Wemade Co.,Ltd. (A112040) Earnings Call Transcript & Summary

Good morning, this is [indiscernible] of the IR department at Wemade, thank you for joining our 2022 First Quarter Earnings Conference Call of Wemade and Wemade Max. We will start with opening remarks by our CEO, Hyun-Guk Chang, followed by a presentation on our first quarter results by Head of IR, Sang-Won Kim, before taking your questions. Our 2022 first quarter results presented today have not yet completed review by the external auditor and are provided for your convenience. Therefore, it may change during the auditing process, as well as according to instructions by the Financial Services Commission. We also remind you to refer to the disclaimer included in the presentation material, posted on our website. Now our CEO, Hyun Chang, will make a few opening remarks.

Good morning. This is Hyun-Guk Chang, CEO of Wemade. Thank you for joining our first quarter earnings conference call for year 2022. While it is true that information at a certain time point or juncture carries important meaning, time always passes and the future soon becomes the present, and then again, the past. That is why more meaningful implications and insights in understanding the world and the phenomenon around us can be gained from a longitudinal approach. And today, I would like to start by talking about the past, present and future of WEMIX. Back in January 2018, when everyone was talking about bitcoins and talking about blockchains, Wemade, with a clear and firm vision, started to act and not talk and take -- took a long-term perspective. Then in February 2018, the crypto market went through a practical collapse, and this was the start of a 3-year crypto winter, during which companies lacking vision either decided not to start a crypto business or simply gave up. However, Wemade did not give up. We actually started to prepare in anticipation of the future by investing long-term sustainable resources and waiting for the market to resume growth. The achievement of WEMIX thus far as well as the achievements to come in the future, are the very fruit of our unwavering vision and relentless passion. Just as our conviction, the crypto market reopened with macroeconomic changes and WEMIX as the then fully prepared -- by then fully prepared, came to operate Mir4 Global, the most successful blockchain game yet. WEMIX is the clear global number 1 blockchain game platform with a total of 9 games currently live in service. And at this [ pace ], about to onboard 100 games and claim the dominant position as a truly open game platform. Ultimately the paradigm will become that each game would have its own game coin and NFT. And the goal of WEMIX is to become the de facto blockchain platform for roughly 50,000 new games released each year globally. WEMIX is, clearly, currently in the very forefront and we are mobilizing all internal and external resources, according to this bold strategy. There are several followers already in Korea, but none pose a meaningful threat to Wemade's leadership. And even the leading global mainnet have only now started to realize the whole role played by games in the blockchain economy, and have started to follow our path. We're currently developing the WEMIX 3.0 as our new strategy for making WEMIX, which is currently the number one in the core area of games, into the number one blockchain. WEMIX Play is the open game platform, the NFT-based [ DAU ] new economy and Defi service covering all financial services will be serviced on top of a decentralized mainnet WEMIX 3.0. All of this forms part of the huge virtual economy that Wemade aims to create. We will also launch the WEMIX dollar, the stablecoin as the pillar that supports the stable growth of this huge economy. Specifically, we will mobilize all the services and assets of WEMIX to deliver the goal of stable annual 20% yield based on a scalable and sustainable protocol. WEMIX will evolve from the world's number 1 to the world's number 1 blockchain, not despite of starting from games, but because it started from games. It was exactly a year ago during our earnings conference call that I declared that Wemade with now a metaverse and virtual asset company. I recall that at that conference call, I did not get a single question about this topic and no one believed this nor were interested. Still, we have made it thus far and, of course, where we are today is not enough, but we have achieved a huge change and the past year has been nothing short of a dream when considering the huge potential for change we have created. The year to come will be even more dramatic than the year we have seen, and I hope you will all keep faith in Wemade and continue to bear witness to how Wemade realizes this vision. I say that no success has ever come without patience. Thank you.

Good morning. This is Sang-Won Kim, Head of IR at Wemade. I would love to start with some key business highlights for the first quarter, and updates and plans for the second quarter. This year 2022 will be an important year for WEMIX in solidifying its position as the global blockchain game platform, and we are focusing all of our resources on building a WEMIX-based blockchain game platform and ecosystem. First, in terms of an update of new games launched on WEMIX and future onboarding plans, in first quarter, 2 games, Rise of Stars and Gunship: Crypto Conflict, were released on the WEMIX platform and YULGANG Global and Dark Eden M were additionally launched on the WEMIX platform on April 1st and May 4th, respectively. All of the onboarded games have shown positive performances, including server expansions post launch, and in particular, YULGANG Global hit 500,000 concurrent users in the first week of service. As of May 11, a total of 9 games are onboard and in service on the WEMIX platform. In terms of future onboarding plans for the WEMIX platform, there's the 2 new blockchain games, Every farm from the Wemade Connect, which is a Wemade subsidiary, as well as 4 Gods, that are in pre-registration currently and preparing for global serviceable. Crypto Ball Z, which is a new game, will be launching its service as of today. Wemade Play, which has become a subsidiary consolidated onto Wemade financial starting from this quarter, is planning the launch of 1 blockchain-based social casino game during the first half, and about 10 or so games are preparing to onboard on the WEMIX platform during second quarter, including titles such as Icarus online, Doki Doki Restaurant, Kingdom Hunter and Spirits Savor. WEMIX, which is the key currency of the global blockchain game platform, continue to list on more exchanges in Korea and abroad during the first quarter, including Upbit, which is Korea's largest virtual asset exchange, and 6 overseas exchanges such as Crypto.com, OKX and Huobi global. As of May 11, WEMIX is listed and trading on more than 20 exchanges and has the goal of completing its listing on all of the top 50 global exchanges in the future. We expect to announce news of additional listings throughout the year. Also to expand the WEMIX based Defi service on January 6th, the WEMIX staking service was opened, followed by the KLEVA Protocol, which is a new Defi service officially opened on January 19th. Since launch, KLEVA Protocol has exceeded a TVL of USD 500 million. The company has also been actively promoting the WEMIX platform in the global market. For example, last March, Wemade participated in GDC 2022, the world's largest game developer conference held in San Francisco, as a diamond sponsor to promote the WEMIX platform's P&E model. We were able to introduce the WEMIX platform to global game developers and hold various business discussions, including onboarding opportunities. Wemade will continue to attend various global events this year to promote the WEMIX platform, widen the WEMIX ecosystem and further strengthen its position as a global blockchain game platform. We're also preparing for the launch of the new MMORPG game, Mir M, in Korea. Pre-registration started as of April 21st and after our [ 4-day CBT ] starting from May 19, Mir M official service will open during the second quarter. The Mir M Korean service is planned to be followed by a global release of the blockchain version of Mir M. Now I would like to go over the first quarter tentative consolidated results of Wemade. First quarter revenue was KRW 131 billion, which is a 3% increase Q-o-Q and a 72% increase Y-o-Y, mainly attributed to the consolidation of Wemade Play. Operating expense increased by 23% Q-o-Q due to the newly consolidated affiliates and the increase in our headcount. And operating profit was KRW 6.5 billion in first quarter, which is a 75% Q-o-Q decrease. Net profit in Q1 was KRW 400 million, which is a decrease Q-o-Q due to the base effect against fourth quarter when there was a fair value valuation gain recognition of KRW 280 billion. Next are the revenue mix and WEMIX platform KPIs for the first quarter. We will provide the revenue breakdown by platform versus license revenue, as well as a regional breakdown. First about our platform revenue. First, our Game business revenue, which combines both mobile and PC online games, was KRW 115.8 billion, which is a significant increase Y-o-Y and Q-o-Q due to the inclusion of Wemade Play in the consolidation. License revenue was KRW 12.9 billion, which is a 64% decrease Q-o-Q due to the base effect against the previous quarter tied to the temporary accounting recognition resulting from change in accounting standards during fourth quarter last year. Next, regarding the WEMIX platform revenue in Q1, during the auditing of the fourth quarter 2021 statements, it was decided that the income from WEMIX liquidation would be recorded as unearned revenue in our accounts. And the platform revenue received in the form of WEMIX -- that is the fees collected from WEMIX wallet, coin transactions and NFT transactions -- will continue to be recognized as revenue. However, the WEMIX price used for the revenue recognition has been changed from the market price of the quarter when the revenue was accrued, to the moving average price applied at the time of recognizing the unearned revenue. Accordingly, the WEMIX price applied for the WEMIX platform revenue is KRW 1,647 per WEMIX for the first quarter and KRW 1,284 per WEMIX for the fourth quarter of last year. Accordingly, fourth quarter last year platform revenue was KRW 700 million and first quarter this year platform revenue is KRW 1.1 billion. Because the markets for these virtual assets are still in its early stages, no accounting standards have been firmly established yet. In meanwhile, Wemade [ by ] policy adopts the most conservative accounting method possible and will adopt reasonable accounting standards once they are formed to provide more accurate accounting information. Next are the WEMIX platform KPIs. First quarter WEMIX wallet and DEX MAU was averaged 1.31 million and 620,000 users respectively. A total of 7 games were in service on the WEMIX platform during the first quarter with plans of adding new games continuing throughout second quarter and reaching a total of 100 games onboard within the year. According to the DAU trends until present since the launch of the WEMIX wallet and NFT market, DAU has cumulatively increased as more games are launched and has shown an overall upward trend. Considering that user numbers, which is one of the most important metrics of a platform, has continued to increase with additional game launches, we expect to further widen the competitive edge as a platform, as the number of onboard games increase in the future. During Q1, the WEMIX transaction volume was about 40 million WEMIX. We expect the transaction volume also to grow as more games are onboarded on the WEMIX platform from second quarter and onwards. The total NFT transaction volume in Q1 on the WEMIX platform was approximately 5.2 million WEMIX, which is a 730% increase Q-o-Q. Next is the regional breakdown of revenue. In terms of revenue, revenue in Korea, Korean revenue, was around KRW 61.9 billion, which is 163% increase Q-o-Q, reflecting the revenue from the casual game lineup of Wemade Play, which was newly added to the consolidation from first quarter. Overseas revenue increased by 271% Y-o-Y, but decreased by 33% Q-o-Q due to factors such as the base factor against Q4 last year when licensing revenue accounting recognition standards were changed. About Q1 operating expenses, the Q1 consolidated basis operating expense was KRW 124.5 billion, which is a 23% increase Q-o-Q and 157% increase Y-o-Y, reflecting the increase in labor cost tied to our increased headcount, and also the increase in advertising, promotion and depreciation due to the consolidation of Wemade Play. That completes the tentative results for Wemade. And now I would like to go over the tentative first quarter results for Wemade Max. Well, first quarter consolidated revenue of Wemade Max was KRW 23.4 billion, which is 148% increase Q-o-Q, driven by the reception of Mir4 and Mir4 Global revenue, due to the inclusion of Wemade Max as an affiliate of -- or excuse me, Wemade Next as an affiliate of Wemade Max. Operating expense increased by 56% Q-o-Q due to increase in overall expenses, also tied to the inclusion of Wemade Next. Operating profit was KRW 9.4 billion, which is a significant and noteworthy improvement, both Q-o-Q and Y-o-Y, and net profit was KRW 9.2 billion, turning around from a net loss in fourth quarter of last year, and also showing a significant improvement on a year-over-year basis.

Now that completes our presentation on the first quarter results of Wemade and Wemade Max and now we will start the Q&A session.

The first question will be presented by Hee-Seok Lim from Mirae Asset Securities.

I have 2 questions. First question is about the utility coin. Currently the revenue that's recognized in the form of utility coins are not recorded on your financials. Can you show -- can you share with us the size of this revenue that you are bringing in the form of utility coins and therefore not included yet in your numbers? Also, of the revenue that you record from Mir4 Global service, what would be the share of that revenue that's recorded in the form of a utility coin? Second question is about the pricing of WEMIX. You said that from fourth quarter last year, as well as the first quarter this year, a moving average price will be used to convert the revenue, the platform revenue you record in WEMIX into a Korean won figure. Can you share with us the starting point of that moving average calculation period?

Regarding your first question of the revenue that's generated in the form of utility coins are also called game coins. It depends on game to game. Currently, game companies do not recognize this as their revenue. And so even though fees are recorded, if it's recorded in the form of a utility coin or a game point, it is not included in the revenue numbers currently. You've asked about the share of, for example, Mir4 revenue that's generated in the form of game points. That's around 20% to 30% of the total Mir4 revenue. There is a difference from game to game. So in some games, actually, the revenue generated in the form of a game coin, utility coin is sometimes larger than the game revenue itself. As we mentioned during the presentation, by policy, Wemade adopts the conservative accounting policy, and we will wait until a reasonable accounting treatment standards are determined, for example, by more discussions within the government, as well as the academia, and adopt the reasonable accounting standards as they are established to value this into our books. Your second question was about the starting point of this moving average calculation for the WEMIX price. The starting point is actually when we made the first sale, liquidation of WEMIX. That was a private sale, very long time ago at a relatively low price. And that moving average is calculated all the way back from that point until the time that is applicable. The difference of the WEMIX price versus fourth quarter -- first quarter is that the fourth quarter WEMIX price reflects the liquidation that went through up to December last year. Now, after that, we had some additional liquidation of WEMIX during January. And so the first quarter WEMIX price, the moving average, includes that January liquidation price.

The next question will be presented by Jae-min Ahn from NH Investment & Securities.

I have 2 questions. First question is more of a fundamental theoretical question of what's necessary to drive up the performance of the WEMIX platform itself. I think basically what the market wants to see is the WEMIX platform revenue itself to increase. That is going to be the main source of the most visible effect, and also the strongest driver for the company's performance as well. But if you just look at the first quarter numbers, even though the number of onboarded games on the WEMIX platform has increased versus the previous quarter, the MAU numbers, even though it is still at good levels, have actually decreased quarter-on-quarter basis. So what what's to, to make this market stronger? To actually form a market, do we need a larger number of onboarded games or do we need a huge mega blockbuster hit such as Mir4? So overall in terms of stimulating this market around a P&E game platform, what is needed, for example, in terms of number of onboarded games or the quality of games to be onboarded? Second question is about labor cost. The IT industry overall is trying to figure out this issue. I'm assuming that Wemade would not be an exception about the increase in labor cost and the difficulty of hiring engineers. So can you give us some more color of what you're expecting, what you're experiencing in terms of hiring and also labor cost increases?

Well, [ tackling ] your first question, I would take the view of separating or differentiating a content business, for example, a game business from a platform business. They do have different natures as a business. If you look at existing open, successful platforms, such as the Apple App Store or the Google Play, or even Steam, because they actually is a -- they are a platform for such a large number of content apps or games, the impact of a successful content, either positive or negative, on that platform is not very decisive. So once a platform actually becomes a host of a large number of games, I actually think the impact from a specific content, a specific game would not be very large. Now that said, our WEMIX platform is still in its relatively early phase and still Mir4 does have a large impact on the overall KPI, the metrics of the platform. And Mir4 right now in terms of life cycle has passed its initial peak and have stabilized at a certain level. And that explains the performance of the platform indicators that you're seeing in the first quarter. But if we just look into the performance of the Mir4 game itself, it's stable in terms of traffic, as well as revenue across March, April and May. And on top of the stable performance of Mir4, as we're able to add on and onboard additional games incrementally, there will be a drive stronger towards a stronger growth. And also in terms of onboarding, as we have already gone through the initial learning curve of onboarding games, I expect our onboarding piece to also accelerate, which will drive an exponential growth of the platform itself. And we will at that point reach and start to behave and deliver numbers similar to other existing platforms. So to sum that up, I still believe that the most important factor of deciding the success or failure of a platform is the competitiveness of the platform itself. Of course, having better quality games, successful games, flagship titles that as Mir4 on the platform would help us shorten the time we need to get there as a full-fledged platform. It would also increase the impact that we have as a platform, but I don't see a case in the past where a single title was powerful enough to make something an established platform. And what we believe that the key to becoming a successful platform is gaining the competitiveness of the platform itself. Your second question was about hiring and labor costs. As you know, all of the Korean game companies are following to do what we have already done. Even some of the key, the major mainnet projects are also mimicking the strategy that we have been implementing already. I think this is itself proof that our strategy is the right strategy to take. And therefore, with that confirmation, we will actually try to implement our strategy more aggressively and more actively, which would necessitate gaining more talent, hiring more people. Also M&A would be another source of gaining more talent or even talent acquisition. So, given all of that, in the context of our strategy execution, there is a high possibility our labor costs, in an absolute term overall, may increase going forward. That said, we are mindful that whatever we do needs to still remain within a scale that is sustainable. This is the approach that we [indiscernible] when we made the financial investments into our early WEMIX projects. And so while we will aggressively expand in order to implement our strategy actively, we will keep in mind the need to remain financially stable and sound. Well, that said, we already have Mir4 operating stably as a game. And on top of that, we're expecting Mir M soon to add to the -- further add to our top line. So we have that stable top line source. On top of that, the nature of a platform business, that it's mainly a fixed cost business, which means that with the growth in its scale, the profitability of a platform business has a far larger upside. And that is what we have in mind as we plan out our future cost.

The next question will be presented by [ Yeta Yoon ] from Hana Financial Investment.

I have 2 questions. First question is about the Mir M that you're preparing to launch. Internally, what kind of expectations do you have for the upcoming Mir M versus the Mir4? What kind of differences are there in terms of Mir M? And you've already gone through -- you're already going through the pre-registration. Can you share with us the color of your pre-registration thus far? Second question is, can you give us the revenue, first quarter, [ daily ] for the global Mir4 as well as the Korean Mir4 service?

Regarding your first question about Mir M, internally, we actually think we have higher expectations for Mir M versus Mir4; one, because we actually have reflected the lessons learned through the Mir4, as well as the capabilities that we've built up from Mir4 into our development of Mir M. So we have a higher expectations for Mir M and we will be able to get some better feel from the user side once we start the CBT scheduled for May 19th. In terms of pre-registration, actually, we have intentionally, sort of, shifted the strategy of our pre-registration. We think that ultimately it's more important for us to focus on the users that would actually download and to lock them in during the pre-registration phase, rather than using pre-registration mainly as a marketing tool to build up expectations for the game, which was, sort of, the past conventional practice. So actually the pre-registration for Mir M has been rather strict. It's only being conducted through markets up to now, we have around 550,000 pre-registration, which is actually a quite strong performance, given where we stand in terms of the launch schedule. Your second question about Mir4 revenue, I think the detailed revenue breakdown, probably our IR team will be able to follow up, but to just give you the rough trend, it did slight -- dip slightly in January before revenue actually increased in February and then dipped back down to January levels in March, where it has remained stable during April and May. That was the monthly trend. Combining both Mir4 global and domestic, we're generating around, grossing around KRW 20 billion on a monthly basis, revenue.

The next question will be presented by [ Wong Bin-Im from CS Discretionary Investment ].

Tell us about the possibility and the preparations of launching Mir4 in China. In terms of valuation of Wemade Next, there were talks of possibilities of launching Mir4 service in China by year 2023, and an expected revenue of around KRW 470 billion from that service. Now, considering the timeline, where we currently stand, in order to launch Mir4 in China in 2023, probably the company should be already doing some preparations. So can you give us your thoughts about Mir4 service launch possibilities in China next year? And if the company is preparing, can you give us an update on where those preparations are currently at?

Regarding your question about the Mir4 Chinese service, generally, in order to launch a game in China, there are many preparations that need to be made, as you alluded in your question. First of all, there has to be the Chinese build, a build of the game for the Chinese market. And then we have to find the operator, the publisher of the game. And also, because this is China, an ISBN, the [indiscernible] also needs to be obtained in order to open a game service in China. I think I've already mentioned this in another occasion, but my view is that this year is not a good year to do any business, including games, in China. I think we still need to wait until October, the Party Congress, after which we will probably get a better picture of the [indiscernible] sort of economic activities and freedoms that would be available in the Chinese market. Now that said, despite that outlook for this year, in terms of just the requirements that we need to cover to launch the Mir4 service in China, first of all, in terms of the Chinese build, because our Mir4 global service already supports the Chinese language, I don't think we have any issues in terms of preparing a build for the Chinese market. In terms of operation, actually from our perspective, it's just an issue of different operational models that we can choose from. I don't think finding the right party to operate the service in China would be of any issue to us. We just have many options to choose from. The third requirement, which is the [indiscernible], the ISBN, we are preparing for that. And recently there's been some changes in the Chinese [indiscernible] ISBN system. So we are aware of that. We are preparing and have plans of acquiring the ISBN before the year ends. And with that, actually, we've basically covered all of the bases that we need to launch the Mir4 service in China. And so we still stand by the plan of launching Mir4 service in China next year.

The next question will be presented by from [ Wong Bin-Im from CS Discretionary Investment ].

It is another question about what the comments that were made during the online event in February. I think during that time the company explained that its plans for Wemade Max long-term was to develop it into an M&A platform, but then actually Wemade Play was acquired, not at Wemade Max level, but at Wemade level. And that sort of actually, I think, is inconsistent with that vision of making Wemade Max developing into an M&A platform. In that context, can you give us a bit more color into your thoughts of the role of Wemade Max in the overall Wemade Group?

To just give you a bit more color about Wemade Play. That is a company that focuses on social casino and casual games. And so even if Wemade Play was acquired at Wemade level, that has no impact on our overall strategy of making Wemade Max into an M&A platform. I did mention several deals in the process underway during the February online event. Those deals have not yet closed, but we hope to close those deals soon and be able to make some public disclosures once they are closed. Overall -- for example, Mir M, which is preparing for launch, was developed by another developer affiliate. Wemade M is the company that's developed Mir M, the upcoming new game, and once Mir M is successfully launched, that could also be brought under Wemade Max, similar to how Wemade Next was brought under Wemade Max. And so that would be an example of how we plan to implement the strategy of making Wemade Max into an M&A platform of game companies.

Hee-Seok Lim, Mirae Asset Securities.

I have 2 questions about the blockchain game platform business recently. Now, in addition to Steam, Apple has also introduced stronger regulations against blockchain games. What would be the impact of these regulations? Don't you still need to have these key distribution channels in order to grow as a blockchain game platform? Second question is I'm assuming that having the participation of the global game -- major global game companies would be an important element to become a global blockchain game platform. Can you give us an update on any talks or plans of a major global game company coming onboard your platform?

To answer your first question on several levels, first of all, in terms of the [ as-is ] even though regulations were adopted by Steam and more recently Apple, in terms of as-is, we have been able to effectively deal with that situation. And that is shown in our numbers in terms of our smooth, continuous service of our games, as well as the game traffic and revenue numbers. So we have been effectively responding to these changes in regulation. That said, the world continuously is in a transitional period and these policies adopted by certain distribution may have a time lag between the reality and policy. But I believe that eventually, the policies will evolve to match and reflect what they see in reality. So this is going to be a transitional situation. And on top of that, actually, fundamentally speaking, the blockchain and the game are not tightly coupled. Actually the 2 are loosely coupled, which actually gives us the room of dealing with policy changes that are adopted by distribution platforms without having serious interruption to our game service. Your second question was about the onboarding plans of global game companies onto the WEMIX platform. We, as we mentioned, have a plan of having a total of about 100 games onboarded within this year. Of that 100, around 20, only about 20 would be our own developed -- internally developed games. 80 of that 100 is expected to be third-party developer games. And of that 80, we expect that 20 of them would be from global game developers. A good example would be Yangon Mobile, even though yes, that is published by a Korean company, the developer is a Chinese game developer. And similar to this, we expect around 10 games to be onboarded that were developed by Chinese game developers. Also, the GDC was a great opportunity for us to start talking with Western developers. And so we are having business discussions with Western developers and expect around 10 games to be onboarded through the discussions with the Western developers we currently have.

The next question will be presented by [ Tong Gin-Kim from CLSA ].

I have 2 questions. The first question is about the competitiveness of a platform that you mentioned is the key to a platform success. Recently, we're hearing some of the companies, game companies that assigned MOUs with you already, for example, Joy City, now signing -- publishing agreement with other blockchain platforms such as Gala Games. So even the game developers that have an MOU with you, with Wemade are looking towards other publishing arrangements. How are we supposed to understand this? What would be the correct way of understanding and reading these situations where MOU companies are moving over and signing publishing agreements with other players? Second question is about the fundamental dynamics of a play-and-earn game and play-and-earn economy. Even though we say it's play and earn, I'm assuming, if we have to divide users into those interested in playing versus earning, the earning users, those are interested in earning are the core user group of a P&E game. Even myself, when I have played a lot of those P&E games out there, notice that actually it's important how easy it is to earn playing the game. That is an important factor in deciding which game I choose to play more. Given the fact that there is a huge supply of tokens coming out there, how do you try to match the demand for the tokens from this huge supply of tokens? Do you think that the playing aspect alone, the enjoyability, the playability of the game itself is enough to match this? Or do you have any insight on how to use this dynamic to match the demand versus supply of tokens?

Well, to answer your first question in terms of what consists -- what is the competitiveness of a platform, I think there's 2 main dimensions to it. Number one, as a platform to be competitive, you need the user, the size of the user base. Number 2, you have to have the size of the economy basically represented in terms of transaction volume. And in terms of both metrics, in terms of users as well as transaction, WEMIX is definitely clearly the number 1 platform. That's where we currently stand and we have plans of aggressively increasing that scale. So I'm very confident that Wemade -- WEMIX will continue to remain competitive as a platform. That said, we're not the only platform out there. There are other companies, players trying to follow what we have already done. But none of them has yet posed any valid threat to our plans. And there were cases where followers have already failed to do what they have promised. And so, because we're confident that we will remain clearly the number 1 in terms of competitiveness as a platform, I'm not very concerned about platforms, for example -- partners working with other players. We think that what we need to do is just focus on doing what we do well, even better as a platform, and then everything else will fall into place. Well, as you know, we have plans of launching WEMIX 3.0, which is itself a mainnet. And one of the rationale, the benefit of doing that is that that would enable other games to actually become, create their own game economy. So these game coins will be able to then upload or list directly on Upbit or Binance themselves without having to go through, for example, WEMIX. And by having that ability, we would be able to then invite larger games onto the platform. Regarding your second question, I think that question basically is about how we see the economics of a blockchain game. We have coined the new word play and earn instead of play to earn, and I think play and earn actually best reflects the reality of the user base of the games that we provide on our platform. If you just look into the details of the Mir4 user base, actually, we see a far larger share of our users playing the game and earning the coin so that they can actually use the coin to enjoy the game more. So more of the user base of Mir4 are interested in earning to play more, rather than just earning to then liquid -- than to sell those coins. I think one of the key points that I've highlighted when I say play and earn, is that a play-to-earn game isn't really sustainable in the long-term. If a game itself is not playable, if it's not enjoyable, then that game would not be sustaining because if the only purpose of playing the game is to earn, then that playing becomes a task. And there are other ways of earning, for example, a person could invest directly in coins or do Defi instead of playing a game to earn if earning is the only purpose of playing. I think that is what I've described as the limitations of a play-to-earn model have already been demonstrated by other play-to-earn games that have not been sustainable. And Mir4 shows that play and earn is a way to make a game sustainable. Of course we have our shortcomings. We have had our misses, even though we've also had some great successes, but I think as of where we stand today, we have a far larger upside to go. And the new games that we would be introducing will reflect the lessons that we have earned -- learned during the past experience and will have a far stronger and sustainable economy to it. I think one of the ways of addressing the question that you have raised about the supply and demand matching of coins fundamentally would be to create a stronger inter-game economy. For example, right now Draco and Hydra are only used within Mir4, but if there's an inter-game economy created and very active, then that would make the overall play-and-earn economy more sustainable.

The next question will be presented by [ Tong Gin-Kim from CLSA ].

I have a follow-up question too, that if -- despite what you have just described in terms of the sustainability of P2E game, I think there are experiences already that shows that there are limitations to that, and that there are actually more users out there playing to earn rather than to just play itself. If what you said was true, then there would not have been a reason to adopt the Trinity algorithm on Mir4. Also according to my understanding, in the first several weeks of launch, YULGANG also introduced a 3,000 coin limit, a [ coda ] that's available for mining on a daily basis. I think these are ways of the company trying to sustain the value of the coin. If what you said was correct, in terms of the sustainability and more users playing itself, then I would think that these would not be necessary. So, my question, to post the question, is whether you -- the company plans to continue to maintain the Trinity algorithm or other mechanisms to somehow support the value of the coin going forward? Or is the company willing to let the value be determined by the free operation of the game economy itself?

I completely accept their point. As I said, there are still many imperfections and there's still more room for us to learn and improve. Even though we are at the forefront in terms of what we have already acquired, in terms of knowledge and experience, nobody else knows or has experienced as much as we have, I think where we are today in terms of knowledge and experience is only about a 1% of where we eventually need to get there. So we are continuously studying and looking into various ways and approaches. What we are applying in that process, one is a way of us to address balance between demand and supply on a temporary basis. But also some of these measures are intended to disincentive -- disincentivize game bots that are out there and does harm the experience, game experience of good-faith users. Of course, these measures to disincentivize game bots do need to be kept at a balance level so that they do not affect negatively the game experience of good-faith users. I still believe that eventually this has to be left to the free economy, the free market economy, so that good games prosper and not so good games do not. That is the fundamental approach, but as I mentioned, because still this is in very early phases of the market and we still have imperfections and improvements we need to make, if necessary, in order to, for example, address temporary supply and demand imbalances or to, for example, to disincentivize bots, that we will also be taking measures as necessary.

Now that completes the Q&A session. Before we close the conference call, CEO Chang will make some closing remarks.

Due to the macroeconomic situation and also the fact that we are in the initial phase as an industry, I think there are aspects where we are more effective than others in terms of the external factors. But the company has a very firm vision, it has a strategy to get to success. And so once again, I ask you to keep watching us in how we achieve that vision and strategy. And meantime, we will do our best to report to you better performance results next quarter.

And that completes our first quarter earnings conference call. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]