played the role of cross-border funding. Among them, I expect the proliferation of new funding models over time, where content or apps are funded primarily through NFTs to provide purchasers with various discounts, benefits, and accesses in the digital world since NFTs do not encounter conflicts of interest with securities. I also think the membership landscape of brands and artists is set to expand. Early membership models often ended up short-term marketing promotions due to poor revenue models. Basically, aside from the benefits of secondary transactions, blockchain technology is the most efficient and cheapest technology for identifying, authenticating, and rewarding users. Top-tier global brands are tapping into the benefits of blockchain technology to create a sustainable membership ecosystem for their global fanbases. Finally, the growth of the resell market has been steady in recent years, and Naver has been investing heavily in it. We believe that blockchain-based transaction markets can be formed in areas where existing markets face pricing, revenue distribution, and tracking challenges, or where there’s a demand for cross-border and digital transactions, such as resale of tickets and even physical brand name goods.
6. Closing
Min: This was indeed a very interesting live session with fascinating insights from Web3 experts who are closely collaborating with Web2 companies. It seems clear that Web2 companies are well-positioned to draw from their successes and contribute to the development and mass adoption of Web3. As they have the know-how to turn their business into a success, they will be able to replicate their earlier achievements in Web3 again by incorporating blockchain technology into their services. To all Web2 companies considering a leap into the Web3 market, I hope the session has provided you with valuable insights. Thank you for joining us for CMC's first live session in Korean. We hope you enjoyed it.