A significant portion of my thesis proposal involves the adoption of a borderless cryptocurrency utilization between North and South Korea. A big question from one of my critiques include giving a feasible reason to why the South and North Korean government would want to adopt a decentralized form of cryptocurrency in comparison to fiat currency where it is essentially issued and regulated by the government.
Crypto vs. Fiat
|An asset||Limited as a currency|
|Price determined by an algorithm||Price determined by markets and regulations|
|Generated by computers||Issued by the Government|
|Limited supply and has a set of maximum||Unlimited supply and produced by the government as necessary|
|Digital method of exchange||Physical Method of exchange|
|Form of private and public pieces of code||Form of coins or paper money|
|Decentralized and uncontrollable by any entity or government||Centralized and controlled by the laws and banks|
Fiat Currency’s Transition from the Physical to the Digital
These past few generations, there has already been a transition from physical to digital for fiat currency, as most people carry credit or debit cards in their wallet in comparison to carrying physical cash. There has been a decent amount of discussion towards transitioning into a cashless society. The government has also been supporting this notion by removing dollars from circulation and demonetizing cash reserves.
I speculate that this would facilitate a easier transition to utilizing cryptocurrency as a dominant source of transaction in comparison to the existing traditional system. Only 8 percent of the world’s finances are represented in physical currency. India is currently experiencing a crisis in their economy from their leaders trying to convert through a demonetization process.
The biggest advantage to cryptocurrency is the fact that it has a specific cap. There is a limited amount of cryptocurrency that is going around, therefore it would increase its value as a purchasing power due to people saving.
Additional Advantages to Cryptocurrency
Transactions through cryptocurrency limits the transactions to only two parties. This system of a peer-to-peer networking structure essentially cuts out the middleman which would otherwise include fees, unnecessary paperwork, commissions, and just in general additional time, which is valuable in a majority of scenarios. This puts greater accountability on the two parties in exchange for a lack of involvement in additional parties. This also allows for more confidential transactions.
The blockchain itself can be considered a large property rights database, where it can enforce the property rights to specific material possessions, in addition to digital assets. This allows for the user to have full possession of their account, which also minimizes the time and expense involved in making asset transfers.
Easier International Trade
This is a big one, where a huge limitation of traditional fiat currency is that every country uses a different kind of currency, and there is an existing exchange which balances the worth of their respective currency with other countries’ currency system. This excludes cryptocurrency from unnecessary charges such as interest rates, exchange rates, or any specific levies by a specific country. The blockchain can facilitate a more efficient transaction over the borders of different countries.
With the traditional system of credit cards and banking, the user essentially turns over the stewardship of their funds over to a third party, which puts your assets at risk in the event of an economic crash. These accounts can be discontinued through the power that is imposed from these banking companies. A major advantage of the blockchain is that you hold true ownership of your assets through a bunch of private and public encryption keys that make up your cryptocurrency network.
The fact that there are over 1,200 different cryptocurrencies in circulation worldwide allows for a great deal of flexibility of the crypto-network. Many of them are indeed ephemeral, but there have been cases where they were created for specific use cases that illustrate the dynamic qualities of the growing phenomenon.
A Strengthen Security
When conducting a transaction, post-authorization it cannot be reversed, and there are no charge-back instances which prevent fraud from occurring, as this specific agreement prevents refunds in the event of a return policy. The well-established encryption that makes up the blockchain network as a distributed ledger serves as a safeguard against fraud and account tampering.
Government’s Power in the Crypto-World
One of the biggest challenges that the government has had to face was place regulations on the cryptocurrency in order for it to be universally accepted as a different form of currency. But this task is nearly impossible. Why? Because it is a borderless asset. They can regulate the exchanges within their respective countries, but they cannot regulate the cryptocurrency itself.
I need to give a reason to why the governments of North and South Korea would want to adopt a cryptocurrency system post-reunification in comparison to a more traditional fiat currency system. What’s special about the situation is that South Korea has already started regulating the cryptocurrency in terms of monitoring the exchanges. Normally, governments would only turn to cryptocurrency as a financial alternative when they’re in dire situations, such as Venezuela, or North Korea.
This news article that I highlighted in a post here talks about how North Korea has been developing a Bitcoin exchange, while also mining cryptocurrencies. They are utilizing this market platform exchange as a way of strengthening their weakening economy. It is also great to use cryptocurrency in this kind of environment because to an extent, both sides to the unification process have utilized cryptocurrency in a specific way, with North and South Korea being familiar with this currency in different ways.