On December 22, the Korea Information Processing Society (KIPS) held a conference on “digital currency and financial revolution” at JW Marriott Hotel Seoul, with a view to allowing experts from the government, industry and academia to discuss the convergence of the most common virtual currency ‘Bitcoin’ and IoT and the future of financial technology (fintech).
“Internet-driven social stratification and various technological innovations, powered by social networking services, have given rise to digital money. Thus, discussions on desirable technological and policy directions for cybercurrency become more important than ever before,” Cho Sung-kap, Chairman of KIPS, said in his opening address.
“Bitcoin, a software-based online payment system, was introduced in 2009 by Japanese programmer Satoshi Nakamoto. In his paper, Bitcoin is defined as an open-source decentralized digital cryptocurrency that circulates via peer-to-peer networks without the help of financial institutions as intermediaries,” Chairman Cho explained.
As Bitcoin exchanges are being put up and Bitvoin is increasingly receiving media attention, public awareness of Bitcoin has grown accordingly. The 2012 - 2013 Cypriot financial crisis and US Federal Reserve Chairman Ben Bernanke’s comments on Bitcoin have thrown Bitcoin into the global spotlight. Since Cyprus joined the EU in 2004, resource-rich Cyprus has grown into a ‘tourism powerhouse’ with overall bank assets around eight times GDP. Since a one-time tax of 9.9 percent is levied on Cypriot bank deposits of more than 130,000 euros, Bitcoin has rapidly caught on as an alternative investment asset.
Technically speaking, Bitcoin is based on cryptography, peer-to-peer networks, a fixed supply, an open-source operational system and the Bitcoin mining mechanism.
The use of Bitcoin at both online and offline shopping malls around the world is on the rise. Encrypted virtual currencies, like Bitcoin, and fintech services are projected to revolutionize the global financial sector if they are embraced by Global IT giants through their online transaction systems, such as Apple’s Apple Pay, Alibaba’s Alipay, Facebook’s “Buy now” button.
According to the eTODAY’s news report, released on September 24, 2014, eBay signed an agreement to allow the use of BitPay (the electronic payment processing system for the bitcoin currency), Coinbase and GoCoin through PayPal. Though eBay has limited the use of BitPay to the North American market, it said it would gradually increase its support for Bitcoin.
Around 2000 BC, most transactions occurred between individuals within the same physical area, so there were many obstacles. As a result, currency was created as a medium of exchange that can complete each transaction without creating any debtor-creditor relationship in a ledger.
Since then, banks have come into the picture as bookkeepers. Individuals usually made cash transactions. However, the advent of the Internet has ushered in the electronization of financial transactions. More credit card transactions and online banking are taking place than cash transactions. In other words, transactions through banks or credit card companies have replaced direct transactions between individuals as the predominant form of financial transactions.
Third-party transactions, of course, accompany transaction fees. What’s more, since countries have different currencies and financial institutions have different ways of keeping their accounts, additional costs are also incurred for currency alignment.
The bitcoin blockchain, a shared public ledger on which the entire Bitcoin network hinges, is a technical attempt to address the inefficiency of third-party transactions. Anyone can make a transaction via the Bitcoin peer-to-peer program and each transaction is recorded in a single global ledger. Therefore, Bitcoin entails no transaction fee while making possible offline cash transactions in cyberspace.
At the conference, Chairman Cho also said that financial authorities and the government should draw up preemptive measures in response to the possible impact of advances in ICTs on each industry. Israel is emerging as a bitcoin mecca; startups armed with various ideas are spring up everywhere to take on the Bitcoin market.
“One of the world’s biggest computer company has acknowledged that bitcoin’s block chain technology can be put to good use in the era of IoT. IBM has already embarked on the development of a distribution platform for the IoT, which is based on bitcoin's block-chain technology. IBM’s such moves will have a significant impact on the IoT industry overall,” Chairman Cho added in his opening address.
By Yeon Choul-woong