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LINK token review

LINK by Line Token Review: The Future of Token-based Social Media

Japanese messaging service LINE Corporation spent 2018 laying the foundations for its blockchain-based future. LINK is the utility token that runs the company’s crypto exchange BITBOX. It will soon be the cryptocurrency for LINE’s mobile social media platform.

Even if you don’t have an interest in Asian messaging apps, LINE and its LINK token hint at what our blockchain-based social media future might look like. This LINK token review will let you know what to expect as other walled-garden social media companies migrate to the blockchain.

Note: LINE Corporation decided to call its token LINK and its blockchain CHAIN Link. These are not the same as the ChainLink project and its Link token.

CoinIQ provides this article as an informational resource for its users. We do not recommend this or any other cryptocurrency. Choosing which cryptocurrencies and tokens to include in an investment portfolio is an individual decision. Only you can decide whether a particular token meets your performance goals and risks tolerance. Consult with a professional investment advisor before making any investment decision.

Background

LINE mobile messaging
Source: LINE

LINE Corporation got its start in the wake of the Fukushima earthquake in 2011. Service disruptions prevented many people across Japan from making calls or sending emails from their mobile phones. Employees at the Japanese subsidiary of South Korean telecoms company NHN quickly developed a workaround.

Three months after the quake, NHN released the LINE messaging and voice app. The service became so popular in Japan and other Asian countries that NHN spun off LINE Corporation in 2013.

Already listed on the Tokyo Stock Exchange, LINE raised another $1 billion by also listing on the New York Stock exchange in 2016.

LINE’s walled garden

LINE is a walled-garden social media service that people access through the LINE mobile app. Since its founding, several hundred million people across Asia have become LINE users. While Japan still accounts for half of the company’s user base, Thailand, Taiwan and Indonesia are now major LINE markets.

Much like its Chinese rival WeChat, LINE evolved far beyond its messaging roots. LINE users can share media and make free voice and video calls with each other. An ad-supported option lets users place free international calls outside the LINE network. Mobile games and apps maximize the time users spend within the LINE ecosystem.

A sticker marketplace lets people design, sell and buy stickers to personalize their in-app presence. Those stickers have been turned into merchandise that fans can buy online or in real life. LINE pop-up stores have appeared across Asia and even as far as Hollywood. Due to the pop-up stores’ success, the company opened permanent LINE Friends stores in Korea and Taiwan.

LINE storefront
Source: LINE Corporation

Advertising subsidizes all of these services to the tune of nearly ¥53 billion (USD $473 million) in LINE’s most recent fiscal quarter. A rewards program called LINE Points helps make mobile advertising more effective. Users receive points for watching videos, downloading recommended apps and other sponsored activities.

LINE users buy stickers and merchandise with their points through the mobile app. They can also convert the LINE Points to cash by using the app’s mobile payment system. Several retailers across Asia have even started deploying LINE Pay point-of-sale terminals in their stores.

Besides its mobile payment service, LINE offers insurance, investment management and other financial services.

Laying the blockchain foundations

LINE Corporation kicked off a series of blockchain-related announcements in early 2018. The first announcement came in April when the company opened a blockchain research and development subsidiary in South Korea. Two months later, the company entered a joint venture with blockchain project ICON. Next, LINE Corporation revealed it would launch its own cryptocurrency exchange. BITBOX opened its doors to crypto traders the following month, with the exception of people living in Japan and the United States. BITBOX lets crypto investors trade more than 30 cryptocurrencies and tokens. In early August, LINE announced the LINK token.

Leaders

Visionary leaders drive many blockchain projects in the same way that technology inventors drive startup companies. The LINK project is different, in part, because LINE Corporation is an established, multi-million dollar company. Rather than an act of market disruption, LINK is a strategic corporate initiative. As a result, the corporate entities are the main players, not the executives.

  • LINE Corporation: Developer of the LINE instant messaging platform and ecosystem.
  • LINE Tech Plus: Singapore-based subsidiary of LINE Corporation.
  • BITBOX: Singapore-based cryptocurrency exchange owned by LINE Tech Plus.
  • LINE Plus: South Korean subsidiary of LINE Corporation, co-owner of unchain and parent company of unblock.
  • unblock: Blockchain research and development subsidiary of LINE Plus.
  • unchain: South Korea-based joint venture between LINE Plus and ICON.

What Does LINK’s Blockchain Do?

The LINK token ecosystem
Source: LINK Network

The developers supporting open-access platforms like Ethereum or EOS have no control over the distributed applications (dApps) built on these decentralized networks. That is not the approach LINE is taking with its blockchain strategy. Everything in the LINE ecosystem serves the LINE ecosystem.

“Over the last seven years,” LINE CEO Takeshi Idezawa explained in the announcement, “LINE was able to grow into a global service because of our users, and now with LINK, we wanted to build a user-friendly reward system that gives back to our users.”

“With LINK, we would like to continue developing as a user participation-based platform, one that rewards and shares added value through the introduction of easy-to-use dApps for people’s daily lives.”

LINK is the utility token that connects these dApps and users within LINE’s walled-garden. In effect, it replaces LINE Points and takes the program to the next level.

Line Tech Plus distributes coins to each dApp project. The dApps then reward LINE users for contributing to the dApp by, say, posting a restaurant review or liking a photo. LINE users pay for any in-dApp purchases with LINK tokens.

Which dApps run on LINK’s blockchain?

LINK-based prediction market
Source: 4Cast

LINK is also the BITBOX exchange’s utility token. Traders get discounts when they pay their trading fees with LINK. In a recent promotion, BITBOX airdropped TRON tokens to its customers based on their LINK holdings. Investors can also trade LINK for other tokens listed on BITBOX.

In late September, LINE announced the first five offerings on its dApp roadmap. LINE will release the dApps as Japan-only beta projects before launching the dApps globally. The first two dApps are only available in Japan. The other three will enter beta testing by the end of 2018.

  • Wizball: A Quora-like question and answer service. Users receive LINK tokens for helping to improve the quality of content.
  • 4Cast: A prediction market that asks members to forecast the outcome of events.
  • Pasha: A product review service. Users share photos and opinions of the products they own.
  • TAPAS: A dining review service. Users must scan their receipts to prove they actually visited the restaurant.
  • STEP: A travel and hobby social media platform. Views of vacation photo books will generate LINK tokens for users.

In order to expand the range of dApps, LINE will release a dApp developer’s kit in 2019. Third-party services will be able to connect into the LINE ecosystem and use LINK to develop their business.

How Does the LINK Blockchain Work?

ICON blockchain platform
Source: ICON Foundation

LINE’s new blockchain platform, CHAIN Link, is an independent mainnet built using the ICON project’s blockchain technology.

Based out of South Korea, ICON’s developers wanted to create a blockchain ecosystem that meets the needs of enterprise customers. The slow, energy-intensive proof-of-work system used by Bitcoin and Ethereum make them poor choices for apps at the enterprise level.

Consensus on trusted networks

ICON uses a consensus algorithm called loopchain. It is not based on proof-of-work like Bitcoin and Ethereum or on proof-of-stake like EOS. Those systems must be trustless because of the decentralized way they process transactions. ICON’s customers, on the other hand, are enterprises that run their own trusted servers. That lets ICON use a more efficient way to reach consensus.

Related: Proof of Work Vs. Proof of Stake – What’s the Difference?

Loopchain uses loop fault tolerance, a form of byzantine fault tolerance, to decide which blocks to record onto the blockchain. Computer scientists developed byzantine fault tolerance to address scenarios where a failed component behaves differently to different observers.

ICON created its own version of byzantine fault tolerance to run a “permissioned” blockchain. Since the blockchain network’s nodes run on trusted servers, ICON could optimize their technology in ways not possible for a decentralized blockchain.

Several enterprise-class blockchain projects, primarily in South Korea, use ICON’s technology. Korea’s financial industry, for example, is developing an ICON-based clearing and settlement system. The Korea Customs Service is developing an ICON-based system to speed packages through customs and reduce smuggling.

LINE’s Korean connection must have made working with ICON a natural choice.

ICON co-founder Hong-kyu Lee is the CEO of the LINK-ICON joint venture unchain. In explaining the tie-up between the two companies, Lee said “We expect to promote an array of blockchain-based dApp services for daily use. The rise of these services is expected to catalyze the growth of LINE and the ICON blockchain ecosystem.”

How Are LINK Tokens Distributed?

LINK's distribution model
Source: LINK Network

Since LINK Chain is a permissioned blockchain wholly owned by LINE, there was no initial coin offering. LINE will distribute one billion LINK tokens over time through its Singapore subsidiary, LINE Tech Plus.

Each dApp in the LINE ecosystem will receive token distributions to fund their rewards to LINE users. The rewards that dApps give to their users can be fractions of a LINK. Just as bitcoin has its satoshis, LINK’s smallest denomination is the cony. One cony is a millionth of a LINK.

The first distribution of LINK tokens went to customers on the BITBOX exchange. Throughout the month of September, the exchange awarded customers 0.1% of their trading volume in LINK tokens. As Wizball and the other new dApps emerge from beta, they will play a bigger role in distributing LINK tokens.

The distribution will stop once 800 million tokens have entered the LINK ecosystem. LINE Tech Plus will hold the remaining 200 million LINK as a reserve fund.

Does LINK Have a White Paper and Blockchain Explorer?

The LINK blockchain explorer
Source: SCAN Link

Since the LINK ecosystem is not a public blockchain, LINE did not issue a highly technical document. Instead, the LINK white paper is more of an explanation of LINE’s business model. It describes each participant’s roles and how the LINK token facilitates their interactions.

LINK SCAN blockchain explorer

LINK SCAN provides summary statistics of transaction volumes and total token distribution. It also lets you inspect blocks, transactions and token transfers.

Where Does LINK Stand Now?

More than 100 million LINK have already been distributed through the BITBOX exchange. Traders receive tokens through promotional offers. When the first dApps emerge from beta testing, more tokens will start flowing into the ecosystem. By 2019, more than half of LINE’s customers will be using LINK.

The only LINE customers who cannot take advantage of the LINK-based ecosystem live in Japan and the United States. LINE is very clear in its statements that LINK is not a security. For example, owners of LINK tokens have absolutely no voice in the governance of LINE Corporation, the LINE messaging service or the LINK-based ecosystem. Nevertheless, LINE has taken a conservative approach with respect to regulators’ concerns that tokens may be securities.

Japanese customers continue to use the LINE Points program. Once Japan’s Financial Services Agency approves the LINK token, these customers will receive LINK in exchange for their Points. LINE has disclosed plans to enter the US market.

Final Thoughts

In many respects, LINE’s launch of CHAIN Link and the LINK token are evolutionary steps. They simply migrate the existing LINE Points program from a traditional database to a blockchain. However, the social media company’s strategy will kick into gear in 2019 as more dApps reach its global customer base. The LINK ecosystem should increase the time customers spend within the LINE walled garden. That can only mean higher advertising revenues.

As a preview of blockchain-based social media, LINE’s moves hint at Facebook’s future: a blockchain-based system that gets more people spending more time on Facebook. Whether that makes you excited for this social blockchain future or sends shudders of fear coursing through you, LINE is worth keeping an eye on.

Christopher Casper

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