The East Vs. West — Here Is How Cryptocurrency Adoption Compares?
Cryptocurrencies show a marked difference between the East and the West. Know the reason behind this phenomenon. Also, who are the market leaders?
The Differences In The East And The West
The paths to blockchain and cryptocurrency adoption are not the same and both have their own challenges for the East and West.
Appearing to have reached an inflection point for user adoption is Ethereum recently turning five years old. According to a recent report from Dapp.com, in the second quarter of 2020 daily active Ethereum users nearly doubled to 1.26 million up from 637,000 in the first quarter. Widely attributed to the release of Compound’s COMP governance token is the sudden spike.
Several other numbers stand out in the same report. Klaytn and Terra are the two blockchains with the most daily active users after Ethereum, as Klaytn is far ahead of Ethereum in the daily active users before the excitement around decentralised finance thereby following the COMP token release in June.
In achieving over 7.5 million total unique users versus 4.5 million on Ethereum, Klaytn has also made strides. It is worth noting that it outpaced every other major blockchain platform including EOS, Tron, and NEO although Terra is still catching up with 1.78 million total users.
When they have both been around for less than half of Ethereum’s lifetime, what is it about Klaytn and Terra that manages to attract such a sizable user base? Here we find many of the driving factors at play.
Here comes the most obvious comparison of the East and West. While Klaytn and Terra both have more of an Asian focus, the Ethereum foundation is based in Switzerland with many of the decentralised applications based on Ethereum being developed by teams in Western countries.
There are some critical variations in the path to adoption between countries in the East and those in the West zooming out to the macro level. To account for the variation in adoption rates, these differences create a plausible basis.
Time To Start From The Bottom Up
Entire Asian countries such as South Korea, Japan, and Singapore have become renowned for their affinity with technology in the consumer’s daily lives while Silicon Valley has firmly established itself as the epicentre of Western tech development.
For over four decades, the government has been on a mission to put the nation at the forefront of telecommunications development in the case of South Korea. The government investment took Korea to universal status in telecommunications from 1980 to 1987. South Korea has had universal fibre network access in place for years now when fast-forwarding to today. Where fibre access stands at around 30% compare this to the United States. According to the Electronic Frontier Foundation, the existing investment means that the Korean infrastructure can be upgraded to substantially higher speeds at low costs for decades to come.
The Consumer-Focused Adoption
Leading to major global technology firms including Samsung, and LG, establishing themselves in Seoul, is due to the extensive government investment in infrastructure. Incorporating it into their existing range of consumer products, these firms have also been at the forefront of embracing blockchain technology.
Being established by companies that already had an existing working product and consumer base is the massive reason for the rapid success of Klaytn and Terra. Holding a 98% market share Kakao Talk, Klaytn emerged from a subsidiary of Kakao operating as Korea’s biggest messaging app.
The fact is that a mobile payment service integrated with several major partners for the payment services, which also includes Yanolja, Korea’s number one hospitality app as well as Nexon, Korea’s premier game publisher, Terra hosts CHAI. In organic volume within the next six months, Terra is on track to surpass 1 trillion Terra.
These projects have taken an existing product or platform and then incorporated blockchain technology in a way that users don’t need to know that the underlying technology is based on a blockchain in a similar way to Samsung. Enabling them to create solutions that consumers value, furthermore they have an established user base and understand their needs.
This is the reason as to why Ethereum took longer to gain traction among users. The users need to hold Ether to pay gas fees a critical barrier to entry and that the developer either leaves in place or since have had to work to overcome.
Here is how the first paradigm shift that shook the crypto industry has represented developers thereby starting to build around the market demand, and then capturing an opportunity to provide a new financial infrastructure for users, is the rise of DeFi. It is operating in a niche of users who already know and understand blockchain technology and cryptocurrencies while DeFi is undeniably a fascinating and burgeoning segment that is being powered by the Ethereum ecosystem. As an infrastructure solution rather than in response to consumer demands the barriers to entry are a natural consequence of the way that Ethereum emerged.
There Are Variations In The Regulatory Approach
Its unfortunately been the case that US regulators have stopped them in tracks where western firms have attempted to take a more consumer-focused approach to blockchain implementation. Telegram Open Network project and Facebook’s Libra venture are the two most prominent examples.
The finding is that the Securities and Exchange Commission deemed its token sale an offering of securities, whereas as a decision that was later criticised by SEC Commissioner Hester Peirce, Telegram was forced to abandon the TON project. Telegram isn’t even a US company as Peirce pointed out.
Coming up against intense regulatory scrutiny from both the US and the counties in the European Union was Facebook’s Libra project. Dropping out of the project entirely was this as it ultimately led to many of the Libra Association’s original members such as PayPal and facing lengthy delays by the project.
The approach to regulation leads to another critical difference between East and West. Having roots going back further than it may first appear, is this issue. The authorities of both countries the US and South Korea, started sitting up thereby taking notice of the cryptocurrencies around the time of the ICO boom in 2017.
Many citizens were already heavily invested in cryptocurrency partly thanks to the established digital infrastructure in South Korea. Bitcoin and Ether were trading on South Korean exchanges at a 30% premium above their western counterparts because crypto was in such high demand at one point in 2017.
The South Korean government has had to take a more cautionary approach, in contrast with the positively draconian attitude of the SEC. Regulators would have been a political death knell clamping down with a similar attitude to the US regulators.
Due to the onerous obligations that the SEC imposes on venture funds, it is furthermore obtaining investment that can be fraught with friction in the US. Providing early-stage backing to projects including Klaytn and Terra, in contrast, the Korean Financial Service Commission taking a hands-off approach to proprietary investment funds such as Hashed.
To help better regulate cryptocurrencies to bring greater clarity to those operating in the space is Hashed working with the South Korean government. More recently the government approved an amendment to existing legislation around taxation to include a flat tax on crypto profits, as in March, the law was passed that introduced a permit system for digital asset exchanges.
It is unarguably the case that regulation brings more freedom to operate for existing businesses wanting to expand into digital assets while some quarters of the crypto community prefer an unregulated environment. Major banks are now starting to develop infrastructure for cryptocurrencies such as custodial solutions as a result of the South Korean government’s improving framework.
Lastly Smoothing The Path Is Key
The path to blockchain and cryptocurrency, none says its adoption is simple. The journey is convoluted and comes with its own challenges in the East and the West. To ensure that the necessary legal frameworks are in place to enable freedom to operate and attract broader investment from outside the space, the cryptocurrency community should work together with regulators.
If it's coupled with a consumer-centric approach to blockchain applications only then this will help achieve adoption. Now is the time to start considering how consumers can best interact with blockchain technology as with the last few years have placed a heavy focus on developing technological underlayers. We can accelerate the quest for mainstream mass adoption by removing these two significant rocks from the road.