By Lee Yeon-woo
The scale of domestic gambling services, where users deposit their coins to receive rewards, has expanded to trillions of dollars.
As service brokerage fees are emerging as a new source of revenue for cryptocurrency exchanges, competition between exchanges has also intensified.
The cumulative amount of coins staked on Upbit, the largest domestic cryptocurrency exchange, exceeded 3 trillion won ($2.1 billion) in April, according to industry sources.
The staking involves using investors' coins to verify the blockchain network. In exchange for their participation, investors can receive a set number of coins as a reward. By staking their coins, investors actively contribute to improving the security of the blockchain network.
Although staking is often compared to a bank deposit in terms of holding investors' assets over a period of time, cryptocurrency exchanges do not manage currencies like banks manage money. Rewarded coins are not compensation for management benefits.
Engaging in betting can be difficult for individual investors. Therefore, cryptocurrency exchanges often act as representatives and charge brokerage fees.
For example, Upbit currently offers a service for five currencies: Ethereum, Cosmos, ADA, Solana and Polygon. The estimated reward rates per year are 3.1 percent, 16.6 percent, 2.6 percent, 6.5 percent and 4.8 percent, respectively. In exchange for its brokerage service, Upbit deducts 10 percent of rewards before distribution.
These services have become a breakthrough for domestic cryptocurrency exchanges, which traditionally relied on transaction fees for revenue. As declining profits drive efforts to diversify revenue streams, each exchange is markedly expanding its staking services.
Upbit distinguishes itself as the only exchange that operates and participates directly in the entire process without outsourcing. The exchange emphasizes security by storing all staked assets in cold wallets, which are disconnected from the internet.
Bithumb and Coinone, the second and third largest in the market, offer a daily betting service to differentiate themselves from Upbit.
This service allows investors to deposit and withdraw their coins freely, unlike traditional staking services, which require days to process holds and withdrawals.
Bithumb also announced a rebranding of its betting service on Monday, along with special events for new customers. It currently provides betting services for 15 coins.
Despite its popularity, experts warn investors about the inherent risks associated with gambling.
"Assets in staking services are vulnerable to losses from hacking and technological failures. Additionally, they cannot be 'unstaked' during the designated period. If the value of the currency falls, customers who have deposited coins may experience significant losses," Korea Capital Market said. Institute researcher Maeng Ju-hee said.
"Korea will need to establish regulatory frameworks for gambling, including determinations on its status as a security."
