Kakao, Naver collide head-on over blockchain
Which could be the first mover to increase market share easily?
Kakao and Naver, Korea‘s leading IT companies, are poised to launch their blockchain businesses on a large scale as Kakao has drawn up a plan to unveil the testnet for “Klaytn,” its own blockchain, in October.
Kakao and Naver’s Japanese subsidiary Line are working on “Klaytn” and “Link Chain,” their respective public blockchains. They are also in a hurry to unveil various blockchain-powered services. The two IT rivals had collided head-on in the early 2000s to dominate the internet arena. Now they are flexing muscles in blockchain after competing fiercely in the mobile segment.
The two companies have been cautiously preparing to enter blockchain and cryptocurrencies. After unveiling “BITBOX,” its cryptocurrency exchange, in July, Line announced a plan to issue its cryptocurrency “Link.” Link is due to be used as tokens in “Link Chain.”
Kakao set up Ground X, its blockchain subsidiary, in Japan earlier this year and recruited Han Jae-sun, former chief technology officer of startup accelerator Future Play, to head Ground X. Dunamu in which Kakao is taking part as a major shareholder is running cryptocurrency exchange Upbit. GroundX reportedly plans to unveil the mainnet for Klaytn in the first quarter of next year.
Given that the two companies boast plenty of users, they will show more strength than any other blockchain services thanks to the so-called “network effect.” That’s why blockchain businesses as well as conventional industries take note of the two firms’ moves.
Their advantageous territories are different though. Naver and Line have vast markets thanks to the huge number of multinational users in such areas as Japan and Southeast Asia. In contrast, Kakao has solid service bases on the blockchain such as mobility, securities and finance and crypto infrastructures.
Naver’s reliance on network effect
The network effect refers to a phenomenon whereby a good or service becomes more valuable when more people use it. That is, the more Facebook subscribers are, the more you feel motivated to subscribe to it.
The network effect is regarded as the most important factor in the blockchain business model. That’s because any platform, which secures more decentralized applications (DApps) and users, would be able to win dominance, considering that the blockchain industry is still in its infancy.
To be sure, Naver and Kakao will try to make the best use of their existing networks for blockchain. Line’s main stage is Japan. Its presence in Taiwan, Thailand and Indonesia is strong too. Line boasts 164 million users of its messenger service in the second quarter of this year, including 76 million in Japan.
Japan is one of the first countries to have embraced blockchain and cryptocurrencies. The island country is acting briskly to protect investors while regulating crypto exchanges. Simultaneously, Japanese companies and their government attempt to apply blockchain technology to the industrial sector. There are reports that crypto transactions are possible in more than 260,000 stores in Japan
Thailand and Indonesia seem friendly to cryptocurrencies. In Indonesia where 260 million people inhabit, cryptocurrency investors exceed stock investors, according to some reports. Thailand‘s central bank tends to acknowledge blockchain and crypto projects while trying to allow commercial banks to set up crypto subsidiaries inside Thailand. Thailand’s population reaches 70 million.
What’s notable is that these Southeast Asian countries fall far behind industrialized countries in IT convenience but this might serve to cause them to advance the introduction of blockchain technology. People in advanced countries are slow to receive new technologies because of less need to do so amid ample convenience in online transactions or payments. But developing countries could accept cryptocurrencies as a medium for services without hesitation.
It goes without saying that Naver, which is enjoying overwhelming market positions, can also serve as an important factor behind Link Chain’s fast growth. Especially considering Naver’s technical expertise and market dominating power in search, e-commerce, communities and payment, its market position could be much firmer if blockchain technology is added.
Kakao’ diverse services
When it created Ground X in March, Kakao said it would strive to develop Asia’s representative platform where everyone can take part. The company also announced plans to launch new services by grafting blockchain technology onto Kakao’s existing services. It was clearly a strategy to feature Kakao’s rich services in Asia through blockchain
What kind of services is Kakao offering now? Its businesses are divided into mobile messenger, portal, music content, paid content, mobility, commerce and payment (KakaoPay). In addition, intellectual property and artificial intelligence are being driven as new projects.Blockchain technology actually can be applied to all these.
Regionally, Kakao is going ahead with a plan to set up subsidiaries in Asia’s major countries. The company has KakaoG, a blockchain holding company, under its wing, which would in turn rule Ground X developing a blockchain platform. KakaoG is operating blockchain subsidiary Ground A in Korea and has plans to create Ground B, Ground C, etc. in other countries subsequently.
Much-acclaimed DApps
Naver and Kakao’a ultimate success in blockchain will depend in large part on which company can develop much-acclaimed DApps. That’s because the network effect can be utilized best when there is enough attraction to use blockchain. In fact, DApps are a service users can access actually.
Given that the first mover in a new market can increase the market share easily to a certain extent, there will be the competition to unveil DApps earlier. In connection with this, Ground X plans to debut Cosmee, a beauty DApp, as Klaytn‘s first DApp. Cosmee, a service unveiled last month by Cosmochain Kakao Investment picked as its first blockchain investment, is a kind of Steemit in the beauty segment where creators and users get compensation.
Line also plans to unveil two decentralized applications this month and has a road map for launching more than 10 DApps by the end of March next year. “Kakao’s subsidiaries have been considering converting some of their mobile services into blockchain,” an industry watcher said, adding that “the two IT giants will seek a double strategy _ drawing new partners into the platform while trying to put their existing businesses on the blockchain network.”
/ by Shim doobo, Won Jaeyeon (shim@decenter.kr)
Originally published at: decenter.kr
