Revitalizing the Blockchain Industry Starts with a Shift in Government Perception

The National Assembly has been busy moving to foster the blockchain industry. Regardless of party affiliation, lawmakers have been voicing support for promoting the blockchain industry through a variety of formats, including National Assembly seminars, debates, and roundtable meetings. Most notably, the National Assembly recently hosted the “2018 GBPC (Global Blockchain Policy Conference),” its first-ever blockchain policy conference, with participation from members of the National Assembly from leading blockchain countries such as Japan, Estonia, and Finland. The attendance of top domestic financial and economic officials—including the Deputy Speaker of the National Assembly, the Deputy Prime Minister for Economic Affairs, the Chairman of the Financial Services Commission, the Governor of the Bank of Korea, and the Minister of SMEs and Startups—indirectly demonstrated the government’s strong interest in the blockchain industry.

In fact, this policy conference represents quite a dramatic reversal when considered in light of the government’s position on the blockchain-based cryptocurrency market at the beginning of 2018. From the second half of 2017 through early 2018, the government emphasized only the investment risks associated with surging cryptocurrency prices and the possibility of illegal activities such as money laundering, while refusing to recognize legitimate investment in cryptocurrencies. That stance remains in place even now. At the same time, however, the government highly valued the potential applications of blockchain technology, which underlies cryptocurrencies, and even pursued government-led projects based on it. In other words, it encouraged blockchain technology development while refusing to recognize investment in and trading of cryptocurrencies. Naturally, this gave rise to controversy over whether cryptocurrencies can truly be separated from blockchain technology.

Blockchain is a decentralized distributed network in which transactions take place and records are stored according to the consensus algorithm of network participants. One of its most important features is that transaction records agreed upon by network participants are stored sequentially on each participant’s network node. Because blocks containing transaction records are linked together like a chain, it is called a blockchain. The network is expanded or maintained through a process known as mining, which requires a high level of computing power and therefore incurs costs. Cryptocurrencies serve as compensation for this process and act as an incentive for participating in the blockchain network.

Meanwhile, blockchain’s greatest strength lies in security. To alter information once stored on a blockchain, one would have to modify not only the targeted record on every network node but also all subsequent records—something that is, in practice, nearly impossible. In other words, the distributed network itself naturally becomes the key to solving security problems. In some cases, this characteristic can also become a drawback in terms of blockchain application, but cryptocurrencies that address the shortcomings of early cryptocurrencies such as Bitcoin and Ethereum continue to emerge steadily.

Simply put, blockchain can be described as a trustworthy distributed network. It is a network technology in which authentication or verification is guaranteed, and anyone in the world can participate as long as they are connected to the internet. It can dramatically reduce transaction fees and complete international transactions and payments in just a few minutes. Beyond finance, including cross-border remittances, the potential uses of blockchain are now being discussed across most industries, including healthcare, distribution, tourism, sports, and gaming.

Naturally, related jobs are also increasing exponentially around the world. According to the global employment site Upwork, demand for blockchain skills is growing faster than for any of the roughly 5,000 technical skills tracked on the platform, and in the first quarter of 2018 alone it increased by 6,000% compared with normal levels. In Korea as well, according to the job site Saramin, there were 464 cryptocurrency- and blockchain-related hiring cases in September alone. A notable feature of jobs related to blockchain technology is that they are high-quality jobs. Supply still falls short of demand, and in response, leading universities around the world—including Stanford, Cornell, Harvard, and Princeton in the United States—are actively opening blockchain courses and specialized programs, as are Korean universities.

Another notable development is the shift in the policy stance on cryptocurrencies in major countries such as the United States and France. In the United States, SEC Chairman Clayton and Senior Researcher Hinman had previously regarded cryptocurrencies as securities, but in 2018 they showed a changed position. France, meanwhile, has made a complete about-face from its early-2018 policy of a total ban on ICOs (initial coin offerings) to a stance of promoting them. It is now moving quickly, together with the National Assembly, to implement supportive ICO policies in early 2019. In addition, countries such as China, the Dominican Republic, Ireland, Lithuania, and Venezuela are moving forward with issuing electronic currencies that can be used in place of their national currencies. These changes are based on the understanding that blockchain and cryptocurrencies are difficult to separate.

At the same time, the government’s commitment to the blockchain industry—recognized alongside big data and artificial intelligence as a core technology of the Fourth Industrial Revolution—is firm. It has planned blockchain projects totaling KRW 10 billion in 2019 and is seeking to cultivate specialized talent by investing KRW 74 billion through 2022. Nevertheless, the government has still not changed its policy of banning ICOs and refusing to recognize cryptocurrencies as investment assets.

Under these circumstances, it is clearly a positive sign that members of the National Assembly, regardless of party, have recently been actively engaged in legislative efforts to revitalize the blockchain industry. The goal is not to go against global policy trends but rather to lead them. If the government truly wants the blockchain industry to develop, then the time has come for it to adopt a new understanding of the cryptocurrency market.

Byunghwa Lim / Professor, Department of Economics, The University of Suwon

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Original title: 블록체인 산업 활성화는 정부의 인식 변화로부터

Author: Byung-hwa Lim

Date: 2018-11-07

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=16&idx=11211