Category: Knowledge

Onboarding SMEs and Startups in Thailand on Sustainability Journey and Roles of Financial Institutions to Accelerate Their Sustainability Transformation

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When envisioning a sustainable business, we can imagine those adopting practices such as embracing clean energy, incorporating social impact in a business’s decision-making, or having a diverse board of directors. Conceptually, sustainability encompasses environmental, social, and governance domains, but in this article, we will emphasize the environmental aspect due to the urgency and severity of environmental issues.

For a comprehensive shift towards sustainability across the entire economy, it is crucial to onboard Small and Medium Enterprises (SMEs) and startups, which make up the majority of businesses in most countries. Therefore, supporting these smaller enterprises on their sustainability journey is essential.

Having SMEs and startups join the journey could present significant challenges for these businesses. Integrating sustainability practices may impact profit margins due to additional costs. Tasks like redesigning manufacturing systems for eco-friendliness and engaging external advisors for certification divert resources and attention from core functions. Given these formidable challenges, it is unsurprising that many of them have not prioritized sustainability or, in some cases, have outright rejected participation in the journey toward sustainability.

On the flip side, it is widely believed that sustainability transformation could equip SMEs and startups with the ability for greater value creation. From a financial perspective, they can anticipate top-line growth due to increased opportunities from entering new markets, forming partnerships, setting green price premiums, and so on. In the United States, SMEs and startups that hold strong sustainability propositions will have a higher chance to participate in public-private infrastructure projects than those with a smaller footprint in sustainability adoption. For the case of Long Beach, California, for-profit companies operating with low environmental impacts were selected to participate in the local public-private infrastructure construction projects such as developing the freeways and community areas.  Moreover, SMEs and startups can also envision a decrease in operational expenses attributable to mainly reduced waste in manufacturing processes, enhanced energy efficiency, and improved productivity. From a non-financial standpoint, businesses can enhance employee engagement by aligning values and interests on sustainability goals, thereby fostering a more engaged workforce, and has better recognition by the communities around it.

However, there is a possibility that SMEs and startups will be compelled to comply with ESG regulations in the future. Take the new regulation initiated by the EU as an example; the EU has introduced a carbon tariff policy called CBAM (Carbon Border Adjustment Mechanism) to promote decarbonization by imposing taxes on those who export certain products that generate significant amounts of carbon to European countries. SMEs and startups operating in these areas will end up bearing higher costs, ultimately resulting in a loss of competitiveness. Therefore, business owners and management teams should keep this possibility on their radar and proactively consider sustainability transformation to avoid being forced into compliance.

To facilitate SMEs and startups in their journey toward sustainability, a ‘Sustainability Pathway for SMEs and Startups Framework’ will be employed. This framework includes four key steps: 1) establishing awareness, 2) understanding solutions, 3) implementing solutions, and 4) monitoring, to ensure the adoption and progress of the transition for SMEs and startups.

Sustainability Pathway for SMEs and Startups Framework

  • Establishing Awareness and Identifying Gaps:

The primary and crucial step for SMEs and startups is to cultivate awareness regarding the necessity and value of sustainability transformation for their business such as understanding what their path to sustainability entails, ability to identify weak points in their businesses, and current limitations in filling the gap. Without a proper education or a comprehensive understanding of the potential benefits, they might experience a lack of motivation and could potentially abandon the transformation process prematurely.

  • Understanding Available Solutions:

Once SMEs and startups understand the potential benefits associated with embracing sustainability, the subsequent step involves strategizing the path forward. During this stage, SMEs and startups need to gather data about sustainability solutions such as available technologies in the market, methods for integrating sustainability solutions into their core business, anticipated impacts on their business resulting from the adoption of these solutions, and external source of funds.

  • Implementing Solutions:

At the implementation stage, there are three main tasks that SMEs and startups need to get involved in consisting of goal setting and planning, onboarding stakeholders, and executing the plan.

      • Goal Setting and Planning:

SMEs and startups must establish clear sustainability goals based on their potential capacities. For instance, those in manufacturing might target short-term carbon reduction and long-term neutrality. To determine the level of sustainability they aspire to achieve, SMEs and startups might need to strike a balance between the costs and benefits they would incur. Given their resource constraints, SMEs and startups should break down the entire processes of their business to identify the critical areas e.g., waste management process that they can integrate sustainable practice while creating the highest possible impacts.

      • Onboarding Stakeholders:

Once a clear goal and plan are established, the subsequent step involves securing the buy-in from relevant stakeholders. For example, SMEs and startups may need to persuade their shareholders to adopt sustainability standards, which could entail accepting additional costs during the transformation. Furthermore, SMEs and startups will need to engage in communication with their suppliers and customers to establish a sustainable supply chain that is transparent and has ethical sourcing practices. Lastly, it is crucial to communicate the goals and plans across the organization, ensuring alignment among employees in pursuit of the same direction.

      • Executing the Plans:

During the execution process, SMEs and startups will touch on several activities such as acquiring technology and integrating it with their core business, recruiting talents with domain expertise in sustainability, arranging training sessions for employees, and securing sources of funds. Among others, sourcing funds is pivotal and challenging for SMEs and startups. Given their resource limitations, securing the funding to support the transformation should be a primary focus for business owners.

  • Monitoring:

The final step of sustainability transformation involves monitoring. SMEs and startups should start thinking about collecting data in order to generate reports for both internal use and regulatory compliance. Although SMEs and startups in most countries have not been directly required to submit a report to prove their Environmental, Social and Governance (ESG) footprint, some countries have started to demand evidence of carbon emissions and reduction efforts. Take CBAM as an example, SMEs and startups that currently export certain products to the EU will end up paying higher taxes if they cannot comply with the standards or have no solid evidence of their carbon footprint.      

Current Stage and Key Challenges of Sustainability Transformation of SMEs and Startups in Thailand

When we apply the sustainability pathway framework to SMEs and startups in Thailand, we have observed that the majority of SMEs and startups in Thailand are concentrated in the first two stages. We have discovered that the primary challenges hindering the progress of Thai SMEs and startups towards sustainability transformation are 1) Insufficient awareness about the significance of embracing sustainability and a lack of know-how and 2) Limited access to sustainable finance products.

  • Insufficient awareness about the significance of embracing sustainability and a lack of know-how

During our research, we found that not so many SMEs and startups in Thailand are fully aware of how sustainability can help create value. Some of them also perceive that sustainability is relevant only to large corporations and the adoption of sustainability practices is more in terms of costs rather than benefits. Even though some of them are starting to realize the significance of embracing sustainability, they lack the know-how and are still struggling with where to start and what solutions they should adopt. Furthermore, the majority of transformation activities have been primarily driven by financial institutions (FIs), instead of business owners. Based on our preliminary interview, most deals are initiated by the product development teams of financial institutions to pitch the benefits of being sustainable and offer financial solutions to corporate clients directly.

  • Limited access to sustainable finance products

We found that the lack of widely accessible sustainable finance products prevents various SMEs and startups in Thailand from participating in sustainability transformation. Currently, the two main products circulated by financial institutions in the Thai market are 1) sustainable bonds and 2) sustainable loans which provide lower-cost financing for investments that are qualified as ‘sustainable’ per the Thai government’s guidelines[1] including but not limited to climate action, clean water and sanitation, no poverty etc. These products are currently available for certain types of businesses such as solar energy, waste management, reuse and recycle materials, and digital green innovation. The requirements set by FIs for these products are highly stringent, stemming from greenwashing concerns, and often costly to be qualified. For instance, the green project that wants to apply for sustainable loans must be certified by a certain government agency to ensure compliance or have to provide a performance evaluation summary report, prepared by either the company itself or by a third-party advisor. Additionally, companies must maintain their solid financial position, with a Debt-to-Equity ratio lower than 3x. Given these conditions, these products inadvertently become reserved for large corporations that can afford to meet these obligations. As a result, the current sustainable finance products remain out of reach for some SMEs and startups in Thailand.

Roles of Financial Institutions to Accelerate the Sustainability Transformation of SMEs and Startups in Thailand

The journey towards sustainability transformation demands the active participation of every stakeholder, ranging from the public and private sectors to individual consumers. FIs are also considered as one of the most important key players to accelerate the process given their substantial capital and human resources, and extensive outreach channels to SMEs and startups. Considering the challenges that SMEs and startups in Thailand are facing, FIs could help support and accelerate SMEs and startups to the next stage of sustainability transformation and participate in each step of the Sustainability Pathway for SMEs and Startups Framework as follows.

Roles of FIs in Promoting Awareness:

  • Creating demand for sustainability among customers will draw the attention of SMEs and startups to start thinking about sustainability transformation. To initially attract individuals, FIs can consider introducing new financial initiatives that generate demand among individuals. For example, FIs can offer carbon credit cards, enabling cardholders to track and measure their carbon footprint for each purchase and offset their carbon emissions by investing in renewable energy projects. Once individuals adopt a sustainability mindset, they can drive more demand for sustainable products and services afterward.
  • FIs can leverage their sales representatives to support the sustainable product development process, introduce sustainable finance products and educate about the potential impact of sustainability transformation on their top-line growth and cost reduction to SMEs and startups. This idea is based on the rationale that sales representatives have a deep understanding about existing sustainable finance products and have direct contact to SMEs and startups so they are able to truly recommend suitable products and services to bridge the gap.

Roles of FIs in Helping SMEs and Startups to Understand Solutions:

  • FIs can collaborate with government agencies to offer technical assistance services to SMEs and startups. This partnership would enable government agencies to assist SMEs and startups in various activities, such as providing professional advice on energy efficiency improvements, conducting technical workshops on resource efficiency, and performing energy efficiency assessments for facilities. This collaboration leverages the extensive customer base of SMEs that FIs have, allowing government agencies to expand their outreach to a broader range of SMEs and startups.
  • FIs can also partner with third-party sustainable solution providers owning services such as clean energy technology, waste management, sustainable consultancy service, etc. to offer such suitable solutions to their SME and startup clients. This represents a win-win situation where FIs can assist their clients in becoming familiar with the range of available solutions by connecting their clients with experts and can introduce their related sustainable finance products to these clients. Simultaneously, these third-party solution providers could expand their business by tapping into FIs’ customer base.

Roles of FIs in Assisting Implementation:

  • FIs can expand the range of sustainable finance products available in the market for SMEs and startups so they can partake in this sustainability transformation. For example, FIs can consider introducing more financial products such as social loans and microfinance for women and minority-owned businesses, credit guarantees for green projects operated by SMEs and startups, or green securitizations (a process of transforming illiquid assets such as wind or solar projects owned by SMEs and startups into tradable financial instruments[2]) that allow SMEs and startups access to additional sources of funds apart from traditional ones.
  • FIs can consider leverage funding and credit lines extended from international financial institutions as it might be challenging for FIs to lower their bar in providing loans to SMEs and startups due to greenwashing concerns and associated risks given the size of the company at the moment. Promoting sustainability transformations of SMEs and startups is one of the focuses of these international financial institutions but they lack a direct channel to provide loans to these targets in various countries. Therefore, they work through intermediaries, mostly local commercial banks in those countries. For example, FIs can consider partnering with ADB to co-lend on projects developed by SMEs and startups or to provide credit guarantees for green bonds issued by SMEs and startups. This approach will allow local FIs to have increased flexibility in providing sustainable loans as it reduces risk, including longer-term finance risks by sharing them with other lenders, and receiving technical assistance and training so that SMEs and startups can develop more feasible projects.

Roles of FIs in Supporting Monitoring:

  • FIs can develop their monitoring solutions or collaborate with third-party providers who possess advanced monitoring and reporting technologies and provide access to SMEs and startups at a reasonable price. Simultaneously, FIs should encourage SMEs and startups to collect their data throughout the sustainability transformation journey by including it as a requirement when such SMEs or startups want to apply for sustainable finance products. From this, SMEs and startups would be well-equipped in terms of reporting for their internal improvement and future regulatory compliance.

Final Thoughts

Successful sustainability transformations can lead to increased value creation for SMEs and startups. However, addressing challenges like awareness and access to sustainable finance products is crucial. FIs have a vital role to play in supporting these enterprises along their sustainability journey. However, it is essential to expand sustainability goals beyond the environmental aspect to encompass addressing social and governance concerns, as there is substantial room for improvement in these areas. As Thailand moves towards a sustainable economy, collaboration and innovation will be key in ensuring the prosperity of the nation in the long run.



Author: Warittha Chalanonniwat (Paeng)

Editors: Wanwares Boonkong (Pin), Woraphot Kingkawkantong (Ping)

Special shout-out: Pirada Choophungart (Nina)






Empowering ESG with Blockchain Technology

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Image by Finboot

Blockchain and its underlying technologies have been around since the late 1970s and were brought to life from the introduction of Bitcoin in 2008. The general public might associate blockchain technology with just cryptocurrency, but the application of blockchain technology goes beyond that. As people see that blockchain is a valuable technology due to its nature of transparency and traceability, automation (from smart contracts) and decentralization, the technology has been evolving tremendously over the past years to include new use cases in several sectors such as banking, supply chain, healthcare, etc. The technology is considered to be on the path to mainstream adoption in coming years.

On the other hand, the topic of Environmental, Social and Governance (ESG) has been a growing topic of interest and businesses have to fine-tune their operations to raise the standards and accountability to comply with the current and upcoming regulations. Blockchain offers a great fit for organizations that have a desire to initiate and/or incorporate ESG initiatives to their existing operations and manage relevant reporting requirements.

In this article, we will discuss the current use cases of blockchain in Environmental, Social and Governance aspects, current and foreseeable challenges from leveraging blockchain to tackle the ESG issues and implications to financial institutions (FIs). 


When Blockchain Collides with ESG 

Conceptually, the key strengths of blockchain of traceability, automation, and decentralization could be translated to an increase in transparency, efficiency and accountability across Environmental, Social and Governance elements in several meaningful ways.

Nevertheless, the intersection of how blockchain and ESG could work together is only at the beginning of formation, as blockchain is still considered as an emerging technology and the ESG impact measurement and reporting practices are still under development. Due to the urgency of the problem and suitability of using blockchain technology, there are a number of use cases on the Environmental aspect, compared to Social and Governance elements that are still in the exploration phase. 

Image via  iStock by Sakorn Sukkasemsakorn

Environmental x Blockchain 

There are growing use cases in the Environmental aspect by utilizing blockchain technology particularly the infrastructure levels to promote transparency and efficiency such as energy management, deployment of renewable energy, recycling etc. Nevertheless, there are three main use cases of blockchain technology consisting of tracking, trading and compliance, which are currently implemented across different industries. 


The immutable ledger of blockchain enables a better transparency to the supply chain. The companies can track the movement of materials from the point of origination to the destination, leading to the opportunity to pinpoint the area of inefficiencies, energy usage, and carbon emission. The traceability allows the companies to better reduce waste and carbon footprint, control that the production is operated in a sustainable manner and promote economic circularity from recycling materials and transparency to consumers. For example, Food Trax is a farm-to-fork traceability solution provider enabled by blockchain technology to eliminate food waste from storage and improper operations and offers better visibility of consumers. The company is developing a solution to collect and monitor various data points leveraging RFID, variable data printing, scanners, mobile computing platforms, and et cetera to cover all steps in the supply chain. The transparency yields an increase in revenue and higher brand loyalty from clients.  


One of the main advantages of blockchain is its ability to provide a more effective and efficient settlement process as the nodes/validators certify the transaction and all members in the network have the same record, reducing the need for reconciliation. Blockchain could be the backend technology for the trading of sustainable financial products such as green bonds and renewable energy credits including renewable energy certificates (RECs). Additionally, tokenization of real-world assets such as carbon credits can enable more efficient trading by reducing the investment ticket size from fractionalization, increasing price discovery and liquidity to the market and performing almost real time settlement. Consequently, businesses and individuals can participate and promote the growth of renewable energy and sustainable production. For instance, Toucan Protocol is developing technology to bring carbon credits to an open blockchain, allowing everyone to have an access to the carbon markets. The protocol has built Carbon Bridge to tokenize the carbon credits by transferring certified carbon credits onto Toucan’s system and mint TC02 carbon tokens. TC02 carbon tokens can be staked into Toucan’s carbon pools with each pool linked to credits with similar characteristics and receive carbon pool tokens, a fungible token backed by one tokenized carbon credit. This mechanism allows carbon pool tokens to be traded in decentralized exchanges and used as collateral in the lending markets, paving the green building block in Web3. 


The transparent nature of blockchain as well as smart contracts, a self-executing program that automatically executes the required actions if the conditions are met, could help companies to comply with the ESG standards. As the companies are able to trace its supply chain, they could report the emission and trading of carbon offset in a more accurate manner. Furthermore, smart contracts could help automate the enforcement of sustainability and ethical practices. This could help smaller companies with limited time and resources in their ESG monitoring and reporting endeavors. One of the companies helping companies to comply with ESG reporting using blockchain technology is Diginex. Its DiginexClimate integrates climate-related data to the existing ESG reports that companies have to do and comply with the company’s reporting requirements covering different frameworks such as GRI, SASB and TCFD. The solution could greatly save time and cost for businesses following the ESG standards. 

Social x Blockchain 

It is undeniable that the general media usually ties cryptocurrencies with criminal activities. However, according to Chainanalysis, in 2022, only 0.24% of all cryptocurrency transaction volume is associated with illicit activity. In contrast, cryptocurrency and blockchain could bring the ‘good’ to society by providing solutions to promote financial inclusion and facilitate humanitarian causes. The most developed use case is payment for cross-border payments, domestic transactions and payment for humanitarian causes. 

Cross-border Payments

Due to Blockchain’s decentralized nature and the ability to transact without intermediaries, crypto transactions could be faster, cheaper, inclusive and censorship-free. This means that cross-border transfers can be made with smaller amounts at a much lower cost than the traditional money transfer. A report by Oliver Wyman and J.P Morgan found that digital currencies could save global corporations $120 billion a year in transaction costs for cross-border payments. They are arguably a better alternative than cash in countries with volatile and/or depreciating local currencies. 

Domestic Transactions

Nations are separated into two schools of thoughts regarding regulations of crypto as means of payment. Thailand and China as examples of viewing crypto as means of payment on a stricter side. While Thailand has regulations supporting digital asset businesses, the country banned cryptocurrencies as a method of payment. The Thai Securities and Exchange Commission (Thai SEC) stated that digital assets do not provide improved efficiency to the payment market because of their volatility and high transaction fees. China wiped out trading and cryptocurrency mining. 

El Salvador and Ukraine, on the other hand, legalized crypto transactions. El Salador has made bitcoin a legal currency and aimed to become a hub for crypto activity. Additionally, in 2022, Ukraine passed a law that creates a legal framework for the cryptocurrency industry in the country. The first use case was accepting donations toward its military defense against Russia via bitcoin and ether.

Payment for Humanitarian Causes

Apart from the commercial use case of payment, cryptocurrency could also support humanitarian causes. One of the prime examples is a project by the United Nations High Commissioner for Refugees (UNHCR) and the Stellar Development Foundation, a nonprofit that supports the growth of the Stellar blockchain network. UNHCR realized that some refugees do not have a bank account and cash is difficult to move around. The two organizations are working alongside MoneyGram, a money transfer company, and Circle Internet Financial, an issuer of the USDC stablecoin, to deploy an alternative system to send aid directly to Ukrainian refugees using cryptocurrencies. The UNHCR delivers USDC through the Stellar network to a refugees’ digital wallet installed in their smartphones. The refugees then exchange USDC for local currency at the MoneyGram facilities.

Governance x Blockchain 

Blockchain advocates argue that decentralization promotes good governance from the absence of a single point of failure. No single entity has control over the network. Nevertheless, to fully and properly govern the networks, it will take time for stakeholders to participate, design and enforce rules to ensure stability, and penalize bad actors. There are two emerging use cases for the Governance aspect that blockchain could provide value-adds on the transparency consisting of measuring and assessing ESG milestones and blockchain voting. 

Measurement and Assessment of ESG Milestones

Blockchain networks with decentralized databases could help entities measure and prove ESG milestones. Participants in the network may include vendors, suppliers, internal business divisions to share information such as product tracking, carbon emissions and labor conditions. Smart contracts embedded in the blockchain networks can be applied to automatically disclose the data, all without the need for human intervention. The regulators or a credible third party could securely access the collected data and verify whether the organizations are meeting standards as claimed. Blockchain could act as a tool to boost transparency.

Blockchain Voting 

Blockchain voting has been in discussion globally. This use case is still in its early stages, and there are many challenges to be addressed through several pilot testing before implementing nationwide. However, several countries have put efforts and endorse blockchain voting. In October 2022, Cointelegraph reported that Greenland was exploring an online voting platform, which may be based on blockchain. In November 2022, South Korea became the first country to set up an online voting system based on blockchain making sure each vote is secured and cannot be manipulated. In India, blockchain-based voting has been tested for Telagana’s municipal election in 2021. The pilot showed positive signs; however, more pilots are needed to fully implement the system. 


Challenges of Utilizing Blockchain in the ESG Space

Despite a lot of benefits that blockchain technology could bring to support ESG initiatives, there are a few points that also need to be considered as blockchain is not problem-free. The current challenges of using blockchain can be seen from both the technology layer and its applications across Environmental, Social and Governance aspects. 

Technology Layer of Blockchain 

Blockchain is mainly a backend enabler

Blockchain technology does not help businesses determine what kind of data to collect, measure or verify but it is rather an enabler to make the process more efficient. It is important to determine which types of data, verified or unverified, to be uploaded to a distributed ledger or set rules on how to differentiate them as the uploaded data cannot be changed and can affect business’s data usage and compliance with the ESG standards

Blockchain technology is still in its early days

Blockchain technology is considered as an emerging technology. The infrastructure is yet to be fully developed despite its proposed potential to disrupt several industries. Additionally, companies across verticals are still at the beginning stage to integrate blockchain to their current operations. Therefore, the technology is still evolving and it has to be developed in parallel with the initiatives in the ESG space through trial and error. 

Applications of Blockchain Across ESG Aspects 

(E) Utilizing energy-inefficient blockchain create environmental impact 

By using blockchain with Proof of Work (POW) consensus like Bitcoin, it is very energy-inefficient as the miners who compete among themselves need to use a lot of electricity to tackle computational problems to get a chance to validate the transaction and receive reward. It creates more problems than trying to solve the environmental impact. Therefore, it is crucial to use energy-efficient blockchain, which can be Proof of Stake (POS) consensus, to decrease carbon emission or use POW blockchain that uses electricity from renewable energy sources. 

(S) Crypto space has been plagued with fraud and cybercrime

Given the nature of blockchain, it attracts fraudsters to continue to exploit user’s funds as crypto transactions could not be reversed and no personal data is required to receive cryptocurrencies for the non-custodial wallet. The safety of user’s funds is often compromised and causes tremendous loss to the users. It is very important for both centralized and decentralized platforms to step up in the game to enhance their technology stacks/codes to increase platform securities, improve ID-proofing without increasing onboarding friction and/or utilize data enrichment tools to get to know more about the users. These solutions could help prevent scammers from participating in crypto activities. 

(G) Blockchain also subjects to risks of bias and conflict of interest

Despite blockchain’s benefits of transparency and automation, the design of the blockchain that involves human decision-making can be flawed with human biases. Conflict of interest also arises when people behind the code design do not put the users at heart. Certain groups of users, especially minorities or marginalized populations, might be treated differently and not have the access to a particular product/service or users’ data might not be properly managed. Ethical code of conduct and regulations could potentially solve the issues and govern blockchain technology. There is no bullet-proof solution at the moment and awareness on these risks is needed to be able to utilize the technology in a fair and appropriate manner. 

How the Concept can be Applied to Financial Institutions 

Apart from using blockchain as a backend technology for financial institutions (FIs), the institutional adoption of Web 3.0 is becoming an increasingly popular topic as digital assets are seen as a portfolio diversifier and can create more yields in a portfolio and treasury account. A relatively new concept such as Regenerative Finance (ReFi) is also being discussed on how Web 3.0 and FIs could play in the space such as responsible lending by taking into account environmental and social factors. 

While Web 3.0 gives people sole control over data and assets, it comes with complexity. Unclear regulations, complicated user experience and limited scalability and interoperability hinder the growth of institutional adoption in the space. Web 2.5 may help solve the issue. Web 2.5 is used to describe blockchain businesses that operate in between Web 2.0 and Web 3.0. “The idea behind Web 2.5 is that consumers want the advantages of a blockchain-based platform. However, they don’t want the complexities and friction that often come with blockchain-based systems.”, DropChain explained.

Web 2.5 takes advantage of both worlds by prioritizing privacy and decentralized nature while maintaining the ease and accessibility. Blockchain technology is used at the infrastructure level and appropriate Know Your Customer (KYC) measures take place to mitigate the risks for sensitive financial data.  

With the concept of Web 2.5, blockchain could help solve the challenge of FIs and their customers across ESG aspects.

  • Improve Internal Infrastructure

Financial Institutions could build and/or integrate blockchain-based Infrastructure for collecting, tracking and tracing data for ESG-linked bonds, green loan origination and credit rating embedded with ESG factors. As multiple parties are involved in ESG measurement from data collection to validation, Web 2.5 could bridge the gap by providing a secure and transparent platform with ease of use to all parties.

  • Collaborate with External Parties

Financial Institutions can collaborate with external parties by leveraging their solid compliance capabilities or partnering with blockchain companies to expand reach of existing businesses or build new products/services. FIs could provide modular services such as KYC services to partners and clients to reduce risks and comply with current regulation and ESG standards. FIs could also partner with trusted blockchain companies to support open finance initiatives and improve financial inclusion such as providing access to low-cost cross-border payment for foreign workers or unsecured personal loan. 


Although blockchain proposes a lot of potentials to support the growth of sustainability going forward, the technology is not a panacea for tackling all the sustainability issues and there are a number of challenges that blockchain has to overcome to maximize its capabilities. The organizations including financial institutions need to define their sustainability goal then initiate strategies which involve the identification of which tools, technologies and partners would work best for them to accomplish impactful outcomes for the organizations and the society. 


Authors: Wanwares Boonkong (Pin), Panuchanad Phunkitjakran (Pook)

Editor: Woraphot Kingkawkantong (Ping)

Carbon Post Tax Economy

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The World with Carbon Tax: Impacts and challenges to businesses, consumers and governments

The world is getting warmer 🔥

The world is getting warmer, and has been for 46 consecutive years. 

We, humans, are the main cause of the change. We cause climate change by emitting greenhouse gas (GHG) from activities like burning coal or flying airplanes. Climate change matters because it affects the lives and safety of all living organisms on earth. People have already had to relocate due to a rise of sea-level or droughts, and animals and plants face the danger of going extinct. With an ongoing emission rate, the United Nations expected that the number of “climate refugees” will further increase. 

In December 2015, countries signed the Paris Agreement to limit global warming and to reduce greenhouse gas emissions (most commonly tracked as carbon emissions) as soon as possible. According to the IMF, 140 countries (accounting for 91 percent of emissions) have already proposed or set carbon net-zero targets for 2050.

While government support is vital for hitting carbon reduction targets, continual subsidies are not sustainable. Market mechanisms like carbon taxes and trading systems are arguably among the easiest and most cost-effective ways to achieve the targets by shifting the burden to those who are responsible for it.

Carbon taxes provide economic incentives 🤑 to reduce emissions 

Large-scale capital and financing is required to significantly reduce emissions. The Intergovernmental Panel on Climate Change (IPCC) reported that all countries are massively short on decarbonization funding. Carbon credit markets, where carbon credits are bought and sold, could solve this issue by shifting funds from heavy emitters to people and organizations decarbonizing the economy. Broadly, there are two types of carbon credit markets: compliance (regulatory requirement e.g. cap-and-trade in which factories are allowed to emit specific amounts of emission and trade emission-reduction to others) and voluntary (to issue, buy and sell carbon credit on a voluntary basis). A carbon price stimulates clean technology projects and innovation. However, building integrity in carbon markets is key, as the ultimate goal is to reduce emissions, not just force emitters to pay for it.

Illustration A: Carbon credit market allows reallocation of capital to carbon-reduction projects

Source: Beacon VC

Generally, carbon credits are generated from verified carbon or GHG reduction projects, and can be traded to a carbon emitter who wishes to offset their carbon emissions. For example, solar panel deployment or tree planting projects are converted into tonnes of carbon dioxide equivalent or tCO2e. Those offsets are priced in USD or Euro per tCO2e for trade. There are two main types of offsets: carbon avoidance (reducing emissions from existing or future operations) and carbon removal (removing carbon or equivalent GHG from the atmosphere).

Under a carbon tax, emitters must pay for each ton of greenhouse gas emissions they emit. Taxes act as financial incentives for corporations and individuals to reduce emissions, switch fuels, and adopt new technologies to reduce tax burden. 

According to the World Bank’s carbon pricing dashboard, carbon pricing (carbon tax and emission trading system) initiatives have been implemented globally (see Illustration B). As of April 1, 2022, 103 national jurisdictions have initiated carbon pricing, covering 24.30% of global GHG emissions. Of those, 47 have implemented or considered implementing carbon tax. In Europe, carbon credit pricing ranges from less than €1 per metric ton of carbon emissions in Poland to more than €100 in Sweden. The tax rate and tax scope can vary based on the types of GHG and countries’ policies; for example, while carbon tax in Spain only applies to fluorinated gasses, other countries cover most types of GHG emissions. 

Illustration B: Carbon Pricing Implementation Globally

Source: State and Trends of Carbon Pricing 2021. (World Bank, 2021)

In Thailand, more progress has been made on carbon markets than on taxes. In 2014, Thailand Voluntary Emission Reduction Program (T-VER), a voluntary carbon credit market, was introduced by the Thailand Greenhouse Gas Management Organization (TGO), a public entity set up by the government to promote sustainable low-carbon economy and society. Since 2015, T-VER has issued and certified (to measure and verify carbon reduction) 141 projects. The amount of GHG reduction from the projects grew at 45% CAGR from 2015 to 2022. 

Most T-VER projects are carbon avoidance projects, which commonly replace coal energy with green energy such as wind or biomass. Other projects such as forestation are nature-based carbon removal projects. There is also growing interest in technological solutions for carbon removal such as direct air capture technology. This technology pulls carbon dioxide from the air and safely stores it. For example, Climeworks AG captures carbon and stores it underground. Carbon Limit produces cement that absorbs carbon from the air. However, the challenge for technological solutions is scalability, which could lower the cost of adoption and encourage mass deployment.

On the one hand, the timing and scope of carbon taxes in Thailand are still being debated, though there are positive signs that Thailand will implement a carbon tax economy. Mr. Ekniti Nitithanprapas, ex-Director General of the Tax Revenue Department said that “Thailand cannot avoid collecting carbon tax because many other countries have already started doing it. If Thailand does not collect carbon taxes on these goods, exporters will have to pay the tax at the destination EU nations. If we collect the tax in Thailand, we will negotiate with the EU to exempt the goods from double carbon tax.” It seems likely carbon taxes will be implemented, but the big questions are when and how. 

Illustration C: Statistics of Issuance of T-VER 

Source: TGO, adjusted by Beacon VC

Carbon Post Tax Economy 🌏 

Carbon tax will drive higher costs of energy-intensive goods and shift the way consumers and businesses make decisions. However, the quantifiable effect of the carbon tax is still debatable. While it is believed that carbon tax would positively impact emissions, policy makers may have  concerns about a negative impact to the economy. However, most economists who have analyzed the situation argue that there will not be a negative impact on the economy.

Since carbon taxes will drive costs of energy-intensive goods, The National Institute of Economic and Social Research expects carbon taxes to drive inflation in the short term and lower GDP by 1-2% in carbon-intensive countries. In the longer term, the effect on the economy depends on how revenues from the tax are used. The UN’s ESCAP is also optimistic that the tax revenue will have a positive effect on GDP in the long run by increasing economic activity and reducing poverty and GHG emissions. Other economists believe there will be little or no impact on GDP and unemployment. They believe that long run GDP growth rates are driven more by fundamentals than by policy variables such as tax rates, and therefore unlikely to face negative impact from implementing carbon tax policies.

GDP measures production capacity and economic growth; however, it does not explain the market trend and behavioral shifts. Carbon tax could potentially accelerate changes of consumer behavior. Consumer behavior changes overtime and changes fast. Robert H. Frank wrote in The New York Times about behavioral contagion that even though the carbon tax could affect a small group of consumers, the behavioral change could spread like “infectious diseases.” Similar to cigarette taxes, carbon taxes affect a small group of people which could expand rapidly by network effect. In turn, consumer preferences impact business decisions. 

With or without a carbon tax, businesses will already face various risks ranging from climate change, price of raw materials, consumer preference and regulation. Carbon tax would likely increase administrative burden and costs of running business especially in carbon-intensive industries such as oil and gas, power generation, transportation, and construction. The costs may translate into higher prices to end customers, so businesses must identify the risks and design strategy going forward.


The big challenge is to align incentives to truly reduce emissions. Carbon credits (especially in Thailand) focuses on monetizing existing projects, not building new ones. Those credits, therefore, do not contribute to carbon reduction. Additionally, with different tax policies, businesses may seek to move to operations with less stringent policies and, as a result, increase total emissions. Other complex issues include double-counting of emission reduction, and greenwashing (companies falsely market their green credentials).

Stakeholders are trying their own ways to solve those issues. Some startups are trying to solve these problems. ImpactScore and Good on You provide a “green” score for shoppers to check and help alleviate greenwashing issues. Companies are looking to create data solutions such as IoT devices for greater traceability and apply ESG information disclosure and standards. Governments, together with non-profit organizations, are working on policy alignment to reduce emissions worldwide. Financial institutions are designing mechanisms to alleviate initial high ESG adoption costs to businesses and consumers. 

Closing Thoughts

It is abundantly clear that global warming poses a major threat to society. Nations worldwide have agreed to slow down and ease the threat of global warming, leveraging various initiatives to incentivize reduction of the GHG emissions which are the cause of global warming. Carbon tax policies may be a catalyst for speedier adoption of green energy and technology to reduce or avoid carbon emissions in the private sector. Consumers and businesses are also paying more attention to carbon reduction and ESG risks. Based on the shift in consumer preferences, it is expected that more goods and services labeled ESG will be sold, though the challenge of how to prevent greenwashing and ensure that consumers can effectively express their preferences remains

Beacon VC is excited and ready to support its parent company, Kasikornbank, across a wide variety of impact initiatives, particularly with regards to sustainability and net zero carbon targets. Beacon VC has recently launched the “Beacon Impact Fund” to invest in startups seeking to create a positive impact on ESG issues. The Beacon Impact Fund is part of Kasikornbank’s overall sustainability strategy and leadership vision in the field of ESG finance.  Both Beacon and Kasikornbank are committed to upholding ESG principles and paving the way for Thailand’s transition into the new world.


Author: Panuchanad Phunkitjakran (Pook)

Editors: Krongkamol Deleon (Joy), Pajaree Prasitsak (Wan), Woraphot Kingkawkantong (Ping)

What is Digital Inequality and Why does it Matter?

Posted on by beaconvcadmin

Digitalization has influenced banking services around the world to move online. It is common these days to see bank branches closing down as many commercial banks have shifted their focus to digital banking in order to better serve customers’ demands and satisfaction. However, even in countries like Thailand, which is known for having high smartphone and social media penetration rates, many people are still needing to wait in line at bank branches to conduct their own financial transactions or to seek assistance in obtaining government financial aid (aid which is provided via an online system such as “Khon La Khrueng” or คนละครึ่ง). Understanding why these situations occur helps to highlight the fundamental problems that need to be fixed to ensure that everyone is included in the new digital economy.


What are the Causes of Digital Inequality?

Digital inequality refers to the disparities in knowledge and ability to use digital and information technology based on different demographics, socioeconomic backgrounds, and information technology experience and competencies. The problem is not merely one of access, as disparities also exist among people who have access to digital technology. The digital gap is also caused by lower-performance computers, lower-speed wireless connections, and limited access to subscription-based content.


These disparities stem from barriers in three areas: availability, affordability, and adoption.

  1. Availability: digital infrastructure needed to access online services through alternative channels, such as wireless data plan, wired broadband, and fiber services.
  2. Affordability: to stay connected, individuals must pay for device acquisition and service subscriptions, which are continuous expenses. 
  3. Adoption: people are prevented from utilizing the internet by knowledge hurdles, such as a lack of digital literacy or educational constraints.


Digital Inequality is a Human Rights Issue

Computers and smart devices have become vital to almost every aspect of daily life, from fundamental activities like paying bills and shopping, to more enjoyable activities like entertainment and socializing. They are also essential for maintaining relationships with loved ones. Access to the internet has opened up new opportunities for employment, health care, financial support, and pursuing both informal and formal education. Those without access to the internet are missing out on information that may help them find jobs, online entertainment, and many other essentials. Research shows that households that adopted broadband are on average 8.1% more likely to be employed, and earned on average 2,202 USD higher annual household income. Lack of internet access has also been consistently linked to a high risk of mortality from COVID-19. Hence, the capability to access and work with data and digital technology should be considered as fundamental human rights. Without it, there are no opportunities to access what the knowledge economy and digital connectivity can provide.


Is Inequality Persistent in Thailand?

Thai people are renowned for being active online with some of the highest proportions of social media users in the world. Approximately 50.05 million Facebook users are located in Thailand, representing 71.5% of the country’s population. The smartphone penetration rate was 59.3% in 2022, ranking Thailand the 12th place in the world. Thailand also ranks 87th in the world with 54.5 million internet users (77.8% of the country’s total population).


While Thailand’s internet availability is high, affordability and adoption remain problematic. According to the International Telecommunication Union (ITU) and TDRI, only 21% of Thai households have computers, which is lower than the global average and the developing countries’ average, at 49% and 38% respectively. Moreover, computer affordability is worse for low-income households. According to the National Statistical Office of Thailand in 2017, only 3% of low-income households (households with an average annual income of less than 200,000 baht) have Internet-connected computers, compared to 19% of households with higher income. Low accessibility to proper digital devices has caused immense inequality for Thai students’ education, especially since the start of the Covid-19 pandemic. Covid-19 has widened the gap of digital divide among students as learning has been moved online. Recent studies suggest  that learning loss will be the greatest among low-income students as they are less likely to have access to high-quality remote learning or to a conducive learning environment, such as a quiet space with minimal distractions, to devices they do not need to share, to high-speed internet, and to parental academic supervision. 


Digital inequality has not only amplified the importance of technology in education, but also affected the wellbeing of Thais. During the pandemic, the Thai government offered subsidy programs to help Thai citizens with their economic hardships. The most well-known package was “Khon La Khrueng”, roughly translated as “Let’s Go Halves”, in which the government subsidized half of all qualifying payments via an e-wallet application. To sign up for government’s aid and make payments, individuals needed to have internet-capable devices, data plans, and access to Wi-Fi to receive the benefit. 


Given Thailand’s smart device penetration rate of 59.3%, this meant that almost half the Thai population were excluded from the government program. Challenges also emerged in relation to adoption: elderly and low-income persons who were likely to be targets of such campaigns were also less likely to be familiar with using mobile applications.  


Due to these issues, the government was pressured to allow people to register for “Khon La Khrueng” offline at branches of government-supported banks, resulting in lengthy waiting lines. The congestion at the banks made many people lose work opportunities while still not alleviating the struggle to register for the package. This case truly highlights the need for digital education to be able to obtain a fundamental support population in the present world. 


What Has Been Done to Reduce Digital Inequality

As highlighted previously, there are three main obstacles that prevent the realization of digital inclusion: availability, affordability, and adoption. This section will focus on the approaches taken by private organizations, governments, and financial institutions to reduce the gap in each dimension.



Hardware innovation has emerged as a way to improve the accessibility of the internet. Starlink, a low-latency broadband internet system project, has introduced the internet via satellite, which is expected to benefit people in remote areas where telecom cell sites and fixed broadband internet services are inaccessible. The average download speed for Starlink is slightly below the average for the entire fixed wireless internet category, at 105 Mbps and 131 Mbps respectively (though far better than rivals Viasat and HughesNet). Although there is still much to be done (Starlink will likely need at least 10,000 satellites to cover a majority of the globe), rapid progress has already been made, with Starlink available in 32 countries, using more than 2,300 satellites.


Governments are also acknowledging and trying to solve this infrastructure issue. Net Pracharat, a nationwide project aimed to extend high-speed internet to all villages in Thailand, covered 24,700 villages with free public Wi-Fi hotspots in 2017 and reached 6.6 million users in 2019. However, problems remain. Internet use from community locations declined during the pandemic as a result of concerns regarding the spread of Covid-19 in public areas.  Similar projects have been developed to increase internet connectivity, including National Broadband Plan (Philippines) and Palapa Ring (Indonesia). This highlights the need to expand internet connectivity programs to households, not just public areas. 


Recently, Kasikornbank has introduced Solar Plus, offering a free of charge service of solar roof installation for Thai households. Proven by Teltonika and Bartech, the service could be combined with cellular routers, offering internet connectivity for households. This self-sustained technology would provide the end-users superior internet connection in places without access to the power distribution grid. It would therefore allow expansion of internet connectivity at a more affordable price.



Although the price of internet devices has been declining, upfront costs remain a major barrier for the low-income population. Thus, some governments have implemented smartphone and computer subsidies for low-income or senior citizens to increase adoption. For example, Singapore has a program called Mobile Access for Seniors which provides subsidized smartphones and mobile plans to low-income seniors.  The Singaporean government has also offered affordable-price computers to students or persons with disabilities who come from low-income households via the project “NEU PC Plus”. The Vietnamese Ministry of Information and Communications in collaboration with smartphones’ manufacturers launched a universal smartphone program, aiming to push smartphone penetration to 100% by reducing the price of a smartphone to approximately 20 USD. 


Private entities have also begun finding ways to reduce this gap. For example, UOB launched a project called UOB My Digital Space which provided students in Singapore with digital learning devices including a new laptop and a Wi-Fi dongle with monthly data usage together with online learning resources to take them beyond the school curricula for their longer-term development.



To date, most efforts aimed at closing the digital inequality gap have focused primarily on availability and affordability problems. Although investment by government and private sector players to build out the requisite infrastructure and make internet service affordable are critical, the benefits will not be fully realized if households lack the knowledge to use and fully realize the benefit of these services. Accordingly, several startups have emerged to tackle this challenge. Jules, a Singapore-based startup, works with 200 preschools in Singapore, Malaysia, Vietnam, Taiwan and China to train children between the ages of four to eight in computational thinking. The company runs a “School of Fish” curriculum where children are taught digital skills such as programming, animation, and game design through games and animated storytelling. Ruangguru is an Indonesia-based startup that collaborated with the country’s Ministry of Communication and Informatics (Kominfo) to create Indonesia’s Digital Literacy Space Program in 2021. The company created content that covers digital security, digital ethics, and digital culture. The program is expected to train 50 million students by 2024. In addition to startup efforts, Saturday School, a Thai educational non-profit foundation, creates the Saturday Film camping program aiming to equip students with the skills necessary to convey stories through various kinds of media. The foundation has also partnered with corporations to foster children’s digital literacy via several projects including Young Safe Internet Leader Camp Version 1.0.


Financial institutions are also launching initiatives to increase digital literacy. KLOUD is an example of a project by Kasikornbank that aims to facilitate individuals’ learning by offering a co-working space to offer an alternative space to students who lack internet access or appropriate learning environments. KLOUD also hosts knowledge sharing events for the public, including financial literacy, cyber literacy and green awareness. 


The adoption barrier is also a huge threat for ASEAN nations competing in the digital economy. Despite having the third largest population in the world, the sixth highest GDP, and the fourth highest trade value, ASEAN’s digital economy only accounts for 7% of its GDP, lagging behind China’s 16%, the EU-5’s 27%, and the US’s 35%. Accordingly, the Go Digital ASEAN program was launched to increase digital skills participation across all 10 ASEAN nations, reaching everyone from farmers and home-based handicrafts producers to small-scale hotels, restaurants, and shops. The project has already reached Phase 2, which will provide more advanced training for up to 200,000 underserved MSMEs on skills like business and financial literacy.


Closing Thoughts

Digital inequality is not all about internet connectivity. Despite considerable investment to develop the necessary infrastructure, the advantages will not be fully realized until people embrace and use the services. In other words, the affordability of data plans and devices together with digital literacy are essential to cope with the digital divide.


Although the situation of digital inequality in Thailand is relatively less severe compared to neighboring countries, many Thai students were still left behind when in-class instruction switched to online learning. Thais from lower socio-economic backgrounds were also left behind with unequal access to government programs intended to provide economic relief.

So far, both private and public sectors have made tremendous efforts to narrow the digital gap and include all people in digital transformation. Still, there are countless steps left to reach the goal of digital equality. Research shows that digital agents are crucial for getting people to adapt to digital technology. Banks can utilize their current resources, primarily staff and physical branches, to deploy agents and help close the inequality gap. Particularly in Thailand, bank branches are all over the country and can play a leading role in driving adoption in rural areas. As financial transactions are increasingly executed online, instead of laying off branch staff, banks may consider changing their role from day-to-day transaction operators to digital navigators who can educate banks’ clients in-person about how to make financial transactions online, troubleshoot issues, and other digital skills such as helping them to become familiar with banks’ digital products. This transformation shortens the time to achieve the goal of digital equality. 


Banks may also share digital infrastructure to individuals, which could help increase the level of internet accessibility, especially in the rural areas where households rarely have internet access. Since branches and ATMs always need to be connected with the internet, banks might see an opportunity to split the network and share public Wi-Fi to facilitate bank-related activities.  A similar project was seen in New York City in 2015, using payphones instead of ATMs.  In that program (LinkNYC), payphones in New York City were transformed into free Wi-Fi hotspots


In conclusion, all three factors that contribute to digital inequality (availability, affordability, and adoption) must be considered as part of the transition plan so that all humans have equal opportunity to thrive in the new digital economy.


About Beacon Impact Fund

In recent years, society has placed an ever-growing level of importance on social impact.  As seen in the examples above, many of the world’s problems (whether they be categorized as environmental, social, or governance issues) are being tackled by startups, which are well suited for the fast experimentation and innovation needed to address these problems. Kasikornbank, as one of Thailand’s leading financial institutions, has also launched many ESG initiatives to help drive Thailand’s transition to a sustainable economy, including several of the projects discussed previously regarding digital inequality.  It is clear that affecting material change to these areas requires active participation by all.


Beacon VC sees a great opportunity to not only support these startups which are seeking to create positive social impact, but also to drive the conversation and collaboration between startups and large corporations to magnify and accelerate that impact, and is proud to announce the launch of the Beacon Impact Fund.  Beacon Impact Fund is a 30 MUSD fund that will invest in for-profit startups that have quantifiable, sustainable, and scalable impact. Beacon Impact Fund intends to invest to accelerate the shift to a sustainable economy, improve social equality by promoting financial inclusion, digital literacy, and equal-opportunity growth, and to support good governance and privacy protections in both business and consumer markets.  The hope is for the Beacon Impact Fund to inspire new generations of innovators to solve the planet’s biggest challenges, and to inspire investors and institutions to take a proactive approach to creating impact, as achieving meaningful impact will require support by all stakeholders.





Author: Supamas Bunmee (Jae)
Editors: Krongkamol Deleon (Joy), Woraphot Kingkawkantong (Ping)

What Is Next for Super Apps?

Posted on by [email protected]

Will Super Apps Continue to Thrive? And What Should Financial Institutions Consider to Stay Relevant in Markets Dominated by Super Apps? 

It’s 2022, and the number of mobile apps have skyrocketed with no signs of slowing down. At the moment, there are over 3.48 million apps on Google Play Store and 2.2 million apps on Apple’s App Store. Among these massive numbers of apps trying to compete for a spot on a consumer’s phone, there are a handful of ‘super apps’ that managed to top the list. This article aims to provide readers with insights and analysis into the world of super apps and its future by shedding some light upon some of the ever-fascinating questions of 1) why super apps are concentrated in emerging markets; 2) how can super apps continue to grow sustainably, and 3) what do financial institutions have to consider when coping with the looming threats and emerging opportunities from a rise of super apps.

What is a Super App and What Makes It Super?

A Super Application (super app) is a mobile app that serves as a one-stop solution to multiple services for all possible users’ needs at their fingertips. Some services super apps offer are food delivery, ride-hailing, messaging, digital wallet, and payments.

How to Become a Super App


Here is how an app evolved into becoming an app that rules all:

A super app first introduced itself to the world as one killer app that offers a single function. With the purpose to quickly gain mainstream user adoption, the single function characterizes as one with high stickiness and open rate, the percentage of users who open the app after downloading. Features like messaging or ride-hailing services help the app capture and retain customers to open the app daily.

Once a mass adoption is established from the high-frequency niche function, super apps begin to equip themselves with financial services mainly due to the large user base demanding a convenient way to conduct their finances. In the case of payment, super apps must find the easiest way for users to conduct transactions by launching their own e-wallet or integrating with other payment services to satisfy the customers and drive revenue. With Grab, for example, the demand for better digital payments from users to pay for ride-hailing services led to the launch of GrabPay, Grab’s payment services. GrabPay not only allows users to make payments with one click, but also helps Grab manage cash flows to its drivers. Additionally, the visibility of payment flows allows Grab to offer more financial products like loans and insurance, which in turn draw even more new users to the ecosystem.

Demand from one area of the app drives the demand for another, and the ability of super apps to meet those demands entices more users to join. A large user base creates a positive network effect which further drives growth. Super apps broaden the use cases of apps through extensive partnership deals with third-party providers or in-house product development. This helps super apps expand vertically to achieve the goal of becoming a one-stop service to support users’ everyday life. For instance, Grab started with a ride-sharing service, then quickly expanded into food, and package and grocery delivery, with the goal of helping users organize their life’s logistics. At the same time, Grab could increase user’s usage frequency and earn higher average revenue per user (ARPU) by creating an attention flywheel – where a customer’s attention is increased by Grab providing more valuable services to them.

Tech companies further leverage customer data and loyalty programs to cross-sell new services to retain existing users, and to acquire new users for the app. For example, Grab utilizes users’ riding behavior data to send targeted food delivery advertisements during pre-dinner hours while the users are on their way home from work. Also, Grab segments its customers into gold, silver, and bronze tier, which is based on customer’s usage level as a way to reward and retain loyal customers (e.g. promotions, points for cash).

Super App’s Landscape in the World 

Since the inception of the super app concept, super apps have been rising in major cities across the globe. It is very common for super apps to gain strong traction and dominate the emerging market and less so in more developed markets.

**Penetration rate is the number of super app’s users in home country divided by home country’s population

Before diving into the reasons why super apps thrive in the emerging markets. Let’s quickly examine why super apps struggle to gain traction in the developed economies.

Three main reasons why super apps are struggling to gain traction in the developed economies:

  1. High dominance of existing players in each vertical: Developed markets like North America and Europe are overcrowded with powerful existing players who specialize in each vertical, possibly because the developed economy’s tech market has developed long before that of emerging markets, making it harder for a super app newcomer to penetrate and scale. For example, in the U.S., Amazon already holds roughly 40% market share in eCommerce, and Uber has about a 70% share of the ride-hailing market. Thus, building one super app to win in fiercely competitive developed markets is an uphill battle.
  2. Consumer’s concern over data privacy: Contrary to the mobile-first population in emerging economies, the developed economies’ population has experienced the desktop era of the internet and learned from it over the last three decades on poor data security such as data privacy abuse and data breach from big technology companies which raised the user’s concern over their data privacy. Users are wary of having all of their personal and behavioral data stored in one platform’s arm reach. Hence, to convince users to provide their data super app has proved to be very challenging.
  3. Regulatory issues: In general, regulators in the developed markets have a more comprehensive framework and guideline to enforce stricter practices in data sharing and privacy. For example, Kakao only conducts know-your-customer (KYC) and anti-money-laundering (AML) checks for their users once and then passes on the information to their partners. Given the existing strict restrictions and scrutiny imposed by regulators in developed markets, a practice like Kakao’s cannot be implemented in the markets. Hence, super apps face yet another prohibitive constraint, preventing them from their success.

Economic, social and regulatory aspects are very different in developed economies as opposed to in emerging ones. Super apps in developed markets find it difficult to rise above competitors, gain customers’ trust and combat regulatory constraints. Hence, they often fail to gain traction and growth.

On the contrary, why are super apps rapidly proliferating across emerging economies?

Over the past decade, following the rise of WeChat in 2011, dozens of new super apps have emerged and quickly gained massive popularity and adoption. These super apps have catalyzed the economic, social, and cultural growth of emerging markets. The proliferation of super apps came from the company’s efforts, which is to ensure product market fit and seamless customer’s experience, and was driven by supporting market factors as follows.

Market Factors – Emerging markets possess these factors that help drive the adoption of super apps:

  1. Mobile-first population: Emerging economies such as China and Indonesia jumped from the desktop internet revolution in the 90s straight to smartphone adoption as the mass population is able to afford the mobile device. Accessing the internet through mobile apps has become second nature to emerging markets’ populations which accelerates super app’s adoption. Early super app developers like WeChat leveraged this opportunity and designed their app to cater specifically to mobile users.  
  2. Banking the underbanked and unbanked: Super apps allow underbanked and unbanked consumers to conduct digital banking services all through a super app such as accessing their online banking and purchasing financial products such as property microinsurance or personal loan for their new smartphones. Before, traditional financial institutions did not focus on these segments as the customer lifetime value is not worth it compared to the high customer acquisition cost. Thus, the access to financial products/services which has been made available by super apps consequently further drove adoption.
  3. Government support: Governments did not prioritize their budget, resources and capabilities to build financial infrastructure. Instead, the governments supported the private sector like super apps to help build the necessary infrastructure. A prime example of this case is WeChat. During its early days, the Chinese government heavily supported the app which was another lever that drove WeChat’s viral growth in China.

Future of Super Apps: How Will the Future of Super Apps Look Like? 

Now that we have grasped the reasons why super apps thrive or fail in certain markets. What will be the future of super apps? This section will explore the challenges that super apps are facing today and consider ways for them to grow sustainably.

Where are super apps today and why are they struggling to get where they want to be?

Super apps envision a bright future of becoming profitable ecosystem owners and market leaders in their prospective industry. However, how to get there is not as easy as initially pictured. Today, super apps are operating in ultra-competitive red-ocean markets, which are swamped by large-size super apps backed by deep-pocket parent companies or investors. New market entrants and existing players fiercely compete to protect and seize every decimal point of market share by burning their capital to acquire and retain users through aggressive price incentives. Super app companies trade off their profitability for growth in market share, which often causes them to incur massive losses from thin margins and fleeting user loyalty.

With the example of Grab and Gojek, Southeast Asia’s top tech companies, neither companies are profitable despite owning the majority of market share in their home market, 50% in Singapore and 59% in Indonesia in the first quarter of 2022, respectively. Due to low switching costs and little product differentiation, once the super apps stop injecting money into huge discounts and marketing expenses, users flee to competitors. Lack of customer’s loyalty explains this unsustainable market share. This tradeoff between profitability and market share does not seem to get super app companies anywhere near their goal. Perhaps there are other considerations that they need to adopt instead of sacrificing their profitability for growth when customers possess little to no loyalty to the apps.

What are the key considerations super apps should ponder in order to grow sustainably?

The majority of super app companies have already captured a sizable market share, at the expense of their profitability. Super apps that can sustainably grow are the ones that find the fine balance between spending to build customer’s satisfaction and loyalty, and company’s profitability.

Customers who are exceedingly satisfied and appropriately rewarded, are very likely to become loyal customers and will be more willing to pay and spend more on the app. In fact, research shows that loyal customers are up to 65% easier to sell to than first-timers. Additionally, effective loyalty programs increase customer’s lifetime value, which could be worth over ten times their first transaction.

Profitability can be achieved through effective cost minimization and monetization. Super app companies may have to determine which vertical or sub-vertical in which market is worth fighting to gain market share. For instance, Gojek was operating at an increasing loss ever since it entered the Vietnam market in 2014. It lost VND 1.67 trillion in 2019, up 89% YoY to protect its 10% market share. In addition, it is equally important for super app companies to execute effective monetization strategies. To illustrate, Gojek monetizes its ride-hailing services by charging partners in exchange for advertisements on riders’ vehicles. This helps Gojek generate additional revenue with little to no additional cost by leveraging existing assets in the ecosystem. Lower cost, higher revenue, and greater customer loyalty will pave the way for higher margin and profitability, which only then can super app companies grow sustainably.

How the Rise of Super Apps Could Affect Financial Institutions (“FIs”)? 

Since the emergence of the internet, technology startups have disrupted one industry after another. The rise of super app startups is no different. As the industries covered by super apps expand, user expectations are also turning towards the desire to perform almost all possible activities, including financial activities through these super apps. Super apps respond to offer financial products not only as a means to provide seamless customer’s experience, but they are also incentivized by potential significant revenue growth from additional product offerings. Super apps offer more and more financial services from e-wallet to full digital banking. Though most financial activities currently performed through super apps require integration with FIs, certain super apps like Grab, Gojek, Kakao and WeChat (with banking license) can now operate a full digital bank with little to no dependence or assistance from FIs. Hence, FIs should pay special attention to the development of super apps and carefully evaluate potential risks and opportunities to take appropriate actions going forward.

Assessing the level of risk by considering the comprehensiveness of product offerings

The more comprehensiveness of financial offerings a super app provides, the higher the risks to FIs. High level of risk is from those that offer a fully comprehensive suite of financial products/services, such as Korea’s Kakao and India’s PayTM. Though there are only a handful of them, the number is increasing at an astounding rate. There may be some barriers to entry, such as requirements for banking licenses to offer banking services in most countries. Still, some super apps have already proved that they can find ways to either obtain or bypass those regulatory hurdles. A medium level of risk is found in super apps that offer limited financial services such as payment and money transfer, but lack some important banking services such as lending. Lastly, super apps that are low risk to FIs are the ones that do not offer their own financial products/services and just connect to other payment providers to offer in-app payment services.

Low-and-medium risk-level super apps today can become a high-risk super app tomorrow because super apps are equipped with data analytics knowhow and expertise and thus can quickly leverage their vast wealth of data to deliver better financial products/ services. Additionally, super apps have been building their brand reputations in financial services by exposing their massive user base with their offerings and partnering with reputable companies to assimilate super app’s branding with that of their partners’. As more financial products and services are being served and purchased through super apps, they are gradually disintermediating FIs from their customers.

Possible actions for FIs to ride with the trend of super apps

Product/Service Offering Occurrence Frequency Opportunities  for FIs to participate in super app’s growth


High -Provide back-end infrastructure and services to super apps

– Increase switching costs to lock in users and merchants (i.e. offer incentives that are tied to other banking products)


(personal loans and business loans)


Medium – Get data from super apps and provide loans to their users

– Partner with super apps to provide co-lending service

– Provide banking license and/or underwriting services for super apps

– Provide capital/funding with interest charged directly to super apps

Wealth Management (investment/advisory/brokerage)


Insurance Services

(life/health/home /vehicle)


Medium – Partner with super apps to integrate and sell FI’s products through their channel

– Leverage FI’s credibility and reputation to promote offerings on FI’s online channels and/or application

Checking & Saving


Low – Partner with super app companies to get float from super app’s users’ deposits

– Improve online presence, sales channel and ensure customer’s satisfaction by leveraging both online and physical presence

Closing Thoughts

Majority of super apps are struggling to become profitable due to price war from increased competition. Super app companies trade off their profitability to maintain and grow their market share through aggressive price discounts. Prioritization of customer’s satisfaction and company’s profitability should be the key focus to a sustainable future in the long term.

FIs may feel threatened by the potential of super apps because of the possibility that users may reduce their usage on offline branches and traditional banking apps and start using super apps instead. However, what could be viewed as a threat could also be an opportunity since FIs can consider partnering or providing backend infrastructure to super apps to expand their revenue stream in the short term.

Going forward, the financial industry will continue to change and evolve and there will be new ways that super apps and FIs can collaborate and leverage the capabilities from both sides. All in all, FIs should proactively assess risks and consider both external and internal factors in order to take appropriate action that would strengthen and leverage their differentiated strong suit in an effective and timely manner to remain a stronghold through this ever-changing future.


Author: Premika Bhongsudhep (Prink)

Editors: Panuchanad Phunkitjakran (Pook), Wanwares Boonkong (Pin) and Warittha Chalanonniwat (Paeng)


Making sense of the Crypto M&A wild west world

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“It is a wild wild west out there right now; there’s no framework” – Vanessa Grellet, Managing Partner of Aglaé Ventures at Permissionless 2022


The M&A scene in the crypto market is relatively young. Nevertheless, the industry has witnessed an ever-growing number of deals over the past few quarters. While the crypto M&A industry is still evolving, analysis of the current state of the industry can give readers a basic framework and thought-starters to comprehend this nascent phenomenon.

Market conditions favor a Crypto M&A boom

In the past several months, the entire crypto market has weathered storm after storm, which, although not necessarily started by Luna’s collapse, was definitely exacerbated by said collapse. Nevertheless, many seasoned Crypto Believers remain hopeful, as true innovations are born in crypto winters, learning from the past and paving the way for the next crypto summer.

As the market retreats from the high-yield gold rush, innovators must develop sustainable innovations with real use cases, such as decentralized identity solutions or blockchain security and protocol audits, making the crypto market, or the general Web3 industry as a whole, more appealing to institutional investors.

Institutional investor’s appetite for engagement in crypto manifests in many forms, including building a dedicated team to develop solutions in the crypto space (for example, KBank’s Kubix), investing in crypto tokens (an emerging area still under consideration by some regulators), investment into crypto native VC funds (such as Pantera Capital), and conducting Merger & Acquisition transactions (“M&A”).

Despite being a staple in the TradFi industry, M&A in the crypto market is a relatively new but robust phenomenon. According to Blockworks, M&A activity in 2021 tripled to 180 deals from 59 deals in 2020, and the industry already has seen over 92 deals in the first half of 2022. Many industry experts believe that industry participants will witness even faster growth of M&A activity over the next year as crypto winters present an opportunity to shop for companies or projects at a very low valuation.

Crypto M&A helps accelerate innovation within the industry

At its core, decentralization promises the elimination of intermediaries, and Crypto Believers see this as a very important evolutionary step in our civilization. With the industry being in its early days, full decentralization requires a massive attempt to build necessary infrastructures, develop appealing products and services, recruit communities, and unite ecosystems. For these to happen, innovation within the Crypto industry must occur not only for Crypto Believer’s hedonism or altruism but also for economic and financial reasons.

As many people believe that innovation is a way out of this crypto winter, M&A can accelerate the rate of innovation within the Crypto space expanding the possibility for innovators to get incentivized for their endeavors, which is especially important during this turbulent time. More M&A activities in the space create a positive feedback loop for more innovation. In addition, having M&A as one of the exit goals, innovators are required to think about the monetization, economics, and risks of their projects early on, giving the innovation landscape the ability to withstand shocks in the long run.

What types of M&A can the industry expect?

Traditional reasons for M&A typically fall into four categories, corresponding to that industry’s life cycle: capability acquisition, market access & customer acquisition, promoting economies of scale, and market consolidation.

M&A objectives by industry life stage

Source: Beacon VC internal analysis

Despite the shrinking market capitalization during crypto winter, many Crypto Believers think the market is still in the early or growth stage, meaning that most upcoming M&A activities within the crypto space will be for capability acquisition or market access.

Strategic Motives behind M&A in the Crypto Market

Strategic motives seen in crypto M&A transactions can broadly be categorized by who and whom the acquirer and target are (Enterprise vs. Protocol). To clarify, Enterprise refers to companies with a conventional equity structure (either TradFi or CeFi), managing the organization using a centralized top-down approach, while Protocol refers to Decentralized Applications (D’Apps) or decentralized autonomous organizations (DAOs) with governance tokens representing ownership in a decentralized protocol.

The list of strategic motives below is a sampling of what the market has seen, and is by no means meant to be totally conclusive.

Overview of Crypto M&A transaction motives

Source: Beacon VC internal analysis


Given regulatory uncertainties, especially for DeFi, not all enterprises are ready to offer on-chain DeFi products or services, but many see the opportunity to capture the value created in the crypto space. Enterprises looking for a less risky way to engage with the crypto market are eying infrastructure provider/ enabler play, which is achievable through acquiring existing infrastructure, blockchain enablers, or CeFi companies. The types of services that will be provided by enterprises for the crypto industry include wallet and custodian services, auditing services, or blockchain-as-a-service, similar to what AWS does for Web2. Paypal’s acquisition of Curv is a great example of this strategy.

CeFi companies can also be acquirers, especially large CeFi exchanges looking to enter new jurisdictions. The target would likely be existing CeFi exchanges with local licenses and hopefully good relationships with regulators. FTX’s acquisition of Liquid Group, then rebranding it to FTX Japan, reflects this strategy.

Innovation Leapfrogging

Innovation happens fast, often faster than blockchain-native CeFi companies can keep up. Acquiring frontier protocols allows companies to leapfrog their competition. In fact, many industry experts expect that CeFi exchanges to be the most active acquirers. Coinbase, for instance, has made more than 20 acquisitions since its inception, accounting for over $800 million in acquisitions.

Traditional enterprises are also developing a clearer picture of their long-term strategy and crashing the protocol acquisition party to accelerate innovation. For example, eBay recently acquired NFT marketplace KnowOrigin as a part of its ‘reimagine eBay strategy’.

Real-world Capability Cultivation

Successful decentralized protocols rely heavily on their communities to push out innovations and build infrastructure. As these projects tend to scale rapidly, many lack sufficient resources to handle the ecosystem. 

Many successful protocols that are cash-rich may take crypto winter as an opportunity to develop internal capabilities for the next crypto summer, by acquiring traditional companies to develop real-world capabilities. The acquisition target for these protocols would likely be an existing vendor or supplier to that protocol, as the community already has buy-in for the value that the target is able to generate. Sandbox’s recent acquisition of Uruguayan tech firm Caulit is a great demonstration of the attempt.

Synergy Building

As previously discussed, successful projects place high importance on their communities and the platform’s ability to maintain the community. During crypto summer, investor goodwill is high, and funding is easy to come by. When investor money is tight, however, projects and their communities turn to each other in the hope of sharing resources and growing their footprint in a more cost-efficient manner.

The acquisition motive for synergy can take many forms. One can be product-driven similar to Uniswap’s acquisition of Genie, an NFT marketplace aggregator, to complement its existing NFT liquidity pool – Unisocks. Another could be efficiency-driven similar to the Rari-Fei protocol merger to create a mega $2B liquidity pool.

Possible Structures of Crypto M&A

There is still very limited disclosed information on the deal structure, therefore the structures described below are solely based on market observations and internal analysis. In addition, there are still several challenges in executing a crypto M&A, and there is no standard playbook. In general, however, the Equity/ Token Direct Acquisition is the default method of M&A for its relative simplicity for all types of M&A motives, while Token Swap and Token Merge happen exclusively within Protocol-Protocol acquisition.

Level of control associated with transaction structures

Source: Beacon VC internal analysis

Equity/ Token Direct Acquisition

The direct acquisition method involves purchasing a controlling stake of the target’s equity or governance token, usually aiming to acquire total operational and directional control of the target. The process is executed similarly to traditional M&As, where both parties agree on the transaction price, draft legal documents, execute the agreements, and transfer the securities (or tokens). 

Unlike traditional M&As, there are still several challenges in crypto M&A such as token valuation, legal recognition of governance tokens as an acquirable asset, governing jurisdiction, and the absence of a legal entity for many crypto protocols. With these complexities, it is not surprising that the deal structure for direct acquisition will vary greatly, depending on the specific challenges of the deal.

Token Merge

Token merge happens when the acquirer and acquiree merge to form a new entity and issue a new token. Under this structure, both parties have approximately similar bargaining power, knowing that each party cannot succeed without the other party’s strength. The aforementioned Fei-Rari Merger is a great example for this case. Token holders of Fei and Rari would exchange their respective tokens for a new TRIBE token, under the project name FeiRari. 

Some other remarkable token mergers include the WRAP-PLENTY token merge into PLY to provide a more comprehensive all-in-one DeFi experience on the Tezos blockchain. More details on the merge mechanics are available here.

Token Swap

Token swap usually happens when the acquirer has a larger market capitalization compared to the target, and is looking to acquire smaller projects to complement or help complete its current product or service suite. Unlike total acquisition, the acquirer wants to allow the target company autonomy to operate and innovate. To put it in simpler terms, as Cointelegraph has put it, token swaps can be viewed as a crypto partnership on steroids, to drive the stickiness of the main ecosystem. TNC’s, a blockchain network company, announcement of 4 token swap transactions is an example of this pursuit.

Executing token swap transactions requires multiple smart contracts to manage both parties’ tokens staking into each other’s platforms, or through a shared wallet. The swap itself is a smart contract design problem, but the real challenge happens pre-transaction, similar to the token merge structure, as successful conclusion of the deal involves an extensive community buy-in program for both parties’ stakeholders, not only to align at the financial level, but also to align on project directions. 

Some Areas with Still More Questions than Answers

There are still many questions in the crypto M&A space that need to be answered. Most remaining questions are related to the execution of transactions, since there is still limited understanding of blockchain economics, and an unclear regulatory framework surrounding the space. Below are some of the biggest questions by stage of transaction that deal practitioners are trying to answer.


Valuation: How to value the project as a basis for acquisition? 

At the moment, there is no definitive approach to value crypto-based companies for general investment or M&A, creating tremendous difficulties at the negotiation table. 

Some of the methodologies being used to uncover ‘fair value’ of the project include:

  1. Market Approach – use comparable tokens and respective market price/ capitalization ratios;
  2. Cost Approach – approximation of input cost to create that specific token or project as a lower bound of valuation range;
  3. Income Approach – discount the future economic benefit or utility of such protocol at an ‘appropriate’ discount rate; and
  4. TQM or Quantity Theory of Money approach – approximation of equilibrium market capitalization value in the future, discounted to estimate the present value of the project.

These approaches are inherently subjective by nature, and the characteristic of tokens in each project also brings tremendous complexity.  For a deep dive into crypto valuation, follow the link to EY’s report on the valuation of crypto-asset or’s guide to crypto valuation.


Utilization of on-chain transparency: How to best leverage the abundance of on-chain data for deal-making?

On-chain data promises to help investors make smarter and more well-informed decisions. However, only a handful of investors really understand how to mine insights from the blockchain. Most investors lack the right tools to conduct on-chain due diligence, and further development of the market requires investors to explore how best to leverage on-chain data.

During-transaction/ Deal-making

Agreement drafting and enforceability: How to ensure that the transaction is legally enforceable and minimizes counterparty risk?

The difficulty of enforceability arises from the discrepancies in how different jurisdictions recognize digital assets or DAO entities, or the lack of recognition in several jurisdictions. Cambridge Judge School of Business provides a deeper analysis of the legal and regulatory framework of different nations. In addition, many institutions are subject to anti-money laundering regulations, requiring that any transactions or activities be free of potential money laundering activities. As decentralized blockchain transactions are anonymous in nature, such institutions may be unable to participate in these transactions. 

Legal practitioners and deal makers have been trying to popularize provisions, which protect both parties, including adverse materials, definitions of digital assets, and agreement termination clauses. Bloomberg Law has published a great analysis piece on crypto drafting trends. 


Means of payment and volatility hedging: How to shield parties from the volatility of digital currency as means of payment?

While there is strong demand to use digital currency as means of settlement for crypto M&A (either for tax, transaction speed, or any other reasons), the high volatility within the market prompts both acquirer and target to question how to best shield their position. At the current stage of the market, there aren’t many cost-effective hedging options available, even for institutional investors.


Integration of technologies and communities: How to ensure successful post-merger community and technology integration?

Many M&A transactions ultimately fail due to a lack of compatibility between entities. Integrating two blockchain projects and work processes is a major problem, as currently there is no standardization between projects. Another problem is how to best handle the two communities, whose interests and passion for the projects may not fully align.

Closing thoughts – the beginning of beginnings

With the industry learning more about crypto M&A, we hope that industry participants are working to close the industry’s understanding gap in good faith and for the sake of innovation, and not in an exploitative mindset. 

While many people hope that decentralization would become one of the most prominent turning points of mankind, there are several pieces of evidence suggesting that M&A activities can adversely affect the rate of innovation in a monopolistic or oligopolistic market environment. Acquirers must strive to remember that these transactions must be done for the sake of value creation for all stakeholders, and in pursuit of the betterment of society. Only with the joint hands of institutions and innovators to lay the groundwork and create meaningful solutions, the pursuit of decentralization dreamworks can be realized.

Author: Woraphot Kingkawkantong (Ping)
Editors: Krongkamol Deleon (Joy), Wanwares Boonkong (Pin)

Cryptocurrency Fundraising for Dummies and Why It Matters to Startups and Investors

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Finding funding to start new ventures has long been a difficult task for entrepreneurs, even those with great business ideas, as the traditional fundraising process requires significantly more effort, time, and money. Cryptocurrency fundraising offers an alternative that is best suited for blockchain-related projects. This article will walk through the emergence of various forms of cryptocurrency fundraising, how the fundraising landscape may continue to evolve, and the role financial institutions can play in this area.

The Past Experience of Traditional Fundraising

In the traditional finance textbook, there are two primary sources of funding: debt and equity. Companies can raise debt funding by asking a bank for a loan or issuing corporate bonds. Equity fundraising offers a different set of options. Companies can bootstrap, ask friends and family for small investments, or raise funding from private investors. Startups are typically tech-heavy and require time to generate a positive bottom line, and therefore may require multiple private equity funding rounds over several years before they can access equity funding from public market investors via an Initial Public Offering (IPO).

Following the development of blockchain technology in the late 2000s, Decentralized Applications (dApps), which are web services that use blockchain as a base infrastructure, gained popularity in recent years. The most widely mentioned use for dApps is financial services, referred as Decentralized Finance (Defi). In normal cases, the trustworthiness of the dApp project (also referred to as dApp protocols) will depend heavily on the project roadmap in the white paper, the code presented, and the owners’ background. However, dApp projects do not need to be a registered company and the project owners can be anonymous.

As traditional fundraising can be slow and costly, particularly for entrepreneurs without existing investor networks, an alternative source of funding for dApps has emerged: Cryptocurrency Fundraising (also known as Token Fundraising), where the project owners offer its dApp project’s tokens to interested investors at a relatively discounted price in order to raise funds to run their business. This fundraising method has rapidly gained its popularity due to its benefits relative to traditional fundraising especially for fundraisers, which will be discussed later in this article.

Image source: Maketecheasier – Decentralized Applications (dApps) are digital applications or programs that exist and run on a blockchain or peer-to-peer (P2P) network of computers instead of a single computer. dApps are outside the purview and control of a single authority.

Types of Cryptocurrency Fundraising

There are several ways people categorize the types of token fundraising. One of the easiest ways to understand cryptocurrency fundraising is to break it into Private Placements and Public Offerings. Please note that each country’s regulations might have an effect on the nature of fundraising.

Private Placement

A project owner may decide to conduct a Private Placement in which tokens are offered to a select group of investors prior to a public offering. This is known as a “token presale,” where the startup or project sells tokens while the project is still being developed. The goal of the token presale is to either raise funds for the project’s early development, or for business growth accretion that will eventually lead up to the Initial Coin Offering (ICO) launch. Since token presales are highly risky and investors may lose their entire investment if the project fails to deliver the intended outcome, tokens are usually sold at a huge discount compared to their expected exchange listing price. However, given the cheap price, if the project succeeds, investors will be rewarded with a huge profit. Due to the high risk/high return tradeoff, token presales have gradually become the main event before a new protocol’s public offering as speculators gamble on being rewarded with a satisfying profit.

Public Offerings

There have been three main types of public offerings.

Initial Coin Offering (ICO):

By definition, an ICO refers to the first time when a project raises funds by selling its token to public investors. However, over time the word has taken on another meaning, and now typically refers to any token offering where the project has organized the sale of its tokens by itself. The majority of tokens raised via ICOs are utility tokens. These are tokens that can be used to access and obtain services and products within the protocol. The project may also issue governance tokens in an ICO, which represent the right to vote for the project’s direction. For avoidance of doubt, a token can have both utility and governance features. Unlike an IPO where all fundraising documents are submitted to and evaluated by the Securities and Exchange Commission (SEC) before the company is allowed to issue shares to public investors, in an ICO, the project owner creates a whitepaper which covers all the details of the project. The purpose of the whitepaper is to provide enough details to obtain investor trust, as there is no regulator responsible for verification. One of the most well-known ICO projects was the launch of Ethereum in 2014.

Data source: Coinschedule – According to January 2021 ICO market report, there have been 5,728 ICO projects launched in total. These projects had acquired a market value of $ 27 Billion.

That said, due to the lack of regulation, many projects raised funds but never developed the project promised in the whitepaper. Many of these projects turned out to be scams created by anonymous project owners who ran away with investors’ money, which caused ICOs to lose popularity. Consequently, the undesirable image became one of the major downfalls of this method, along with the need to conduct its own marketing expense to raise funding awareness into investors’ ears. In Thailand, government regulators have stepped in to mitigate some of the trust issues in the ICO market, but two other token fundraising options have also arisen as an alternative to ICOs: IEO and IDO.

Initial Exchange Offering (IEO):

IEO is an improved version of ICO created to address the problems found in the ICO market. An IEO is an ICO where the projects are thoroughly screened and analyzed before tokens are sold on a cryptocurrency exchange. The exchange is responsible for evaluating the credibility of the project, and therefore will need to thoroughly verify the token issuers in order to maintain the credibility and trustworthiness of the exchange. As a result, cryptocurrency exchanges can prevent scams and suspicious projects from raising funds through IEOs. Further, as exchanges act as mediators, projects can get significantly more exposure, interest, and credibility. After a successful IEO, the token issuers pay a listing fee to the exchange, along with a pre-determined amount of tokens for the use of the exchange’s platform services. IEOs gave birth to some of the most well-known blockchain projects of today including Polygon and Elrond. In Thailand, as of March 2022, there is no authorized digital asset exchange which is granted permission to conduct an IEO.

Initial Decentralized Exchange Offering (IDO):

While IEOs solved some of the problems which existed in the ICO market, proponents of dApps faced a dilemma, as the IEO process is a centralized process, relying on a centralized exchange such as Binance or FTX. Proponents of dApps claimed that decentralization could remove human fraud and error, speed up the process, and lower fundraising fees. Consequently, they needed to find an alternative to IEOs.

IDOs, which are a decentralized version of IEOs, originated in 2019 when Decentralized Exchanges (DEXs), a blockchain-based peer-to-peer exchange where transactions occur directly between crypto traders, gained popularity. IDOs use a DEX to facilitate the token sale via the DEX’s IDO launchpad. IDO launchpads are fully automated and run on blockchains using smart contracts. The most popular ones include BSC Pad, Polkastarter, DAO Maker, and Solanium. In order to raise funds, a fundraising project is submitted to an IDO launchpad. If the project meets the launchpad’s standards (as assessed by the community, the launchpad team, or the 3rd party auditor), the project owner(s) are permitted to issue their tokens on the DEX. These assessment processes usually cover only the project code and whitepaper, and do not require disclosing the identity of the project owner, making the process substantially less strict than the IEO process.

Image source: NGRAVE – The Crypto Funding Hype Cycle. From the first ICO in 2013 to the first IDO in 2019. Crypto funding models are continuously evolving to improve upon inherent pitfalls. Initially introduced by Ruben Merre in a 2019 article.

One of the most successful IDO fundraising cases conducted by a Thai dApp is GuildFi project. GuildFi is a Play-to-Earn (P2E) Game-Finance (GameFi) community where players, NFT owners, and game developers are connected. As GameFi requires a player to own NFTs to play games, GuildFi helps players who don’t own an NFT to borrow it from NFT owners. After a player earns income from the game, the income will be shared between players, NFT owners, and the platform. GuildFi also acts as a venture builder and invests in high potential GameFi projects before uploading the game to its platform community to bring traffic into the new game.

Apart from ICO, IEO, and IDO, where the majority of tokens raised are utility tokens, the fall of ICO also created another form of regulated fundraising method: Security Token Offering (STO). STO is an issuance of securities in the form of digital tokens on blockchain, backed by a real-world asset such as stocks, bonds, REITs, or commodities. Such digital tokens are called security tokens, and are a digital representation of the asset to the holder. Since security tokens need to be backed by real-world assets, they are deemed to be a security and are highly regulated by the SEC in many countries. The STO market is therefore relatively small and less liquid compared to ICO, IEO, and IDO markets. In Thailand, STO and security tokens are governed under a Securities and Exchange Act and regulators are in the process of developing the necessary infrastructure to support STO activity.

What Type of Fundraising Method is Suitable for Startups?

Blockchain startups and projects should perform token fundraising via private placement since the companies can gain instant funding and other benefits from investors without giving up ownership or voting rights. The token fundraising process is also substantially more efficient in terms of cost and time since the companies do not need to pay for investment bankers fee or spend time restructuring the organization and preparing tremendous documentation as required for the traditional IPO. The company or project owner can approach several angel investors or institutional investors to gain advantages such as increasing the project’s credibility, providing operational support, or helping the company grow its network and ultimately developing a concrete protocol. By taking these actions in the private placement stage, the company or project owner can later execute an IEO/IDO at a higher price compared to presale round, or raise funds via traditional debt or equity as needed. In general, it is still not recommended for dApp startups to execute an ICO, as ICOs are less credible and more costly compared to IEO/IDO. Low credibility and lack of investor awareness could prevent startups from raising sufficient funding. Thus, ICOs require the projects to pay a significantly large sum of marketing budget to build their trustworthiness and raise funding awareness, whereas IEO/IDO can utilize their own credibility and existing customer base nearly at no cost. Nevertheless, this is subject to each country’s regulations. For instance, in Thailand, as of March 2022, there is currently no digital asset exchange that is permitted by the SEC to perform an IEO and most of the tokens must be raised via authorized ICO Portal.

Further, startups should be wary of raising funds via both equity and token, since it may create a conflict of interest between equity holders and token holders. This conflict of interest occur since the causes of appreciation of equity and token are completely different. The appreciation of equity value is subject to generated cash flow and expected growth of the company. On the other side, the appreciation of token value is tied to the pure demand of the token. To illustrate, there might be a case where a token holder attempts to convince the company to spend unreasonably expensive investment just to increase the traffic and the demand of the token. Thus, to remove this conflict of interest, a dApp startup should either raise funds via token or equity. Otherwise, it needs to manage majority of the investors to hold equal amounts of tokens and equity.

What Type of Fundraising Method Is Suitable for Investors?

In general, dApp startups want funding from institutional investors, as these investors can offer a business instant credibility, operational support, and extended connections. This equips the institutional investor with high negotiating power. Thus, institutional investors who believe in the roadmap of a project and its team should invest in private placements in order to maximize financial return, as tokens are offered at a discount price. Retail investors are usually unable to access private rounds unless they have a good network with the project owner, but may still find upside in investing via IEOs or IDOs.

Token investments provide a crucial benefit to angels and institutional investors who invested in the private round: the ability to turn over cash flow. Unlike an equity investment, which requires an extensive holding period, token investments allow early-stage investors to exit at a significantly shorter investment horizon, since pushing a project through IEO and IDO, where these investors unload their token to realize their profit, is considerably easier and thus faster than traditional equity IPO. In addition, the token can be staked, during the holding period to gain more return along with, of course, risk. These benefits allow the investors to realize their profit quicker and manage their limited cash flow more flexibly.

Opportunities of Token Fundraising for Financial Institutions

Though equity and token fundraising will continue to co-exist in the future since the causes of capital appreciation are different, token fundraising may still heavily disrupt existing financial institutions’ services, particularly as a lender or underwriter. However, there is room for financial institutions to engage with the token fundraising process.

Loan Provider

In a similar fashion to how financial institutions provide lending to traditional small businesses, financial institutions can provide financing to registered dApp startups or individuals who want to create their dApp projects. Financial institutions have much financial and business expertise where most of the dApp projects are running their business. This could include business loans, project financing, or even sponsorship of activities such as gaming, in exchange for interest and/or other types of dApp incentives.

ICO Portal Provider

One of the major weaknesses of ICO and IDO is the lack of trustworthiness. Financial institutions have credibility in the eyes of consumers and could create their own ICO portal to act as a lead underwriter for any token fundraising projects. In addition, there is a growing trend where regulated firms wish to initiate project financing by raising funds via the token. For example, GDH 559, a leading film studio in Thailand, raised funds by selling utility tokens via Kubix, Kasikornbank’s affiliate which operates an ICO Portal, to fund the movie “Bpoop Phaeh Saniwaat 2”. The utility tokens not only provide monetary return to token holders, but also provide special privileges, such as the right to attend the movie premiere and the right to receive special souvenirs. Another use case is the issuance of investment tokens. For instance, in October 2021, Sansiri, one of the largest real estate developers in Thailand, raised 2400 million Thai Baht by selling Sirihub investment tokens backed by the cash flow generated by its real estate, providing up to 8 percent annual return to the token holders. Unlike security tokens, investment tokens do not provide ownership over the asset, but rather the right to receive the cash flow generated.

In accordance with the Emergency Decree on Digital Asset Businesses B.E. 2561, the Thai SEC currently only regulates raising funds via investment tokens and non-instant utility tokens (utility tokens which investors cannot use immediately), both of which must be raised via authorized ICO Portal only. However, it has not yet regulated fundraising via instant utility tokens (utility tokens which investors can use immediately). As of March 2022, the SEC is considering requiring any fundraisers who want to list instant utility tokens on exchanges to seek SEC approval or use an ICO portal. This potential regulation could create more traffic for ICO portal providers.

KYC Information Provider

When regulations mature, regulators may begin forcing registered dApp startups to KYC their users. Since financial institutions have extensive customer data and expertise, they can help dApps comply with AML regulations by acting as an information provider or consultant for startups to conduct KYC and onboard customers who want to use dApp service.


Lastly, financial institutions (FIs) can invest in and support dApp projects by purchasing tokens. dApp and blockchain protocols will contribute a considerable role in financial and other sectors in the future, and financial institutions can capture capital gains by investing in these technologies while they are still in their infancy stage. As providing funding to these startups allows them to kickstart their ideas, FI investments can help shape how this industry develops. In addition, financial institutions can impact the growth of these startups by providing operational support, expertise, insights, and connection to other institutional investors.

Token fundraising will be a large part of company funding and project financing in the future, and financial institutions should take the opportunity to gain knowledge and build up their capabilities in this industry now. This will enable them to better assess the next investment potential in the dApp industry. Perhaps, this could become an origin of a new business model where financial institutions could advise retail investors on investing in dApp startups, or provide tools to help investors evaluate proposed token fundraising deals. By doing so, financial institutions can utilize their credibility and provide other investors with a safer and easier way to invest.

What’s Next?

Token fundraising grants dApp projects, as well as traditional companies, a new source of capital; faster, cheaper, more flexible than ever before. IEOs and IDOs have emerged to mitigate many of the problems seen in the ICO market, and in the future, will co-exist as an alternative funding method alongside traditional fundraising. However, the traditional ICO method will continue to lose popularity and shift to a credibility-upgraded version, the ICO portal. Further, the development of the token fundraising market is not yet mature; new methods may continue to emerge and be further developed, including the use of NFTs for fundraising and the tokenization of real-world assets.



Author: Pobtawan Tachachatwanich (Pob)
Editor: Krongkamol Deleon (Joy), Warittha Chalanonniwat (Paeng)
Special shout-out: Wanwares Boonkong (Pin)




NFTs – Simple Guide to the World of NFTs and Its Potential Beyond Art and Gaming Industries

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This year’s hottest emerging use case of digital assets, particularly in the art and gaming industries, is the use of non-fungible tokens, or NFTs. NFTs as a concept are not something new, but recent explosive popularity in 2021 put the market in awe, from the sale of Jack Dorsey’s first tweet at $2.9M to Beeple’s digital artwork at $69M. In this article, we will take you through the world of NFTs, including current use cases beyond the art and gaming industries, and opportunities and potential to transform the financial sector.


What Exactly is an NFT?


An NFT is a unique digital asset token that represents ownership of digital or physical assets. You can think of NFTs as digital certificates of authenticity and ownership.

Generally, tokens traded on any blockchain fall into two categories, fungible and non-fungible. Fungible tokens, like Bitcoin, are those that can be traded interchangeably. This is similar to trading a one-dollar bill in which all one-dollar bills contain the same nominal value. On the other hand, NFTs fall into the latter category, as each NFT is distinct and therefore not interchangeable – no two NFTs are the same.

Despite the growing hype, NFTs are encountering three key challenges:

  • expensive transaction fees stemming from the nature of the blockchain layer used by the NFT project;
  • ongoing questions on the legal enforceability of the NFT, such as what the buyer actually owns when they buy an NFT; and
  • environmental impact due to high energy consumption in proof-of-work blockchains.


A Quick Overview of NFT Landscape


Sales Volume

NFT sales volume experienced tremendous growth to $2.5B in H1 2021 from $94M in 2020 as more participants such as celebrities, artists, and companies are joining the space. It appears to have potential for future mainstream adoption.


Fundraising Activities


In terms of funding, according to CB Insights, in the past year roughly 15% or 18 deals of blockchain funding deals by top blockchain investors are digital collectibles and NFTs compared to only 2 deals in the previous year. The top blockchain investors include but are not limited to Digital Currency Group, Pantera Capital, and Andressen Horowitz (a16z).

Diving into the top-funded companies in this space, many NFT marketplaces have emerged to serve the rising demand. Dapper Labs, an NFT development platform, raised a total of $635.6M and was recently valued at $7.35B in September 2021. Additionally, one of the most well-known marketplaces, Opeasea, recently closed a $100M Series B round led by a16z in July 2021. Other marketplace players include  Sorare, SuperRare, Rarible.


Thai NFT Landscape


We also see growing adoption in the Thai NFT market. Several NFT projects have emerged, ranging from local celebrities to pageant fans. Bitkub Group partnered with Miss Universe Thailand to bring NFTs to pageants to stimulate fans’ engagement both before and after the competition. In addition, Jay Mart plans to launch JNFT marketplace and collaborate with celebrities to introduce its NFT collection in order to boost the use case of JFin tokens.

However, mass adoption of NFTs may face challenges on the regulatory side. In June 2021, the Thai Securities and Exchange Commission prohibited digital asset exchanges from offering trading of fan-based tokens and NFTs. The regulator aims to stop the trading of digital assets which have no clear objective and whose price could be manipulated by social media trends.


NFT Ecosystem Stakeholders


The main stakeholders of the NFT ecosystem are the creator/artists, the collectors, and the platform providers. Benefits that these stakeholders could receive from NFTs include:

Creator/Artist: The creator/artist could be anyone who owns a digital asset, e.g. artwork, music, or tweets, and wants to monetize it securely. Tokenizing the digital asset into NFTs can help keep the artwork safe, differentiate the original from the copies, and create value from scarcity, resulting in a higher asset value. Retail businesses can expand their product range to include NFTs, creating new revenue streams.

Collectors: Those who are looking to own a valuable digital asset. They could benefit from NFTs in several ways, such as supporting their favorite creators, holding a piece of history, capital gains from market fluctuations, or keeping money protected from inflation.

Platform providers: Providers can generate revenue from transaction fees; for example, OpenSea, the largest peer-to-peer online marketplace for NFTs, makes money by collecting fees from successful transactions. OpenSea is free for NFT buyers, but it charges sellers of NFTs a 2.5% commission on any transaction made through the platform. Different platforms have different models for how they charge fees.


NFT Use Cases Across Industries


NFT applications serve well in any industry where authentication and proof of ownership are crucial. We can observe many real-world use cases of NFTs across different sectors including art, gaming, retail, supply chain management and logistics, and real estate.



Opportunities of NFTs for Financial Institutions (FIs)

  1. How FIs can get involved or provide support in the NFT ecosystem


Some marketplaces, like Mintable, allow their users to pay for NFTs using a credit card. These users can purchase NFTs on the marketplace without needing any digital assets in their wallets (they still need to have a wallet to store purchased NFTs). Financial institutions could enter the NFT space by partnering with NFT marketplaces to allow their users to use credit cards on the platform. For example, Visa has taken steps in this NFT universe by making it convenient for users to convert and spend digital assets with a Visa card.


NFTs transactions can involve large amounts of money, posing risks of money laundering, malicious transactions, illegal activity, or scams. Financial institutions can take part in the space by conducting due diligence on customers involved in NFT and digital asset transactions.

NFT Market Operator

FIs can take part in the NFT market by participating as an NFT marketplace to capture the growing demand and explore new space while leveraging their trusted brand. FIs can support the creators to help launch new NFTs on the platform and earn a fee or percentage cut from each peer-to-peer transaction.

NFT Fund

FIs can also launch NFT funds for investors to have exposure in digital art, digital collectibles, and metaverse, and to own a part of several NFTs without direct exposure to the NFT market. FIs can leverage their existing large customer bases, as well as drawing in new clients to invest in their NFT funds.

  1. Application of NFTs in the Financial Sector

Application of NFTs is still in a very early stage for the financial services sector but it has the potential to be integrated deeper into the space to improve operational efficiencies as well as create new revenue models.

To improve efficiencies for FIs, NFTs can be used to record ownership and transfer of assets. They can be utilized to ensure the provenance of goods (point of origin), for fraud protection, and for debt management, including tracking and managing debts. On the potential revenue-generating side, it is possible for FIs to explore the convergence of decentralized finance and NFTs by allowing the holder of the NFTs to earn yield (staking) or use their NFTs as loan collateral.


How to Get Involved in the NFT Market


This section will guide you through the general process of how to create NFT collections and store and sell NFTs to have a better understanding of how the process works.


Step 1: Determining an appropriate blockchain


Every creator will start their NFT journey by deciding which blockchain they should adopt. Most NFT activities we observe today are built on Ethereum, due to its capability to attract a broad set of users and developers. In the future, we can expect to see more blockchains entering the market. Users should consider tradeoffs and pick one that suits well with their objectives.


Step 2: Minting NFTs


After picking which blockchain to use, the next step is to transform the digital assets into NFTs. This process is called minting. Several platforms can help with minting, such as OpenSea, Rarible, or Bitski. One important thing to keep in mind when deciding on what platform to use is controllability. We should pick one that gives us as much control over NFT features, such as provenance, attributes of the NFT, or storage of the underlying asset. Once NFTs are minted, they will be stored on the blockchain, unchangeable and tamper-proof.


Step 3: Storing digital content file


During the minting process, users will have options to store their digital content file either on the blockchain itself, or in other places. While storing files directly on blockchain (e.g. on Ethereum) may limit storage space, some users might find it more convenient to use third-party storage as it is more reasonable in terms of price and storage space. Currently, both centralized and decentralized storage options exist. Centralized storage makes NFTs more dependent on storage providers, and if such a provider is out of the business, the NFT will link to nothing. Decentralized storage has evolved to mitigate this issue because the architecture of this method completes the full circle of blockchain principles and operates without the intervention of any intermediary.


Step 4: Storing NFTs


Once the creators successfully mint NFTs, they have to keep them in a digital asset wallet like other digital assets. There are two models of wallets, custodial and non-custodial. For the custodial solution, third-party providers will store private keys of wallets on behalf of customers. Creators should only use a custodial service from a trusted brand with strong security. In contrast, the non-custodial solution is that customers are responsible for storing their own private key to access their wallets.


Step 5: Distributing NFTs across the marketplace


Nowadays, we have many NFT marketplaces in the space. Well-known players in this space include OpenSea, SuperRare, Rarible, Nifty Gateway, Foundation, Enjin, and many more.




By considering its underlying technology and current use cases, mainstream adoption of NFTs may be in the foreseeable future. Big brands and public figures in the traditional world are joining the NFT ecosystem which then stimulates and increases awareness among the general public. Nevertheless, regulations related to NFT, including the classification and anti-money laundering need to be monitored, as this type of digital asset is still in the early-stage, and regulators may attempt to closely monitor and control it as it grows. Looking into the future with proven technology, NFT has the potential to go beyond what we see today in the digital art and gaming industries. It could potentially transform existing sectors from retail to financial services, which may present an even greater opportunity for NFTs in forthcoming years.



Author: Warittha Chalanonniwat (Paeng), Wanwares Boonkong (Pippin)

Editors: Panuchanad Phunkitjakran (Pook), Woraphot Kingkawkantong (Ping), Krongkamol Deleon (Joy)


From Internet Banking to Blockchain Finance, What’s Next for Financial Institutions?

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The concept of banking first emerged sometime around 2,000 BC in Mesopotamia, where merchants felt the need to give out loans to farmers and traders who roamed the different cities. From then on, as trade and the economy grew, modern financial institutions were built to consolidate the scattering of economic activities and provide trust.


For centuries, the financial system has been heavily centralized. Along with other government entities, financial institutions joined hands to govern almost all transactions, from money issuance to lending and investing. They have this power to centralize because they alone can keep track of all financial transactions. The invention of blockchain will change the fundamental mechanics of how this new era of the financial system operates with its decentralized record-keeping feature. Once this technology fully matures, traditional financial institutions as we know them will have a lesser role in the financial system.


Blockchain and Its Promise to the Financial System


Blockchain is a decentralized record-keeping system that documents all transactions that happened on it. In other words, it is a bank book that everyone can possess and whose content is self-updating with all new transactions and the change in ownership of any assets. It defies financial institutions’ fundamental role as the centralized record keepers who prevent the same money from being spent twice or the same asset being transferred repeatedly.

Fully mature blockchain technology promises to provide greater efficiency, lower transaction costs, better transparency, a speedier rate of financial innovation, and a much lower carbon footprint (still heavily debated) compared to the traditional financial system.


The Inception of Blockchain Finance


In the early days of blockchain finance, Satoshi Nakamoto (pseudo name – actual identity remains unknown) invented Bitcoin (whose underlying technology later became known as blockchain), a digital currency to aid in the decentralized transfer of money. The transfer data stored in Bitcoin’s blockchain is static – meaning that the blockchain can only record that Entity A transfers B amount of money to Entity C.

Ethereum then came along and introduced smart contract technology, which allows blockchain to be programmable. Ethereum blockchain can instruct that only when Event D happens, Entity A can transfer B amount of money to Entity C. Any transactions can become fully automated upon a defined set of rules.

Both technologies were the foundation of the concept of what is now known as Blockchain Finance.


The Blockchain Finance Dilemma


While groundbreaking, current blockchain finance is not without limitations. The challenge lies in the Blockchain Dilemma – that blockchains may only choose up to two qualities to achieve: Security, Scalability, and Decentralization. The limitation is the mechanism to how each party in blockchain finance agrees that a transaction is legitimate and therefore should get updated in everybody’s copy of the bank book (referred to as the “Consensus Mechanism”).



Source: Original framework by Certik, adapted by Beacon VC


Since both Bitcoin and Ethereum prioritizes Security and Decentralization, scalability is a challenge for both blockchains. In order for a new transaction to be recorded in everyone’s copy of the bank book, someone who holds a copy of the bank book must confirm that the transaction is legitimate through the computation of a complex mathematical equation. That person is referred to as a miner, and the first miner who gets the equation right wins a monetary reward. This process of solving a mathematical equation to confirm a transaction is called the proof-of-work consensus mechanism (PoW).


Other blockchains prioritize Decentralization and Scalability, giving birth to the proof-of-stake consensus mechanism (PoS). Blockchains that adopt PoS include Polkadot and Vechain. Under the PoS concept, a miner can be eligible to confirm a transaction by putting down a ‘ stake’ in the form of coins belonging to that blockchain (think of it as a refundable deposit). The more coins put down by a specific miner, the more eligibility that miner has to validate a transaction. This consensus mechanism works because the miners who are not validating any specific transactions are obliged to check the work of the validating miners. Faulty confirmation of a transaction is penalized by confiscation of stake.


Finally, other blockchains prioritize Security and Scalability. While many blockchains use the PoS to validate transactions, we have seen a rise in the proof-of-authority consensus mechanism (PoA). In this case, new transactions are confirmed by a few authorized players in that blockchain. These players are incentivized to keep transaction data legitimate and enjoy the monetary benefit for that blockchain growth. Examples of blockchains that prioritize security and scalability include blockchain consortiums formed by financial institutions (JPM coin), and the Bitkub chain. In reality, there are many other ways that a blockchain can achieve scalability and security, as we also see cases using a hybrid model between PoS and PoA – the delegated proof-of-stake mechanism (dPOS), which we will leave for another discussion.


The Two School of Thought of Blockchain Finance (CeDeFi/ DeFi)


There are big debates in the blockchain finance space whether blockchain finance should be centralized (CeDeFi or CeFi) or decentralized (DeFi).



CeDeFi is an evolution of the current financial system where an intermediary helps manage the transaction and regulate the users’ activities in that ecosystem. Under this scenario, if a user wants to make a transaction, the user needs to create an account with the company, deposit cash or any assets into the company’s custodian, and use that company to execute the transaction. In this case, the customer would need to reveal their personal information to participate in the ecosystem. Great examples of CeDeFi platforms include Binance and Coinbase.


Conversely, with the growing need to protect own data and distrust in institutions comes the demand for DeFi. Users are required to manage their own funds and financial activities. They must have a personal wallet where they store their assets and use that wallet to carry out transactions by connecting it with decentralized service providers. Since these decentralized service providers execute trades based on smart contracts, the transactions automatically occur when conditions are met. There is zero need for human intervention. This gives flexibility for DeFi users to select service providers whose set of rules they like the most.


Which School of Thought Will Prevail?


Although there is no guarantee which school of thought will prevail, or that there will be any clear winner, we anticipate that CeDeFi will gain mass acceptance and adoption for real commercial purposes first, despite the current boom in DeFi which has been driven by speculative forces.

It is all about the evolution of public trust. CeDeFi is, by design, a bridge for general customers to start exploring the blockchain finance ecosystem and shifting their trust away from financial institutions/centralized governing entities to service providers (think of Binance, Bitkub, Zipmex, Satang Pro, etc.). These companies excel in replicating the same user experience a customer would have if they were to interact with general fintech that people know and have grown accustomed to. Once more people start adopting CeDeFi, and the infrastructure and interface for DeFi are in place, the public will soon learn to shift trust from said service providers to algorithms (code and rules of how transactions are made), leading to the potential mass adoption of DeFi. It is impossible to say when mass DeFi adoption will happen, but we can definitely see both CeDeFi and DeFi co-existing in the foreseeable future.


Such co-existence can take place in a number of manners:

  • Gateway: Since value creation in the economy is still largely driven and transacted in the physical world, CeDeFi can exist as a gateway for users to convert traditional assets (such as fiat money) into decentralized blockchain finance. We are already starting to see this symbiotic relationship between CeDeFi and DeFi, in which users convert their money into digital assets using CeDeFi and then transfer it to their personal DeFi wallet. (think of Fiat -> Binance -> Metamask wallet)
  • Market Segmentation: It is possible that CeDeFi and DeFi can co-exist by serving different markets in the economy. Segmentation can be based on the need for governance. For instance, CeDeFi can serve segments where visibility and governance are critical, such as corporate clients, while DeFi can serve the retail market. Segmentation can also be based on the type of trust users require. Conventional users can use CeDeFi because their trust system is based on having a single entity to point to when things go wrong, while DeFi users can be more comfortable with the algorithm.
  • Business Extension: CeDeFi organizations can use DeFi as a place to experiment with financial innovations and later acquire the know-how to build or integrate similar services to their platform. This is the same model that we already see in the financial industry, in which big financial institutions leverage the capability of startups to enhance the robustness of their offerings.


While this migration unfolds, regulators and financial intermediaries incumbents will likely try to slow the migration rate to a minimum. This is because they will first need to find a satisfactory framework to thrive in an entirely DeFi environment. After all, there are certain benefits to centralization, such as the ability for the government and banks to control fund flow, regulate the market, and effectively pull monetary levers to protect the economy or national interests.


What’s Next for Financial Institutions?


There is no telling when mass CeDeFi or DeFi adoption will happen, but it is paramount that financial institutions start finding their role in this emerging ecosystem. To start from an inside-out perspective, financial institutions were built upon trust and efficiency through consolidation. The critical area of exploration is where financial institutions can continue to deliver benefits both in the CeDeFi or DeFi context. From an outside-in approach, financial institutions can navigate through different blockchain layers and access points in the ecosystem to identify a natural fit for their current products, capabilities, or future strategy and monetization models.


While we are racing towards what may be the most significant overhaul of the financial system in modern history, we must strive to remember that different populations adopt technology at different rates and that meaningful innovation must not further marginalize anyone.



Author: Woraphot Kingkawkantong (Ping)
Editor: Krongkamol Deleon (Joy)
Special shout-out: Wanwares Boonkong (Pin), Phanthila Saengthong (Mook), Panuchanad Phunkitjakran (Pook), Napat Nantavechsanti (Jum+), Phongsuphat Kanchanakom (Monn)