Let’s look back to the blockchain market in 2021. First-world countries such as the US, European Union, and China take up more than 70% of the industry spending. Financial blockchain, such as DeFi, digital custody, and CBDC, was the leading industry, taking up about 60% of the market, followed by manufacture, distribution, and public sector. Disregarding the current development stage, more than 80% of the world’s biggest 100 companies have implemented blockchain technology.

Although more than half of the enterprise blockchain is based on private chain – especially Hyperledger fabric – rather than public chain, the blockchain trend in 2021 demonstrated the need to increase multi-chain use in accordance with the expansion of blockchain technology and its application. As the awareness on the need for appropriate chain is increasing, development of a platform supporting multi-chain as well as bridge technology supporting between-channel communication will keep accelerating.

The acceleration of blockchain will be led by the three waves of 2021 – Web 3.0, DAO 2.0, and DeFi 2.0.

Web 3.0

Web 1.0 was a basic homepage, a one-way window to promote what a company has. In Web 2.0, two-way communication was the biggest concern. Users could communicate via writing, in contrast to passive reading in Web 1.0. Web 2.0 brought about the development of mobile environment and social platforms based on user-generated content. The unreasonableness of Web 2.0, however, was that user-generated content was owned by the platform service provider, not the user, and it was the reason the initial Web 3.0 focused on individualization; that is, the nature of Web 3.0 was hyper-individualism, offering optimal information and service necessary for an individual. Nevertheless, Web 3.0 merged with blockchain strives for a bigger value. Rather, it seeks to revolutionize the internet ecology which is centralized and monopolized by few Internet giants and create digital economics that is fairer and decentralized. In other words, by offering an infrastructure which enables horizontal value exchange, blockchain-based Web 3.0 provides a protocol for participants to freely exchange values without an interruption from centralized institutions, like platforms. New technologies such as smart contracts, dispersed infrastructure, decentralized finance, digital certificates, proof of ownership, and DAO will be imperative in Web 3.0 era.

DAO 2.0

Blockchain-based Web 3.0 is also changing the form of companies, and it is called Decentralized Autonomous Organization (DAO). DAO is a futuristic organization operated by smart contracts. Its very first model, “the DAO,” defined itself as a new form of consultative group reclaim novel business opportunities for participants’ improvement.

DAO operates consensus rules based on smart contracts, so it works autonomously once rules are set. This structure is in stark contrast with original incorporations which implement a top-down structure grounded on shareholders because it seeks to achieve a goal set by DAO members, not the profit of shareholders. Thus, it may look more like a co-op. DAOs include, but is not limited to, Uniswap (DeFi DAO), Neptune (investment DAO based on Venture Capital), constitution DAO (collector DAO), or other fan club DAOs run separately from agencies.

Since the basic principle of DAO is to set a company’s goal via participants’ votes and fair distribution of profits, advocates of decentralization appreciate DAO. However, voting rights in DAO are determined by stakes, leaving a side effect – that a small part of participants invest most of capitals for voting rights – to be solved. Nevertheless, Wyoming, probably the most progressive state to new technologies, acknowledged DAO as a legal limited company in 2021. The progress is notable regarding the lack of legal ground to admit DAO as a legitimate company.

DeFi 2.0

One way to apply DAO was DeFi 2.0. DeFi 2.0 supplemented drawbacks of DeFi 1.0, which has been criticized as a Phonzi scheme by some, by a simple logic: high liquidity backed by a high interest. By implementing a bond system which DeFi 1.0 lacked, Olympus DAO, a representative DeFi 2.0, created a system in which a protocol can manage liquidity pool. Thus, Olympus DAO is still holding the lower limit price – a culprit of the failure of DeFi 1.0 – quiet successfully so far, despite some cynical perspectives on it. More DeFi 2.0 models, like MakerDAO based on Ethereum security, are being created.

It is still necessary to monitor how and what financial authorities will regulate on DeFi users and service providers. Nevertheless, regulation issues did not stop DeFi from its sevenfold growth rate in 2021 alone, and it is only expected to accelerate this year. As virtual assets are occupying more spaces of the portfolios of institution investors, DeFi industry related to digital custody is almost doubling annually.

Competition over CBDC Supremacy

Throughout the history of humankind, in the center of authorities always lied a financial supremacy. The United States of America took over world’s supremacy by making dollars a key currency right after the World Wars. The emergency of Bitcoin is probably the first variable of the dollar-based US supremacy. China performed Central Bank Digital Currency (CBDC) test before anyone else and is seeking to expand its use via 2022 Beijing Winter Olympics.

China’s effort to promote its CBDC is one of the reasons the US and some of its alliances are politically boycotting the Olympics. China, probably the only threat to the US supremacy, is actively looking for a chance to shake the dollar supremacy. The intention is pretty clear reflecting that the US government regulated the effort of Facebook – currently Meta – to issue a new coin named Libra, worrying that it would threaten dollar supremacy. Facebook moved on to issue Diem, on which Facebook also gave up. Eventually the only coin Facebook issued was Paxos, a stable coin only for American users.

The political concerns complicate the hidden intentions of each country. The biggest concern of the US is to preserve the existing financial ecology while that of China is to preoccupy digital currency ecology. Hong Kong and Singapore, two center mediators of world’s finance, are seeking for profits by mediating new and original financial ecologies. The Bank of Korea is planning to initiate the first step of a pilot program of Korean CBDC by June, 2022, and the second step in the second half of the same year. Regarding the cautious attitude of financial authorities so far, however, completion of the pilot program will not determine its launch. Korea should carefully consider that neighboring countries are progressing CBDC based on their own benefit; we hope that Korea makes a strategic move, rather than a conservative one, regarding CBDC.

Industrial Areas: Manufacture, Retail, and Public Sectors

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