Translated by elcreto & LC
Xangle Visits KBW 2022: ③ Impact
The Xangle Research Team joined the Korea Blockchain Week (KBW), the largest blockchain conferences in South Korea. Being the biggest event in the country held face-to-face in three years since the outbreak of the pandemic, the line-up was star studded with leading blockchain experts from around the world. Tickets were fast sold out and the venue was packed with a throng of people, overshadowing the concerns that South Korea’s blockchain market has lost steam after Luna’s collapse. The discussion of most of the speakers revolved around progresses being made towards “a wider adoption of blockchain.” In this publication, we’d like to cover some of the primary thoughts and insights that the panel shared with us during those sessions.
The “Xangle Visits KBW 2022” Series
The War of Layer 1s that Broke out in South Korea
In the blockchain circle, layer 1s are at an all-out war. The layer 1 war refers to the competition among layer 1 blockchain services, such as Ethereum and Klaytn. The competition is progressing from i) scalability and mainnet enhancement and then onto ii) developer and dapp project onboarding. This time at KBW 2022, projects staged a siege from both ends in and outside the venue at the Grand InterContinental Seoul Parnas. They not only articulated their commitment to mainnet enhancements during their keynote sessions but held events on the sidelines in multiple parts of the city, eagerly looking for talented developers.
Ethereum's Buterin Opening Fire
Undoubtedly, Vitalik Buterin grabbed the most attention. Reflecting Buterin’s significance in the circle, numerous visitors scrambled to attend his session. He discussed both the Merge, which has been envisioned for long since the start of Ethereum’s design and the future of the Ethereum ecosystem after the Merge. He discussed a combination of scaling solutions like rollups as a solution to high gas fees and slow transaction speeds and saw Proto-danksharding as a technology that will enable the solution after the Merge.
One of the key things to note from his remark is that Ethereum may serve again as a payment solution once the gas fee falls to $0.002-$0.05 and the network succeeds to scale. Since a myriad of dapps were built atop Ethereum, it has been increasingly regarded rather as a currency to pay for the cost of using a decentralized computing system than as a vehicle of payment. In this sense, his remark is considered a hint at a possible return to the past. Also last week at BUIDL Asia 2022, Buterin mentioned the international fund transfer service as the killer dapp, signaling the network’s function not only as a decentralized computing system but also as a vehicle of payment.
Polygon Landing a Mega Partnership with Neowiz
Recently, Polygon has been the choice of many global giants like Disney and Instagram, fast emerging as one of the top three layer 1 blockchains. Even during the duration of the KBW 2022, it sealed a partnership with Neowiz, one of the most prominent game publishers in South Korea. It marks another tangible result for the project as one of Neowiz’s games is said to be onboarded on the Polygon chain. A series of landmark deals have grabbed market’s attention and prompted questions about the intention, to which the project’s answer was various scalability solutions for developers. (Please see Xangle Visits KBW 2022: ② ZK Night & Polygon Connect for more details)
One of the things that stood out from the session was Polygon’s business approach, which is clear identification of target users and missions. According to the project, the top priority target customers have been the developers of the services running on the Polygon network and ultimately, the end users of the services. Its mission, it said, was to provide the developers and end users with services that they could be satisfied with. We could actually hear from the projects that were developing services on the Polygon network that they were benefiting from Polygon’s financial and technological support.
Klaytn’s Ecosystem Needs Time
Klaytn is South Korea’s top layer 1 project. As the leading project in the country, the project joined the Korea Blockchain Week as the main sponsor of the event. Sangmin Seo, the Director at Klaytn Foundation, was one of the keynote speakers who took the mic after Vitalik Buterin and sought to raise awareness of the project. The Klaytn project, he said, aims at a layer 1 blockchain that supports metaverse, including gaming. To this end, he unveiled the plans to build i) a three layer blockchain architecture and ii) infrastructure, such as a bridge and an oracle, by the end of 2H of this year. As a monolithic blockchain, Klaytn has chosen a three layer structure to accommodate a larger number of users.
As was previously discussed in the Xangle Original, The Klaytn Ecosystem Needs Time (featuring Xangle Analytics), Klaytn is striving to come up with solutions to multiple issues. It appeared that one of the important intentions of joining the KBW was to publicly announce the direction of Klaytn 2.0. It might have been even better if it had addressed its plan on improving tokenomics through token burn. Further announcements will be much looked forward to.
NEAR Protocol on the Hunt for 1.0B User Base
In addition, the project focused on what really mattered to users, which was what values the app offered rather than where the app was built and run. NEAR protocol set forth the direction for better user experience, introducing the concept of “Remote Account,” which was designed to connect a service on one chain to a wallet on the other. As such, we will keep looking forward to the paths the project will be taking to improve usability and achieve the 1.0B user mark. (Please see Xangle Visits KBW 2022: ① BUIDL Asia for more details)
Avalanche Hinting at Its Efforts and Commitment
Ava Labs (Avalanche) COO Kevin Sekniqi likened the state of the blockchain industry to the years before the Cambrian explosion in that it is still in its infancy and has not experienced such explosive growth as in the Cambrian Period, where a vast amount of life forms began to appear on earth. He said that no one knows what technology would become the ultimate winner, predicting that optimization, credibility, and interoperability would be increasingly central to the success of a blockchain.
Sekniqi mentioned network, execution, consensus, storage, communication, language, tools, and applications as Avalanche’s top priority areas and shared the progresses being made in tackling issues, newly adopted technologies, and ways forward. His presentation gave a glimpse into the project’s significant efforts and commitment to surviving the escalating layer 1 war, allowing for a promising outlook for Avalanche's expansion and advancement.
- South Korea is by no means immune to the war among layer 1 blockchains.
- The competition between the front-running Ethereum pack (Ethereum, Polygon) and the challengers (Klaytn, NEAR, Avalanche) can also be viewed as a competition between modular and monolithic blockchains.
- The ways forward for the layer 1s would be: greater scalability, lower fees, and onboarding of ecosystem developers.
The Growth of Blockchain Games and Metaverse: Where They Are Headed?
Certainly, games and metaverse have the largest blockchain user base and are attracting massive VC investments. Recognizing the potential of P2E gaming, Web2 companies are flocking to blockchain games and their rich reservoir of IPs is expected to earn them a large user base.
Initially, there were concerns that the Web3 adoption and subsequent transfer of ownership of items may hurt the bottom line of a game company. According to Mythical Games, however, the Web3 adoption has turned out to have a positive effect on the games and game companies. If a metaverse game built on a blockchain allows users to own and sell items, users tend to spend 33% more time and 3 times more money on the game. As a result, the Web3 adoption is expected to boost the user lock-in effect, which in turn will help increase the lifecycle of the game.
Yet, some assessments consider that Web3 games and metaverse are lagging significantly behind Web2 games and metaverse, particularly in terms of the number of users. For instance, the number of weekly active users of Decentraland is 1,000, standing in stark contrast to millions of daily active users of Web2 metaverse services, such as Roblox (43M DAU) and Zepeto (2M).
Apparently, there are limitations in the existing game content and technology to facilitate the spread of blockchain. Then, what attempts are being made in the blockchain industry?
Community and Content are Key to Building Successful Metaverse
Janine Yorio, CEO of Everyrealm, said securing the community and content is essential for metaverse's mainstream adoption. At present, the number of metaverse users is significantly lower than Web 2.0 because while the current metaverse has the “land,” it does not offer content from it.
In the case of Roblox, which has 150M monthly users and 40M monthly active users as of 2021, users create content by participating in game programming. Metaverse goes further than that, focusing on all game related stakeholders to be involved in creating content and the overall game economy.
In today’s metaverse, however, projects mainly carry out content creation as the metaverse ecosystem needs more time to mature. To build a community on metaverse, Everyrealm created a learning platform called the Realm Academy to educate people on the metaverse and a dating platform.
Blockchain Games: In Need of Fun Games and Advanced Digital Infrastructure
The prerequisite of masterpiece games is that the game must be fun and make users want to play the game repeatedly for a long time. Gone are the days when P2E games had successful launches just because of that “P2E” title. That means, as the blockchain game market matures, the sustainability of those games has become more important to users.
Recognizing the tremendous potential for blockchain games, many conventional gaming companies are joining the race to go crypto. Leading Korean gaming companies, including Com2uS, Wemade, and Neowiz Games, have already launched or announced the launch of blockchain games based on their gaming IPs. By leveraging the successful Web 2.0 games with a vast player network, the crypto-based games are expected to attract millions of players fast.
To make blockchain games mainstream, platforms should have the right infrastructure in place. Mythical Games, a leader in the P2E gaming industry, is developing a technology that would allow users to stream real-time 3D content and engage with content without downloading it. Web 3.0 is still in its early stages of development, and our current infrastructure is more suitable for Web 2.0 companies. For blockchain games to be more sustainable, companies should look for the missing pieces and build an advanced infrastructure to help Web 3.0 make headway.
- Web3 adoption is expected to boost the user lock-in effect, which in turn will help increase the lifecycle of the game.
- The number of metaverse users is significantly lower than Web 2.0 because while the current metaverse does not offer content, projects are leading content creation and community building.
- Web 3.0 is still in its early stages of development. To bring more sustainable and scalable blockchain games, companies are looking for missing pieces to build an advanced infrastructure to help Web 3.0 make headway.
Institutional Investors and Leaders from VCs Share Blockchain Outlook
The second day of the main stage event included discussions about investments in the current crypto market. Institutional investors, leaders from VC firms, and Binance CEO Changpen Zhao expressed their ideas on the future of blockchain, emphasizing that i) product-market fit should come before tokens and ii) investors should get through this bearish period with a long-term investment strategy.
Product-Market Fit Should Come Before Tokens
Global Web 2.0 companies such as Meta and Stripe teamed up with blockchain projects recently to build Web 3.0 experiences for their mass audience. At KBW, Changpen Zhao, the CEO of Binance, advised the Web 2.0 companies and emerging projects to shift their focus away from issuing or listing tokens until they have product-market fit. Many speakers who took the podium after Zhao also agreed with his remarks as fixating on tokens can distract from building products that users want.
Having been too focused on short-term events for token holders, many projects have failed to build sustainable services in the past. In this context, speakers advised projects to build a product with clear product-market fit before issuing a token.
The Long-Term Game Plan for the Bear Market
Discussions took place on the difficulties caused by the bear market and how to survive the crypto winter. Many speakers have agreed that investing in crypto at this point can be extremely risky. According to Brian Lee, a partner at FTX Ventures, the recent crash began earlier this year due to macroeconomic factors, including liquidity tightening and rampant inflation. However, the situation was quite different during the 2018 crypto winter as liquidity was abundant and interest rates remained low for over a decade. Lee further mentioned that because of these circumstances, many crypto projects are under-evaluated than their fundamentals and that the prices may further decrease.
Though a prolonged period of price decline is settling over the crypto industry, the speakers emphasized that VCs and investors should continue to look on the positive side of the market. The speakers painted a rosy picture for the current bear market as the projects looking to obtain investment through the crypto winter are becoming more top-level, and a great number of top blockchain developers are on the market. Given that many DeFi protocols, including Uniswap, were all founded during the 2018 bear market, the speakers believe the 2022 crypto winter will present opportunities to projects amid chaos. On the other hand, the speakers also pointed out that DeFi 2.0 projects should focus on designing a sustainable DeFi space, as while DeFi 2.0 is providing new approaches to advance the original DeFi concept, the architecture still lacks sustainability.
- Having been too focused on short-term events for token holders, many projects have failed to build sustainable services that users want in the past.
- Seeking product-market fit will become more important than issuing or listing tokens.
- It’s true that the current investment situation is risky from a macroeconomic perspective, but the 2022 crypto winter will present new opportunities to crypto projects. It is wiser for investors to get through this bearish period with a long-term investment strategy.
KBW Makes a Strong “IMPACT”
KBW 2022: IMPACT returned after three years away, leaving a resounding impact on Korea’s crypto ecosystem. The two-day main stage event was sold out days before the kickoff, and thousands of people flocked to KBW to witness Asia’s largest blockchain event. KBW featured the blueprints of Layer 1 projects, which are the core of blockchain technology, presentations from game and metaverse projects, and discussion sessions with VCs and institutional investors, presenting the future direction of the blockchain industry. Although the main-stage event is over, attendees will engage in various side events for networking opportunities. What remains to be done is to create Web 3.0 services that users want. As Web 3.0 has yet to offer a service adopted by the general public, this crypto winter may be a good time to BUIDL. From web search portals, messenger apps, game content, and e-commerce platforms, Korean entrepreneurs have the DNA that enabled them to succeed in the global Web 2.0 competition. We hope that “Made in Korea” will leave a strong impact on Web 3.0 as it did in the previous era.