Line bets on blockchain mass adoption
Unblock Ventures is taking a different approach from Facebook or WeChat to messaging app-based crypto.
Mass adoption of blockchain-based platforms in finance, from trade finance to cross-border payments, still evokes the Chinese expression, “castles in the air”. But one of the world’s biggest messenger-app companies, Line, says mass adoption is close, and it’s putting money against seeing this come true.
Gaming, for example, is experiencing early production using decentralized applications, said Sabrina Tachdjian, head of investments at Unblock Ventures – Line’s investment arm dedicated to digital assets, launched last July with an initial funding of US$10 million.
Japan-based Line is owned by South Korean internet giant Naver. Both countries are seen as friendly for blockchain and crypto developers. Line declared its vision of a tokenized economy last year. Since then it has launched a cryptocurrency exchange, BITBOX, as well as its own cryptocurrency, Link, which operates on a proprietary blockchain, Link Chain.
Unblock Ventures so far has invested in four projects, plus CMCC Global, a fund investing in cryptocurrencies. Deployment of capital slowed in 2018 as the entire crypto space suffered a crash, but Tachdjian says the pace of investments is increasing again.
The aim of Unblock’s investments is to back companies with a shot at building a huge user base. “Mass adoption is the most important factor,” she said. “We look at projects that provide a tangible improvement in user experience.”
Mass adoption is the most important factorSabrina Tachdjian, Line
This is in contrast to bank-backed projects using blockchain, such as for letters of credit trading or mortgage lending. Executives at firms such as HSBC and J.P. Morgan say full deployment of their blockchain projects remains three to five years away. Unblock Ventures is looking at much faster bangs for its bucks.
Therefore, its investments are shying away from traditional financial applications, where regulation is a huge barrier to startups, particularly those out to disrupt the sector.
Outside of financial services, though, the barriers are technological, but these are being solved, notably scalability. “We’re close to production level,” she said of these other investments.
Virtual building blocks
For example, Line wants gamers to use its cryptocurrency, Link, to buy virtual weapons or trade in virtual reality with other gamers. Cryptocurrency can also serve as loyalty rewards for users in Line’s network.
This concept is similar to Tencent’s QQ coins. But Line envisions a use case on dApps (decentralised applications) instead of on a centralised server, which means even if Line were hacked or shut down the business, users can continue to run the service.
“DApps are peer to peer applications. It won’t be controlled by one central party,” said Paul Sin, Deloitte’s Asia Pacific blockchain lab leader.
So far Link has released several dApps on Link Chain, including Wizball (a Q&A-based knowledge-sharing platform), Pasha (A.I.-based image search), and 4CAST (futures forecasts). In other words it is accumulating the building blocks of search that Google pioneered for the World Wide Web, but aimed at a future of decentralized computing.
Digital rewards versus stablecoins
Line is building up a token economy. This ecosystem approach is in contrast to Facebook’s drive to use stablecoins to support payments on WhatsApp, a competing messaging app. It’s also different than other closed-loop networks, such as WeChat.
“Line aims to establish itself as a leading digital reward platform,” a company spokesperson told DigFin.
The idea is to create a social network in which posts, group chats, product reviews and data sharing is converted to nodes on a blockchain, with smart contracts guiding how users are rewarded for activity. Such loyalty points are expressed as tokens or digital assets that can be used to purchase real-world goods and services.
In other words, Line’s idea is to use blockchain to incentivize use of its marketplace without forcing users to remain inside; instead they are given forms of digital cash that can be spent in a variety of places.
Three projects Tachdjian has invested focus on this aspect.
Airbloc and Carry protocol, two Korean investee companies enable sharing of customer data. Upon giving consent for data to be shared, and probably accept having advertisements aimed their way, users can win reward tokens that can be converted into real-world goods, such as coffee coupons.
Carry claims to have 15 million users in Korea and Japan.
Zeex, another of Unblock Venture’s portfolio companies, lets consumers use cryptocurrency to buy products online from a range of sellers, from Amazon to Nike. (Zeex is a spinoff of a European gift card company, Zeek Group.)
Tachdjian hopes to see these tech companies explore use cases on Link Chain, which could lead to broader cooperation.
“Blockchain allows us to expand our ecosystem to include third parties in ways that were not possible before,” says the spokesperson.
In addition to startups, Line can potentially partner with Big Tech players experimenting with dApps. For example, both Samsung and Huawei have released mobile handsets with built-in e-wallets that can handle crypto.
Such hopes are why Line decided to build its own blockchain protocol, rather than use an existing infrastructure such as Ethereum. Line wanted a platform built around its loyalty programs.