By Kim Yoo-chul
Since the beginning of last year, the price of bitcoin, the most well-known cryptocurrency, and that of other digital tokens have skyrocketed, prompting debates about regulating them.
The Korean government, which believes the “bitcoin craze” is over-hyped and irrational, is trying to curb speculative transactions via strict regulations.
But the question is whether there are any negative side effects? This reporter is afraid that there are some.
Analysts concern that the government may end up “throwing the baby out with the bathwater.”
In other words, the government may be curbing the development of the base technology of bitcoin, dubbed blockchain, while trying to stop speculation.
Blockchain is dubbed as the next big thing after the internet and other countries and big companies spend vast sums of money to take the driver’s seat in the development of the potential-rich technology.
Blockchain is an open source code. Using this technology, participants can transfer value across the internet without the need for a central third party.
Buyers and sellers interact directly without needing verification by a trusted third-party intermediary. Transactions are not anonymous, but they are pseudonymous _ a transaction record is created, but identifying information is encrypted, and no personal information is shared
Big banks and governments are implementing blockchains as distributed ledgers to revolutionize the way information is stored and transactions occur.
More thoughtful governments in Europe are investing considerably in understanding how blockchain tech can transform not only central banking and the nature of money, but also government operations and the nature of democracy.
Their goals are laudable _ speed, lower cost, security, fewer errors and the elimination of central points of attack and failure.
It does make sense for government officials to have a strong say about the recent bitcoin craze given their focus on public interests and keeping customers safe from any hacking attacks from North Korea or anybody else.
Big mistake?
Allergic to anything related to digital tokens, however, the Seoul administration seems not to be jumping onto the blockchain bandwagon.
In the world of new technologies, the first mover tends to take all of the advantages unlike in conventional areas where there existed second-mover advantages.
Korea is seemingly rejecting the essential along with the inessential. Of course, the former is blockchain while the latter is speculation with cryptocurrencies.
Blockchain opens new opportunities
Today’s bitcoin frenzy can be compared to the dotcom bubble that sent the United States into recession before rebounding as a major industry.
Discussions should be focused on seeking ways for proper use of digital currencies as a good regulatory framework could provide room for businesses and the common good to evolve blockchain technology for it, and everybody, to thrive.
The Moon government is pushing for a “sharing economy.” Airbnb, Uber, Lyft and TaskRabbit are growing their businesses. They are very successful because they don’t share _ they aggregate. It is an aggregating economy.
None of these companies existed a decade ago as the technological preconditions were not there _ smartphones and highly-advanced payment systems. Now with blockchains, the technology exists to reinvent these industries again.
For example, within the blockchain Airbnb (bAirbnb), the bAirbnb software helps renters scan the blockchain for all the listings and filters and displays those that meet the customer’s criteria.
Benefits are the same as in the financial industry. With blockchain, not only can people become connected, but more important become included in financial activities, able to purchase, borrow, sell, and otherwise have a chance at building prosperous lives.
“This is a true peer-to-peer sharing economy,” said Park Seong-joon, head of the blockchain research lab at Seoul’s Dongguk University. “Some general thoughts are that Korea is an ideal country to develop blockchain-based technologies given the country’s ability to provide super-fast Internet and to have high Internet literacy. But the government is paying more attention to how to regulate digital token trading by pushing back the growth potential of blockchain.”
A couple months ago, the government banned initial coin offerings (ICOs), a new method of fund-raising in which firms create blockchain-based virtual currencies, which could be used to buy products and sell them publicly.
ICOs are considered as an ideal fund-raising campaign for start-ups given a little paperwork.
“Within the blockchain platform, new kinds of peer-to-peer collaborations could target humanity’s most vexing social problems. Perhaps, we could solve the crisis of confidence and even legitimacy in today’s institutions by shifting real power toward citizens, equipping them with real opportunities for prosperity,” said Don Tapscott, author of the book “Blockchain Revolution.”