While hundreds of blockchain projects are cropping up around the world, the technology’s true potential to seamlessly share information is still largely untapped. In South Korea, one company is vying to be the first to connect the country through a massive-scale blockchain, and it is already gaining momentum.
Dayli Financial Group, a house of Korean fintech startups, wants to create an ecosystem that will allow government departments, universities, hospitals, securities, banks and essentially every company to interact without third-party networks that charge transaction fees or delay the process. The applications could range from trading not only digital currencies but also stocks, games, security information and even hospital databases. Eliminating the middleman, the makers are framing it as a decentralized public good that is not controlled by a single entity and operates for the benefit of society.
With heavily invested internet infrastructure, a strong push for smart cities, a rapidly increasing acceptance of cryptocurrency and a strong economy, Korea has perfect conditions for blockchain, says Min Kim, chief strategy officer at Dayli, formerly named Yello Financial Group.
“Any mom-and-pop shop can take potentially take advantage of something like this,” says Kim. “If we connect every single company in Korea or even half of Korea on our network, that’s a massive success story.” Kim hopes that strengthening the blockchain network in Korea will build momentum to springboard into foreign markets.
Building a wide-scale blockchain network in Korea is still uncharted. See-eun Ha, cohost of The Blockchainers, a YouTube channel on blockchain for Koreans, says the country is quickly adopting cryptocurrencies like Ethereum, Bitcoin and Ripple, because concepts like credit cards over cash and virtual marketplaces for esport game items have helped them understand transferring value between the real world and cyber world. Initial coin offerings have been extremely popular in Korea since Ethereum gained traction earlier this year, Ha says.
But blockchain is a different story. People in Korea think of it first for its use as an investment vehicle to help them make money, but not necessarily its costs or other applications, he said. “Right now it seems people are slowly beginning to understand what this is technology capable of,” he says.
But there is a way to go until it is adopted by the mainstream. He believes development of blockchain technology in Korea is still far behind other major markets. Part of that is because Korea is unfamiliar with open-source software, depending instead on proprietary software such as Hancom, the Korean take on Microsoft Office that is used ubiquitously despite its errors or vulnerabilities, he says.
Another roadblock for developers is the language barrier that keeps them from collaborating with the world’s collective intelligence, Ha says.
“We might have developers who are very skilled. But when those developers cannot communicate with other developers, when it comes to the finer points of the code that they’re writing, that’s going to hinder development of the technology,” he says.
That’s where Ha believes ICON has a special role in the Korean ecosystem. The technology is already institutionalized, with the backing of the financial sector. It has signed on various projects for a securities consortium, a university, a hospital and insurance providers.
“I think what gives them leverage is that they have a working blockchain engine that is to be deployed in the banking, medical and university sectors,” says Ha, who is familiar with but has no stake in the ICON project. “We know they’re capable at the minimum, so that already puts them ahead of other ICOs that don’t have working products.”
He believes Dayli has an edge because it already has all the infrastructure components in-house. ICON is built on the enterprise blockchain technology of TheLoop, part of Dayli's portfolio, while the initial coin offering will be doled out by Coinone, the financial group’s cryptocurrency exchange startup. Meanwhile, Dayli Intelligence provides the artificial intelligence component to distribute the coin.
Kim claims that while many blockchain architects develop a project and expect clients to use it, Dayli builds the projects around clients' specific needs.
The first project launches in September, allowing a consortium of securities brokerages to share client identification directly with each other on the blockchain so that their clients can open new accounts easily between the brokerages and skip the "know-your-customer" process. Kim claims the project will be one of the first commercial products to be used by an entire industry.
“Based on the reliability and security of the block chain through joint authentication, we believe it has a good alternative solution to some of the limitations of the [traditional] authentication methods,” says Hong Sung-jin of Daishin Financial Group, the cryptocurrency leader for the securities consortium. For example, they can eliminate registration of other institutional certificates, reduce commissions, expand the renewal cycle, and use simple password schemes, he explained.
Korea University Hospital is applying the blockchain technology to help with data integrity, a cross-border digital signing system, and a health coin. Its first project, in cooperation with the government and other hospitals, is a cloud-based precision medicine hospital information system that will help with synchronizing databases between hospitals, according to Sangheon Lee, a professor at the hospital.
The blockchain developers are also working on a securities clearing and settlement project to be launched next year that clears stocks immediately and allows trade in real-time, rather than passing the transactions through Korea’s clearing house, Kim says.
Meanwhile, Korea’s top-tier Sogang University is using the blockchain to create a university currency for students to pay through QR codes for the first time in Korea at on-campus stores, shopping malls and vending machines, as well as lending to classmates and paying tuition, and it is expected to especially benefit students overseas. The school considered networks like Cosmo, Corda and EEA, but chose ICON as it is more suitable for real-life, real-time conditions, Jayoung Lee from the Sogang Academic Cooperation Foundation explained.
While each industry has found a different purpose for the blockchain technology, ICON wants to link them all together. "We are seeing, by working with these guys, a need for all these consortiums to interoperate,” says Kim. “There are many blockchains that need to connect with each other."
Blockchain in general is a struggle to win over early adopters as the technology is still new, and several parties need to commit for it to work, Kim says. But with four use cases so far, he hopes that momentum will help springboard ICON into ubiquity in Korea.
Ha from Blockchainers compares ICON’s strategy deployment to New York-based Tendermint, which created an open-source blockchain engine that is now used by private companies. Now the developers are using the blockchain to build the Cosmos hub to allow interoperability between blockchains.
Connecting diverse sectors into one giant hub can help financial information to flow freely between industries, which would help businesses collect accurate data in a simpler, streamlined process, Ha says.
“I think they have a pretty big mission,” says Ha. “If everything goes according to plan, you have a very strong competitor in the worldwide stage who already has the network effect from Korea.”
Fundraising and open-source
ICON is structured as a nonprofit modeled after the Linux Foundation. Although the current projects are made by the Dayli team, they have opened the technology to developers on Github to create applications for diverse enterprise uses. The makers are raising funds through an initial coin offering of its own currency called ICX in September worth 150,000 ether to develop the open-source technology and set up private servers for clients.
Whether or not the ICO does well is another issue.
Ha from blockchainers is skeptical of ICOs, which help companies with liquidity but do not necessarily correspond with how well the projects will perform. ICOs focus more on marketing than technology, and that’s why the valuation and due diligence methods of traditional venture capital investments should come into play in the ICO world.
If the ICO doesn’t pan out, Ha believes the current clients, who sought to solve a problem in their own company or industry, will still get what they need, but won’t be able to interoperate with others. But he warns investors to do research, communicate with developers, and know their investment whenever they consider any ICO.
“When it comes down to the ICO, it depends on how well they can localize a Korean private blockchain platform to the rest of the world. I think communication will be key,” Ha says.
Eunwoo Hwang contributed to this article.