In 2018, LINE announced the concept of a LINE token economy, unveiling its efforts to develop its own blockchain and DApps platform. Establishing itself as a platform, not merely a smartphone app, it is becoming a major presence in areas such as games, music distribution, shopping, news, and AI. As it expands even into the financial sector, what does the company hope to accomplish with blockchain? This is what we asked Toshimasa Nasu, head of LINE Blockchain Lab, and Shinichiro Isago, who serves as a pipeline with the developer community.
Collaboration with South Korean blockchain project ICON
―― What are your roles and the organizational structure of LINE’s blockchain business, specifically the LINE token economy and LINK ecosystem?
Shinichiro Isago: I’m in charge of developer relations for all of LINE. My role is to form relationships with external developers, so it’s also sometimes referred to as technology public relations. For example, we’ve published LINE’s messaging API outside the company, so I provide the necessary information to developers who use it.
With LINK Chain, we plan to release it as a DApps platform and provide a development kit along with it. As we work towards that, I discuss with Toshimasa’s team what kind of technical information we should provide at this stage.
We take on a variety of positions – we’re blockchain and platform administrators, token developers, and even DApps providers. So we use trial-and-error to see what style of communication is appropriate.
Toshimasa Nasu: Before joining Blockchain Lab, I was in charge of the back-end system for LINE messaging. We used distributed database technology such as Apache HBase in developing and operating the storage portion, the base of the transaction system. Having this experience with distributed systems and also being interested in blockchain, when I heard that the company was thinking about a blockchain business and setting up a lab, I raised my hand.
Blockchain Lab’s establishment was announced in April 2018 but within the company things started moving around February. On the South Korean side, a development team also set up a lab around the same time, so we began discussing the direction and token economy concept with them.
The result was that we formed a technical partnership with ICON, a South Korean blockchain project, and created a joint venture called Unchain for technology development. In addition, we established a subsidiary, Unblock, to design the token economy. Unblock also manages a venture fund called Unblock Ventures Limited that specializes in the cryptocurrency and blockchain field. In collaboration with these affiliates, LINE’s blockchain business is moving forward.
The token economy as a mechanism for user returns
―― The expectations for blockchain vary from industry to industry, with token economies being only one of these. When and why did you decide on a token economy?
Nasu: Our discussions began with the question of whether there was any way in which we could make use of blockchain. LINE offers a wide variety of services, even family-oriented services, but from the start, these services have grown based on user actions like posting or “liking” things. Therefore, we wanted to provide some mechanism to return value to the users, who are contributors to our service growth. Discussion progressed from there and we concluded relatively quickly that if LINE were to do something with blockchain, a token economy would be best.
Of course, blockchain offers other possibilities as well. But LINE is good at planning and developing services, so we think we can leverage that strength by using the blockchain as a platform.
Increasing transparency and reliability with blockchain
―― LINE has already developed many services and businesses, foremost among them the LINE communication app, which has firmly established itself as a platform. Why work on the blockchain in spite of this? What value does blockchain bring to LINE?
Nasu: What LINE wants to realize is appropriate returns for users’ actions. That desire served as the backdrop to this. As you say, it’s not impossible to do that with existing services. However, using a blockchain increases transparency and can build consensus apart from us, which increases credibility. Looking at the way the world is going, we believe that being able to offer such value will be critical to providing services in the future.
Isago: Compared to other blockchain players, what makes LINE a bit unique is that we’re constantly asking if using the blockchain will make users happy and benefit them. If you’re only pursuing technical advancement and performance, it doesn’t have to be blockchain.
It wasn’t just the planners; the engineers had also long wanted to see user returns, and blockchain appeared as a solution. Their natural reaction was, “This has low transaction costs, high resistance to falsification, and no verification costs, so let’s try it!”
The DApps we’re currently providing are also mainly Q&A, future forecasting, and other activities based on these benefits. We’re making it so that all participants can both raise topics and answer them, and incorporating the returns mechanism into that. When we think about the prospect that we might be able to produce the future of the Internet that was laid out 15 years ago, everyone, planners and engineers included, gets very excited.
LINE’s corporate culture of self-sufficiency
―― There are already a number of other chains, such as Ethereum, so why did you decide to create your own using ICON technology?
Nasu: We decided to partner with ICON because it was listed on exchanges like Ethereum and Bitcoin and its extensibility and high processing capability had been proven in actual application environments. Another deciding factor was being able to work with a team with operational experience.
Isago: If the question is whether we couldn’t have done it on Ethereum, the answer is probably because our corporate culture is one of doing everything ourselves. Many at LINE, including management, believe that “everything we can do ourselves, we should do ourselves.”
For example, in smart speakers, we’re developing LINE’s own AI assistant called Clova, but if you’re only thinking about amount of effort, it would’ve been much easier and faster to simply provide skills to Amazon’s Alexa. But then there would’ve been no difference with putting out a LINE application for iOS and Android. If we have a chance to compete as a platform, we want to go for it. Even if that takes money or manpower or is risky, we should do it. This is a major premise in our decision-making process.
Nasu: Another reason is that to become an experiment ourselves, moving things around on a blockchain and trying to optimize it, we decided it would at least be better to start on a private chain.
Ethereum has built a very good ecosystem. Many developers are actively trying to make it better, so it evolves at a rapid pace. However, I’m not sure that matches what we’re looking for in a chain or our priorities in realizing it.
Our thinking is, let’s test a lot of different things, and once we’ve verified that LINK Chain serves the users and can maintain performance, we can go public with it. Until then, we’ll make our attempts on our own rather than on an existing public chain.
Expanding the market with a developer-friendly DApp platform
―― If you consider LINK to be a DApp platform, how do you plan to develop it as its administrator?
Nasu: I’d like to make it friendly to external developers. That’s why we’re also preparing protocols and development kits for that. If you do too much as a platform administrator, people call it a centralized platform, but we think that providing DApps, issuing tokens, and building an economy are the role of the platform, so that’s what we’re actively involved in doing.
―― Will it ever become an open DApps platform where others can issue their own tokens?
Nasu: There will be a number of stages, but we may get there eventually. Our first priority right now is making it easy to deal with our own tokens, LINK Points for Japan and LINK for other countries.
Isago: I think LINE’s skill requirements for external developers are lower than those of other companies. We’ve made it easy and straightforward to use LINE’s messaging API, including names and other elements. The reason so many developers use our messaging API is that they can accomplish what they want more easily than if they were developing native iOS or Android apps. In the same way, we want to make it so that even if developers don’t fully understand the fundamental technologies of blockchain and cryptocurrency, they can develop DApps with LINK.
―― Does that mean you want to increase third-party DApps?
Isago: That’s right. If we increase the developer population, the user base should also increase. 30 developers building for 1,000 users doesn’t make an ecosystem. But I think people are looking to LINE to make DApp development more widespread, and we see that as our mission.
Nasu: We really want to grow the DApp market, which is still small. That’s why we’re building a platform and even providing development kits – we think that can accelerate market growth.
―― Are the five DApps announced in September 2018 also intended to serve as samples to developers?
Isago: If you’re suddenly told, “Make whatever you want,” it’s hard to know what to make. The five DApps we announced are examples of things sure to be supported by users and help establish a token economy. Based on past app development experience, we consider them to be standard DApp architecture as general user services. By showing these, people emerge who think, “That’s not what I want to make. I’ll make something myself.”
However, we don’t think these are completed DApps either. They’re merely what ideas produced through trial and error look like right now.
Tokens as the lubricant for services
―― Are you not considering a business model of collecting and monetizing tokens through DApps?
Isago: DApps are cryptocurrency-centric, so we may move toward turning a profit with one-of-a-kind game characters and items with greater redeemable value. However, our biggest theme is discovering what kind of mechanism users will most actively participate in, so tokens, including cryptocurrencies, are merely “lubricant” toward that end. Even with BITBOX, our purpose was never merely to engage in the cryptocurrency exchange business itself but to build a component necessary to realizing a token economy.
―― LINK can currently only be transacted by users outside Japan and the US, and in Japan it’s provided in the form of LINK Points, which are not a cryptocurrency. It seems like integrating these would be ideal, but how are you thinking about the future?
Isago: Of course the best would be if everything were the same, but all of our services should be offered in accordance with legal developments and not operate in any gray zone. We will abide by each country’s regulations and move on to the next stage only at the appropriate timing.
From the perspective of the user, we understand that it’s more convenient to be able to convert to cash. In order to provide that with an existing mechanism in a form compliant with the legal system, we make LINK Points, the tokens for Japan, exchangeable with LINE points. Our responsibility as a platformer is to popularize LINE Pay so that LINE points can be used as conveniently as cash. If that happens, not being able to exchange with cash will be less of an inconvenience. Personally, I do hope for a world where it’s eventually possible to exchange it with cash and cash equivalents.
―― Users outside Japan and the US can purchase LINK on BITBOX, but what are their expectations? Until the DApps gain momentum and LINK usage increases, is it mere speculation?
Isago: I think that for now it is speculation. For the LINE Group as a whole, our true purpose for LINK Points is to distribute them to users in Japan in exchange for them taking some sort of action. Rather than increasing the number of places where they can use it as currency, it’s about how to use it as a lubricant to grow the services.
In the future, LINK itself might be able to be used somewhere. But instead of concentrating on that, we’re trying to secure a mechanism for exchanging it into something equivalent to cash. For example, if LINK could be exchanged for Ether (Ethereum) on BITBOX, it could be turned into cash.
Staffing the new business from inside the company
―― Are you also recruiting new personnel such as engineers to launch this blockchain business?
Isago: One of LINE’s strengths in entering this field is that we have the personnel inside the company.
We have many engineers – Toshimasa is one of them – that have been involved in distributed systems and sophisticated transaction systems, so we’re securing the staff simply by transferring them. We don’t struggle with that like other companies, giving us a relatively advantageous starting point.
Each has their own technical expertise, especially those with experience operating a distributed system, and together they hone their skills in the field of blockchain. That’s happening on both the Japan side and the South Korean side, making the development team a diverse organization.
At the same time, the marketing team is working on planning the DApps and figuring out how to demonstrate the blockchain. Having provided many apps and services already, we’ve accumulated a lot of knowledge on what is readily accepted, how to think from the user’s point of view, and how to make improvements based on KPIs. This is another slight advantage that LINE has.
―― The shortage of blockchain engineers is often talked about, but is the level of skill required and the number of new things to learn not that great?
Nasu: In terms of engineering, personnel skilled in distributed systems are crucial to building a platform and blockchain itself.
In my case, I had experience such as HBase, so I wasn’t allergic to consensus-building algorithms or Byzantine faults and could slip right in. Regarding blockchain, I feel like I’m about at the level where I’m starting to produce a range of somewhat workable algorithms.
―― If you’re experienced with distributed systems, is blockchain so familiar that it lacks novelty?
Nasu: There’s a lot of middleware that considered distributed processing, and solutions using it have also been provided. For someone who’s worked with distributed systems, it’s like, “You’re only talking about consensus-building now?” and it might seem strange to be remaking it all from scratch.
However, existing distributed systems are mainly assumed to be built on private networks. That solves the Byzantine fault, but public blockchains are on P2P networks, so that means taking another look at consensus-building methods. Bitcoin and Ethereum have proposed concrete methods, but there are still problems. We recognize that now is the time when technical solutions are most actively being researched.
Taking on the world not only with technology but culturally sensitive services
―― What do you think are the strengths of LINK and LINE in the international market?
Isago: That really depends on whether strength means a technical advantage, an ecosystem of services, or the Japanese cultural perspective symbolized by the LINE app.
But it does all result in the same story. First you have LINE’s goal to use LINK to create a harmonious participatory system in which users are more active. And maybe there’s something in the national character of Japanese people that has sought that sort of thing since the dawn of computer communication. LINE’s biggest differentiator may be that in terms of working together to make everyone’s wish for something like that come true, we’re trying to build culturally-specific mechanisms.
If you only look at the individual technology, you’re bound to find others with higher or lower performance or computational complexity, but this will all eventually be commoditized.
Of course competing in those aspects is important for R&D, but if people start saying, “This is amazing, but what service is this going to be incorporated into again?” then there’s no point. More importantly, we’ve seen content and services that, based on users and cultural background, were hugely popular in Japan but fell flat in Thailand, for example. We want to compete with strength in that regard.
Counterbalancing the over-concentration in GAFA
―― There are many platforms on the Internet, but among them, GAFA (Google, Apple, Facebook, Amazon) have a huge amount of power; so much so that some say we’ve lost the original freedom and diversity of the Internet. As we enter the era of blockchain, what do you think will happen with platforms, competition, and differentiation?
Isago: Personally, I have the same kinds of conversations in the context of AI, where GAFA is also a major presence, along with China’s Tencent and Alibaba.
These companies possess enormous amounts of text information, map information, product information and purchasing information, all of which they use to generate revenue. However, there are some types of data that cannot be collected, and therein lies the opportunity – this is a staple of GAFA theory. But before that, there is the problem that unless we can collect data, our AI technology cannot advance.
Machine learning and deep learning play an important role in current AI technology, but training data is crucial to that. Training data requires tags (annotations) such as “good” or “bad,” or what something means, and we think that a blockchain-based token economy is extremely compatible as a mechanism for collecting that kind of tagged data. For example, increasing the number of users of a service that photographs products, writes reviews, and tags them not only makes it more convenient for readers but also contributes to AI research.
In compliance with the legal system and regulations of each country, and with the full consent of users, we will build up a firm foundation upon which we can collect data, the source for making AI smarter. Based on that, we hope to compete against GAFA as a Japanese company; as an Asian company.
I don’t think any of us want a situation in which whenever we try to do something in Japanese, we find that no Japanese company has the data and we can’t know Japanese purchasing information or see photos of Japanese tourist spots without paying money to GAFA. It’s not even about nationalism, it’s just inevitable that as the company most familiar with the lifestyles and tastes of people in Japan, LINE would take this on. We want to deftly use blockchain technology to create a world that everyone can enjoy and in which productivity increases.
Nasu: Regarding competition with companies like GAFA, our aim is to position ourselves as another option rather than to confront or oppose.
We’re approaching the verge of a decentralized world in which information is not over-concentrated but rather shared by everyone. If that happens, as Shinichiro said, business will support a distributed, freely-accessible world rather than one in which we have to pay money to one over-concentrated group or entity.
I can’t imagine what the current platformers will look like then. But I do think more and more of these distributed platforms will be built.
Ethereum is a wonderful platform, but it’s not perfect. That’s why there’s movement all over the world to develop other platforms. If numerous blockchains emerge, I believe they’ll be followed by a world of cross-chains and inter-chains connecting them.
Interview date: November 8, 2018
Editor: Makoto Nakazato
Photographer: Ayano Tomozawa
Developer Relations Team
Following experience at Oracle Corporation Japan, a strategic consulting firm, and a startup, Shinichiro Isago joined Microsoft Japan and served as an evangelist. Microsoft’s high school girl AI, Rinna, gave him the opportunity to work with LINE. In order to promulgate technologies such as AI and blockchain, he heads up all awareness-raising activities about LINE’s platform, which shrinks the distance between companies, society, and individuals.
Development Center 1
Coming from NAVER Japan Corporation and then NHN Japan Corporation to LINE Corporation, Toshimasa Nasu stays extremely busy managing the development of LINE’s own blockchain, LINK Chain, in the LINE Blockchain Lab.