Why startups and Fortune 500s alike are ramping up DeFi efforts and Layer 1 blockchain launches
In 2022, we saw more mainstream South Korean financial companies venture into decentralized finance (DeFi) than ever before, as they embrace new and creative forms of financial innovation. This local trend is tracking the wider crypto-curious sentiment among global institutions. In particular, institutions are starting to explore the realms of DeFi and decentralized exchanges, an area of the crypto ecosystem that’s currently underserved.
For example, just recently, JP Morgan executed its first DeFi trade on a public chain, as part of a pilot program to explore potential DeFi applications in wholesale funding markets. Clearly, Fortune 500 companies have begun to see the attractions of utilizing DeFi and blockchain technologies. Even the largest financial players are getting on board with the blockchain-based tokenization of real-world assets.
As for South Korea’s mega-corporations, they seem to have a particular taste for launching their own Layer 1 blockchains. For those unfamiliar, a “Layer 1” blockchain refers to a base-layer network, such as Bitcoin, BNB Chain, or Ethereum, and its function as underlying infrastructure to a wider ecosystem of Layer 2s, etc. Independent, and often already fully-operational mainnets, these blockchain networks provide a potentially transformative opportunity to give value back to users and clients. Expect to see more of them emerging in 2023.
Better management and more autonomy
In 2022, we’ve seen companies and developers become increasingly concerned with securing their own autonomy. Disruptive moves from major Web2.0 platforms, for example, Google adjusting its Play Store commissions, are changing how users and developers perceive the value of Web2.0 models. By launching their own Layer 1 blockchains, companies are aiming to reclaim control over their own ecosystems.
The native assets on these Layer 1 platforms function as the common medium of exchange within the network, representing a revolutionary shift toward a user-owned economy. In 2023, we foresee a growing demand for decentralized app (DApp) development, utility, and transactions, as the focus continues to shift toward greater control and autonomy. DeFi will likely gain an edge over centralized finance (CeFi) applications, such as centralized exchanges (CEXs), due to the greater transparency for all stakeholders.
In the early days, Layer 1 mainnets were the focus of the entire decentralized crypto financial system. Just as mainnets started the crypto revolution, the appeal of greater independence and agency is now once again pushing companies to launch their own Layer 1s. As this trend picks up in 2023, we expect a more inclusive and sustainable crypto community for Korea will emerge, especially within the gaming space.
All eyes on gaming giants
Gaming companies in particular have taken to launching their own Layer 1 blockchains in 2022, and the trend holds major disruptive potential across the financial, tech, and gaming sectors. While this phenomenon is prevalent in South Korea, we also see similar developments in the Japanese market as well. Take for example Japan’s Oasys, which recently announced the launch of its own Layer 1 chain.
Web3 gaming has rapidly changed the video game landscape in 2022. Leading the way are South Korean blockchain platforms like Bora Network.
WEMIX is a blockchain NFT gaming platform developed by WeMade Tree, in turn, a subsidiary of WeMade, the South Korean game developer behind The Legend of Mir franchise. WEMIX integrates core gaming content with blockchain technology. By incorporating technology that lowers the barriers to entry for both developers and users, WEMIX has increased mass adoption, furthering the development of sustainable gaming.
Pay extra focus on security
By building their own mainnet and the related wider ecosystem, companies can have more control of their revenue and revenue models, something not possible in Web2.0. That includes activities such as token issuance and setting transactions or staking fees. The new paradigm is ‘real ownership’ in the network as opposed to the ‘IOU system’ in place today that holds up larger centralized platforms.
However, while branching out on your own may grant greater autonomy, it comes with a directly proportional level of responsibility. The security of any blockchain is foundational to its sustainable operations, and building continued trust within the wider ecosystem. Take for example the hacking of Layer 2 chain Ronin earlier this year. The incident significantly dented the Axie Infinity community’s trust in the game developers.
The fortified integrity that a smart contract audit guarantees are essential for these newly created mainnets to succeed, both prior to launch and after. The public release of an insecure mainnet leaves the entire network, and its users, vulnerable to attackers. Conducting a smart contract audit should be considered a prerequisite to launching any blockchain, especially Layer 1s.
To summarize, this acceleration of Layer 1 launches reflects the widespread desire to leapfrog the unfair revenue models within Web2.0. We foresee further, and significant disruption and innovation on this front in 2023. The Layer 1 take-off will force established platforms to re-architect their infrastructure to accommodate new players. Where South Korea has begun to realize this potential for a strengthened user-owned economy, we’re certain that the Layer 1 take-off won’t stay a regional phenomenon for long.
As a security researcher of DeFi infrastructure service provider Sooho.io, Jasper Lee conducts security audits of various DeFi and NFT services such as KLEVA and Klaycity. Headquartered in South Korea, the company aims to become the SWIFT for Web3.0 and connect the Korean DeFi ecosystem with the rest of the world. The company specializes in developing DeFi products and smart contract auditing, offering one-stop customizable solutionsto financial institutions.
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