Korean blockchain operators urged to enhance vigilance against accidents

Industry players advised to do more research on failed projects

By Lee Min-hyung

Korean blockchain operators are being urged to reinforce verification of their software programs and stay alert to any danger signs amid unceasing concerns over the possible recurrence of an accident similar to the recent Terra-Luna fiasco, industry officials said.

It has been three months since the once-promising algorithmic stablecoin and its sister token stunned the blockchain industry after their sudden collapse. The shock, however, does not appear to have lasted long here, as few noticeable technological improvements have been made on some local blockchain platforms.

Klaytn, a blockchain platform developed by Korea's leading mobile giant Kakao, is losing the market's trust after it was exposed to some network errors.

The blockchain caught the attention of local partners, such as game firms, as it was developed by one of the most famous tech firms here. But with more partner firms leaving the Klaytn ecosystem, the price of the coin also nosedived. It was once traded at more than $4 in March last year, but its value plunged to around $0.3 as of Thursday.

Industry sources said blockchain players should do more research on failed cases, rather than aggressively promoting their next projects and future roadmaps.

"Tech powerhouses such as the United States are accustomed to analyzing why certain projects ended up in failure and remain cautious not to make a similar mistake again," a cryptocurrency industry source said.

When there is a problem, the U.S. focuses more on finding out the root cause behind it, but this is not the case in Korea, according to the official.

"We are not used to taking such an attitude in case of a crisis," the source said. "Most Korean companies take makeshift measures without endeavoring to find accurate solutions against the possible recurrence of such incidents."

Ethereum founder Vitalik Buterin delivers a keynote speech during the Korea Blockchain Week 2022 in Seoul, Monday. Yonhap

A few blockchain companies brought up the issue of the recent Terra debacle and raised awareness of security loopholes during the recent Korea Blockchain Week, the nation's largest annual blockchain event which ended its two-day run on Tuesday.

Many speakers from local blockchain firms went all-out to promote their own platforms' technological competitiveness to attract the attention of more than 8,000 participants, mostly delivering rosy future outlooks of the industry.

Another source from the blockchain industry also urged authorities to introduce tighter regulations on blockchain companies, so they can be more responsible for their actions.

"For instance, if authorities mandate cryptocurrency developers to issue an investor alert in detail, fewer people will fall victim to incidents like the Terra fiasco," an official at a crypto exchange said.

When the Terra-Luna ecosystem was spotlighted by investors last year, a number of people here and abroad went on a buying spree without knowing what exactly the coin is and how it can deliver high yields.

"Some alternative coin developers are still watching for a chance to delude such investors. Even if blockchain firms and cryptocurrency developers should operate their platforms with by focusing on ensuring security and stability, this is not the case for all of them. Investors should be reminded that some companies may be exposed to moral hazard risks at any time."

But now is an apparent transition period in the blockchain industry, as it is still in the legally grey area here. So no one can say for sure whether another big debacle will occur again in any other form in the near future, according to the official.

"This is why financial watchdogs should introduce laws on digital assets and blockchain as early as possible to force market players to thoroughly check any internal risk factors before launching their platforms on the market."

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