Both Rachel and Hwaryun referred to Wangnan as the prince of the red light district in which, the latter further elaborated, that he inherited a power that he wasn't, supposed to have in the first place or being a mistake of Zahard/10 families IIRC. We all know, that Zahard himself, doesn't have any children and we also can't deny, that Zahard and Wangnan are in some way related to each other. So in order to solve that discrepancy, we need to think outside the box.
And this is what I came up with in the story so far, we have encountered many 'themes' like for instance, experimentation with human beings resulting in:
- Living Ignition weapons (Thorn), Emily
- Ghosts of the 13 month series (imbuing a soul in a needle)
- Magic Spells (Hoaquin & Daniel's Soul Absorption technique, Karaka's immortality)
- Curses (Native one's not being able to fully use their ability)
- Floor of death ( Gustang's Soul Binding technique)
- Hidden 'Hidden' Floor [Kings Cradle] ( An alternative space, in which the Towers rules are 'lessened')
If I forgot something then feel free to correct me. But so far these points are enough to explain my hypothesis. Only the highlighted one's will be taken into consideration. But before I begin, we have to make a slight detour and look for Karaka's motivation or for a lack of a better word his insanity. Because I feel like that his bloodthirstiness and hate for Zahard and the 10 families is an important piece of information in order to explain his and Wangan's background ergo 'the red light district'. Assuming that just like the 13 month series, which are the halfs of the Towers keys and the rings being the other half of it. It's safe to say that there also exist a total of 13 keys. And just like you shaheer, I believe that the red light district was a 'breeding ground' with
12 different location throughout the Tower. What I mean by that is that Karaka/Wangnan are 'inexplainable existences', if we take into consideration that Zahard as of to this day doesn't have any offsprings.
Which brings up the question, what exactly are they then? It must be something extremely disturbing to the point that Karaka has sucidal tendencies.
And here is my take on that. I think that after Zahard found out about V and Arlene's relationship (after he proposed to her with the ring [Tower's key]) He or most likely the workshop came up with the idea of experimentation with human beings. Since Zahard is unable to have children the conventional way the red light district was established to fulfill his wish at the time, which was having a child with his love interest (especially after he 'killed' Arlene's baby). From here on out the highlighted points will be taken into consideration but not in order lol... I might edit it later though.

After Arlene somehow managed to leave the Tower, the workshop most likely made an item for Zahard, which he could exclusively use in order to enter the hidden floor without any restrictions. Because he needed to extract, like an USB device, Arlene's Data for the experimentation. Since the hidden floor is an alternative space, where Data people can physically interact with human beings. The workshop needed Arlene's DNA in order to start their experimentation.
How did they manage to do it? I think that they used the original spell of Hoaqin & Daniel's Soul Absorption technique to extract Arlene's data and store it inside an item with Gustang's Soul Binding technique (that process might have birthed Emily & 13 month series as a concept). At the red light district they tried to replicate her DNA in order to make a clone of her, which must have failed for obvious reasons. But the attempt was not a complete failure but it resulted into an expiring life form, which I assume is Wangnan's mother figure the 'Nanny' (Arlene & her seem to resemble each other IIRC). And now here comes my attempt to explain the whole Zahard has no son but his biggest regret. The next step was most likely to mixed both of their DNA's (Zahard & Arlene) with the result being the 'Kings seed' Karaka/ Wangnan & the princes. This is indeed a roundabout way of fullfillling both criteria's Zahard no children clause and the mistaken inheritance, his immortality and Karaka's suicidal tendecies with the story as source material.
But Zahard's regret was most likely his fear of being overturned by his creations the immortal princes, a total of 13 of them with his potential. In order to limit their potential he placed a curse/seal on them, just like he did with some of the native one's. They are restricted in using their
inherent abilities, that could explain the difference between Wangnan and Karaka's talents. And now with the current storyline having a 'revolution' or self finding theme of the main characters. I expect Wangnan just like Rak to have access to his inherent abilities in some way or form. That's it though, my post became longer then originally intended. :P