Blockchain adopted to build trust and strengthen market community
To address the so-called lemon problem, Joonggonara, the largest online used goods marketplace in the country, is incorporating blockchain technology into its system with the help of Actwo Technologies. It hopes to rid the process of marketplace asymmetry and build trust between buyer and seller.
Blockchain involves the use of distributed ledgers that can’t be altered and are stored in a decentralized form.
JoongAng Ilbo met with Joonggonara CEO Lee Seung-woo and Actwo Technologies founder Han Seung-hwan to discuss their efforts to improve Joonggonara with blockchain and what the future holds for the technology.
A.Lee Seung-woo: There are three reasons: community, trustworthy transactions and convenience. Joonggonara has always encouraged an engaged community by being community focused. But we had to be careful in implementing changes and improvements because we believe in the community’s autonomy and ability to expand by itself. We expect more benefits to the community by introducing blockchain technology. We are planning to provide rewards for activities that help the community grow, prevent wrongdoing and strengthen the integrity of the market. If trust can be ensured in a transaction, people who avoided buying used goods due to the issue of trust will be able to take part without worry. We will be a step closer to Joonggonara’s vision of establishing a business network based on a virtuous circle of resources.
Who first suggested the idea of the two companies collaborating?
Han Seung-hwan: An acquaintance introduced me [to Joonggonara] six months ago just as I was thinking that Joonggonara would be a very useful platform for the incorporation of blockchain technology. There are a lot of people who doubt whether there is in fact a blockchain industry. Blockchain is vague and abstract and relies on conditions that may only be possible in the future. I think that even those who believe in the future of blockchain are growing weary. We are at the point where we desperately need blockchain in real life that we can experience. About 18 million people, one third of the country’s population, use Joonggonara. They are already developing a peer-to-peer economy in a distributed form. There is no centralized authority. Only a platform exists. Users are active on the system due to demand, and it has grown continuously. Joonggonara and blockchain can create perfect harmony.
How can blockchain technology be used on Joonggonara?
Han: Transactions in Joonggonara are conducted as written posts. All the real transactions happen outside the system, and through this process, there are a lot of unanticipated problems and unintended inefficiencies. For example, firstly, the transaction data is recorded in a form that is difficult to utilize, and a large portion ends up lost. Secondly, there are a lot of scams as the systems for payment and for product delivery are separate. Third, the payment system itself exists outside [of Joonggonara], so the utility of Joonggonara is limited. Lastly, the credibility of both the buyer and the seller are important, but it is difficult to check them. We aren’t trying to tear apart Joonggonara and fix its problems, but we expect to reduce inconveniences by using blockchain.
What are some examples of changes users will experience as the result of the incorporation of blockchain?
Han: We are at the schematic stage now. We don’t have anything clearly decided that we can show. But we will implement changes step-by-step that will not drastically alter or intrude upon the current user experience. Whereas most other blockchain projects are focused on the main net or the technology itself, Joonggonara is the opposite. This is solely focused on Joonggonara. We are planning to introduce blockchain technology gradually in a way that will not change the Joonggonara user experience.
Will this involve a reverse initial coin offering? (A reverse initial coin offering raises funds through cryptocurrency for an existing business, while in a regular initial coin offering [ICO], funds are raised to create a new cryptocurrency.)
Lee: A cryptocurrency is not the objective. We are focused on introducing blockchain technology. I also used to think that blockchain and cryptocurrency were the same thing, but you can improve services by incorporating blockchain technology. The local market was too focused on cryptocurrency in the early stages, which led to the criticism that it had no substance. If a service based on blockchain comes out, such worries might go away. So far, the market has placed the cryptocurrency cart before the blockchain horse.
Korea is known for having a difficult environment for start-ups because of regulations and existing businesses. Is this true?
Lee: Joonggonara became a corporation in January 2014. I have thought about ways to change the payment system, which has been the most inconvenient issue in used-goods transactions. But in order to incorporate a payment system, you need to acquire a financial business license. This is difficult for start-ups like us. We solved this issue by partnering with Toss (the largest simple money transfer service in Korea). But we understand the government’s stance as not everyone can conduct financial business. We would just like the government to take a flexible attitude towards the various efforts start-ups make. The fortunate thing is that the used-goods marketplace isn’t large enough for large corporations, and such companies are barred from selling used cars as the market is reserved for small and medium sized companies by law. That is why SK sold off SK Encar.
What are the benefits of blockchain technology?
Han: There are three benefits. The first is the distribution and ownership of data. People can share their data, which can also be examined by anyone. Secondly, the value is determined by the data. Human civilization has been able to develop due to the storage of things of value. By accumulating surpluses, people were motivated to work. Now, the size of the financial economy has overtaken the real economy. And the ownership of such worth can only be represented by data. Just because you live in a house, doesn’t mean you own it. You need a document stamped with a seal. Furthermore, not only governments but all economic participants such as companies can issue currency. This means the ability to create an economic environment that stands on its own. If taken to the extreme, this could mean that a Samsung token issued by Samsung may hold more value than the Korean won. Of course, this is why the government can be hostile to cryptocurrency.
The government says it is possible to separate cryptocurrency from blockchain.
Han: It is possible theoretically but impossible at this time. For technology to develop, the brightest have to take part, and the brightest are only induced to take part by opportunity. Currently, the ability to issue currency through blockchain presents itself as an opportunity, and creates worth independently without government or external investment. The market itself is fostering talent without the government having to do anything. [The government] seems to be impeding the industry’s development when it can just let it be.
Cryptocurrency prices plummeted due to intervention by the financial authorities earlier this year. The government argued that it had prevented speculation. What did you think about the response?
Han: The government offers up a narrative completely opposite to that of the market. But, whether it stabilized or destabilized the market is an issue that only those in the market can determine. Did the government intervention stabilize the cryptocurrency market? From a different perspective, the government’s plans to develop the industry could be a measure to limit the growth potential of the sector. Structure comes after substance. If structure comes beforehand, it can restrict substance. The government is trying to grow an industry that it currently does not even understand by placing fences around it. Does that mean those outside the fence are supposed to just disappear?
BY KO RAN [chae.yunhwan@joongang.co.kr]
with the Korea JoongAng Daily
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