“Keep building” was the overall vibe of last week’s Korea Blockchain Week (KBW) event – a complete 180-degree turn from last year’s relatively flashy show. Homegrown gaming upstarts dominated the venue, pitching gambling, racing, metaverse and arcade apps built on networks like Ethereum, Solana, Cosmos and others.
There was little whisper about Terra, the Do Kwon-run blockchain with a large Korean fanbase whose tokens amounted to a market capitalization of almost $40 billion before imploding spectacularly. Some felt that it took a while for the industry to shake off Kwon’s hubris, but slowly regained users’ trust.
“The conversations I had with key ecosystem players showed that it had a huge impact that changed the Korean forever [decentralized finance, or DeFi] ecosystem for institutions,” Hoon Kim, the chief technology officer at blockchain project Astar, told CoinDesk. “It made it harder for private investors to look at domestic projects, and companies started to look at all their options with a critical eye.”
“But I would also say that this is positive on balance, as institutions and companies are more concerned with real-life use cases with different innovations. So DeFi or anything that depends on market conditions brings too much risk for companies,” Kim added.
However, Terra remained a sensitive topic for the local population. Some said they felt betrayed and expected better from Kwon, a Korean citizen.
As such, Korean banks are gradually dipping their toes into the market. On stage, BitGo, a crypto custodian based in California, said Tuesday that it had signed a strategic business agreement with South Korean commercial bank Hana Bank.
The deal includes security solutions, technical collaborations and a possible joint venture. BitGo will also assist Hana Bank in developing custodial services in the second half of 2024, as reported.
Local developers and vendors told CoinDesk that trading activity on local exchanges is increasing, fueling attention from traditional companies.
“The sector is subject to strict controls due to the Terra fiasco. But there is still a lot of trading going on,” said Jen Kim, Chief Operating Officer of NFTBank. “Upbit has even seen an increase in trading volume recently. So Korea still has the potential to play a meaningful role in bringing the market back up.”
In July, a favorable lawsuit involving Ripple Labs sent prices of the closely related XRP tokens surging, with local exchange UpBit recording $2.5 billion in volume over a 24-hour period.
On the application side, publicly traded Korean game publisher Neowiz said it planned to build games on the Avalanche blockchain through its Web3 arm IntellaX. The main reason cited was that Korea has a preference for esports and blockchain games, with a large fan base for different gaming cultures and huge consumer interest.
Gaming needs an ‘ETF’ moment
But even though blockchain-based gaming remained a big theme at the event, few developers were contrarian about why the sector might be somewhat overhyped.
“I wouldn’t say blockchain gaming or NFTs are of huge interest to users,” says Astar’s Kim. “Users are increasingly looking for new experiences, and companies are starting to lose competition in the traditional market as the entire industry becomes saturated.”
The industry itself has struggled to find a big hit, as many of the most popular blockchain games have only a few hundred to a thousand users – a fraction of what traditional third-tier games on platforms like Steam count.
“So if companies want to stay competitive, they are incentivized to deliver something new for another generation, and it just so happens that blockchain technology is best to leverage the network effect that the young generations are looking for,” Kim added to.
South Korea is still not a hub
A final takeaway from the show is that it is still a Korea Blockchain Week, and not a pan-Asia or international event like the ongoing Token 2049 conference in Singapore.
Local businesses dominated the show floor and advertising. An expectation, considering that Korea is a large economy with a strong domestic crypto industry.
But crypto is an international business; there is only one market. In the world of traditional finance, you might see traders who specialize in investing in the financial markets of emerging countries, and thus a sector of supporting infrastructure.
Crypto doesn’t have the same analogy. There is no equivalent for the African bond market or the Southeast Asian stock market. There is only one crypto market.
A focus on localization is therefore a sacrifice of liquidity. The more regionalized a crypto product is, aside from exchanges that need to specialize in licensing and fiat increments, the more likely it is to be abandoned or become vaporware.
At last month’s IVS crypto conference in Kyoto, there were plenty of gaming and NFT projects looking to capitalize on all things Japan, but on-chain data suggests many of these will be back with be razed to the ground.
Think about it: how many of these projects are actually registered in Korea, and how many call Singapore home?