Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Cyworld new owner's plan for cryptocurrency business causes concerns
Seen above is the entrance of an empty office of Cyworld in Seoul on June 4. The company has suspended its once-dominant social media service since October 2019 amid worsening financial conditions. Yonhap
By Lee Min-hyung
By Lee Min-hyung
With Cyworld set to resume its social media service under new management, concerns are growing that the new management may seek “speculative” profits by issuing a new cryptocurrency and repeat its past mistakes.
Cyworld Z, which recently took over the once most popular social media site here back in the 2000s, recently shared the plan to list its Ethereum-based cryptocurrency on one of the nation's big three exchanges soon.
But investors are urged to remain wary of the newly issued virtual asset amid concerns that Cyworld Z may also end up following its predecessor which also issued and sold a cryptocurrency called Cling in 2019.
Earlier, Cyworld attracted capital worth 484 million won during the initial exchange offering of Cling. But its value nose dived by more than 96 percent within about five months of its listing in May, 2019.
The firm's financial condition also deteriorated following the failure of its news curation service Que. With customers paying little attention to the once-dominant social media platform, the company ended up failing to find other business models for a rebound.
Most of the firm's employees had since left the company throughout 2019. Cyworld's former CEO Jeon Jae-wan was also accused of failing to pay 1 billion won in overdue wages.
But with Cyworld Z resolving the issue by acquiring Cyworld, attention is growing as to how the new management of the company will be able to achieve a turnaround for the money-losing platform. In particular, former Cyworld investors who purchased Cling are also paying attention to whether Cyworld Z's new cryptocurrency will result in long-term success this time.
Cyworld Z is considering measures to exchange Cling with the firm's new cryptocurrency at a certain, unconfirmed rate, a move to bring back Cling investors and help appease their frustration over the collapse of the cryptocurrency.
But concerns remain that the firm may end up seeking a short-term profit by making use of the popularity of the Cyworld platform and fueling speculation of the cryptocurrency at a time when Cyworld Z's specific business models have not been unveiled.
The price of Cling became volatile after Cyworld Z's decision to resume the service. As of 10 a.m. Wednesday, Cling traded at around 7.6 won on the local crypto exchange BitSonic, up by 900 percent from a day earlier.
As the volatility of such a digital asset comes from the speculative nature in the market, investors are urged to remain more than careful before investing their capital into Cling or Cyworld Z's new cryptocurrency.
As the crypto market is still in its infancy, it lacks a secure safety net that can protect the rights of investors as of now.
“No one can predict future price patterns of bitcoin or other cryptocurrencies,” an industry source said. “Investors who plan to invest in digital assets need to be willing to take risks for the drastic ups and downs of their prices.”
Cyworld Z is known to have attracted investments worth 8 billion won from multiple investors ― such as entertainment firms.
The company plans to resume the PC version of its social media service in March, and will launch a mobile beta service as early as the first half of 2021.
Cyworld was established in 1999, and became the nation's most popular social media platform with a user base exceeding 30 million. But it has since fallen into decline amid the rise of Facebook and Instagram.
Cyworld failed to catch up with the mobile trend initiated in the 2010s amid the spread of smartphones. The service has been suspended since October 2019.