Innovative and disruptive technology is met with resistance in the initial period. Once the advantages are appreciated and cynicism derails the new technology reshapes the world we live in. Same is the case happening with Blockchain technology that is certainly a revolution.
There was always a looming threat that Bitcoin will replace the existing currency. However, the fact is currencies coexist. Many large institutions that were running on the centralized system are exploring the ways in which system can be decentralized given its massive potential.
Kakao is a corporate behemoth has swept the Korean mobile market. Its App Kakaotalk has already captured 94% of the domestic market. Considering is native acceptance, Kakao has ramified into many sectors like advertising, gaming, mobile banking, taxi services and many others.
Consequently, Kakao employs 2600 staffs as of 2017 and has recorded annual sales of 1.97 trillion, with a whopping profit of 165.3 KRW
The company has announced a new blockchain business. The conundrum is Kakao is itself the middleman. What is going to be the future of Kakao if it eliminates its role as an intermediary? How are profits going to be impacted?
The Intermediary has its salience
Jason Han the CEO of Ground X was approached to share his views on this blockchain company.
He asserted,’’will the middleman disappear? Are middleman all bad? I don’t think people are thinking seriously about these questions.
Han is apprehensive about the fact if the surge In ICO project will be able to live up to its promise barring Kakao, Amazon and few others.
“ICOs have an odd structure. You’ve already made all of your money by the time you start. Let’s say you can’t dispose of the money for two years. Two years go by very quickly. You spend those two years working on development to get your smart contracts working, then release your service. Maybe 1,000 users sign up. But you need something more to attract more users beyond that. You have to spend a lot on marketing and go through all kinds of trouble to get your name out there. But why bother doing all that? You’ve already made all your money,” he said.
Han enjoys a good combination of finance and technology. Before joining Kakao he was working with Futureplay where his role was to evaluate the technology of the companies that were potential investment targets.
“From my investment experience, there is a huge gap between what startups promise in their white papers and what they actually deliver,” he said.
Han suggested that the gap cannot be bridged by developing smart contracts or designing good token economics.
“Those who have real experience in business will know. When you finish development, it’s not the end of the project – it’s the beginning. Figuring out how to close that gap is a business problem,” he continued, adding:
“Until last year, nobody talked about business when they were making dapps (decentralized applications), but I think things will be different this year. Decentralization can’t be the core of a service, it’s just a method of providing the service. Tokens can’t be the only kind of value that you offer to users. Tokens are only part of the value. What’s important is the essence of the business itself.”
Counting the advantages
The blockchain being offered by Kakao can be said as partial or gradual decentralization
He was sceptical about everybody using blockchain these days. He wished people stopped trying to put everything on the blockchain
Kako’s services will only be partially decentralized. The entire service won’t be put on the blockchain, certain crucial functions could be separated out for decentralization and tokenization
“For example, let’s say that we convert the mileage points system into tokens. From the company’s perspective, it’s just changing the money into a token format. If we did that, it would be more about making mileage more useful rather than sharing our profits with users. When you tokenize non-core aspects of the service, it allows the company to retain its profitability model while also expanding user inflow. With a forward-looking approach, tokens could also be used to provide incentives to users, but in that case, there need to be benefits for Kakao as well,”
The eminent question is what are the benefits kakao is contemplating through blockchain?
“The token economy is a business model that no one could have imagined before,” he said. “Until now, Kakao has only operated in Korea, but through blockchain, we could expand into the global market. That means taking a portion of the profits we earn as an intermediary and using it to expand our market by sharing it with users.”
For instance, he explained that Kakao was currently earning 100 units in profits, if the market was grown up to 1000 units, the company will retain 700 units and distribute 300 units amongst participants.
“What kind of strategy could Kakao adopt if it wanted to export its successful service to the Asian market? Each country already has one or two established services. The only solution I can think of is offering incentives through blockchain. With blockchain, you can shake up the existing order.”
Kakao’s longstanding opponent Naver is likewise hopping into the blockchain business with its auxiliary, LINE Plus.
North America-based dispatcher benefit Kik is additionally chipping away at a blockchain business called KIN, while Telegram has raised $1.7 billion through an ICO, the biggest sum at any point recorded in a token deal.
“The greatest worry for dapps on ethereum or EOS is the way to draw in clients,” Han said. “Flag-bearer administrations like Telegram have favourable position since they as of now have a stage with a setup client base. This is the reason we have to focus on what these organizations are doing. Then again, those informing administrations have heaps of clients however no different administrations, while Kakao as of now gives an extensive variety of administrations.”
In spite of the fact that Han was incredulous of ICO ventures, he doesn’t trust that these new companies are bound to come up short.
“Twenty years back, no one could have envisioned an organization like Google or Amazon,” he said. “There are such a large number of groups buckling down without anyone else ventures, and some of them will have the capacity to make new kinds of business that are totally not quite the same as anything we as of now know. Some of them might have the capacity to make imaginative plans of action by concentrating on decentralization. With blockchain, I think this will just take five or 10 years, not 20.”
Han gave the promoting market for instance to clarify the opposition he hopes to find in the token economy without bounds. In that industry, there are now numerous blockchain ventures trying to interface publicists and purchasers, in this way producing monetary advantages for buyers.
To begin with, it will be hard to totally evacuate the go-between and make the administration 100 percent decentralized. Since it requires cash and pushes to draw in sponsors and shoppers, at first the broker may take 70 percent of promoting income, while buyers would get the rest of the 30 percent. This model would as of now be focused against current promoting offices, where they go between doesn’t pay a penny to customers.
The rivalry may lead a few organizations to offer 50 percent to purchasers, at that point 70 percent, at that point 100 percent, in the long run making a totally decentralized framework.
“At this moment, no one recognizes what sorts of administrations may leave the blockchain world,” Han says. “We haven’t seen them yet. Steemit has demonstrated to us a portion of the potential, yet no one knows how far it will develop. Yet, in the event that you sit staring you in the face for some time and after that something new turns out, it will as of now be past the point of no return. In this circumstance, having a go is the best activity.”
“Issuing tokens and listing on an exchange are two separate issues. There are several creative ways to issue tokens, including through an ICO, an airdrop or offering tokens as rewards for active participation on the platform like Steemit does.”