Finschia - LINE's Bold Web3 Move with 196M User Base

Key Takeaways

• Finschia is a blockchain network developed and operated by the Finschia Foundation and LINE NEXT, a blockchain subsidiary of LY Corporation that services the messaging app LINE with 196 million monthly active users worldwide.

• The Finschia network distinguishes itself from other networks in three ways: 1) a transparent and fair token economy through a zero reserve and service contribution reward policy, 2) connection with the popular Web2 service LINE, and 3) secure yet highly scalablility using Ostracon consensus, which utilizes Tendermint BFT and VRF.

• The most active service on the Finschia network is the global NFT platform DOSI. DOSI hosts various brand stores, providing real world utilities to users. It has announced plans to expand beyond NFTs into a global digital goods marketplace.

• LINE NEXT recently secured a significant investment of $140 million, led by Crescendo Equity Partners backed by Peter Thiel. This funding aims to aggressively expand the Finschia network and the DOSI ecosystem.

1. LINE's Bold Web3 Move: Finschia

1.1 Challenges in the Cosmos Ecosystem

The Cosmos ecosystem, aiming to fulfill the vision of 'The Internet of Blockchains,' is built around service-specific app chains and cross-chain protocols (like IBC, ICA, ICQ) for seamless inter-chain communication. Based on the powerful Cosmos SDK, which simplifies L1 blockchain development, Cosmos has grown to include 73 zones (Appchains).

Source: Map of Zones

However, issues like fragmented communities and frequent governance disputes have limited Cosmos' ecosystem scale compared to Bitcoin, Ethereum, and Solana. The combined TVL of Cosmos' top 5 chains is around $1B, similar to Solana and half that of Ethereum's single rollup, Arbitrum.

The good news is that major projects like Celestia and dYdX joining Cosmos signal a more substantial ecosystem. Nonetheless, Cosmos lacks the Web2 connections that ecosystems like Ethereum, Avalanche, and Solana have been leveraging to attract non-Web3 users.

Fortunately, Web2-focused game and IT companies are increasingly integrating blockchain into their services using the Cosmos SDK. Krafton, the developer of PUBG, plans to launch a network called Settlus, which will handle payments in Krafton's upcoming metaverse (Overdare) through USDC. Another notable Web2 IT company embracing blockchain via the Cosmos SDK is LINE, with its Finschia network.

1.2 LINE

1.2.1 LINE: One of the Most Widely Used Messaging Apps in Asia

LINE, based in Tokyo, Japan, services the widely used messaging app LINE in countries like Japan, Thailand, and Taiwan. Excluding WeChat, based in China, LINE is one of the most used messaging apps in Asia. Launched in 2011, as of September 2023, LINE boasts 196M MAU with a remarkable 81% DAU to MAU ratio, indicating its popularity in many Asian countries. In Japan, LINE is the messenger app for the majority, with a Japanese MAU of 96M - about 80% of Japan's 123M population.

1.2.2 Corporate Structure

LINE, a brand of LY Corporation, is part of a corporate structure where A Holdings, a joint venture formed by Naver and SoftBank Group, serves as the parent company of LY Corporation. With the support of major Korean and Japanese corporations, LINE has become one of the top IT companies in Asia, building a strong network effect in the region through its platform. Seeking new business opportunities, LINE turned its attention to blockchain field.

Idezawa Takeshi, then CEO of LINE, launched the LINK token, a user-friendly reward system, as a strategy to grow with its global user base. He emphasized developing user-engaging dApps for everyday use, marking a significant strategic move at a time when few blockchains had onboarded a large number of Web2 users. LY Corporation has numerous subsidiaries, including blockchain-related entities like LINE Xenesis, LINE NEXT Corp., and LINE NEXT Inc. The history of LINE's blockchain venture dates back five years to 2018.

1.3 Finschia's Journey

1.3.1 The Beginning of LINE Blockchain

In August 2018, LINE launched its first-generation blockchain, Alder Mainnet, based on Iconloop. During a time when ICO (Initial Coin Offering) was prevalent, LINE chose not to conduct an ICO but instead rewarded ecosystem participants with mainnet tokens. This approach aligns with Finschia's Service Contribution Rewards system, demonstrating LINE's commitment to ecosystem activation through participant rewards. LINE even built its own exchange, BITFRONT (formerly BITBOX), to distribute the then mainnet token, LINK.

The distribution of LINK tokens started with an initial follow event on BITBOX's official Twitter, followed by a more significant distribution in September 2018 through an event on BITBOX, rewarding traders with 0.1% of their trade volume in LINK. While the mining cost was nearly zero during BITBOX's no-fee event, it rose to around $3-$5 after the event ended. Approximately 4 million LINK tokens were mined during this period, a significant proportion compared to the current circulation of about 7.4 million.

1.3.2 Integrating Blockchain into Everyday Life

Shortly after the mining event, LINE introduced five new dApps that incorporated LINK into daily life. These included a Q&A-based knowledge sharing platform Wizball, a future prediction platform 4Cast, and a restaurant review service Conomi, among others. Users could earn LINK through activities within these apps. In Japan, due to regulations, users received point rewards instead of token rewards. Unlike other ecosystems, LINE directly launched these services, a strategy made possible by its status as a large corporation. Later, services operated by external companies were also onboarded. However, due to the cryptocurrency bear market, many of these services ceased operation.

1.3.3 The Revitalization of the Ecosystem

Despite initial challenges in activating its ecosystem, LINE has continued to bring positive developments. In September 2019, LINE obtained a trading license in Japan and established the BITMAX exchange. In January 2020, the LINK token was whitelisted by the government, enabling official listings. In February 2022, LINE Pay, a subsidiary of LINE, began supporting payments with LINK in the Japanese market, with about 5,000 merchants accepting FNSA (LINK's rebranded version) tokens.

There have also been continuous updates in the technical aspects of the mainnet and the ecosystem. In July 2019, the second-generation LINE blockchain, Bamboo Chain, was launched, followed by the NFT-focused Daphne Chain in June 2020. These chains operated in parallel until they were merged and upgraded into the Finschia Mainnet. The Daphne Chain, in particular, saw significant activity, thanks to the global NFT platform DOSI launched in September 2022. As of July 2023, just 10 months post-launch, DOSI has achieved over 5.4 million wallets and 4.7 million+ NFT holders, with over 470,000 cumulative transactions.

Source: LINE

1.4 The Birth of Finschia

1.4.1 Launch of the Finschia Network

Source: Finschia

On December 22, 2022, LINE Blockchain unveiled the Finschia Network, a new blockchain network. The Bamboo Chain ceased at block height 51,775,518, with Finschia's first block commencing at 51,775,519. The LINK token from Bamboo Chain automatically migrated to Finschia, rebranded as FNSA. On May 25, 2023, the Daphne Chain, handling NFTs within the LINE Blockchain ecosystem, was also integrated into the Finschia Mainnet, completing the onboarding of the entire LINE Blockchain ecosystem to Finschia.

1.4.2 Strengths of the Finschia Network

Source: Finschia

The Finschia Network's advantages over other networks are threefold:

1. Zero Reserve and Incentive Policy - Unlike other networks, Finschia does not allocate pre-issued tokens to a foundation reserve. The reserve grows automatically with token inflation, ensuring transparent and fair usage. Finschia also emphasizes a virtuous cycle with its Service Contribution Rewards policy, allowing network participants to be rewarded proportionally to their ecosystem contributions.

2. Integration with LINE - Finschia is linked with LINE, one of Asia's largest messaging apps, and aims to support LINE's Web3 business.

3. Technology for Large-Scale Applications - Finschia utilizes the Finschia SDK, a modified version of the Cosmos SDK, to provide blockchain technology suitable for mass adoption. It enhances security using Tendermint BFT with VRF in the Ostracon protocol, offers CosmWasm and various development languages for convenient developer use, and prepares for ecosystem expansion with IBC integration and EVM utilization.

In summary, Finschia leverages the proven network core of the Cosmos SDK to offer a technological foundation ideal for blockchain mass adoption. With its transparent and fair token economy and integration with LINE, a major IT service, Finschia is poised to introduce a new paradigm in the blockchain ecosystem.

1.4.3 Securing $140M of Investment and Finschia 2024

On December 13, 2023, LINE NEXT Inc., the developer of DOSI and Finschia services, successfully secured an investment of $140M from Crescendo Equity Partners Limited, backed by Peter Thiel, co-founder of PayPal, Palantir Technologies, and Founders Fund. This investment ranks as the second largest in the blockchain sector for the year 2023, following Worhole's $225M funding. LINE NEXT Inc. plans to use this capital to expand its global platform business and develop various services.

Firstly, Finschia announced five ecosystem expansion strategies. These include supporting LINE's Web3 business and launching an ecosystem fund focused on DeFi, Social Media, X2E, and Stablecoins. Additionally, Finschia has opened its previously closed ecosystem to public endpoints, allowing developers to deploy smart contracts through CosmWasm on the Finschia network. The network is also exploring various expansion options by adopting IBC and EVM.

Secondly, DOSI, the largest service on the Finschia network, disclosed eight future updates. The full version of DOSI, set to launch soon, will evolve from handling limited types of NFTs to a versatile digital marketplace trading various digital goods and ownership rights. DOSI plans to release a mobile app, integrate Apple Pay and Google Pay for easier user access, and launch DOSI SDK and DOSI Biz, new development tools and business solutions, to assist corporate onboarding. Additionally, the integration of GAME DOSI for expansion into the gaming sector and LINE NFT for official entry into the Japanese market are in the pipeline.

This article explores how LINE, with its 196M MAU, is expanding into the Web3 ecosystem through Finschia, focusing on 1) Finschia Mainnet's technology, 2) token economy, and 3) DOSI.

2. Finschia Mainnet

2.1 Finschia Mainnet Architecture

2.1.1 Consensus Algorithm Suitable for Mass Adoption

Finschia, embodying the slogan 'Blockchain for All,’ focuses on creating a blockchain accessible to everyone. According to FLP Impossibility, in asynchronous networks, it's impossible to achieve Safety and Liveness simultaneously. What does this mean? Firstly, blockchain is a decentralized network, so it's unreasonable to assume that all participants are always online and part of the consensus process. Hence, a blockchain system, where the receipt and response time of messages can't be predicted, operates as an asynchronous network. Secondly, Safety ensures that honest nodes agree on the same value, meaning in a blockchain, Safety is achieved when consensus on the same block at a given height is consistent, and forks with multiple agreed-upon blocks don't occur. Thirdly, Liveness guarantees that honest nodes will eventually reach a consensus.

Though Safety and Liveness are critical in blockchain, in asynchronous blockchain systems, both can't be satisfied simultaneously; a choice must be made. Which would better align with Finschia’s vision of ‘Blockchain for All’? Finschia opts for Safety, prioritizing user convenience in real-world blockchain applications. If Finschia had focused on decentralization like Bitcoin and Ethereum networks, it would have chosen a consensus mechanism prioritizing Liveness. These networks ensure consensus under any circumstances and allow anyone to participate as nodes, contributing to high decentralization. However, this can lead to forks where multiple blocks are agreed upon at the same block height, delaying final block confirmation.

2.1.2 Finschia Based on Cosmos SDK

In real-world blockchain applications, non-finalized blocks imply delays in settlement for transactions, causing inconvenience. Conversely, blockchains choosing Safety over Liveness finalize blocks immediately upon creation, ensuring instant settlements. A prime example is networks using Tendermint BFT or its fork, Comet BFT, from the Cosmos ecosystem. However, prioritizing Safety increases the volume of messages exchanged between nodes. Consequently, Finschia’s network is based on Tendermint BFT and follows the structure of the Cosmos SDK.

Finschia operates on its own mainnet, built using the Finschia SDK, a modified version of the Cosmos SDK. The architecture of Finschia comprises an application layer and Ostracon, which communicate via the ABCI interface. Developers can deploy Wasm-based smart contracts on the Application Layer, thanks to the integration of the CosmWasm module. Ostracon encompasses a consensus layer, where nodes participate in consensus, and a networking layer for message exchange. One of the key distinctions of Ostracon compared to the traditional Tendermint BFT is the incorporation of Verifiable Random Function (VRF). This addition in Finschia allows for random selection of block proposers, enhancing security against malicious attacks. (For a detailed explanation of VRF, refer below.)

2.1.3 Efficient Development Through Modules

Following a modular design similar to Cosmos SDK, Finschia enables efficient development by easily incorporating necessary modules. The modules included in Finschia are:

• Bank Module: Manages native token FNSA, enabling transactions and balance checks.

• Collection Module: Implements NFTs.

• Mint Module: Determines the inflation rate of FNSA tokens, automatically adjusting based on the target staking rate.

• Distribution Module: Allocates newly issued FNSA according to set proportions for network contribution rewards, service contribution rewards, and the treasury.

• Governance Module: Manages on-chain governance activities.

• Staking Module: Allows users to stake FNSA by delegating to validators.

• Wasm Module: Introduces a Wasm VM to the network, enabling the deployment of Wasm-based smart contracts.

• IBC Module: Facilitates cross-chain messaging with other networks using the IBC protocol.

• Foundation Module: Manages the foundation's on-chain treasury.

• Feegrant Module: Allows third parties to pay transaction fees on behalf of users, similar to gas fee sponsorship in Ethereum's account abstraction. This feature aims to facilitate easy service use for users without native tokens.

2.2 Ostracon Consensus Mechanism

2.2.1 Ostracon Overview

The Ostracon consensus mechanism, fundamental to Finschia's mainnet, essentially adheres to the Tendermint BFT process (Propose-Prevote-Precommit-Commit). However, it introduces an additional layer where the block proposer is selected using a Verifiable Random Function (VRF) and a subsequent verification process. In traditional Tendermint BFT, the next block proposer is determined in a round-robin fashion, which could be a potential vulnerability if the identity of the next proposer is predictable. Ostracon addresses this issue by randomly selecting the next block proposer and voters using a VRF function, a strategy previously employed by Finschia when it was based on Iconloop's first-generation LINE blockchain.

Ostracon's process is divided into three stages:

1. Election: Validators are randomly selected as a proposer and several voters through the VRF.

2. Block Generation: The chosen proposer gathers transactions from the mempool to create a new block and proposes it to the voters.

3. Block Validation: The voters verify the validity of the proposed block. According to the Tendermint BFT consensus algorithm, the block is added to the network once it is validated by more than 2/3+1 of the voters.

Currently, validators on the Finschia network operate in a permissioned environment, managed in consultation with the foundation. External validators like Certik and A41 have joined, and more external entities are expected to take up validator seats in the future. The hardware specifications required for a Finschia validator include a 32-core CPU, 128 GB RAM, 5 TB SSD, and 300 Mbps Bandwidth.

2.2.2 Overview of VRF

The VRF is an algorithm that generates a hash value t, which can be used as a cryptographic pseudo-random number. Unique to VRF is that only the private key holder can generate the hash value t, while anyone with the public key can verify its validity.

A VRF hash generator k can create a VRF proof π from a message m using the private key S_k:

π = vrf_prove(S_k, m)

The hash value t is derived from π:

t = vrf_proof_to_hash(π)

To prove that the hash value t is generated by the owner of S_k based on m, it can be verified using k's public key P_k:

vrf_verify(P_k, m, π) = VALID

In Ostracon, the proposer and voters for the next block are determined based on the values of the previous block. Let’s explore the steps involved: Election - Block Generation - Block Validation.

2.2.3 Election

During the Election phase, a single proposer and several voters are randomly selected through VRF for the upcoming block. The proposer and voters are chosen based on the computed value t_(h-1), derived from π_(h-1) of the previous (h-1) block. In the Finschia mainnet, a proof-of-stake network, the probability of being chosen as a proposer is weighted by the amount of staked FNSA tokens.

2.2.4 Block Generation

The proposer, randomly selected through VRF, gathers transactions from the mempool to create a block. After verifying the new block height h and the current round r’s VRF proof π_h, the proposer proposes the generated block to the voters.

2.2.5 Block Validation

Voters receive and validate the proposed block. Besides the standard block validation common in blockchains, voters also conduct VRF-related verifications. This is done using the generated block’s m_h, π_h, and the public key P_k. Like Tendermint BFT, the validation process involves Prevote-Precommit-Commit stages, requiring two rounds of 2/3 consensus.

3. The Virtuous Cycle of Token Economy

3.1 Background

With the reveal of its new identity, Finschia emphasized two key aspects: Zero Reserve and Service Contribution Rewards. In simple terms, Zero Reserve means that instead of starting with a predetermined foundation reserve, a portion of token inflation is allocated to the reserve. Service Contribution Rewards are incentives given to protocols and users contributing to network activity, which is part of the token inflation. Finschia aims to create a sustainable token model to foster a positive ecosystem cycle.

Finschia allocates 30% of the FNSA token inflation to Service Contribution Rewards and 20% to the reserve. The FNSA token inflation rate starts at 15%, targeting a long-term rate of 5% (variable based on staking rates). This approach makes Finschia one of the few Layer 1 networks designed to incentivize not just validators but also other network participants.

3.2 Zero Reserve

When the Finschia mainnet was first launched, it was after several Layer 1 networks had already attempted to stimulate their ecosystems through foundation tokens or ecosystem funds. It was common practice for L1 networks to allocate tokens to the foundation and team during token issuance. For instance, there were significant ecosystem funds such as Near's $800M fund, Fantom's $314M fund, Harmony's $300M fund, Avalanche's $180M fund, and Celo's $100M fund. However, most of these ecosystem efforts did not yield significant results.

Considering this, it seems that Finschia introduced Zero Reserve, considering these precedents. Zero Reserve, a policy of not allocating tokens to the team or foundation, was quite groundbreaking at that time, especially causing a stir in the Korean market. In Korea, prominent blockchain networks include Klaytn, operated by a subsidiary of one of Korea's leading IT companies, Kakao, and Wemix, operated by the famous game company Wemade. These networks used a significant portion of their foundation allotments (53% for Klaytn and 74% for Wemix) for ecosystem activation during bullish phases but faced issues like funds flowing into dubious projects or being misused by executives. To rectify this, Klaytn proposed to burn 5.28B KLAY tokens, 73% of the reserve supply, in February 2023, and Wemix's CEO continuously purchased WEMIX tokens as a gesture of apology and commitment to transparency.

Finschia's foundation reserve starts with Zero Reserve, where 20% of FNSA token inflation is automatically allocated to the Reserve. The Reserve's use is carried out according to the nature, purpose, and use described in the whitepaper, and disclosures are posted on the foundation's website whenever it is used. The practice of not pre-allocating tokens to the foundation reserve could be a good precedent for other projects in the blockchain industry. However, there are some concerns, such as the centralized operation of the foundation reserve, despite the existence of on-chain governance and the lack of clear specifics about the usage of funds, even though they are disclosed. However, most projects other than Finschia operate their foundation reserves in a centralized manner without detailed public disclosure, so this cannot be seen as a unique drawback of the Finschia network.

3.3 Service Contribution Rewards

3.3.1 Rationale for Service Contribution Rewards

For a network to operate effectively, the role of decentralized validators who manage the hardware is crucial, but so is the role of service providers who create actual demand for block space. Additionally, providing appropriate incentives to end users participating in the ecosystem is beneficial for creating a positive feedback loop. However, paradoxically, in most L1 blockchains, token inflation rewards have been distributed only to validators. Rewards for service providers are often given in qualitative ways, such as grants or ecosystem funds, rather than through protocol-based rewards. This is partly due to the difficulty in precisely assessing each service provider's contribution to the network. Moreover, rewards for users often stop at one-time airdrops, which, while effective for short-term hype, can be detrimental to long-term sustainability if there's no PMF.

Various L1 networks have announced policies to reward service developers. Evmos, an EVM appchain in the Cosmos ecosystem, introduced the x/revenue module, implementing a dApp store model that shares a portion of the revenue generated by dApps with developers. Archway, another appchain in the Cosmos ecosystem, is built around the concept of incentivizing developers to energize the ecosystem. On Archway, developers earn additional fees whenever their deployed smart contracts are used; 25% of native token inflation is allocated to developers, who receive 50% of the fees generated by smart contracts. Astar Network, a parachain in the Polkadot ecosystem that recently announced the adoption of zkEVM using Polygon CDK, has a feature called dApp staking. Users can stake native tokens in dApps, allowing developers to receive a portion of the staking earnings.

3.3.2 Service Contribution Rewards

The Finschia network operates a Service Contribution Reward program that offers appropriate incentives to dApp developers and even end users. Finschia has always valued incentives for ecosystem contributors, as evidenced by its previous whitepapers, including the LUCAS (LINK User Contribution Assessment System), a program for ecosystem contributors. Finschia's policy for service contribution rewards is based on the principle of 'Contribute first, get rewarded later,' ensuring that actual contributors receive rewards.

The criteria for the service contribution rewards are clearly set out in this document. To qualify as a service contributor under Finschia's terms, one must develop a web service or app based on Finschia, in legal compliance, and contribute directly or indirectly to network transactions. Direct contribution involves creating on-chain FNSA payment transactions, while indirect contribution involves creating on-chain NFT transactions. The extent of contribution is determined fairly and transparently based on on-chain data.

Finschia's service contribution rewards are primarily aimed at boosting demand for its native token FNSA, thereby strengthening the FNSA-centric token economy. This approach not only incentivizes validators within the Finschia ecosystem but also developers and end users, encouraging active participation and fostering a healthy economy.

3.3.2.1 Direct Contribution

Base rewards are provided to direct contributors, calculated as a percentage (currently 100%, denoted as P2%) of the service contribution reward pool, based on the proportion (V) of their service's payment transactions. Consider this example: In the Finschia ecosystem, there are three service contributors: A, B, and C. 1,000 new FNSA tokens were generated due to inflation, and the FNSA payment transactions generated by A, B, and C are 200, 300, and 500 FNSA, respectively. If 30% of the token inflation, i.e., 300 FNSA, is allocated to the service contribution reward pool and P2 is 100%, then the total of 300 FNSA is distributed among A, B, and C based on their contributions. Since the total FNSA payment transactions amount to 1,000, A contributes 20%, B 30%, and C 50%. Hence, the final base rewards are 60 FNSA for A, 90 FNSA for B, and 150 FNSA for C.

Direct contribution rewards incentivize active FNSA payments within the ecosystem, creating a virtuous cycle for growth and a sustainable economy.

3.3.2.2 Indirect Contribution

Bonus rewards are given to indirect contributors, calculated as (1-P2)% of the service contribution reward pool. Currently, this figure is 0%, meaning no rewards have yet been given for NFT transactions. However, as the P2 value can change via on-chain governance, indirect contributors might receive rewards in the future. Like base rewards, bonus rewards are distributed based on the proportion of total indirect contributions. If T represents the number of traded NFTs and U the number of users trading NFTs at least once, the contribution is assessed based on T*U, using log10 for evaluation.

For instance, in the Finschia ecosystem, let's assume three indirect contributors, A, B, and C, with T values of 100, 50, and 30 and U values of 50, 70, and 60, respectively. A's indirect contribution is calculated as 0.35 using log10. Similarly, B and C have indirect contributions of 0.34 and 0.31, respectively. The use of log10 in assessing bonus rewards leads to a more balanced evaluation compared to base rewards.

Indirect contributions, though not directly using FNSA as a payment method, generate transaction fees for the network through other token payments. This also contributes to a healthy ecosystem, warranting service contribution rewards. Ultimately, this approach enables the Finschia ecosystem to embrace not just FNSA but other payment methods as well, achieving its vision of 'Blockchain for All.’

3.3.5 Future Direction

The distribution process involves the Finschia Foundation extracting on-chain data every month to quantify the contribution of each service contributor and calculate their rewards. Once calculated, the Finschia Foundation submits an on-chain proposal for distributing the rewards. After the proposal is approved through on-chain governance, the reward distribution is completed. According to the service contribution reward policy document, a minimum of P1% (currently 60%) of the rewards allocated for each service must be distributed to the users.

Upon reviewing Finschia's on-chain governance page, one can see that since June 2023, service contribution rewards have been distributed through proposals. However, a point of concern is that currently, DOSI, a global NFT platform, is the only service contributor in the Finschia mainnet, receiving all of the service contribution rewards. Although DOSI is the most active service in the Finschia ecosystem and rightly deserves appropriate incentives, it would benefit the ecosystem to onboard more service contributors. Since anyone can apply to be a service contributor through the foundation's email, it is hoped that more contributors will join the Finschia ecosystem in the future.

4. DOSI: Towards a Global Digital Marketplace

4.1 Overview

Source: DOSI

DOSI, a global NFT platform based on the Finschia mainnet, is operated by LINE NEXT Inc., located in the USA. Slated for launch in January 2024, the official version aims to evolve into a digital marketplace trading various digital goods beyond simple NFTs. The name DOSI is derived from the Korean word for 'city,’ and its focus is on usability and convenience, aiming to make NFT transactions and utilization easy for the general public. The service is available in English, Korean, Japanese, Chinese, and Thai and is actively engaged in NFT business in Asian countries, including Japan, Korea, Thailand, Vietnam, and Singapore. Notably, DOSI has received strategic investments from renowned IT companies like SoftBank, Naver, LINE, and prominent Korean entertainment agencies like CJ ENM and YG Plus, contributing to the development of a global NFT ecosystem.

Source: DOSI

In addition, LINE operates a separate open NFT marketplace targeted at the Japanese market, LINE NFT. LINE NFT boasts over 100K users in Japan alone. Interestingly, despite having fewer users than DOSI, which has recorded 530K transactions to date, LINE NFT has generated over 350K+ transactions. LINE NFT, being an open marketplace, has managed to create a significant number of transactions. From January 2024, LINE NFT will be integrated into DOSI, with the goal of transforming DOSI into a global digital market platform, including Japan.

4.2 Strategies for Popularizing NFTs

To achieve the mass adoption of NFTs, DOSI focuses on three key strategies:

Source: DOSI

The first strategy involves brand stores within the DOSI platform. These stores feature various external brands in partnership with DOSI. This includes AVA, which sells NFTs of famous K-pop idols like NMIXX and Treasure, GAME DOSI offering game-related NFTs on the DOSI platform, and K-Auction, a major Korean art auction and sales company. The continuous addition of diverse brands will create more opportunities for users to access NFTs. In the future, an open market for trading these brand store NFTs is also planned. Additionally, DOSI aims to provide DOSI SDK and DOSI Biz services to enterprises, facilitating their entry into the DOSI platform for distributing digital goods and integrating services.

The second strategy is easy payment. DOSI platform offers the DOSI Wallet, enabling easy social logins on the web. Users can create a DOSI Wallet using LINE, Facebook, Google, or Naver accounts and store NFTs in it. When purchasing NFTs in the marketplace, various payment channels are available through the DOSI Wallet. Beyond using FNSA from DOSI Vault or ETH from MetaMask, users can utilize widely used Asian payment services, like credit cards, Naver Pay, and LINE Pay. Furthermore, in November 2023, Stripe payment was introduced in some countries, allowing purchases with preferred methods like Apple Pay and Google Pay.

The third strategy is the DOSI Citizenship program. DOSI has developed a membership system where users can interact through Citizen NFTs. More details will be available below. (Note that a major update to the DOSI Citizen membership is planned for January 2024.)

4.3 DOSI Citizen

4.3.1 Overview of DOSI Citizen

Source: DOSI

On the DOSI platform, any user who has set up a DOSI Wallet can obtain a Citizen NFT. This NFT enables participation in various activities and events. There are four levels of Citizenship, each offering different rewards and accessible content. The content available through Citizen NFT on the DOSI platform includes DOSI Adventure, DOSI Arcade, and DOSI Land.

4.3.2 How to Acquire and Level Up Citizen

Upon completing basic registration, users receive a Level 1 Citizen NFT, the Traveler NFT. To acquire more Citizen NFTs, users can purchase them on the marketplace or earn them by participating in DOSI Adventure content. To level up a Citizen NFT, one needs multiple NFTs of the same level, Level Up Passes (LUP), and a minimum purchase amount. For example, to obtain a Level 3 Citizen NFT, the Resident NFT, one must have 10 Level 2 Citizen NFTs, 5 LUPs, and achieve a purchase amount of over $1,000. LUPs can be obtained with every $50 spent in DOSI and can also be exchanged for 10,000 DON.

The higher the number and level of Citizens, the more DON one can earn during check-ins on the DOSI platform. DON is DOSI's membership point and can be used in various contents like DOSI Adventure and DOSI Land. Additionally, higher levels unlock different content. For instance, only those with a Level 2 Citizen NFT can participate in DOSI Land, and the reward pool varies by level. Sometimes, users with high-level NFTs can also receive whitelists for projects partnered with DOSI.

4.3.3 Citizen Friends

Source: DOSI

Citizen Friends are a separate category of NFTs from DOSI Citizen, featuring cute animal designs. These NFTs provide utility by increasing the amount of DON earned during daily check-ins. Moreover, by combining three Citizen Friends, one can evolve them into a higher-level Citizen Friend, leading to greater DON earnings during daily check-ins.

4.3.4 DOSI Adventure

DOSI Adventure is a weekly raffle event on the DOSI platform. Users can participate by using Level Up Passes (LUP) and have the chance to win various prizes, including DOSI Citizen NFTs and external brand NFTs. Prizes have included blue-chip NFTs from the Ethereum ecosystem, like Meebits, Beanz, BAYC, and Clone X, in addition to NFTs from brands featured on DOSI. Even if users don't win, multiple entries ensure they receive a Level 1 Citizen NFT.

4.3.5 DOSI Land

DOSI Land is accessible to users with Level 2-4 Citizen NFTs. Participants can win FNSA tokens through a lottery system. The reward pool varies with the NFT level, offering greater rewards for higher-level Citizens. Participation in the lottery requires an expenditure of LUPs.

4.3.6 DOSI Arcade

Source: DOSI

DOSI Arcade offers a collection of 10 fun and casual games on the DOSI platform. Players earn points while gaming, translating into weekly prize draws for DON rewards. Additionally, players can use DON for a one-time revival in a game if they lose.

4.3.7 The Future Direction for DOSI Citizen

As a membership program, DOSI Citizen introduces an appealing self-contained economy with charming Citizen and Pet NFTs, as well as LUP and DON currencies. Users enjoy various activities and rewards, including FNSA tokens, NFTs, and DON. However, being a relatively new service, DOSI still has limited utility for NFTs and DON.

While the Citizen NFT membership offers valid utility, like acquiring external brand NFTs or earning FNSA tokens in DOSI Land, the use of DON is quite limited. Currently, DON is primarily exchanged for LUPs for participation in DOSI Adventure and DOSI Land, effectively an extension of the Citizen NFT utility. Considering one of the primary utilities of Citizen and Citizen Friend NFTs is earning DON through check-ins, expanding the utility of DON is crucial for DOSI's sustainable economy.

Aware of this, DOSI plans to introduce several updates in its official launch in January 2024. These include adjustments to DOSI Citizen inflation, improving the difficulty of earning DON, and introducing new buy-back options.

4.4 Brand Stores

The DOSI platform hosts a total of 23 brand stores, including two upcoming stores that are not limited to just DOSI citizens. These brand stores provide an easy NFT experience for users outside the DOSI ecosystem and enable DOSI users to access NFTs with diverse utilities, thereby expanding the overall DOSI ecosystem. Let's take a closer look at these various brand stores.

• WAKE UP BORED (WUB) is a coffee brand commercializing BAYC #1208. It operates a coffee business in Korea through Naver's Smart Store. In DOSI, two types of WUB memberships will be sold based on tier, offering various benefits related to WUB coffee.

• SNKOZ is an M2E (Move-to-Earn) project where users earn rewards by exercising while owning SNKOZ NFTs. DOSI has sold Land NFTs, and the Landowners can receive additional benefits in the SNKOZ app.

• HELLBOUND is an original NFT series of the famous Netflix series 'Hellbound,’ which ranked first in 24 countries and in the top 10 in 120 countries.

• K Auction is South Korea's largest art sales and auction company. Users can purchase NFTs of various artists’ artworks at the K-Auction brand store and also receive the physical products.

• BUGPOLY is a casual game operated by BUGCITY, a famous Korean community NFT project. In DOSI, users can trade weapon items that are usable in the BUGPOLY game.

• Whanki X LG OLED features NFTs of Whanki's artworks. Whanki is a pioneer of Korean abstract art and represents 20th-century Korean art. DOSI has sold VIP invitations to the Frieze Seoul 2023 event featuring Whanki's works.

• GAME DOSI is a gaming platform within DOSI, hosting games like Sweet Monster Guardians, Frame Arms Girl, and Project GD. It supports a marketplace for trading-related items and will integrate into a game category when DOSI officially launches in January 2024.

• AVA is a platform for artists and fans to interact, offering various benefits through a Crystal currency. Famous K-pop groups like NMIXX, Treasure, and ATEEZ are on board.

• Pararium introduces a Metaverse X2E platform, combining the M2E project with Metaverse experiences.

• A.PLA offers a social media service where users can express and communicate through avatars tracked by a camera. It was the first to conduct crowdfunding on the DOSI platform.

• Alien V is an NFT series presented by Kim Cheong-gi, the director of Korea's famous animation Robot Taekwon V.

• Heart Signal is a famous South Korean dating reality show. NFT holders can become producers of Heart Signal and participate in content production through voting.

• Konect is an M2E project that connects creators through points. DOSI has sold limited-edition sneaker NFTs.

• Beergang is an NFT avatar collection themed on beer, created by GoodGang Labs, which includes alumni from LINE, Facebook, and Y-Combinator. They are developing avatar communication platforms and AI-based avatar expression technologies.

• LinedUp Gourmet is an NFT from a famous Korean TV show on tvN, offering CJ ENM's various F&B benefits to NFT holders.

• APOKI is a virtual K-pop artist NFT, offering limited edition goods and Metaverse experiences to NFT holders.

• DIA TV is a South Korean MCN company. Fans can support and interact with creators affiliated with DIA TV through NFTs.

• NAVER Sports commemorated the KBO Korean Series by selling NFTs of the LG Twins team through DOSI.

• HID.DEN School is a membership NFT of the content studio ‘Playlist.’

• Bluefruit is a story-based NFT by artist ‘Myeong Min-ho,’ uniquely handcrafted by the artist rather than being generative.

• ACRZ offers a 3D avatar service that can be used as a profile in the LINE messaging app. On the DOSI platform, users can exchange various clothing NFTs that match their avatars.

4.5 Challenges for DOSI to Address

As we have seen, DOSI, backed by LINE, one of the most successful IT companies in Asia, is actively managing its NFT business to prepare for the Web3 future. Unlike NFT exchanges like Opensea and Blur, DOSI's unique feature is its ability to control quality through a curated platform called the Brand Store, handling only high-quality NFT projects. It aligns with the slogan 'NFTs for All,’ offering many NFTs with real-world utility. However, to truly emerge as a global Web3 NFT platform, DOSI needs to consider the following:

• Open Market - DOSI's strategy of curating brands for its marketplace is beneficial for quality control but can hinder ecosystem expansion. By maintaining the Brand Store concept and simultaneously opening an open NFT Marketplace, DOSI could achieve both quality control and ecosystem expansion, similar to the Rarible.

• UX Enhancement - Compared to Opensea and Blur, DOSI's UI/UX is clean and user-friendly. However, it falls short in marketplace functionality. Adding features like analytics, auctions, and order books, which other NFT platforms offer, would be beneficial as DOSI aims to be a global NFT platform.

• Sustainability of DOSI Citizen - The utility of DOSI Citizen NFTs and related assets (DON, LUP) is relatively limited. Actively incorporating more brands outside the DOSI ecosystem could help build a more sustainable economy.

5. Looking Forward

5.1 Areas for Improvement

Throughout this article, we've touched upon sector-specific shortcomings, but let's now focus on the overall limitations of the Finschia Network. Historically, the Line Blockchain (now Finschia) has operated in a closed network. Services on the network have primarily been developed under the leadership of Line and its affiliates, and a significant portion of staking is delegated to validators within the Line group (LINE NEXT, SoftBank, DOSI, LINE Xenesis). To expand the ecosystem further, more openness is necessary. Fortunately, Finschia announced plans in 2024 to focus on ecosystem expansion and has recently opened its application node endpoints, allowing anyone to deploy contracts based on CosmWasm. Plans to onboard a more diverse range of validators also suggest a more open ecosystem by 2024.

5.2 Implications for the Blockchain Ecosystem

Finschia is set to offer two significant insights into the blockchain ecosystem. The first is the onboarding of Web2 users. Many blockchain networks, regardless of L1 or L2, focus on bringing in Web2 companies and institutions. Notable mainnets in this field include Polygon and Avalanche, and others are actively seeking partnerships. The goal is to attract the vast user base of Web2 to achieve mass adoption of blockchain and sustainable ecosystem operation. In this respect, Finschia is distinct from other networks as it is operated and developed by LINE NEXT, a subsidiary of LY Corporation, whose service LINE already has an impressive ~200M MAU.

The second insight involves a token economy focused on transparency and fairness. Unlike other mainnets, Finschia has introduced a new paradigm with its zero-reserve policy, reinforcing the network economy's transparency and fairness. Recently, LINE NEXT Inc. secured $140M in investments to aggressively expand Finschia's ecosystem, with a transparent and fair token economy potentially acting as a catalyst. Ideally, the zero-reserve and service contribution reward policies will be well-utilized, setting an exemplary standard for future network developments.

5.3 It’s Showtime

After the bull markets of 2017 and 2021, the Web3 industry is at a point where it needs to prove the true potential of blockchain technology for mainstream adoption. With substantial investments, a well-structured token economy, and backing from IT companies with massive user bases, Finschia is ideally positioned. Let's watch together to see if Finschia can successfully onboard the vast Web2 user base into the blockchain ecosystem.

Thanks to Kate for designing the graphics for this article.