Haechi looks to go global with its gas saving digital wallet
05:22, 28 March 2022
Despite a population of just over 50 million the amount of bitcoin bought using the South Korean won is more than double the value originating in euros and is only outranked globally by the US dollar and the Japanese yen linked transactions.
According to Haechi Lab’s head of growth Alex Lim, Korea’s largest exchange by volume upBit has 8.5 million users, and he estimates that more than half the country’s younger population (which he defines as those in their 20s or 30s) currently have an upBit account.
There are numerous reasons for South Korea’s leading role in global crypto markets and Lim says one key element is the relative abundance of development talent in the peninsula.
“The three co-founders of our company got together from Seoul National University in 2018 and started a small community of smart contract security engineers, which was very rare back then. And it’s still rare now.”
Haechi eyes global market
Haechi Lab head of growth Alex Lim – Photo: Haechi LabHaechi Labs started out in 2018 providing much-needed audit services to crypto exchanges. The firm then received an acceleration grant from the Ethereum Foundation and backing from Samsung which enabled it to launch the Henesis Digital Wallet API in 2019.
Henesis is now being used by a number of Korean exchanges as well as Southeast Asia’s biggest crypto bourse Indodax meaning it is the digital wallet of choice for around 100 small and mid-sized centralised crypto exchanges in South Korea and Southeast Asia, but Lim says the company now has its sights on the global market.
“Haechi is looking to significantly scale that up outside of Korea, we’ve been serving predominantly Korean customers so far. But we have enough resources to increase our business overseas. And there’s definitely enough demand out there if the conversations we have had with exchanges so far are a good indication.
“Our growth targets lie predominantly in the American and European markets, as well as further expansion in Southeast Asia. We’re also very interested in exploring what Africa looks like because there are definitely exchanges there with a very high trading volume.”
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Slashing gas fees
What Henesis brings to centralised exchanges is the ability to slash gas fees on transactions by up to 95%. While Ethereum’s gas fees have fallen back from their November peak, partly off the back of declining interest in non-fungible tokens (NFTs), they are still a barrier to trading.
This is where Haechi Lab’s smart contracts expertise comes into play, enabling it to save users of centralised exchanges gas fees, which typically come at three different stages.
The first stage is when a centralised exchange user wants to move ethereum between two different centralised crypto exchanges.
“So let’s say there’s an end-user who, who has an account in both Crypto.com and Binance, is trying to move three ETH between accounts, typically speaking, this triggers a gas fee,” says Lim.
A forward play
However, using the Henesis digital wallet it is possible to include a function called a forwarder. Lim says that this is an auto sweeping function on its smart contract. This can recognise each transaction, and all subsequent times the user makes that exact same transfer.
“So if a user deposits ethereum from Crypto.com to Binance, it automatically detects that positive wallet address, and then sweeps it in one go, so from then on it doesn’t incur any additional gas fees, which is one way that Henesis saves on gas costs.”
Lim says the bulk of savings come from transactions using the ERC-20 tokens which are the industry standard for smart contracts based on the Ethereum blockchain.
“There are hundreds of different ERC-20 tokens that compose the majority of the listings for a lot of centralised exchanges. And when users move these tokens then it looks a little more complicated,” he says.
Integrating wallets
In this instance, users require a separate wallet just to process the gas fees and are typically required to keep a certain amount of ETH in these wallets in order for the deposit wallet to receive the ERC-20 token.
“So for example, if an end-user wants to move a ERC-20 token like USDC or Chainlink between centralised exchanges they have to pay gas fees to move a certain amount of ETH from their main gas fuel wallet to the user wallet.
“Once a user deposits an ERC-20 token from another exchange into their deposit wallet address, they actually sweep the deposit wallet address tokens to their master warm wallet, which also triggers an event on the ethereum ecosystem, and incurs the second gas fee,” says Lim.
At this point, Henesis’s smart flushing functionality kicks in. It allows the gas wallet fee to move to the master wallet at one go and it is also able to process up to 50 wallets in a single transaction. Lim explains that the technology to do this already exists, but the way that Haechi Labs has combined it in its Henensis wallet is proprietary.
Empty wallets are not free
The final stage of gas fee savings comes solving the problem of centralised exchanges incurring a gas fee when they issue a brand new wallet. This costs gas irrespective of whether that wallet becomes active or not – and a large percentage of new wallets do not actually get used, according to Lim.
“But by using a function on Henesis we are able to set up the deposit wallet address so that gas fees only occur when a deposit activity happens.”
Lim says this final function offers major savings for centralised exchanges which he says are focussed on new user acquisition and as a result are not tracking the gas costs incurred by setting up wallets which ultimately do not become.
This means they not only are paying to set up wallets that do not become active they are also unaware of the costs this brings to their business.
Exchanges do not monitor gas fees
Haechi has signed a JV with lender KB Kookmin Bank – Photo: Shutterstock“Most exchanges are super clearly focused on new user acquisition, this implies, running new services, or listing a whole lot of different new tokens. Then they go to his investor calls, and they review their P&L, and when they talk about optimising their operations costs, it turns out they haven’t actually been tracking how much gas fees are being incurred on a monthly basis.”
In addition to its auditing and digital wallet service, Haechi also has a joint venture (JV) with South Korea’s largest lender, KB Kookmin Bank, a firm which recently showed its digital credentials by opening a bank branch in the metaverse, and crypto firm Hashed.
The JV will provide digital custody solutions for enterprises and conglomerates, and crucially holds a regulatory licence which is of great importance given how Korean authorities are increasingly scrutinising the crypto sector.
Lim says the firm is looking to raise funds for the first time in the coming months and it is limbering up to offer a range of Web3 products. He is reticent to give further details about what this will look like but is confident they will be successful.
“We’ll be shipping a variety of different Web3 products in the coming months, and this is all viable because we have all the proprietary wallet related technologists, which sits at the core infrastructure of any sort of crypto businesses or products.”
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