Academic writing course international financial market title future of cryptocurrency blockchain

MINISTRY OF FOREIGN AFFAIRS DIPLOMATIC ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL ECONOMICS - - ACADEMIC WRITING COURSE: INTERNATIONAL FINANCIAL MARKET TITLE FUTURE OF CRYPTOCURRENCY & BLOCKCHAIN TUTOR : Lam Thanh Ha STUDENT: Group 4- KTQT48C1(2) Nguyen Thi Ngoc Minh Nguyen Tien Dat Nguyen Thanh Trang Tran Thi Thanh Thao Ha Noi -2022 Table of contents I INTRODUCTION 1.1 Abstract .1 1.2 Research study scope 1.3 Research methodology 1.4 Research structure .2 II CONTENTS .3 CHAPTER 1: THEORETICAL BASIS 1.1 Definition 1.2 The history of cryptocurrency .4 1.3 Operation .5 1.4 Advantages and disadvantages .6 1.5 Some types of cryptocurrency .8 CHAPTER 2: REALITY 14 2.1 The summary of the cryptocurrency market .14 2.2 The legal issue of cryptocurrency 15 2.3 How to implement crypto into ecommerce and banking 18 2.4 The current cryptocurrency situation in Vietnam 19 CHAPTER 3: PREDICT THE FUTURE OF CRYPTOCURRENCY 21 3.1 Crypto’s market in the future .21 3.2 Blockchain’s Impact On The Economy in the future 22 3.3 Coexistence of Central Bank Coins & Crypto 22 CHAPTER 4: SOLUTIONS FOR CRYPTO’S PROBLEMS .24 4.1 Possible solutions for crypto’s challenges 24 4.2 Proposed solutions to manage cryptocurrency effectively in Vietnam .24 III CONCLUSION 26 REFERENCES .27 LIST GRAPHS AND IMAGINES 29 Rate members Group 4: 32 I INTRODUCTION 1.1 Abstract Before we had “money”, humans would barter, or trade, items of intrinsic value, such as shells and salt, which demonstrated a “proof of work” – often based on discovery, extraction, or transport Some items were clearly more valuable than others; for example, gold possesses a singular array of elemental traits: rarity, beauty, and strength, while simultaneously not being poisonous, radioactive, or corrosive Over time, governments saw value (and profit) in standardizing the size, shape, and weight of what we now call money China produced the world’s first metal coins over 3,000 years ago, and the first paper bills over 1,000 years ago Ultimately, governments also have the unique authority to declare something “legal tender”, which means that courts of law are required to recognize it as a satisfactory payment for a debt Howerver, as time goes by, during the era of technology 4.0, the world financial market has undergone many changes The first decades of the 21st century have seen the birth of new payment methods on the internet - virtual currency Virtual currency have become popular thanks to the ease of transactions, high security and no fees for the third one,… People’s interest in this kind of currency has skyrocketed: it’s a hot topic not only among investors but in popular culture too But this industry is only in its infancy and constantly evolving In fact, it’s difficult to predict where things are headed long-term, so today, group will introduce to you our research about the future of virtual currency– cryptocurrency and blockchain, together with the special example of it – Bitcoin 1.2 Research study scope Space scope: worldwide Time scope: 2009- now 1.3 Research methodology Statistical method: summarize documents, systemarize all definitions and information about blockchain, cryptocurrency,… Information collecting and processing method: our team collected and processed data from many3reliable sources, and then analyzed, assessed, came to conclusion for the topic 1.4 Research structure Our speech’s content, “FUTURE OF CRYPTOCURRENCY & BLOCKCHAIN” consists of main chapters: Chapter 1: Theoretical basis Chapter 2: Reality Chapter 3: Predict the future of crypto & blockchain Chapter 4: Solutions for crypto’s problems We hope that this writing will give a closer look at what is happening in the world financial markets, thereby capturing these trends and applying them to Vietnam's economy II CONTENTS CHAPTER 1: THEORETICAL BASIS 1.1 Definition Cryptocurrencies are digital tokens They are a type of digital currency that allows people to make payments directly to each other through an online system Cryptocurrencies have no legislated or intrinsic value; they are simply worth what people are willing to pay for them in the market Moreover, they are not controlled by any government Cryptocurrency trading is legal in some countries, such as in the UK, the US, Canada, although it’s not legal tender like a pound or dollar, while in China and Egypt, the situation is much more complicated As of early 2022, the most recognisable cryptocurrency is bitcoin, which has exploded in popularity and is now starting to move into the mainstream - according to Bankrate Cryptocurrencies are digital currencies that use blockchain technology, which is a system of recording information, to record and secure every transaction Blockchain is a type of Distributed Ledger Technology in which transactions are recorded with an immutable cryptographic signature called a hash Imagine 1: The properties of distributed ledger technology This means if one block in one chain was changed, it would be immediately apparent it had been tampered with If hackers wanted to corrupt a blockchain system, they would have to change every block in the chain, across all of the distributed versions of the chain In conclusion, Blockchain is the technology that enables the existence of cryptocurrency a type of digital money that you can trade in the hope of earning profit 1.2 The history of cryptocurrency The history of cryptocurrencies can be traced back to the 1980s, when they were called cyber currencies These coins started gaining in popularity in 2008 with the introduction of Bitcoin Therefore, cryptocurrency history can be divided into several stages The first stage: 1998– 2008 The pre-Bitcoin years The cryptocurrency was first mentioned in 1989, American cryptographer David Chaum invented digital cash, which relied on cryptography to secure and verify transactions But it was only in the early 1990s that cryptographic protocols and software began to be developed that would make possible the creation of a truly decentralized digital currency 2008-2017: The beginning of the cryptocurrency revolution In October 2008, a paper by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System outlined a system for creating a digital currency that did not require trust in any third party Nakamoto’s paper effectively launched the cryptocurrency revolution In 2010, Bitcoin was valued for the first time and was traded by some people, but its price was just a few cents Just until years later, cryptos began to see unprecedented growth 2017-Bitcoin’s Rise To Popularity It is said that 2017 was the year of cryptocurrency It is a period of time that saw the price of bitcoin climb from below $1,000 to nearly $20,000 on the CoinDesk Imagine 2: The history of cryptocurrency As the value of Bitcoin and other digital coins skyrocketed, so did the number of schemes and scams targeting crypto investors 2017-10/4/2022 At this moment, there are many different types of cryptos; some have proven more stable than others while still having promise for growth As the digital economy continues to grow at an astronomical rate, cryptocurrencies are sure to play a large role in what makes up our future money system 1.3 Operation Cryptocurrency operates through three main steps Firstly, Cryptocurrencies (which are completely digital) are generated through a process called “mining” This is a complex process because basically, miners are required to solve certain mathematical puzzles over specially equipped computer systems to be rewarded with bitcoins in exchange After that is the buying, selling and storing period In fact, users can buy cryptocurrencies from central exchanges, brokers, and individual currency owners or sell it to them Coinbase are considered as the easiest ways to buy or sell cryptocurrencies Once bought, cryptocurrencies can be stored in digital wallets Digital wallets can be “hot” or “cold” Hot means the wallet is connected to the internet, which makes it easy to transact, but vulnerable to thefts and frauds Cold storage, on the other hand, is safer but makes it harder to transact Finally, transacting or investing When owning bitcoins or other types of cryptocurrency, owners have several choices: using them to buy goods, trading them to other investors or exchanging them into cash Converting cryptocurrency to cash is also possible using banking accounts or peer-to-peer transactions 1.4 Advantages and disadvantages 1.4.1 Advantages - High risk—and the potential for high rewards: There are more than 10,000 cryptocurrencies on the market today and each one has its own particular quirks But all cryptocurrencies have a few things in common—like their tendency to experience sudden spikes (and drops) in value Prices are driven primarily by the supply of coins from miners and the demand for them by purchasers And these supply-demand dynamics can result in hefty returns The price of Ethereum, for example, roughly doubled from July 2021 to December 2021—quite the payday for investors who got on board at the right time - The blockchain technology underlying cryptocurrency is inherently secure: Some of the major benefits of cryptocurrencies aren’t linked to the currencies themselves, but to the infrastructure that supports them That’s the blockchain—the decentralized data-storage ledger that tracks every transaction undertaken on it Once you make an entry in the blockchain, it can never be erased And with the blockchain stored decentrally across multiple computers, no hacker can access the entire chain in one go; any information stored in it is safe for good - Bye bye traditional banks—hello to a fairer, more transparent financial system By and large, our financial system revolves around third-party intermediaries who process transactions This means that if you make a transaction, you’re placing your trust in one or more of these intermediaries—and the recession of the early 2000s made a lot of people wonder if that was a good idea The blockchain and cryptocurrencies offer an alternative They can be viewed by anyone, anywhere, so you can take part in the financial markets and make transactions with no intermediaries whatsoever - Crypto trades around the clock Another advantage that cryptocurrencies have over banks is that the crypto markets are always open With coins being mined and transactions being recorded around the clock, you don’t have to wait for the NYSE, NASDAQ or any other exchange to start trading for the day if you want to buy, sell, or trade crypto This has made such an impact that regular stock exchanges are looking into the option of trading stocks outside of regular banking hours as well—although that might still be some way off So, for investors who are on the go 24/7, crypto might the best way to generate returns outside of normal working hours - Cryptocurrencies could help investors beat inflation Cryptocurrencies aren’t tied to a single currency or economy, so their price reflects global demand rather than, say, national inflation But what about inflation of cryptocurrencies themselves? As an investor you can rest easy, for the most part The number of coins is capped, so the amount available can’t spiral out of control, thus, no inflation Some coins (like Bitcoin) have an overall cap, others (like Ethereum) have an annual cap, but either way, this approach keeps inflation at bay 1.4.2 Disadvantages - Understanding cryptocurrency takes time and effort: Cryptocurrencies can take a while to get your head around If you’re not a digital native, the concept of cryptocurrency (let alone the blockchain) can feel anything but second nature And trying to invest in something you don’t really understand is itself a risk There are plenty of online resources available to help you (including N26’s blog series on crypto), but you’ll still need to dedicate some time to truly understand the pros and cons of investing in cryptocurrency - Cryptocurrencies can be an extremely volatile investment: While the price of a cryptocurrency can spike to dizzying highs (with associated benefits for investors!) they can also crash to terrifying lows just as quickly So if you’re looking to make stable returns, this might not be the best bet The cryptocurrency market fundamentally thrives on speculation, and its relatively small size makes it more vulnerable to price fluctuations That in turn can wreak havoc with the value of coins— one of the major disadvantages of cryptocurrency - Cryptocurrencies haven’t proven themselves as a long-term investment—yet: While cryptocurrencies have become widely known and are still gaining in popularity, it’s worth remembering that they have only been around for just over a decade The concept only really emerged with the publication of a white paper on Bitcoin in 2008 Stock markets, in contrast, can look back on centuries of history The London Stock Exchange, for example, was founded in 1801 Gold has been a proven custodian of value for millennia But cryptocurrencies? Nobody really knows what will happen to cryptocurrencies in the future—and you need to be brave to enter these uncharted waters as an investor - Crypto has serious scalability issues: You could be forgiven for thinking that digital currencies operate at lightning speed—and they do, up to a point But at a certain level they run into major issues which make it difficult to roll them out on a large scale Cryptocurrency providers themselves admit this is an issue, with the people behind Ethereum saying that the blockchain has reached “certain capacity limitations” that slow the rate at which transactions can be processed This can be a frustrating experience for transaction participants, to say nothing of the potential financial losses it can cause - Crypto newbies are vulnerable to security risks: Cryptocurrencies might not have the risks that come with using central intermediaries, but that doesn’t mean they’re completely free from security issues As a crypto owner, you could lose the private key that lets you access your coins—and with it, all your holdings And then there’s hacking, phishing, and all the other attempts to gain control by malicious means This is something that seasoned investors keep an eye out for, but newer investors are more likely to be vulnerable to these kinds of traps 1.5 Some types of cryptocurrency Bitcoin gets all the headlines when people talk about cryptocurrencies, but there are literally thousands of other options when it comes to these digital currencies In fact, cryptos that aren’t Bitcoin are usually considered an “also ran” – what are called “altcoins,” or alternatives to Bitcoin While Bitcoin may have been the first major cryptocurrency to hit the market – it debuted in 2009 – many others have become highly popular, even if not quite as large as the original 1.5.1 Bicoin (BTC) • Price: $43,558 • Market cap: $829 billion Bitcoin is a decentralized digital currency created in January 2009 It follows the ideas set out in a white paper by the mysterious and pseudonymous Satoshi Nakamoto containing $3 million in Bitcoin value believed to have been used to finance the terror operation 2.2.4 The Legal issue of crypto in VietNam Clause 1, Article of Decree 80/2016/ND-CP amending and supplementing Clauses and 7, Article of Decree No 101/2012/ND-CP dated November 22, 2012 of the Government on non-cash payment as follows: Non-cash payment instruments used in payment transactions (hereinafter referred to as payment means), including: checks, payment orders, payment orders, collection orders, collection orders, bank cards and other means of payment according to regulations of the State Bank Illegal means of payment are means of payment not specified in Clause of this Article → Which means bitcoin or crypto generally isn’t legal in Vietnam and the use of Bitcoin or Crypto can be fined up to 100 millions Vietnam Dong 2.3 How to implement crypto into ecommerce and banking It is estimated that, globally, nearly 4% of the world’s consumers hold cryptocurrency, and around 18,000 businesses worldwide accept cryptocurrency as payment And with the rising number of new cryptocurrencies, increasing countries that legalize using crypto and more money dumping into the cryptocurrency market day by day Crypto is ought to be in the ecommerce and banking industry someday Although cryptocurrency may seem like science fiction, it’s very real and relatively straightforward for eCommerce businesses to accept as a payment option It’s not farfetched for online businesses to add cryptocurrency as another option for payment, alongside the typical Mastercard, Visa, Debit and PayPal options currently in place for most eCommerce websites And since Cryptocurrency worked like a medium of exchange without a third party It could also be implemented in banking with the use of transferring money → With the rise of the metaverse, which is built around blockchain, cryptocurrency and the blockchain now has a much larger chance of being implemented in those two industries 18 2.4 The current cryptocurrency situation in Vietnam Vietnam leads globally in cryptocurrency adoption with 41 percent of respondents claiming to have bought Bitcoin and the like, according to a recent survey Twenty percent of Vietnamese said they had purchased Bitcoin, the highest among 27 countries polled with 42,000 respondents, according to the survey by U.S based financial consultancy Finder "Remittance payments may have played a significant role in these numbers, with cryptocurrency an option for migrants who want to send money home and avoid exchange fees," the report stated Imagine 5: Percentage of respondents Despite having the 53rd largest economy based on gross domestic product, Vietnam placed 13th in realized Bitcoin gains for 2020, according to Cointelegraph Adoption was especially high in Asia, with 30 percent of respondents in Indonesia and India claiming to have bought cryptocurrency, the Finder’s survey found In Malaysia and the Philippines, this proportion was 29 percent and 28 percent, respectively There were between 1,160 and 2,511 respondents for each country covered in the study 19 Data from Statista in February showed Vietnam had the second highest rate in terms of cryptocurrency use among 74 surveyed economies, driven by remittance payments Bitcoin and other cryptocurrencies are not recognized as a legitimate means of payment in Vietnam The State Bank of Vietnam has warned that owning, trading and using cryptocurrencies are risky and not protected by law 20 CHAPTER 3: PREDICT THE FUTURE OF CRYPTOCURRENCY 3.1 Crypto’s market in the future The evolution of new technologies, financial innovations and the dramatic evolution of digital currencies is transforming the way we use money How it will evolve is anyone's guess Crypto has always been volatile, both in price and in consumers’ perception Despite the explosion in recent years, what the future of cryptocurrency holds is still unclear For the average investor, for government regulators, and for those attempting to make crypto greener, this is a time of paradoxes to navigate If one thing is certain, it’s that the market in years’ time could be just as unrecognizable to us now as the market was years ago While the future of cryptocurrency will be shaped by regulators, it can also be influenced by brands, many of which are jumping into the market to fill the needs of the growing marketplace that governments have so far ignored This can be through facilitating trades in a more comfortable, safe environment for “newbies,” or offering education and resources for curious intenders Some of the limitations that cryptocurrencies presently face – such as the fact that one’s digital fortune can be erased by a computer crash, or that a virtual vault may be ransacked by a hacker – may be overcome in time through technological advances What will be harder to surmount is the basic paradox that bedevils cryptocurrencies – the more popular they become, the more regulation and government scrutiny they are likely to attract, which erodes the fundamental premise for their existence Avivah Litan, distinguished analyst and VP at Gartner, who also co-authored its report, Predicts 2022: Prepare for Blockchain-Based Digital Disruption, said that you'll see cryptocurrencies being used for retail payments in about three to five years Now and in the next couple of years, you'll see a lot of interest and adoption of cryptocurrency by investors as an investment tool, namely as a hedge against inflation and as an alternative to gold However, it remains an extremely volatile investment Despite this, there's little sign that investors or companies are backing down from the potential reward crypto has to offer That's not just down to speculating on the price of cryptocurrencies Some investors and companies are also interested in crypto to get into decentralized finance or DeFi 21 "Companies want to get in on the action; even the hedge funds are putting more money into cryptocurrency," says Litan Clamping down on crypto scams and misuse will be key to gaining mainstream legitimacy By 2024, we predict that successful cryptocurrency thefts and ransomware payments will actually decrease by 30% due to criminals' inability to move and spend funds off of blockchain networks 3.2 Blockchain’s Impact On The Economy in the future In the future, most people are unemployed as they have been automated out by blockchain tech like smart contracts Indeed, many companies are DAO’s with zero employees All this has concentrated wealth into the hands of a tiny crypto elite of early adopters The financial services industry has now completely disappeared as everyone was automated out by DeFi Even stock markets no longer exist Sure you can invest in companies, but you’ll buy that tokenized equity on an exchange The rise of decentralized search engines and social media platforms ended up killing the likes of Google and Facebook Also, there are very few office workers in the future That’s due to blockchain tech removing a lot of the intermediaries and administrative effort involved in record keeping Supply chains also became a ton more efficient by adopting blockchain to track and trace items Many jobs you take for granted no longer exist Take taxi drivers for example; they were automated out through combining IoT and blockchain In the future, people’s main function is to simply act as consumers Speaking of shopping, loyalty cards are a thing of the past and store loyalty programs are now entirely digital 3.3 Coexistence of Central Bank Coins & Crypto In the future, it’s will be common for stores to have prices, a higher one set for payment in central bank currencies and a cheaper one for crypto It’s because the central bankissued digital currencies are tracked and taxed by the government However, cryptos are not and that means that people can use them to avoid crippling levels of taxation That meant that store owners could accept crypto and not pay tax 22 The truth is that blockchain made private business and the public sector too efficient and that led to a lot of unemployment and the mass rollout of universal basic income That way, governments could issue digital money they could track and tax Obviously, most people want to avoid tax and that’s why lower prices are paid in stores if you use crypto 23 CHAPTER 4: SOLUTIONS FOR CRYPTO’S PROBLEMS 4.1 Possible solutions for crypto’s challenges - Educate, increase people’s awareness of blockchain Before the general adoption is possible, members of the public must understand the difference between bitcoins, other crypto-currencies, and blockchain One should understand that cryptocurrencies are only one application of blockchain technology amongst many others This will help to eliminate the sometimes negative implications and may result in an increased willingness to use the technology - The government and other public organisations should develop a regulatory model that encourages innovation while protecting consumers that might be an eye opener for others - Recently, new solutions emerged which enable legacy systems to connect to a blockchain backend One such solution is Modex Blockchain Database, a product designed to help people without a background in technology, access the benefits of blockchain technology and remove the dangers posed by the loss of sensitive data - Educational institutions should introduce relevant blockchain-related courses Though this will alleviate the market demand, the results however will become palpable only after students will finish their training and that will take some time - Develop more efficient consensus algorithms that are less energy taxing in blockchain proponents From this, reduce energy consumption 4.2 Proposed solutions to manage cryptocurrency effectively in Vietnam Because of the distinctive feature of crypto which is anonymity The first proposed solutions for crypto to be legal in Vietnam would be to tighten the cryptocurrency management Which includes licensing companies that provide the crypto services and regularly monitor them to ensure transparency The second solution we would propose is that the government should put out a declaration saying Cryptocurrency (including Bitcoin) should not be regarded as currencies, but they may be considered to be speculative financial products Followed by effective licensing, reporting, monitoring and supervision mechanisms For individuals and organizations “digging” or exploiting Bitcoin or crypto in general: the value of crypto can be regarded as income; therefore, the income tax on the income earned from "digging" crypto 24 With the official legalization of crypto should also comes the IT and financial experts which control the risks and solve the problem occurs when crypto go officials 25 III CONCLUSION Cryptocurrency, (crypto-currency or crypto), is any form of currency that exists digitally or virtually and uses cryptography to secure transactions Due to its advanced features, many developed nations allow their residents to use crypto as the official types of currency, but it is not legal in all countries around the globe, including Vietnam In fact, experts and many investors have a positive point of view about cryptos’ future, but the reality is it’s still a new and speculative investment, without much history on which to base predictions 26 REFERENCES Reserve bank of Australia (2021), ‘Cryptocurrencies’ https://www.rba.gov.au/education/resources/explainers/cryptocurrencies.html James Royal and Brian Beers (2022), Bankrate ‘12 most popular types of cryptocurrency”; April 2022 https://www.bankrate.com/investing/types-of-cryptocurrency/#:~:text=1.,Bitcoin %20(BTC)&text=As%20the%20harbinger%20of%20the,they%20talk%20about %20digital%20currency EuroMoney Learning, ‘What is blockchain’ https://www.euromoney.com/learning/blockchain-explained/what-is-blockchain Guardian Nigeria (2021), The Guardian, ‘The idea and a brief history of cryptocurrencies’, 26 December 2021 https://guardian.ng/technology/tech/the-idea-and-a-brief-history-of-cryptocurrencies/ Jaya Vaidhyanathan and Aashika Jain (2022), Forbes Advisor, ‘What Is Cryptocurrency And How Does It Work?’, Mar 2022 https://www.forbes.com/advisor/in/investing/what-is-cryptocurrency-and-how-does-itwork/ nibusiness info.co.uk, ‘Accepting online payments’ https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-usingcryptocurrency DatNguyen (2021), VnExpress, ‘Vietnam leads globally in cryptocurrency adoption’, August 18, 2021 https://e.vnexpress.net/news/business/data-speaks/vietnam-leads-globally-incryptocurrency-adoption-4342644.html ThuThuy (2019), Asian Journal of Business Environment, KoreaScience, ‘Current Situation of Cryptocurrency in Vietnam’, 2019.10.30 http://koreascience.or.kr/article/JAKO201915658233883.page Bitcoin (2019), ‘Bitcoin is an innovative payment network and a new kind of money’ 27 https://bitcoin.org/en/ 10 JOHN P KELLEHER (2022), Investopedia, ‘Why Do Bitcoins Have Value?’, March 15 2022 https://www.investopedia.com/ask/answers/100314/why-do-bitcoins-have-value.asp#tocwhy-does-bitcoin-have-value 11 JAKE FRANKENFIELD (2021), Investopedia, ‘Bitcoin definition’, November 30 2021 https://www.investopedia.com/terms/b/bitcoin.asp 12 ADAM HAYES (2022), Investopedia, ‘10 Important Cryptocurrencies Other Than Bitcoin’, March 14 2022 https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoin/ 13 cloud security alliance (2022), ‘The Future of Cryptocurrency’, 02/17/2022 https://cloudsecurityalliance.org/blog/2022/02/17/the-future-of-cryptocurrency/ 14 Anders Bylund (2021), The Motley Fool, ‘The Future of Cryptocurrency’, Dec 2021 https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrencystocks/future-of-cryptocurrency/ 28 LIST GRAPHS AND IMAGINES 29 30 31 Rate members Group 4: Name Trần Thị Thanh Thảo Nguyễn Thị Ngọc Minh Nguyễn Tiến Đạt Nguyễn Thanh Trang Percentage of contribution 100% 100% 100% 100% 32