Table of Contents

1. Introduction

2. NTT Digital's WaaS: The Beginning of a Seamless Web3 Experience
2-1. TGC Kumamoto demonstrates seamless potential of Web3
2-2. NTT's WaaS Solution: Addressing the limitations of existing Web3 wallets
2-3. Business value delivered by scramberry WALLET WaaS
2-4. Early achievements and future challenges of NTT Digital's Wallet Business

3. Circle: Revolutionizing Finance with Trusted and Regulated  Stablecoins
3-1. Circle's USDC stablecoin gradually expands market impact
3-2. Increased regulatory clarity drives value of Circle’s stablecoins
3-3. Expanding USDC from crypto market to B2B payments
3-4. Circle's competitive potential in Japanese and Korean markets

4. Fireblocks Innovates Secure Web3 with Self-Custody
4-1. The imperative of security amid persistent crypto hacking incidents
4-2. Business value of Fireblocks' Self custody solution
4-3. Tailored solutions for local regulations
4-4. Fireblocks aims to become an integrated cryptocurrency management platform

5. Final Thoughts

1. Introduction

Developing a Web3 business necessitates establishing business goals aligned with the company's core values and services. Once these goals are set, selecting the appropriate Web3 tools and managing the associated risks through ongoing monitoring of legal and regulatory changes becomes crucial. This regulatory risk management demands substantial manpower and resources, posing significant challenges for companies new to the Web3 industry. Fortunately, ongoing technical discussions and developments are addressing these difficulties, and reliable infrastructure service providers are emerging in various fields.

The Xangle ADOPTION 2024 Conference will feature many of these leading Web3 infrastructure service providers, showcasing their technical excellence and the business value of their services. In this second installment of the ADOPTION series, we will explore how blockchain Web3 infrastructure services are creating business value, focusing on NTT Digital's Wallet as a Service (WaaS), Circle's stablecoin issuance and payment infrastructure, and Fireblocks' custody service.

2. NTT Digital's WaaS: The Beginning of a Seamless Web3 Experience

2-1. TGC Kumamoto demonstrates seamless potential of Web3

Tokyo Girls Collection (TGC) is a popular event that draws over 8.1 million attendees annually and is periodically held under various themes across Japan. Despite its popularity, the organizers faced the challenge of maintaining continuous engagement with fans beyond event periods. To address this, they decided to adopt a Web3 business model.

For the TGC Kumamoto event held in Kumamoto Prefecture on April 13, 2024, a Web3 application featuring NTT Digital's wallet technology was introduced. Participants were instructed to install the mobile app, and after a straightforward sign-up process, they completed QR check-ins and various quests to earn rewards such as commemorative NFTs and drink vouchers. While existing crypto wallets often pose headaches for general users due to their complicated processes, the TGC Kumamoto event offered an exceptionally user-friendly experience, effectively removing the typical barriers to entry.

A survey conducted by NTT revealed that 90% of users felt comfortable using the Web3 application, and 95% expressed a willingness to participate in similar Web3 events in the future. Based on this positive feedback, TGC organizers plan to continue utilizing the app to provide customized benefits and build lasting relationships with their users.

So, what are the problems with existing Web3 wallets, and how does NTT Digital's wallet service create business value for organizations?

2-2. NTT's WaaS Solution: Addressing the limitations of existing Web3 wallets

Web3 wallets serve as crucial tools connecting users to blockchain networks, enabling them to purchase, store, and manage digital assets. These wallets support tokens from various blockchain networks, such as Ethereum and Solana, and facilitate financial activities, including purchasing cryptocurrencies and NFTs and swapping tokens directly on decentralized applications (dApps). It also functions as a crucial gateway for users to engage with the Web3 ecosystem, offering capabilities to create and manage multiple accounts within a single wallet. Furthermore, a browser extension facilitates seamless access to decentralized applications.

However, many argue that this user experience is too complex for all but the most sophisticated users, posing a barrier to the mass adoption of Web3. To access application services, users must install an externally provided wallet, create an account, and record and store a mnemonic phrase. Furthermore, to use Web3 applications, users need to transfer coins to the wallet. In regions like Korea, this process requires buying coins on a centralized exchange and then sending them to the Web3 wallet, complicating the user journey. Regardless of how good an application is, it cannot be used without going through the wallet setup, making it difficult for Web3 newcomers to avoid feeling alienated by blockchain technology.

Existing Web3 wallets thus suffer from a complicated user interface and preparation process, diminishing the overall user experience. They also face challenges related to security vulnerabilities and regulatory compliance. Wallet-as-a-Service (WaaS) solutions have emerged to address these issues, simplifying the use of Web3 wallets through a user-friendly interface and offering development solution services to support security and regulatory needs.

In November 2022, Motoyuki Li, then CEO of NTT DOCOMO, announced his ambition to transform social infrastructure by building a secure Web3 environment utilizing blockchain and accelerating the Web3 ecosystem, where creators and developers can create great synergies. To this end, the company pledged a $4 billion investment, established NTT Global for the global expansion and connection of advanced Web3 technologies, and created NTT Digital to directly enter the WaaS development infrastructure business—a key tool for Web3 adoption.

NTT Digital's WaaS solution embeds a wallet within a Web3 application, simplifying the user interface and allowing customization to suit the app's features. The strategy for mass adoption of Web3 involves providing a Web2-like experience where users are unaware they are interacting with blockchain technology. For companies preparing Web3 services, building everything from the infrastructure to the product to customize the app is costly and time-consuming. To solve these pain points and create business value, NTT Digital has launched a B2C product called the scramberry WALLET and is enhancing the scramberry WALLET for Business service, a B2B infrastructure solution.

2-3. Business value delivered by scramberry WALLET WaaS

Scramberry WALLET's WaaS solution distinguishes itself by leveraging the vast resources and credibility of the NTT Group, a company with an extensive track record. There are numerous possibilities for enhanced utilization of these resources, including offering a funnel for dPoint users, integrating with dBarai payment methods, cross-analyzing user data via dAccount, and connecting with various DOCOMO and partner services. By adopting scramberry WALLET's WaaS solution, companies can quickly penetrate the Japanese market and operate services for a large user base, achieving competitive growth by offering customized services based on user data.

Companies that adopt scramberry WALLET's WaaS solution can realize a variety of business benefits from both technology and services, including:

• Maximized user experience
  The decentralized secret key backup feature utilizes cloud servers to securely back up users' private keys, eliminating the need for users to write down and store traditional wallet recovery phrases. Additionally, the gas-free user experience allows users to freely use Web3 technology without worrying about transaction fees, maximizing the seamless blockchain user experience. The social login feature further enhances usability by allowing users to easily log in and use the service with their existing social media accounts.

• Security and legal risk protection
  scramberry WALLET employs Multi-party Computation (MPC) technology for distributed key management and signature, ensuring a high level of security. A firewall and fraud notification function protects users from fraud and hacking attempts on smart contracts. The wallet service is designed and updated to comply with international laws and regulations such as GDPR, privacy laws, and financial regulations, thereby minimizing legal risks.

• Scalability and business support
  NTT Digital's WaaS solution provides a suite of customizable features, allowing each client to tailor the service to their specific business requirements. The platform's blockchain network health monitoring and rapid update capabilities ensure swift responsiveness to changes and continuous service optimization. Furthermore, the ability to integrate new blockchain networks enhances technical flexibility, while an always-available response team offers comprehensive business support, ensuring enterprises receive prompt and effective assistance whenever needed.

2-4. Early achievements and future challenges of NTT Digital's Wallet Business

Beyond the success at the TGC Kumamoto event, NTT Digital has engaged in various initiatives and achieved notable milestones.

The "Web3Jam" project, involving 14 major Japanese companies, is experimenting with innovating collaboration through Web3 wallets to provide various benefits to consumers. NFTs associated with participating companies will be distributed via scramberry WALLET, enabling consumers to experience Web3 culture and enjoy benefits based on the combination of corporate NFTs they own. This initiative aims to overcome the challenges of fragmented customer data and create innovative customer value.

The game platform "now.gg," with approximately 600 million users worldwide, has also adopted NTT's WaaS solution. By integrating WaaS, now.gg aims to maximize user experience with Web3 elements within the game, supporting the storage and exchange of virtual assets and NFTs. Furthermore, NTT will facilitate the onboarding of a large number of Japanese users to now.gg. NTT Digital is also the first Japanese company to join the Open Wallet Foundation (OWF), preparing for international interoperability standards for digital wallets. This move is expected to accelerate the global expansion of scramberry WALLET.

NTT Digital's WaaS solution simplifies the complex process of integrating blockchain technology for companies entering the Web3 business, providing the technical foundation to bridge the gap between existing infrastructure and emerging Web3 technologies. Leveraging the NTT Group's large user base and partnerships to achieve synergies is a key factor that differentiates NTT Digital's WaaS from competing offerings. However, as NTT's wallet business is still in its early stages, it requires additional adoption cases and must continue to grow by accumulating recognized success stories in the Web3 market. Expansion will be crucial, including collaborations with Korean and global companies to explore diverse use cases beyond the Japanese market, where application services remain limited. As NTT's wallet business evolves, we anticipate significant progress toward the mass adoption of blockchain technology and Web3.

3. Circle: Revolutionizing Finance with Trusted and Regulated Stablecoins

3-1. Circle's USDC stablecoin gradually expands market impact

Founded in October 2013, Circle set out with a vision to revolutionize digital finance. In September 2015, it became the first company to receive the BitLicense from the New York Financial Services Authority, and in April the following year, it was granted the first e-money license by the U.K. Financial Conduct Authority. The cryptocurrency market experienced a significant bull market in 2020, driven by Bitcoin's third halving and liquidity measures in response to the COVID-19 pandemic. As the DeFi ecosystem flourished, stablecoins emerged as crucial collateral assets, leading to a surge in the issuance volume of USDC.

During this period, Tether's USDT dominated the stablecoin market despite facing various allegations about the reserves backing USDT. In 2021, as scrutiny intensified, Tether disclosed that its reserves were largely comprised of high-risk commercial paper. In the meantime, the U.S. Department of Justice launched an investigation into Tether's executives, providing Circle's USDC with a substantial growth opportunity.

Circle emphasized the transparency and security of USDC, which is backed by highly liquid short-term U.S. Treasuries and U.S. dollars, making it a safer storage option compared to USDT. This structure also allowed Circle to earn stable yields on Treasuries. In April 2022, BlackRock's investment in Circle attracted significant attention, and a series of positive developments drove USDC issuance up to $55 billion. However, Tether's decision to sell its commercial paper and convert it into short-term U.S. Treasury bonds mitigated the controversy. In March 2023, Circle faced a crisis when the collapse of Silicon Valley Bank, where some of its reserves were held, caused USDC to break its $1 peg.

Despite the declining market capitalization of USDC, Circle managed to navigate the crisis with the support of a U.S. government bailout, which fully funded USDC reserves. The SVB crisis prompted Circle to enhance its reserve risk management. USDC has since transitioned to Circle's sole management as the consortium agreement with Coinbase ended. Coinbase remains a shareholder in Circle, positioning Circle advantageously for the upcoming wave of mass adoption anticipated with Bitcoin's fourth halving, all while maintaining alignment with global regulatory frameworks.

3-2. Increased regulatory clarity drives value of Circle’s stablecoins

Circle currently issues two stablecoins: USDC, backed by the US dollar, and EURC, backed by the euro. Both stablecoins are designed to stabilize the value of their respective fiat currencies. USDC's reserves are managed by the Circle Reserve Fund, registered with the U.S. Securities and Exchange Commission, and consist primarily of short-term U.S. Treasuries, one-day Treasury repurchase agreements, and cash. These assets are held at The Bank of New York Mellon and independently managed by BlackRock. In contrast, EURC uses euros as collateral, with funds held at major U.S. financial institutions.

In terms of transparency, Circle has been publishing detailed monthly reports on its reserve assets since 2018. These reports, verified by a Big 4 accounting firm with third-party assurance, comply with the American Institute of Certified Public Accountants (AICPA) accreditation standards. This transparency assures that USDC and EURC are fully backed by highly liquid fiat reserves, segregated from operational funds.

Circle is licensed to operate in 49 U.S. states. On July, 2024, became the first stablecoin operator to receive a European MICA-compliant license, allowing European companies to use USDC and EURC directly. Additionally, Circle holds money transmitter licenses in Bermuda, Singapore, and the United Kingdom, making it the only company globally with multiple licenses to operate a stablecoin business legally.

USDC is currently issued on 16 blockchain networks, enabling seamless operation across various blockchain environments through Circle's cross-chain stablecoin transfer technology (CCTP). This interoperability facilitates the seamless trading of Circle's stablecoins on both blockchains and centralized exchanges, allowing them to fulfill diverse roles in the financial ecosystem.

Public statistics reveal that from October 2022 to October 2023, Circle issued and redeemed over USD 277 billion in USDC between the banking system and blockchain networks. Circle's stablecoins are driving digital financial transformation, offering more efficient and reliable financial services to businesses worldwide with value stability, high transparency, and unparalleled interoperability.

3-3. Expanding USDC from crypto market to B2B payments

Many stablecoins in the Web3 space remain primarily as intermediate stores of value for cryptocurrency trading. Initially designed for liquidity in the cryptocurrency market, Circle's USDC is now prepared to expand into real-world B2B payments, leveraging its status as a regulated digital dollar.

The current cross-border payments market is faced with inefficiencies and high costs due to time zone delays, high fees, lack of transparency, and limited liquidity tied to local currencies. These challenges significantly hinder rapid decision-making and capital mobilization for international businesses.

Circle aims to revolutionize the cross-border payment market by leveraging stablecoins for digital finance. To achieve this, Circle offers core services that maximize stablecoin utility:

• Circle Mint
  Circle Mint facilitates the quick exchange of dollars to USDC and vice versa at near-zero cost, speeding up international payments, providing instant access to funds, and mitigating currency fluctuation risks. It is programmable and accessible via API.

• Programmable Wallets
  Programmable wallets allow secure embedding of wallets into apps, enabling users to send and receive USDC easily. This enhances cross-border payment convenience, enables real-time funds management, reduces transaction costs by bypassing intermediary banks, and improves funds transparency.

Reap, a B2B payment service provider, utilizes Circle's stablecoin technology. Its core service, the Reap Card, is a secure corporate credit card on the Visa network that establishes a line of credit secured by fiat currency or USDC, eliminating the need for a separate bank account. This allows Reap to offer reliable credit services to B2B businesses while minimizing non-repayment risks. Reap Pay, a companion service, facilitates cross-border bank transfers, allowing businesses to process transfers using the Reap Card and USDC. Recipients can convert USDC into local currency via Circle Mint, making it easier for businesses without traditional bank accounts to perform essential financial tasks like payroll and rent payments. This stablecoin-powered revolution in cross-border payments could significantly reduce B2B payment costs and enhance financial efficiency and accessibility for global businesses.

3-4. Circle's competitive potential in Japanese and Korean markets

Japan and South Korea have a significant presence in the Asian crypto market, with both governments taking steps to institutionalize crypto in different ways. In 2022, Japan established a clear legal framework for stablecoins, requiring them to be pegged to the yen or another fiat currency, and restricted issuance to institutions such as banks and trust companies. Consequently, Circle plans to launch a yen-linked stablecoin in Japan, leveraging the favorable regulatory environment. However, Japan's low bank deposit rates and high regulatory compliance costs cast doubt on the profitability of Circle's venture into Japan.

In contrast, South Korea lacks a specific regulatory framework for stablecoins, likely categorizing them as electronic prepaid instruments or e-money. If designated as electronic money, stablecoins will need to fulfill various registration requirements under the Electronic Financial Transactions Act. This regulatory uncertainty is a critical consideration for Circle as it develops its business in South Korea. Despite these challenges, USDC is making headway in the South Korean market. It is listed on some centralized exchanges, and Overdare, the Metaverse studio of Battlegrounds creator Krafton, recently adopted USDC as the primary payment method within its Metaverse ecosystem.

Despite the distinct regulatory environments in Japan and South Korea, Circle's stablecoins are seizing significant opportunities to expand in Asia. In Japan, the market approach requires legal clarity and financial stability in line with regulatory frameworks, while in South Korea, flexibility is essential to navigate and respond to evolving regulations. By managing these challenges effectively, Circle will be well-positioned to expand successfully in Asia, strengthening its position in the global stablecoin market and playing a pivotal role in revolutionizing digital finance.

4. Fireblocks Innovates Secure Web3 with Self-Custody

4-1. The imperative of security amid persistent crypto hacking incidents

The cryptocurrency market has faced relentless hacking incidents, starting with the infamous Mt. Gox bankruptcy. Hacker groups have targeted both centralized exchanges and decentralized protocols (DEXs) through various means, such as exploiting design flaws in smart contracts, stealing private keys, and breaching authentication systems. Most victimized users had entrusted custody and control of their assets to exchanges, rendering them unable to respond effectively to hacks and resulting in significant asset losses. The ongoing prevalence of hacking incidents underscores the urgent need for new approaches and strategies to secure crypto assets.

4-2. Business value of Fireblocks' self custody solution

The numerous hacking incidents have amplified interest in secure digital asset management, leading to a growing interest in self-custody. Self-custody allows businesses to manage their assets directly through their own e-wallets, providing control over their assets and the ability to store and process transactions securely and hack-proof.

Following the 2017 hack of four major South Korean cryptocurrency exchanges by North Korean Lazarus, the founders of Fireblocks identified that existing security solutions were inadequate for the complex security requirements of digital assets. In 2018, they established Fireblocks to develop a secure custody solution and the platform offers a secure and trusted security solution with a multi-layered architecture.

At the core of Fireblocks' security technology is the latest cryptographic innovation, Multi-Party Computation - Computationally Multiparty Protocol (MPC-CMP). MPC-CMP removes the single point of compromise from both external hackers and insiders – as the private key is never concentrated on a single device at any point in time (MPC key sharding). This technology accelerates transaction processing by 800%, enabling real-time transactions while maintaining high security.

The multi-layer security structure provides robust protection for key hacking targets, including private keys, deposit addresses, credentials, and authentication. Each layer fulfills specific roles:

• Layer 1:
  Utilizes MPC-CMP and multi-cloud technology to shard private keys, mitigating single-point-of-failure risks.
• Layer 2:
  Employs enclave technology to safeguard private key shares from compromised servers.
• Layer 3:
  Implements a Policy Engine to enable organizations to set up specific approval policies for every transaction, preventing arbitrary changes.
• Layer 4:
  Monitors and manages deposit addresses, mitigating the security risks associated with deposit addresses through the Fireblocks Network.

Fireblocks' technology has received several top-tier international certifications, including CCSS Level III, SOC2 Type II, ISO 27001, ISO 27017, and ISO 27018, underscoring its reliable delivery of secure technology through periodic certifications.

Fireblocks provides a self-custody solution incorporating these technologies, offering customers the following benefits:

• Eliminate Counterparty Risk in Centralized Exchange Transactions (CeFi Risk Management):
  Fireblocks' custody solution mitigates the counterparty risk associated with centralized exchanges. Its secure network and MPC technology facilitate secure transactions, enabling users to execute trades without storing assets directly on a centralized exchange.
• DeFi Risk Management:
  Fireblocks supports decentralized finance (DeFi) and staking activities through its platform, incorporating various convenience and security measures. Organizations can automate DeFi protocol transaction steps and pre-simulate the consequences of smart contract implementation. This process ensures contract validity and enables real-time threat detection to counter phishing sites and malicious attacks.
• Insider Risk Control:
  Managing insider risk, including suspicious behavior and administrative errors, is crucial for enterprise security. Fireblocks' Policy Engine allows organizations to set role-based access permissions and determine the required number of signatures for approvals based on asset size. Real-time monitoring and alerting help proactively block inappropriate access.

4-3. Tailored solutions for local regulations

Fireblocks adopts a regulatory-friendly localization strategy to provide services tailored to the regulatory environments of various countries in the global digital asset market. This strategy ensures compliance with local legal requirements and optimizes services for local customers.

Fireblocks' localization strategy involves three key dimensions:

• 1. Thoroughly analyzing each country's legal and regulatory environment and updating solutions to minimize legal risks in collaboration with relevant authorities.
• 2. Customizing regulatory solutions to meet changing digital asset regulatory needs, allowing the setting and automation of trading rules specific to each region.
• 3. Developing customized solutions in partnership with local authorities and relevant firms.

To ensure regulatory compliance, Fireblocks collaborates with industry-leading entities such as Chainalysis and Elliptic to scrutinize transactions and manage risks associated with Know Your Transaction (KYT) and Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) regulations. Additionally, Fireblocks partners with companies like Notabene to adhere to the Travel Rule and other global legal requirements. By leveraging Fireblocks' custody solution, the company streamlines regulatory costs across diverse regions and guarantees compliance for local clients. As nations intensify the regulation of the cryptocurrency market, Fireblocks' capability to swiftly provide localized and tailored custody solutions is expected to become increasingly crucial.

4-4. Fireblocks aims to become an integrated cryptocurrency management platform

With its superior security and regulatory responsiveness, Fireblocks now serves over 1,800 institutional customers worldwide, securely processing more than $6 trillion in transactions.

Fireblocks is expanding beyond self-custodial asset management to offer robust infrastructure services for Web3 development. By providing development SDKs and APIs, Fireblocks facilitates the integration of technologies such as WaaS, cryptocurrency issuance, and payment solutions into services, enabling developers to quickly create Web3 products. Companies utilizing Fireblocks' technology have reportedly launched services within a year.

Despite its strategic advantages, Fireblocks faces challenges. Changing regulations across countries may limit rapid response capabilities, potentially increasing risks and costs. While services are maintained through close collaboration with regulators and companies in each region, these relationships could weaken or change over time, affecting service sustainability. Additionally, the evolving nature of technical security threats in the digital asset market necessitates continuous investment and management.

Nevertheless, Fireblocks continues to invest and expand, recognizing these challenges. Fireblocks' robust security technology and compliance strategies enable organizations to securely manage their digital assets, playing a vital role in the growth of the global digital asset market.

5. Final Thoughts

Building and operating a Web3 business entails various challenges and complexities, yet the evolution of supportive infrastructure and solutions is fostering new business opportunities as the Web3 industry gains traction. NTT Digital's WaaS, Circle's stablecoin, and Fireblocks' self-custody solution, highlighted in this edition of Xangle’s “[ADOPTION] - Infra” exemplify innovative technologies and services that maximize business value in their respective domains.

NTT Digital's scramberry Wallet WaaS solution, with its intuitive interface and robust security, simplifies the entry of companies into the Web3 space. The success of the TGC Kumamoto event illustrates that NTT Digital's WaaS can generate business value while optimizing user experience. By leveraging diverse resources to deliver tailored services, WaaS solutions empower companies to achieve competitive growth within the Web3 ecosystem.

Circle's stablecoins are at the forefront of digital financial innovation, offering transparency and stability. These stablecoins are realizing their potential beyond the cryptocurrency market, significantly enhancing the efficiency of B2B payments and international transactions. In the Japanese and Korean markets, Circle's stablecoins are poised for substantial expansion in Asia through an effective go-to-market strategy aligned with regulatory frameworks.

Fireblocks stands as a trusted partner to institutional clients globally, facilitating the secure storage and trading of cryptocurrencies through its advanced security technology and regulatory adaptability. Its self-custody solution mitigates the risks associated with centralized exchanges and excels in managing decentralized financial activities and insider threats. Moreover, Fireblocks offers robust infrastructure services for Web3 development, enabling companies to swiftly bring innovative products to market.

The primary agenda of these three companies is to provide the essential infrastructure for service development within a regulated environment. With regulatory uncertainty pervading the cryptocurrency market and Web3 industry worldwide, the pivotal role of these infrastructure companies is to adeptly respond to regulatory shifts and support the stabilization of the burgeoning industry. As the Web3 industry progresses, these pioneering infrastructures and solutions will continue to evolve, paving the way for more companies to enter and thrive in the Web3 business. We anticipate that these infrastructure solutions will play a crucial role in accelerating the mass adoption of Web3, driven by a synergy of technological innovation and regulatory compliance.