The Japan Blockchain Conference 2019 saw a very interesting comparison of the “new guard” vs the “old guard” of the Internet, the former represented by LINE, and the latter by Rakuten. Although this competition was not entirely fair, with Muroyama-san clearly articulating a business development view, and Rakuten’s take being almost inward looking in describing their Blockchain Lab as a service to the various Rakuten business lines, the depth of the presentation of LINE’s strategy did not leave any doubts about their ambition and focus. LINE will compete, and compete viciously.
There were three sections to the presentation: a brief, general overview of LINE, which we will skip for the most part; a review of LINE Financial, and then an explanation of the LINE token economy.
LINE is the dominant social network in Japan (see our article “How LINE dominates social networks in Japan”), and also has a strong presence in Taiwan, Thailand and Indonesia. In aggregate, these four countries count for 165m users. In Japan, 85% of the monthly active users are using the service daily.
LINE Pay, which was launched in 2014, has a penetration of approximately 40% of the user base, with 30m out of 78m monthly active users.
LINE Pay offers bar code payments, a JCB co-branded debit card (launched in 2016), and QuicPay, which supports non-contact payment in more than 800,000 stores in Japan.
The transaction volume on LINE Pay has been rising significantly, with a growth rate of 123.6% year-on-year for the third quarter (LINE reported fourth quarter and full-year earnings on January 31, after the presentation was given), and a total volume of JPY 261bn (USD 2.4bn). Second quarter and fourth quarter numbers are skewed by insurance payments in Taiwan, so the trend line to watch is Q3'17->Q1'18->Q3'18.
In Taiwan, LINE Pay achieved more than 10m payments per month in April 2018. In Thailand, a joint venture with mass transit to introduce “Rabbit LINE Pay” has lead to growth.
In Japan, regional co-operations have been established with various cities such as Fukuoka (which has a leading position in Japan in creating a digital ecosystem) and Osaka, which allows residents to pay for government services using LINE Pay.
Since its formation in early 2018, the scaling of the LINE Financial offering has been impressive. We have covered most of that in our article “The LINE Financial ecosystem is taking shape”.
LINE Insurance in collaboration with Sompo Holdings launched in October 2018 (see our article here).
LINE’s new app to support bookkeeping for households has already achieved 2m users.
LINE positions itself towards a co-creation model where the users are rewarded with tokens for their contributions, rather than being passive consumers of services.
The LINE blockchain called “LINK” is powered by the Korean startup ICON that at one point was deemed to build infrastructure for the Korean government as well.
The LINE blockchain will have its native token “LINK”, which is already listed on the LINE-operated cryptocurrency exchange BITBOX, operated out of Singapore. In parallel, there will be LINK points, i.e. traditional reward/loyalty points, with a fixed exchange rate between LINK tokens and LINK points.
The reason for this setup is quite simply that LINK tokens are currently not permissible in Japan…
…while outside of Japan, this is not an issue.
Of course, LINE points can already be used in Japan today to make purchases, or to use LINE services, so the use of LINK points instead of LINK tokens is merely a measure to satisfy the regulators — the off ramp from reward points into fiat via LINE points already exists.
There will be no LINK token sale. To make the token valuable, LINE needs to build an ecosystem of decentralized applications (DApps) that employ the token and create demand/scarcity in combination with the LINE platform and third-party applications.