Academic writing course international financial market title future of cryptocurrency blockchain

- 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 infrastruc

MINISTRY OF FOREIGN AFFAIRS DIPLOMATIC ACADEMY OF VIETNAM

FACULTY OF INTERNATIONAL ECONOMICS

-     

-ACADEMIC WRITING

COURSE: INTERNATIONAL FINANCIAL MARKET

TITLE

FUTURE OF CRYPTOCURRENCY & BLOCKCHAIN

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

1.1 Abstract 1

1.2 Research study scope 1

1.3 Research methodology 1

1.4 Research structure 2

II CONTENTS 3

CHAPTER 1: THEORETICAL BASIS 3

1.1 Definition 3

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 asshells 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, whilesimultaneously not being poisonous, radioactive, or corrosive Over time, governmentssaw value (and profit) in standardizing the size, shape, and weight of what we now callmoney China produced the world’s first metal coins over 3,000 years ago, and the firstpaper 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 torecognize it as a satisfactory payment for a debt

Howerver, as time goes by, during the era of technology 4.0, the world financial markethas undergone many changes The first decades of the 21st century have seen the birth ofnew payment methods on the internet - virtual currency Virtual currency have becomepopular 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 amonginvestors but in popular culture too

But this industry is only in its infancy and constantly evolving In fact, it’s difficult topredict where things are headed long-term, so today, group 4 will introduce to you ourresearch about the future of virtual currency– cryptocurrency and blockchain, togetherwith the special example of it – Bitcoin

1.2 Research study scope

Space scope: worldwide

Time scope: 2009- now

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Our speech’s content, “FUTURE OF CRYPTOCURRENCY & BLOCKCHAIN”consists of 4 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

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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 digit-al money th-at you c-an tr-ade in the hope of e-arning 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 pricewas just a few cents Just until 7 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 schemesand 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

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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 processtransactions This means that if you make a transaction, you’re placing your trust in one ormore 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 regularstock 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 Thereare 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’sworth 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

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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, butthat 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 maliciousmeans 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 setout in a white paper by the mysterious and pseudonymous Satoshi Nakamoto

Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin andeveryone can take part Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.

Main characters:

- Fast peer-to-peer transactions

- Worldwide payments

- Low processing fees

Bitcoin has steadily climbed the ladder to become the most dominant currency in the crypto space today, although several digital currencies existed before it It came into the world in 2009, courtesy of an anonymous group called Satoshi Nakamoto The group introduced Bitcoin as a decentralized peer-to-peer currency, free from political and regulatory manipulations like fiat currencies So, how did Bitcoin manage to outperform its competitors and attract such a vast global following in quite a short time? The following are the critical reasons behind Bitcoin’s outstanding performance in the crypto world The main reasons that have enabled Bitcoin to maintain the lead are its first-mover advantage, blockchain technology, and unique supply and demand economics

Imagine 3: Bitcoin's Price History

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- First Mover Advantage:

While other cryptocurrencies existed before Bitcoin, none of them had proven useful untilBitcoin Most people did not believe a digital currency could facilitate transactions like fiat money before Bitcoin However, the world increasingly needed an alternative form of money to eliminate the traditional systems’ bureaucracies

Bitcoin’s unique characteristics enabled it to immediately attract public attention since it promised to solve the inefficiencies of traditional currencies It responded directly to the public’s demands of a decentralized financial system when there were no other practical options That gave Bitcoin the first-mover advantage, allowing it to take the lead in the crypto space

- Blockchain Technology

Bitcoin is a technology-based currency that runs on blockchain One of Bitcoin’s greatest strengths is technology, making it more distinctive and robust than other cryptocurrencies.Blockchain technology is a digitized shared ledger verifying and validating Bitcoin transactions It stores users’ public addresses and transaction history on a distributed digital ledger, accessible to all users on the Bitcoin network

Blockchain technology ensures transparency and security in Bitcoin transactions due to itsirreversibility Its decentralized network and data encryptions make it almost impossible for users or third parties to manipulate the ledger Besides, it also restricts the accessibility

of users’ data to the participants on the network That makes Bitcoin seem more credible and efficient than other cryptocurrencies or even fiat money

- Supply and Demand Economics

Unlike fiat currencies or other cryptocurrencies, Bitcoin also has a unique protocol, impacting its demand and supply Bitcoin’s limited supply caps it at 21 million tokens only, with over 18 million currently in circulation Besides, its availability is subject to thehalving process that reduces the mining incentives by half every four years That ensures Bitcoin’s diminishing supply and scarcity as the market demand increases

Many crypto trading sites such as bitcoins-era.com report constantly growing Bitcoin trading volumes Bitcoin adoption is also rapidly increasing among global merchants and consumers, driving its demand Thus, the increasing Bitcoin’s market demand and diminishing supply allow it to retain a greater purchasing power over time That impacts higher Bitcoin prices, making it more valuable than other cryptocurrencies

1.5.2 Ether (ETH)

• Price: $3,219

• Market cap: $388 billion

Ethereum — the name for the cryptocurrency platform — is the second name you’re mostlikely to recognize in the crypto space The system allows you to use ether (the currency)

to perform a number of functions, but the smart contract aspect of Ethereum helps make it

a popular currency

The applications on Ethereum are run on ether, its platform-specific cryptographic token Ether (ETH) is like a vehicle for moving around on the Ethereum platform and is sought mostly by developers looking to develop and run applications inside Ethereum, or now, byinvestors looking to make purchases of other digital currencies using ether Ether, launched in 2015, is currently the second-largest digital currency by market capitalization after Bitcoin, although it lags behind the dominant cryptocurrency by a significant margin

1.5.3 Tether (USDT)

• Price: $1.00

• Market cap: $82 billion

Tether (USDT) was one of the first and most popular of a group of so-called stablecoins—cryptocurrencies that aim to peg their market value to a currency or other external reference point to reduce volatility Stablecoins are tied to the value of a specific asset, in Tether’s case, the U.S Dollar Tether often acts as a medium when traders move from one cryptocurrency to another Rather than move back to dollars, they use Tether However, some people are concerned that Tether isn’t safely backed by dollars held in reserve but instead uses a short-term form of unsecured debt

1.5.4 Binance Coin (BNB)

• Price: $433.97

• Market cap: $72 billion

Binance Coin (BNB) is a utility cryptocurrency that operates as a payment method for thefees associated with trading on the Binance Exchange It is the third-largest

cryptocurrency by market capitalization While originally created as a token to pay for discounted trades, Binance Coin can now be used for payments as well as purchasing various goods and services

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1.5.5 Cardano (ADA)

• Price: $1.08

• Market cap: $37 billion

Cardano (ADA) is an “Ouroboros proof-of-stake” cryptocurrency that was created with a research-based approach by engineers, mathematicians, and cryptography experts Created by the co-founder of Ethereum, Cardano also uses smart contracts, enabling identity management

1.5.6 Polkadot (DOT)

• Price: $20.26

• Market cap: $20 billion

Polkadot (DOT) is a unique PoS cryptocurrency aimed at delivering interoperability among other blockchains Its protocol is designed to connect permissioned and

permissionless blockchains as well as oracles to allow systems to work together under oneroof Polkadot’s core component is its relay chain, which allows the interoperability of varying networks It also allows for parachains, or parallel blockchains with their own native tokens for specific-use cases A co-founder of Ethereum is one of Polkadot’s inventors, and some industry watchers believe Polkadot is looking to dethrone Ethereum

1.5.7 Dogecoin (DOGE)

• Price: $0.1436

• Market cap: $19 billion

Dogecoin (DOGE), seen by some as the original “memecoin,” caused a stir in 2021 as theprice of the coin skyrocketed Originally created as a joke after the run-up in Bitcoin, Dogecoin takes its name from an internet meme featuring a Shiba Inu dog Unlike many digital currencies limiting the number of coins in existence, Dogecoin has unlimited issuance It can be used for payments or sending money

1.5.8 Terra (LUNA)

 Price: $81.55

 Market cap: $28 billion

LUNA is the native coin of the Terra blockchain, and backs the various stablecoins created on this network Terra's algorithmic stablecoins are backed by LUNA, and use a central pool of tokens controlled by smart contracts to maintain the price

Using its currency Luna, Terra is a platform that helps backstop a range of stablecoins based on real currencies such as the dollar or euro Terra helps stabilize the price of stablecoins through various technical means, and it also supports smart contracts.

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2.1 The summary of the cryptocurrency market

Starting from 2013, the crypto market only has 66 available coin that can be bought andsold But throughout the years the crypto market has risen to an astonishing 10,397 coins.With some of the most noticeable coins include Bitcoin(BTC), Ethereum(ETH),BNB(BNB), Dogecoin(DOGE),etc

But yet despite the large amount of cryptocurrency available on the market, Bitcoin is themost well-known and is considered as the face of crypto, leading crypto through its upsand downs

Imagine 4: Cryptocurrency number

- Liquidity of crypto: The average 5 days liquidity of the top 4 largest crypto is BTC(584.6 million BUSD), ETH( 1.632 billion USDT), BNB(101 million BUSD), DOGE( 208 million USDT) And when compared to the average 5 days liquidity of some blue-chip stocks listed on the America stock market AAPL( 133 trillion dollars),JNJ ( 1.4

billion dollars), BRK:A( 1.3 billion dollars) we can see that the liquidity of crypto is nowhere near those of the blue-chip stocks listed in America

2.2 The legal issue of cryptocurrency

2.2.1 The current legal situation of crypto

With its growing popularity, some countries have considered it a legal means of transaction, and some companies have even started accepting payment in Bitcoin Whether you can use Bitcoin depends on where you are because some regions and countries have not embraced it as others have

But yet one of the main reasons many governments are concerned about the use of Bitcoin in their countries is the anonymity of the transactions and how hard it is to track them The library of Congress usually conducts reviews of different countries’ stands on cryptocurrency and Bitcoin

In November 2021, they found 103 countries whose governments gave financial regulatory agencies directions to develop priorities and regulations for financial institutions concerning cryptocurrencies and their utility in AML/CFT With some of stand out countries like:

+ United States: Since 2013, the United States Financial Crimes Enforcement Network has been giving guidance about Bitcoin The US treasury has described Bitcoin as a convertible currency that people can use in place of the US dollar

They have classified all entities that exchange or administer Bitcoin as money service businesses The government requires that they register with the treasury, file transaction reports above $10,000, and are subject to the Bank Secrecy Act

+ The European Union

The EU identifies cryptocurrencies as crypto-asses, making it legal to trade and use Bitcoin However, the currency regulatory within the EU has announced that any activities involving crypto-assets are not in their control The European Commission in

2020 endorsed a proposal for legislation to regulate all cryptocurrencies The legislation intends to level the financial ground across the union and ensure the public can safely access and use crypto-assets

+ Australia

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