Paper for 2nd International Conference on Humanity, Management and Social Sciences, 30-31 October, 2018, Bali, Indonesia. Cryptocurrencies and Blockchain: New Global Financial Systems Dr. Dhirawit Pinyonatthagarn Associate Professor Bodhisastra University, Florida, USA dhirapin@gmail.com Abstract This paper aimed to explain and examine the new trend in world financial systems focusing on cryptocurrencies and blockchain technology in terms of their origins, definitions, benefits, drawbacks, differences, and different ways cryptocurrencies and blockchain can change entrepreneurship and the job market. It argued that cryptocurrencies make it easier to transfer funds between two parties in a transaction; these transfers are facilitated through the use of public and private keys for security purposes. These fund transfers are done with minimal processing fees, allowing users to avoid the steep fees charged by most banks and financial institutions for wire transfers and the blockchain technology can be used to store an online ledger of all the transactions that have ever been conducted using bitcoins, providing a data structure for this ledger that is exposed to a limited threat from hackers and can be copied across all computers running the software. Every new block generated must be verified by the ledgers of each user on the market, making it almost impossible to forge transaction histories. Moreover, there are at least six ways cryptocurrencies and blockchain can change entrepreneurship and job markets: Increasing access to entrepreneurship education, unlocking crowdfunding opportunities, providing user-friendly financial tools, cultivating new investment opportunities, developing customer-loyalty platforms, and creating reliable agreements. Keywords: Crytocurrencies, blockchain, financial systems. 1
Introduction A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation. The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto. As of May 2018, there were over 17 million bitcoins in circulation with a total market value of over $140 billion. Bitcoin's success has spawned a number of competing cryptocurrencies, such as Litecoin, Namecoin and PPCoin. Benefits and Drawbacks Cryptocurrencies make it easier to transfer funds between two parties in a transaction; these transfers are facilitated through the use of public and private keys for security purposes. These fund transfers are done with minimal processing fees, allowing users to avoid the steep fees charged by most banks and financial institutions for wire transfers. However, because cryptocurrencies are virtual and do not have a central repository, a digital cryptocurrency balance can be wiped out by a computer crash if a backup copy of the holdings does not exist. Since prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely. The anonymous nature of cryptocurrency transactions makes them well-suited for a host of nefarious activities, such as money laundering and tax evasion. However, cryptocurrency advocates often value the anonymity highly. Cryptocurrencies are also considered by some economists to be a short-lived fad or speculative bubble - concerned especially that the currency units, such as Bitcoins, are not rooted in any material goods. Bitcoin has indeed experienced some rapid surges and collapses in value.
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Cryptocurrencies are not immune to the threat of hacking. In Bitcoin's short history, the company has been subject to over 40 thefts, including a few that exceeded $1 million in value. Still, many observers look at cryptocurrencies as hope that a currency can exist that preserves value, facilitates exchange, is more transportable than hard metals, and is outside the influence of central banks and governments. Cryptocurrency as an Asset Class Contrasted with blockchain, cryptocurrency has to do with the use of tokens based on the distributed ledger technology. Cryptocurrency can be seen as a tool or resource on a blockchain network. Anything dealing with buying, selling, investing, trading, microtipping, or other monetary aspects deals with a blockchain native token or subtoken. It is a token based on the distributed ledger that is a blockchain. Cryptocurrency is a digital currency formed on the basis of cryptography, or by definition, “the art of solving or writing codes.” Although all are considered cryptocurrencies, these tokens can serve different purposes on these networks. Referring to the token as the technology can be right in the case of Bitcoin, but is very different when dealing with other blockchain projects like Ethereum. In this case, the technology is known as Ethereum, but the native token is Ether, and transactions are paid in gas. Blockchain as Technology “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” Don & Alex Tapscott, authors Blockchain Revolution (2016) When Bitcoin was the only blockchain, there wasn’t much of a distinction between the terms and they were used interchangeably. As the technology matured and a variety of blockchains bloomed, the uses quickly diverged from the pure money aspect. Instead, technologists experimented with ideas like decentralized name registry. Other uses utilized the peer-to-peer aspect to deliver messages in a discrete way. In the end, many of these projects 3
failed to find a good use of the technology. The projects left standing helped demonstrate what was possible with beyond buzzwords. A blockchain is a distributed ledger technology that forms a “chain of blocks.� Each block includes information and data that are bundled together and verified. These blocks are then validated and strung onto the chain of transactions and information in previous blocks. These blocks of transactions are permanently recorded in the distributed ledger that is the blockchain. Differences between Cryptocurrency and Blockchain Blockchain is the platform which brings cryptocurrencies into play. It is the technology that is serves as the distributed ledger that forms the network. This network creates the means for transacting, and enables transferring of value and information. Cryptocurrencies are the tokens used within these networks to send value and pay for these transactions. Furthermore, we can see them as tool on blockchain, in some cases serving as a resource or utility function. Other times they are used to digitize value of an asset. Blockchains serve as the basis technology, in which cryptocurrencies are a part of the ecosystem. They go hand in hand, and crypto is often necessary to transact on a blockchain. But without the blockchain, we would not have a means for these transactions to be recorded and transferred. 6 Ways Cryptocurrency and Blockchain Can Change Entrepreneurship Currently, it is impossible to ignore cryptocurrency and blockchain. They are everywhere, and there is no sign of slowing down. As a result, blockchain-based exchanges of information and tokens are releasing a wave of new possibilities for entrepreneurs. The rush to create innovative business solutions that are faster, more secure and more transparent is on. Blockchain is already contributing to real-world improvements in the world of entrepreneurship.
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Here are the six ways: 1. Increasing access to entrepreneurship education. People of all ages and from all walks of life are becoming increasingly interested in entrepreneurship, and many simply don't have the time or resources to seek further education from formal institutions. Someone with a 9-to-5 job trying to launch his or her own business likely doesn't have time to enroll in an MBA program. While formal education isn't a requirement, many new entrepreneurs seek flexible, reliable and affordable educational options to help them develop the skills needed to launch their businesses. SuccessLife is using blockchain tokens to offer video content, digital courses and personal coaching to aspiring entrepreneurs, covering topics such as management and investment techniques. The token's immutable ledger and automatic smart contracts render the transactions that provide these educational opportunities reliable and costeffective. Entrepreneurs only need an internet connection to access the educational content. 2. Unlocking crowdfunding opportunities. One of blockchain's most newsworthy contributions to entrepreneurship is its effect on crowdfunding campaigns. In fact, blockchain startups raised $5.6 billion in funds in 2017, mostly driven by community campaigns. This blockchainbased fundraising model has proven so successful that it's attracting plenty of mainstream investment. Despite the success of blockchain-centric crowdfunding campaigns, the traditional crowdfunding market is still extremely inefficient. Only 1.9 percent of campaign funds go to developing countries and 78 percent of campaigns fail to reach their targets. The lack of accessibility has led some innovative companies to combine blockchain with traditional crowdfunding to give power back to entrepreneurs around the globe.
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Acorn Collective is one company providing a second-generation open marketplace for new ventures seeking crowdfunding. Any legal new project whose founder passes primary screening can make a pitch on the Acorn platform. Blockchain makes the process transparent, safe and accessible from any region. On the platform, a crowdfunding engine helps entrepreneurs drum up marketing support, maximizing the chance of a successful project. 3. Providing user-friendly financial tools. More new ventures are using cryptocurrencies in addition to fiat currencies in order to manage their financing, whether that takes the shape of a token sale or an entrepreneur raising funds through adroit trading on crypto exchanges. Managing multiple fiat and crypto accounts, however, has always been a complicated task. Zerta is a next-generation trading platform built by a leading team of exchange technologists and entrepreneurs. The platform connects an exchange, a crypto and fiat wallet, and a bank in a single ecosystem. "We are taking the cryptotrading market up to the level of traditional markets and stock exchanges," says Paruyr Shahbazyan, co-founder of Zerta. 4. Cultivating new investment opportunities. Entrepreneurs across every industry are constantly looking for new ways to diversify their investments, and the introduction of coin-based transactions is opening up new possibilities. For example, Muirfield has decades of experience facilitating private equity investment opportunities. Now, as blockchain becomes increasingly common across industries, Muirfield IP is rumored to be launching its own Tokenized Asset Offering in 2018. Not only do token-based opportunities open up the doors for new entrepreneurs to purchase assets, facilitating a TAO also ensures that the laws and regulations regarding security tokens are strictly followed.
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5. Developing customer-loyalty platforms. Customer loyalty is essential for all businesses. To nurture business-customer relationships, many entrepreneurs try to create customer-loyalty problems. Such programs, however, can require more technological headaches and bookkeeping hurdles, creating one more data field for entrepreneurs to track and manage. Blockchain is an ideal tool for helping entrepreneurs develop low-stress customerloyalty programs, rewarding repeat customers with special incentives and fostering close relationships. Blockchain's automatable transaction ledger can keep track of customer interactions and adjust customers' loyalty status appropriately. Blockpoint, for example, allows users to quickly set up blockchain-based loyalty programs to integrate with their existing businesses. 6. Creating reliable agreements. Entrepreneurs thrive in a network of mutually supportive relationships that allow them to launch their ventures. Many of these relationships, such as between investors and founders, take the form of official or unofficial contractual agreements. When these agreements fall through, entrepreneurs struggle. A product launch, for example, could be ruined if a deal with a manufacturer collapses. Blockchain signatures and smart contracts provide effective, affordable options for entrepreneurs seeking reliable legal contracts. Companies such as DocTailor offer tools for users to build and customize legal agreements and smart contracts on the blockchain. Tennessee recently made smart contracts legally binding in the state, and other locales seeking to nurture tech innovation are likely to soon follow their lead.
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Conclusion All in all, cryptocurrencies make it easier to transfer funds between two parties in a transaction; these transfers are facilitated through the use of public and private keys for security purposes. These fund transfers are done with minimal processing fees, allowing users to avoid the steep fees charged by most banks and financial institutions for wire transfers. However, because cryptocurrencies are virtual and do not have a central repository, a digital cryptocurrency balance can be wiped out by a computer crash if a backup copy of the holdings does not exist. Since prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely. Central to the appeal and function of cryptocurrencies is the blockchain technology it uses to store an online ledger of all the transactions that have ever been conducted using bitcoins, providing a data structure for this ledger that is exposed to a limited threat from hackers and can be copied across all computers where every new block generated must be verified by the ledgers of each user on the market, making it almost impossible to forge transaction histories. Moreover, many experts see this blockchain as having important uses in technologies, such as online voting and crowdfunding, and major financial institutions such as JP Morgan Chase see potential in cryptocurrencies to lower transaction costs by making payment processing more efficient. Finally, there are at least six ways cryptocurrencies and blockchain can change entrepreneurship and job markets: Increasing access to entrepreneurship education, unlocking crowdfunding opportunities, providing user-friendly financial tools, cultivating new investment opportunities, developing customer-loyalty platforms, and creating reliable agreements.
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