Upbit Drops Into the L2 Wars - Giwa's Ambitions Go Way Deeper

The competition among public blockchains has intensified with a new entrant. On September 9, at Seoul's UDC 2025 conference, Upbit, South Korea's largest cryptocurrency exchange, officially launched Giwa, an Ethereum Layer 2 network built on the Optimism OP Stack.

Prior to the announcement, Upbit had only released a cryptic countdown website that generated significant market speculation.

The name "Giwa" holds symbolic significance. In Korean, "기와" means the curved roof tiles found in traditional architecture. These tiles connect layer by layer through an interlocking design, creating a unified and functional roof structure.

Upbit's naming choice appears intentional. The imagery of interlocking tiles reflects modularity and interoperability, which are two fundamental principles of modern blockchain technology.

However, execution may prove more challenging than the elegant metaphor suggests.

Upbit is far from the first exchange to launch its own blockchain. Coinbase's Base has operated for over a year and accumulated more than $8 billion in total value locked (TVL), establishing itself as a platform for social and consumer applications. Binance's BNB Chain is even more established, featuring an extensive ecosystem and utilities linked to the exchange. More recently, Kraken introduced Ink, while Robinhood began tokenizing stocks on Arbitrum.

The underlying motivation is straightforward: exchanges recognize that depending exclusively on trading fees limits their growth potential.

Source: Tiger Research

However, as a latecomer using open-source technology, what competitive advantages might Giwa possess?

Giwa's Outlook

For Upbit, selecting the OP Stack was a logical choice. The Layer 2 landscape offers limited options: Optimistic Rollups, ZK Rollups, and a few hybrid approaches. While ZK technology shows promise, it remains immature. Arbitrum offers robust technology but operates within a relatively closed ecosystem. The OP Stack, however, is open-source, modular, and has already proven successful through Coinbase's Base.

The OP Stack operates on optimistic rollups, which assume transactions are valid unless someone challenges them. This approach offers two key benefits: transactions execute immediately and undergo verification later, enabling faster processing; and the verification process remains simple, keeping costs low. For a high-volume exchange like Upbit, this balance between speed and cost-effectiveness is ideal.

The interesting development is how Base and Giwa are diverging despite sharing the same foundation.

Base leverages Coinbase's U.S. user base to promote "Onchain is the new Online," focusing on social media, gaming, and NFT applications. While these narratives have cooled in the current market cycle, products like Friend.tech succeeded on Base precisely because of this positioning. Base's strategy rests on three pillars: low transaction fees, seamless user experience, and robust developer tools.

Giwa takes a fundamentally different approach. Upbit's user base is predominantly Korean, influenced by local trading behaviors and regulatory requirements. Korean traders are more comfortable with centralized exchange interfaces and have limited DeFi adoption. Consequently, Giwa must balance decentralization with a user experience that resembles traditional centralized exchanges.

Based on available information, Giwa might be pursuing several strategic priorities:

1. Native Korean Won Stablecoin Support

This appears to be Giwa's primary focus. Allowing users to pay transaction fees directly in a KRW stablecoin would dramatically lower entry barriers. However, this requires deep protocol modifications and regulatory compliance. This isn't a challenge that can be solved by simply deploying a smart contract

Reports from July revealed that Dunamu (Upbit's parent company) partnered with Naver Pay to develop KRW stablecoin payment systems. This partnership now appears to be foundational work for Giwa's launch.

2. Built-in Compliance Infrastructure

South Korea maintains stringent regulatory requirements, making KYC (Know Your Customer) and AML (Anti-Money Laundering) protocols mandatory. Rather than forcing each project to develop individual compliance solutions, Giwa could provide standardized, blockchain-level systems including on-chain identity verification and automated transaction monitoring.

3. Optimized for High-Value Transactions

While Base prioritizes high-frequency, small-value transactions that suit social applications, Giwa will likely emphasize efficiency and security for large trades—reflecting Upbit's typical user behavior where transactions worth hundreds of thousands of dollars occur regularly.

The Bridge Challenge

Cross-chain asset transfer represents a critical technical hurdle. Since most user funds currently exist within Upbit's centralized systems, creating a secure and user-friendly method to move assets onto Giwa is essential. Without seamless bridging functionality, all other innovations become irrelevant.

Upbit will likely develop a proprietary bridging solution or follow Binance's model by integrating bridge functionality directly into the exchange interface, allowing users to transfer assets without leaving the familiar trading environment.

Strategic Implications

These observations remain educated speculation based on available information. However, technology choices often reveal underlying strategy. By choosing the OP Stack, Upbit signals its preference for rapid deployment and risk mitigation while planning to leverage its existing centralized exchange ecosystem to drive initial adoption.

Transform or Be Transformed

Upbit's decision to launch its own blockchain appears less like strategic innovation and more like a response to growing market pressures.

On paper, 2025 looks promising for Upbit: the exchange controls 80% of Korea's cryptocurrency market, with daily trading volumes consistently ranking among the world's top three. However, growth is stagnating. Korea's crypto market has limited expansion potential, where nearly everyone interested in trading is already active. The question becomes, where will new users come from?

This concern has plagued the entire cryptocurrency industry over recent years. Exchanges globally are seeking their next growth phase, and their solutions show remarkable similarity: launch a proprietary blockchain.

Coinbase's Base demonstrates this strategy's potential. Beyond collecting transaction fees, the real benefit lies in controlling ecosystem economics. When applications like Friend.tech gained popularity on Base, Coinbase profited not only from direct transaction fees but also from broader ecosystem value creation.

More significantly, building its own infrastructure allows Coinbase to evolve beyond a simple trading platform into a comprehensive infrastructure provider, diversifying its revenue streams in the process.

Korea's Market Isolation Creates Urgency

For Upbit, Korea's unique market characteristics make this transformation even more critical. The famous "kimchi premium," where Bitcoin trades at higher prices on Korean exchanges, might appear to create a competitive moat. In reality, it reflects market inefficiency and isolation. International arbitrage remains blocked, Korean capital cannot flow abroad, and this separation cannot persist indefinitely. Once global exchanges establish compliant Korean operations, Upbit's monopoly faces direct threat.

A Korean won stablecoin could provide Upbit's salvation. Since Terra's collapse, Korea has lacked a reliable KRW-pegged stablecoin, creating genuine market demand across multiple use cases: cross-border remittances, currency hedging, and daily transactions. Public data indicates Korea's annual cross-border remittance market alone processes approximately $15 billion in transaction volume.

Source: Tiger Research

This opportunity comes with a significant regulatory hurdle: South Korea's Virtual Asset User Protection Act prohibits exchanges from trading tokens they issue or control through affiliates.

Upbit has devised an elegant workaround. By launching the Giwa blockchain and enabling partner Naver Pay to issue a KRW stablecoin independently, Upbit can circumvent these restrictions while maintaining practical ecosystem control.

Market competition and investor expectations are also accelerating Upbit's transformation timeline. Local competitor Bithumb plans to go public in late 2025, and Dunamu (Upbit's parent company) almost certainly harbors similar ambitions. With several global exchanges already publicly traded, the "cryptocurrency exchange" narrative has lost its novelty for investors. However, "Web3 infrastructure provider" offers a much more compelling investment story.

The Cautionary Tale of Klaytn

Launching a blockchain carries substantial risks, as demonstrated by Klaytn's failure. Despite backing from tech giant Kakao, the blockchain never achieved meaningful adoption. The problem wasn't technological, but ecosystem development. Without applications and active users, even well-funded blockchains can become expensive failures.

For Upbit, however, the risk of inaction may exceed the risk of failure.

From the perspective of September 2025, exchange-operated blockchains have evolved from experimental "innovations" to industry "standard equipment." Coinbase operates Base, Binance runs BNB Chain, and now Upbit launches Giwa.

The ultimate winner of this competitive race may not be determined by superior technology, but by whoever first establishes a sustainable and scalable business model. In this context, Giwa's launch represents only the opening move in Upbit's broader transformation strategy.

The real test begins now.