Mainnet mergers and acquisitions: a new trend in Web3 project grouping

Original title: "Merger and Acquisition in the Blockchain Industry"

Author: Jay Jo&Yoon Lee

##Compiled by Deep Wave TechFlow

Abstract

• The Web3 industry is changing with each passing day, and mainnet projects are emerging one after another, but many of them disappear quickly. Recently, the

  merger between mainnets is becoming a new trend.

• #Mainnet merger provides benefits such as enhancing competitiveness, securing talent, and expanding value. However, due to the size of the mainnet ecosystem and potential exchange delisting issues, caution is required.

• # In the fast-paced Web3 market, M&A may become a key strategy, but it should be avoided solely for price manipulation or risk aversion.

1. Introduction

In the Web3 industry, mergers and acquisitions (M&A) between mainnets have recently emerged for a new trend. Each mainnet is looking to create synergies by merging with other mainnets with different assets and experience, or to quickly increase competitiveness by acquiring mainnets with proven technical capabilities.

The Web3 industry is characterized by rapid development, market trends appear and disappear quickly, and the pace of change is unprecedented. New mainnet projects emerge every day, and those that cannot adapt quickly may quickly become marginalized and become obsolete. Data from Coingecko shows that an average of 5,300 new token projects are launched every day, highlighting the fast pace of the market, with projects constantly emerging and disappearing. Although token projects are different from mainnet projects, it is reasonable to speculate that trends in the token project field have also affected the dynamics of the mainnet market to a certain extent.

As competition in the Web3 industry becomes increasingly fierce, mergers and acquisitions are becoming strategic means for projects to enhance competitiveness and ensure survival. It is expected that the frequency and diversity of mergers and acquisitions between mainnets will increase, significantly affecting the development trajectory of the industry. This report analyzes recent mergers and acquisitions between mainnets, exploring the goals behind these strategies and the intended outcomes they aim to achieve.

2.

Mainnet mergers and acquisitions: new trends in the Web3 industry

Recent acquisitions and mergers between mainnets can be divided into three major categories Strategy:

1)

Horizontal integration. That is, a mainnet project acquires or merges with a competing mainnet in the same market to strengthen market influence.

2)

Vertical integration. Aims to reduce costs and maximize synergies through mainnet mergers related to the value chain of a specific business or domain.

3)

Hybrid integration. Mainnet mergers with no direct business relevance to diversify operations and quickly improve capabilities in unfamiliar areas.

Vertical integration

• In May 2023, Vietnam’s Coin98 announced the acquisition of TomoChain.

• In March 2024, SingularityNET announced plans to merge with Fetch and OceanProtocol.

Horizontal integration

• In January 2024, Klaytn announced plans to merge with Finschia.

Hybrid Integration

• In April 2024, Carry Protocol announced plans to partner with SLG. Games merge.

##2.1 'Kaia': Integration project of Klaytn and Finschia Foundation

The merger between Klaytn and the Finschia Foundation represents the first of its kind on a mainnet merger. In January this year, the two projects announced the launch of an integrated mainnet, now renamed 'Kaia'. Their goal is to create Asia's largest blockchain by combining their respective ecosystems and assets, aiming to lead the global Web3 market.

The merger is seen as an effort to expand its dominant influence in the Web3 market, especially in Asia, by merging competing mainnets. Its significance lies in realizing the comprehensive integration of human, material and technical resources. Kaia is expected to be operated jointly by personnel from Klaytn and the Finschia Foundation, while integrating their respective assets. Notable examples include Klaytn’s exclusive on-chain assets and real-world assets (RWA), as well as Finschia’s games and other content assets based on the LINE FRIENDS IP.

Leveraging the expertise of EVM-based Klaytn and Cosmos-based Finschia, the team plans to develop an integrated mainnet that supports EVM and CosmWasm compatibility. This move is expected to create a massive ecosystem within the Web3 industry, leading to the birth of a highly advanced mainnet.

Through this comprehensive integration, Klaytn and Finschia will work closely to maximize each other’s strengths and offset their respective shortcomings. They will also leverage the assets of partners Kakao and LINE to further consolidate their dominance in the Asian market. In a Web3 industry where institutional investment is increasing and development is accelerating, the merger is considered a timely strategic move. There are high expectations for the changes and innovations this merger will bring to the global Web3 ecosystem, extending beyond Asia.

2.2 Web3 Artificial Intelligence Alliance's major project 'ASI'

in March , Web3 projects in the field of artificial intelligence

SingularityNET, Fetch and Ocean Protocol announced their merger plans. They are about to launch a new token project called 'ASI (Super Artificial Intelligence)' after being approved by a governance vote in April. This merger is slightly different than the one between Klaytn and Finschia, as they are creating a new project to expand their plans while retaining the independence of each foundation.

The projects participating in the ASI program are not direct competitors, but complementary projects connected to the artificial intelligence industry value chain through vertical integration. They plan to merge existing tokens into ASI tokens and use a Cosmos-based chain (which is a hard fork of the Fetch mainnet) to vertically integrate the technology stack held by each project. The main goal is to create synergies and accelerate the development of decentralized AI technology.

At the same time, the leadership, team, community and financial resources of each foundation participating in the ASI project are expected to remain unchanged. This approach, more akin to a strategic partnership than a full merger, demonstrates an intention to create synergies through collaboration while retaining the identity and unique characteristics of each project.

The ASI project aims to promote the advancement of Web3-based AI technology through vertical integration of the artificial intelligence industry. By setting goals that would be difficult to achieve on a single project, they intend to drive innovation by leveraging the combined strengths of each participating entity. As the convergence of Web3 and AI gains focus as a key driver of future technological advancement, the development of the ASI project is expected to be an important milestone in establishing a decentralized artificial intelligence ecosystem.

2.3 Integration of advertising and gaming industries: Horizontal expansion of the 'GAME Build' project

##In April, blockchain-based rewarded advertising platform Carry Protocol and Web3 gaming platform SLG.Games announced their plans to merge. Following the governance vote, they announced the launch of a new token project called 'Game Build'. By integrating their expertise in blockchain technology, advertising and game development, they aim to create synergies and drive innovation within the Web3 gaming ecosystem.

The merger of these two programs is an example of horizontal integration, designed to leverage each other's strengths to supplement relatively lacking capabilities. Carry Protocol plans to collaborate by leveraging its expertise in blockchain technology and advertising, while SLG.Games will contribute its accumulated expertise in game development and blockchain integration. The goal is to introduce a blockchain-based advertising platform and development tools designed specifically for the gaming industry. Furthermore, the Game Build project envisions providing advertising solutions and developer-friendly one-stop infrastructure optimized for Web3 games.

The success of the Game Build project depends on how effectively Carry Protocol and SLG.Games merge their respective expertise to create synergies. It’s important to observe the changes and innovations their collaboration has brought to the gaming industry.

2.4 Acquire mainnet technology through the acquisition of TomoChain by Coin98

Last year 5 In August, Vietnam's Web3 platform Coin98 acquired the local mainnet TomoChain. This is considered to be a strategy for Coin98, which lacks mainnet development experience, to ensure technical competitiveness and maximize synergy in a short period of time by acquiring TomoChain, which has mature technical capabilities.

After acquiring TomoChain, Coin98 rebranded it as Viction, making it a core component of its ecosystem. Coin98 plans to leverage Viction’s technology and resources to foster a developer-friendly environment and create synergies by integrating it with various services such as its Web3 wallet. This integration is expected to be Coin98’s unique advantage in the highly competitive Web3 industry. However, the changes so far have been mostly cosmetic, including token changes to native tokens, the actual impact of which remains to be seen.

The focus of the industry is the potential changes and impact that the cooperation between Coin98 and TomoChain will bring to the Web3 industry. If this acquisition can successfully integrate and leverage the strengths of the two companies, it is expected to establish a new model for protecting mainnet technology and expanding the ecosystem.

3. What is the purpose of merging the main network?

Case studies to date indicate that mergers and acquisitions between mainnets are becoming a significant trend in the Web3 industry. These trends are driven by various objectives and can be analyzed into three main factors:

• Strengthening business and technological competitiveness

• Acquisition of professional talents

• External extension of project value

First, strengthen business and technical competitiveness. Through mergers and acquisitions, mainnets can expand geographically or enter new business areas. Klaytn and Finschia's 'Kaia' project exemplifies this strategy. Klaytn and Finschia have competitive advantages in different regions and business areas. Klaytn is good at infrastructure-driven industries, while Finschia is good at content-driven industries. Their merger aims to expand their respective business areas, address weaknesses, accelerate growth and development, and rapidly increase market share.

Also, this can also be a strategic move for technological advancement. By acquiring a mainnet with specialized technical capabilities, companies can quickly upgrade their technology. Coin98’s acquisition of TomoChain is a typical example. Their goal with this acquisition is to acquire advanced mainnet technology and expand their wallet ecosystem. This approach is time and cost efficient, making it a key strategy in the highly competitive Web3 industry.

Secondly, the goal of acquiring professional talents. The Web3 industry is a rapidly growing field of cutting-edge technology, and acquiring capable talent significantly affects the growth and development of the project. In particular, those talents who directly design and develop the main network, such as blockchain core developers, are extremely scarce. According to Stack Overflow’s 2023 survey, only 0.42% of all developers are blockchain developers, indicating a severe shortage of professional talent. Therefore, mergers and acquisitions between main networks are also to obtain these valuable talents.

Finally,

External stretch goals for the project value. In the Web3 industry, market capitalization and total value locked (TVL) are important indicators for evaluating mainnets and are considered a measure of credibility. These metrics significantly increase the mainnet’s brand awareness and strengthen its market position. Projects with higher market capitalization or TVL attract more attention and capital inflows. Therefore, mainnets adopt M&A strategies to quickly increase their enterprise value. By combining the liquidity and capital of each mainnet, they can quickly increase TVL and strengthen their market position, making M&A an attractive option. .

In fact, the merger of the three projects SingularityNET, Fetch and Ocean Protocol quickly entered the top 30 in market capitalization rankings. This example shows that mergers and acquisitions can be an effective strategy to accelerate growth outside of mainnet and expand industry influence.

In this way, Mergers and acquisitions between mainnets are becoming a key strategy for companies in the Web3 industry to overcome growth constraints and enhance competitiveness. These initiatives, with the goals of expanding business scope, advancing technology, and acquiring professional talents, are expected to continue and significantly impact the future development of the Web3 industry.

4. What are the precautions for mainnet merger cases?

Mainnet project mergers are similar to the risks encountered in the Web2 industry. Specifically, merging mainnets involves integrating large ecosystems and cultures, making the process more complex and needs to be treated with caution .

• Difficulties in integrating human and material resources

• Difficulties in integrating communities and ecosystems

• Exchange listing issues

First of all, the challenge of integrating human and material resources is Must be treated with care. This process reflects issues commonly encountered in corporate mergers and acquisitions. A famous example is the merger of Mercedes-Benz and Chrysler, known as the "merger of the century". Although it received widespread attention from the market, it ultimately failed. The merger was frustrated by culture clashes and different working styles. Similar issues may arise in the case of a mainnet merger, requiring careful management and foresight.

#Secondly, integrating communities and ecosystems poses significant challenges. Unlike Web2 companies, the mainnet includes an ecosystem and community of various dApps and governance participants. Therefore, internal and external integration with stakeholders is critical. A notable example was the opposition from community and governance actors during the merger of Klaytn and Finschia. Since the mainnet operates within a decentralized structure, it is crucial to achieve consensus not only internally but also among the broader ecosystem stakeholders. Therefore, when deciding to merge, it is crucial to ensure that the process goes smoothly and to recognize that problems can arise if the integration is not done properly.

#For the mainnet, the listing of its tokens on exchanges is crucial. However, the process of token conversion or issuance of new integrated tokens during mainnet integration may not go smoothly on exchanges. In fact, most exchanges are very cautious about token conversions and the issuance of new tokens resulting from mergers. If a delisting occurs, relisting may take a long time, which may reduce competitiveness in the process.

In short, the integration process after mainnet mergers and acquisitions is crucial. Unlike Web2 companies, mainnets must gain consensus from a more diverse and complex set of stakeholders and strictly handle issues such as exchange listings . Successful mainnet mergers and acquisitions require carefully prepared strategies and implementation plans to effectively address these challenges.

5. Conclusion

It is expected that mergers and acquisitions between mainnets will become the new standard in the Web3 industry. As the number of blockchain projects continues to grow, only a few mainnets will eventually gain traction in the market. Therefore, frequent mergers and acquisitions are expected to address shortcomings and enhance strengths.

However, This process should not be used as an event aimed at short-term gains, nor as a means to evade responsibility or risk. As can be seen from the merger cases of Klaytn and Finschia, this process must be preceded by active communication, persuasion and long-term preparation. In most current project mergers, governance votes are poorly conducted and turnout is low. For example, on the merger proposal between Carry Protocol and SLG.Games, only around 100 wallet addresses participated in the vote, indicating that the opinions of all token holders were not fully reflected.

Nonetheless, these confusing situations will hopefully improve as more cases accumulate and new strategies and narratives are established. In conclusion, MainnetM&A is a key strategy to overcome growth constraints and accelerate development, which is crucial for the dynamic Web3 industry. It remains to be seen whether recent M&A cases can serve as successful precedents.

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