Interview: Sunny, David & Zolo, Deep Tide

Guest: Sam Seo, Klaytn Foundation

"In the domestic market, we have a huge influence, but we face fierce competition globally. Our advantage lies in user experience."

--Sam Seo, Representative Director of Klaytn Foundation

Introduction

After Token2049, the crypto market has once again shifted its focus to Asia. While the consensus among the masses is that the Asian crypto industry lacks infrastructure innovation capabilities compared to Europe and the US, the engineering capabilities of internet applications, the government's policy inclusiveness, and the close connections within the community in Asia are not inferior to those in the West, and in some respects, they even have an edge.

South Korea, a crypto nation that was at the forefront of the industry last year due to the Luna Crash, has instead become more resilient.

In terms of crypto policy, the local government, which has always maintained an open stance towards crypto, is vigorously promoting policies to protect crypto investors. At the level of tech giants, South Korean Web2 oligarchs are also actively advancing regional public blockchain construction and leveraging centralized engineering advantages to significantly enhance user experience. In terms of international market expansion strategies, they are employing a "broadening territory is not an overnight success" development strategy: nurturing their domestic crypto industry while establishing a presence in Singapore, using user experience advantages to leverage the Asia-Pacific and Southeast Asian markets, while keeping an eye on the European and American markets.

A simple example is KakaoTalk, a mobile social app with over 95% market share in South Korea, equivalent to WeChat in China. In KakaoTalk, users can use a crypto wallet for transfers, and all gas fees during the process are abstracted away by the backend. User abstraction protocols and other technologies available in the market are applied in this wallet. From the perspective of national tolerance and the strength of tech giants leading the charge, the user experience constructed in the South Korean crypto market is relatively good.

In the realm of Real World Assets (RWA), the South Korean crypto industry is also closely collaborating with the Korea Gold Exchange to promote the on-chain representation of gold assets, enhancing the market sales and liquidity of gold transactions.

Who are the leading projects behind all these strategies?

Klaytn is a public blockchain project invested in and developed by the South Korean internet giant Kakao Group. Every move Klaytn makes is backed by its deep understanding of the South Korean internet market and a spirit of daring to challenge. Similar to Tencent in China, Kakao Group is an important tech company in South Korea, sharing commonalities in operating diverse services such as messaging, gaming, e-commerce, and fintech.

The following is a conversation between Deep Tide and Sam Seo, the representative director of the Klaytn Foundation, which we hope will provide readers with some inspiration or resonance on the topic of crypto market and project development in neighboring countries.

Background Story and Thoughts on Web3

Deep Tide: Could you please introduce yourself and how you initially joined Klaytn?

Sam:

I completed my PhD in Computer Science, specializing in high-performance computing, focusing on optimizing software performance. Before joining Web3, I worked at a research institute, primarily engaged in code optimization and improving developer convenience. In 2017, while working as a research engineer at Samsung Research, a friend introduced me to Bitcoin, prompting me to delve into the Bitcoin white paper and related materials. This marked the beginning of my deep understanding of Bitcoin and its underlying blockchain technology.

I found the philosophy of Bitcoin very inspiring, especially its emphasis on decentralized and transparent systems, which can fundamentally change decision-making and financial systems. However, I also began to understand Ethereum and its unique features and philosophies, which convinced me that it could shape the future of the internet and software systems. Motivated by this vision, I joined Kakao's blockchain subsidiary Ground X as a software engineer and protocol engineer. In the core development team, my responsibility was to design and implement Klaytn as a public blockchain.

Deep Tide:

You obtained a PhD in high-performance computing and learned about the Bitcoin white paper early in your career. From your intuition, given your strong software knowledge background, what is the intersection between traditional networks and blockchain?

Moreover, many believe that the biggest application of blockchain is finance. Even Elon Musk mentioned in a podcast with Lex Fridman that he believes blockchain can ultimately solve financial problems. However, he did not emphasize other potential applications. From your perspective, how should blockchain empower the next generation of networks beyond just serving fintech?

Sam:

First of all, I agree with others that the most common application of blockchain currently is in the financial sector. However, I believe the application scope of blockchain and smart contracts is broader than just financial systems. In Web3, the internet was originally designed and developed as a decentralized system. However, due to operational and technical issues, Web1 and Web2, the current internet, have turned into centralized systems dominated by large companies. The original design of the internet was decentralized. That is to say, we have browsers and interfaces, front ends, and back ends, which are the places where data is stored and owned. Currently, for reasons of system efficiency and security, centralized entities like Google or Meta own and manage all user data.

With Web3 and the implementation of blockchain and smart contracts, everything becomes transparent and accessible. The system itself is highly secure, and cryptographic blockchain technology ensures data security. Data is securely stored, and ownership can be reassigned to creators and users. By owning data ourselves, we can monetize or utilize it without relying on third-party intermediaries or centralized entities. However, to provide a better user experience, large companies may still be necessary. But in terms of data ownership and transfer, blockchain and Web3 technologies can achieve a decentralized approach. This is the distinction, and it is what sets Web3 apart from traditional technologies or legal systems.

Enhancing Web3 User Experience is Klaytn Public Chain's Mission

Deep Tide:

I know Klaytn is building a foundational trust layer for Web3, the metaverse, or the future of the internet. Currently, there are many Layer 1 blockchain platforms. As far as I know, Klaytn has achieved large-scale applications in the South Korean market. Apart from regional differences, what distinguishes Klaytn from other blockchain platforms?

Sam:

Klaytn prioritizes better user experience, which requires providing a low-latency platform and high throughput. While blockchain platforms are generally secure unless they have security vulnerabilities, many blockchain platforms still face issues with speed and responsiveness compared to existing Web2 systems and software. People have become accustomed to high responsiveness and high-performance systems, such as those on mobile devices. However, when using blockchain, people often feel the speed is slow, and users must pay attention to their private keys and potential hacking risks.

Addressing these user experience issues is crucial, and Klaytn's uniqueness lies in its ability to provide second-level block times and finality. When using Klaytn, users may not even notice the difference between Web2 and Web3 applications. Furthermore, while Klaytn does not claim to be the best, its goal is to provide high throughput and transactions per second (TPS), enabling service developers to build applications in a high-performance environment. Finally, Klaytn has offered native fee delegation functionality from the beginning, allowing users and services to abstract away the complexities of gas fee payments. This feature distinguishes Klaytn from other public chains, and we believe this technology can enhance the user experience of Web3 technologies.

Deep Tide:

In the blockchain space, there has been ongoing effort to solve the trilemma of scalability, decentralization, and security. So, if Klaytn can achieve low latency and high throughput, making speed comparable to Web2, which factor among the trilemma needs to be sacrificed to achieve this goal?

Sam:

Initially, we often sacrifice the decentralization of the blockchain to address scalability issues. Security is always a key factor that needs to be ensured. However, when we prioritize scalability, we may need to sacrifice a certain degree of decentralization. Nevertheless, our technical team is still committed to finding ways to improve decentralization while maintaining high performance. They are actively conducting research and have made significant progress in this area.

Preferences of 6 Million Korean Crypto Users

Deep Tide:

South Korea has become an important player in the blockchain and Web3 industry, thanks to significant developments and contributions in this field. How would you describe the current state of the South Korean Web3 industry? As far as I know, your headquarters is currently in Singapore, but Klaytn is expanding into international markets, indicating confidence in the domestic market. What unique characteristics or advantages does the South Korean Web3 industry have compared to other countries?

Sam:

As you mentioned, Klaytn started in South Korea, and although our headquarters is currently in Singapore, our primary market remains South Korea. Understanding the South Korean market is crucial.

The South Korean market is very different from Western markets, especially regarding user preferences, whether they are cryptocurrency users or regular website users. Compared to decentralization, they value credibility and usability more. Therefore, it is noteworthy that they tend to use centralized exchanges more frequently.

In South Korea, there are over 6 million cryptocurrency users, and while not all of them use blockchain wallets, many have accounts on centralized exchanges. This characteristic is unique to the South Korean industry and market. The reason for this preference lies in the usability of centralized exchanges. Compared to decentralized exchanges, they are faster, cheaper, and more convenient. Users do not have to worry about managing their private keys and tend to trust the operators of these exchanges.

In light of this, the South Korean Web3 and blockchain industries revolve around the activities and user experiences of centralized exchanges. Klaytn's goal in South Korea is to attract these centralized exchange users into the world of Web3. Although many of them are currently only interested in trading, if we can provide them with a better decentralized finance (DeFi) experience and enhance their user experience on Klaytn, they may be willing to explore and use Web3 services.

One of the ways we achieve this goal is by developing a crypto wallet within KakaoTalk. KakaoTalk is a popular mobile social app used by over 95% of the population. We integrated the Klaytn wallet into this platform, abstracting away the complexities of user interfaces such as private keys and addresses. Users can seamlessly send tokens and use DeFi services within KakaoTalk. This integration encourages developers to bring Web2 users into the world of Web3 and Klaytn services.

Deep Tide: That’s truly impressive. Have you observed other South Korean projects addressing user experience issues? Have these applications driven mass adoption of the Klaytn ecosystem?

Sam:

One area that has gained popularity on Klaytn is gaming. While this is not a new field, the adoption rate of gaming on Klaytn has been high. To address user adoption challenges, they have implemented Klaytn's fee delegation feature.

A game called "SuperWalk" offers two modes: a free mode and a professional mode. In the professional mode, users need to acquire NFTs to participate. This poses a challenge for users as they must obtain tokens and purchase NFTs to start playing. However, in the free mode, users do not have to face this complexity. The team behind Superwalk uses Klaytn's fee delegation feature to cover gas fees. This way, users can simply enjoy the game without worrying about acquiring tokens or dealing with other complex issues. The SuperWalk team hides this complex interface from users, allowing them to start playing in a user-friendly manner similar to traditional web applications. They gradually introduce users to other features and modes that require purchasing tokens.

Additionally, they have integrated the previously mentioned Klip wallet. KakaoTalk users can easily start using this DeFi application with their own wallets. Even if they initially have no tokens, they can still use the application. Over time, they will gradually learn about purchasing NFTs and other aspects of the game. This approach has helped SuperWalk gain more users in the South Korean market, and they are currently expanding into Japan and other countries. The focus is on providing a seamless user experience without worrying about the token system. Users can start playing the game first and switch to the professional mode when they feel comfortable. This method addresses user experience issues in the emerging gaming field.

Regarding upcoming developments, the team is researching digital world asset organization. While this work is still ongoing, one of the anticipated services is the tokenization of gold. The Korea Gold Exchange hopes to bring transparency and liquidity to physical gold by allowing users and investors to buy, sell, and trade gold tokens on-chain. Although this service has not yet been launched, it is expected to be available later this month or early next month. Once this feature is launched on Klaytn, it will bridge the gap between the on-chain world and tangible assets like gold. People will be able to purchase gold on Klaytn without needing to store it physically, as the gold will be securely held by the gold exchange. This development is expected to pave the way for creating various applications and services based on these gold tokens.

International Expansion or Asia-Pacific Market First?

Deep Tide:

I know Kakao is an important partner and endorsement for Klaytn. What role do you think this partnership plays in the project's development? What challenges would Klaytn face without this partnership?

Sam:

We know that competing with other public chains outside of South Korea is quite challenging. In the domestic market, we have significant influence, but internationally, we must compete with other companies. However, one advantage we can leverage is our expertise in user experience. We have successfully developed and deployed various use cases and applications on Klaytn in South Korea. These can serve as references, and we can easily apply our previous experiences to new markets and different applications by collaborating with local teams in other countries. This is our strategy, and I believe it is also our advantage that distinguishes us from other teams. We have firsthand knowledge of how to get users to use Web3 and DeFi and make them feel comfortable. This is how we rely on existing experience and partnerships to enter other markets.

Deep Tide:

The Klaytn international team has been stationed in Singapore for some time. What kind of relationship do you observe between team members from the South Korean market and those from the Asian market? Additionally, to enhance competitiveness, what does Klaytn need to do in the Asian market to leverage its local user experience expertise?

Sam:

This may be a common approach, but our strategy is to collaborate with team members in Singapore and other countries to localize Klaytn's services in each specific country. For example, this year, our focus is on increasing visibility in the Vietnamese market. To this end, we have hired local team members from Vietnam and collaborated with local marketing teams. We did not rely entirely on existing members but empowered local team members to introduce our history, partners, and ecosystem to the local market. As a result, we have established numerous partnerships with local entities.

When engaging with local markets, we do not only emphasize our success in South Korea. We highlight that our goal is to promote the development of the Web3 industry in the target country. By doing so, it becomes easier for people to accept Klaytn and be more willing to listen to our message. Our strategy is to localize our content and DeFi products to meet the specific needs of each country.

Deep Tide:

For example, let's consider the differences between the Builder market in Vietnam and the South Korean market. The South Korean market places great importance on user experience. However, in the Vietnamese local market, the priorities of Builders differ. So, from the perspectives of Builders and users, what aspects do they primarily focus on?

Sam:

Based on my experience and understanding of the Vietnamese market, Vietnamese Builders tend to prioritize practicality. Although Vietnam has many developers, their experience and maturity in web technology are still at a beginner level. This is why they focus on building small-scale projects or applications that can be quickly deployed to users. On the other hand, South Koreans place more emphasis on enhancing user experience. Many users and developers in South Korea have experience in developing Web3 applications.

In contrast, the market and developers in Vietnam are still in the early stages and lack extensive experience. As a Layer 1 ecosystem, we strive to help them reduce trial and error. Without the collaboration and support we provide, Vietnamese developers would have to independently go through countless trials and errors. Similarly, the key difference lies in the limited experience of Vietnamese Builders, leading them to focus on building smaller projects and prioritize quickly launching services.

Deep Tide:

Yes, I think that's the charm of Web3. Even in the face of competition, people can collaborate because local teams, markets, and builders in different countries have their unique strengths and weaknesses. Web3 is about combining these different elements to create a truly global formula.

Besides the Asian market, has Klaytn considered entering broader markets such as Europe, the US, or South America?

Sam:

We made attempts last year, especially to enter the US and European markets. However, due to a lack of resources and cultural differences, these attempts were not very successful. Therefore, this year we decided to focus our main efforts on the Asian market. Our plan is to build a strong user base and community in Asia first before considering expansion into other regions. Currently, we are primarily focused on the Asian market. While we do have partners in the US and Europe, our target audience does not particularly include users from these regions. We collaborate with partners in various ways, but our main user target is Asia.

Symbiotic Relationship with Ethereum

Deep Tide: Speaking of development strategies, it is worth noting that Klaytn is an EVM-compatible Layer 1 public chain. Given this compatibility, what kind of symbiotic relationship do you think exists between Klaytn and Ethereum?

Sam:

As an EVM-compatible chain, we place great importance on the technological advancements of Ethereum and EVM. We have been working hard to understand the latest developments and updates from Ethereum and EVM. Additionally, we actively strive to contribute to the technological development of the Ethereum community and the expansion of the developer community.

While our contributions may not be substantial, we occasionally submit EIPs (Ethereum Improvement Proposals). This happens when we design certain features in Klaytn and recognize their potential applicability to the broader community. In such cases, we submit our suggestions to EIP, thereby contributing to the technological development of the ecosystem.

Given that Klaytn is an EVM-compatible chain, our smart contracts primarily use the Solidity language. Therefore, we have invested significant resources in introducing Solidity and the EVM environment to numerous developers. Interestingly, we heard from a member of the Ethereum Foundation that Klaytn's presence has greatly facilitated the development of Korean Solidity developers and the entire Web3 developer community, as we actively participate in educating and nurturing this community.

Deep Tide: I know many EIP editors and authors come from Asia and have witnessed the contributions of practitioners in the Asia-Pacific region to the entire ecosystem. Now, in the Asian market, have you encountered competition from Ethereum in terms of market penetration?

Sam:

No, because Ethereum currently positions itself as a settlement layer or data availability layer. They are focusing on expanding their network through the adoption of Layer 2 technologies and other advanced techniques.

I wouldn't say we are in direct competition with Ethereum. Instead, we believe our relationship is one of cooperation, jointly developing the market and expanding the user base. As a chain compatible with Ethereum, we appreciate the technologies developed by Ethereum and adopt them where applicable. We are also committed to assisting Ethereum in expanding its community and market. Therefore, I wouldn't characterize our relationship as competitive but rather as Klaytn competing in its specific domain.

Post-Luna Crash Korea: Market Expansion is No Longer the Top Priority

Deep Tide: Last year, we experienced the Luna crash, which led to a crisis in the entire industry. How do you view its impact on the South Korean cryptocurrency market?

Sam:

In fact, that incident had a significant impact on the Korean cultural industry. Terra was one of the largest projects in South Korea at the time, and many Koreans invested in its tokens. Many teams were developing distributed file systems (DFS) on Terra, and some teams were even operating services on that platform. However, due to the crash, some teams had to migrate to other chains, while others had to cease operations. This had profound effects on both businesses and investors.

Due to the Terra issue, the South Korean government began to closely monitor the implementation of regulations. While the government had already been formulating cryptocurrency regulations, this incident prompted the government to pay more attention to investor protection rather than just focusing on industry expansion. Now, the goal of regulations is to strike a balance between encouraging industry development and protecting investors from fraud and scams.

The Terra Luna incident has sparked more attention from government officials and politicians towards the field of investor protection. While efforts to promote industry development continue, the primary focus remains on how the government and regulations can protect retail investors from such incidents.

Deep Tide: In the post-crisis era, people have been traumatized, and regulations have become stricter. How has Klaytn formulated strategies or taken actions in response?

Sam:

Some of our current actions are not directly due to the Terra issue. However, our direction is to prioritize transparency to address issues like the Terra Luna incident, all of which stem from opaque and centralized decision-making processes.

Our focus at Klaytn is to ensure transparency in the decision-making process and decentralize decision-making authority as much as possible. Since last year, especially this year, we have made significant efforts in establishing a governance portal called Klaytn Square. Klaytn Square is a platform where all information regarding our treasury and governance agenda can be accessed. Users can visit Klaytn Square to see details such as who purchased a specific agenda and how the treasury is managed and utilized. By disclosing this important information, we aim to demonstrate our commitment to providing users and investors with crucial information. We believe that this transparent disclosure will encourage regulators and investors to consider Web3 and Klaytn and promote investment.

Additionally, as a Layer 1 platform, we are actively working to integrate more stablecoins into the Klaytn network. We are collaborating with teams that are already developing stablecoins and prioritizing those with strong security measures during the research process. However, we currently do not have plans to issue our own stablecoin.

Klaytn's Community Cohesion

Deep Tide: The final question is about Klaytn's strong emphasis on user experience. In a bear market, how can those interested in Klaytn learn more and build applications on the platform? Does Klaytn organize any events or workshops for people to participate in?

Sam:

In fact, our annual event "KlayMakers23" just launched two days ago. This hackathon will last for over a month, with submissions accepted until the end of November. It is a global online hackathon open to any developers or development teams building on Klaytn. The event aims to bring more developers into the Klaytn platform.

In addition to the hackathon, we hold monthly all-hands meetings in both English and Korean on Discord. These meetings take place in the last two weeks of each month and are open to users, investors, and anyone interested in learning about Klaytn and the Klaytn Foundation ecosystem.

Moreover, we occasionally participate in various conferences, setting up our booths or joining panel discussions. For example, last month during Korea Blockchain Week, we organized our own side events; at the Token2049 conference in Singapore, we set up a booth in the main venue. We also hosted after-parties and networking events.

These activities, including hackathons, all-hands meetings, and conference participation, are all aimed at engaging users, developers, and investors in the Klaytn community.

Notes*

Developed by the South Korean internet giant Kakao Group, Klaytn is a global Layer 1 public blockchain designed to power the future on-chain world. As a leading blockchain platform with the lowest transaction latency, Klaytn offers enterprise-grade reliability and a developer-friendly environment, providing users and developers with an unparalleled seamless experience. Since its launch in June 2019, Klaytn has accelerated the mass adoption of blockchain through a wide range of use cases, covering areas from DeFi to the metaverse, gaming, and even the CBDC pilot project of South Korean banks. Today, it is one of the few globally competitive Web 3.0 ecosystems developed in South Korea, having supported over 1 billion transactions from more than 300 decentralized applications.

The Klaytn Foundation and Klaytn are two separate entities. The Klaytn Foundation is an independent entity aimed at supporting and promoting the development and adoption of the Klaytn platform. It operates as a non-profit organization and serves as the governing body of the Klaytn ecosystem. The foundation is responsible for managing Klaytn's initial coin offering (ICO), overseeing Klaytn's governance model, and promoting partnerships with other organizations. Its goal is to foster the growth and sustainability of the Klaytn ecosystem.

Reference Links

1. South Korea Crypto Regulation:

https://www.iflr.com/article/2c7n2o4rfmoya8grn7cw1/features/korea-the-current-regulatory-landscape-for-crypto-assets

2. About Kakao Group:

https://www.kakaocorp.com/page/?lang=en

3. About Klaytn Foundation:

https://klaytn.foundation/