Blockchain technology has brought a considerable amount of opportunity to Vietnam, enabling it to grow into one of Southeast Asia’s blockchain hubs.
Yet cryptocurrencies, enabled by blockchain technology like Bitcoin, are facing a massive speculative bubble that puts investments at high risk. Tran Huu Duc, director of FPT Ventures and Vietnam Innovative Startup Accelerator (VIISA) company and a board member of Fintech Vietnam Club, gives VIR some insight into the issue.
“In code we trust”
Bitcoin is no longer a trend. It was a burning story when it reached a new record, just short of $20,000, in mid-December 2017. In fact, 2014 saw a similar price wave when it briefly peaked at $1,000. Now Bitcoin’s current popularity is complicated with speculative hoardings and continuous value fluctuations.
Blockchain technology is one of the most viral trends of the internet era. Online websites and social media allow users to conveniently share information, but such data can just as easily be stolen. Bitcoin is making history by making possible the safe and effective transfer of not only information, but value too. Bitcoin has been proven to be the first blockchain application to ensure security and safety for transfers.
To ensure the transfer of value, blockchain technology focuses on assuring security and safety of transfers, building a strong enough network effect, and involving the system in the currency. The internet became powerful as it was accepted worldwide. Blockchain is a similar case. The more mining users carry out, the more value blockchain can create, thus handing power to the network. This is how blockchains have so far kept a close connection to cryptocurrencies.
In 2009, the world faced a serious financial crisis and central banks raised arguments surrounding a second bailout. At the time, the younger generation blamed central banks for diluting thousands of US dollars from their savings as the banks continued to issue more money, forcing monetary units into swelling inflation. It was in this context that Bitcoin turned up, with a limited quantity of 21 million, and the hope of better controlling inflation.
Now the bitcoin inflation rate trends steadily downwards. The number of bitcoins mined per block is set to decrease geometrically, with a 50 per cent reduction every 210,000 blocks, or approximately every four years. The mining will be completed by 2140 with a strong assertion of a zero-inflation regime. While the US dollar, the most powerful monetary unit in international transactions, proposes that it is “In God we trust”, the Bitcoin community embraces the slogan “In code we trust”.
Opportunities for developing blockchain technology in Vietnam are huge. The younger generation, with their quick access to technology, can now earn money by starting business projects – mining cryptocurrencies or developing other blockchain-based applications. The development of blockchain can bring in decent job prospects for IT programmers. In fact, several startups have dedicated money towards installing supercomputers specifically for mining cryptocurrencies. Even outside of the urban hubs of Hanoi and Ho Chi Minh City, many new supercomputer farms are cropping up, and spreading as far as Laos and Cambodia. The recent prices of Bitcoin still enable its ‘miners’ to gain profits.
Many domestic and regional capital ventures have asserted three key advantages Vietnam has in developing this kind of technology, and growing into a blockchain hub.
Firstly, Vietnam has a large population of computer programmers, most of whom are young and have quick access to computer technology. For example, we opened a Facebook page on blockchains that quickly surpassed 500 IT-worker members, all eager to exchange knowledge on this technology. Many in Vietnam’s younger generations are also eager to approach this industry. Remarkably, there is a Vietnamese student currently nurturing the idea of building a decentralised exchange for cryptocurrencies. Elsewhere, a group of overseas Vietnamese have created a cryptocurrency used to buy virtual items.
Secondly, blockchain is closely associated with algorithm, protocol, and code – and Vietnam already possesses a qualified, mathematical research workforce. The country has earned a name for itself amongst the top regional countries specialising in mathematical theory.
Last but not least, blockchain has gone beyond its technology to become a platform for storing and transferring value. Precisely, blockchain can be used to trace the origin of goods, keep healthcare profiles, or store valuable documents such as the land ownership certificates that several countries are currently piloting.
At the Singapore Fintech Festival 2017, many tech firms presented distinct blockchain-based applications. Of note, a blockchain application could allow a company’s board of directors to make a voting decision from anywhere around the world. The IBM Corporation debuted a blockchain-based auditing system under which internal auditors can log in, inspect, and collect data on all the transactions of each unit.
Coming back to Vietnam, efforts could be raised to build blockchain-based applications for domestic use, and bring them to regional and international markets if they prove effective. For instance, blockchain tech turns even more useful when applied to assets management, banking and finance, and data storage. Up until now, there have been no specific projects for building blockchain applications for the aforementioned fields, but the idea of creating a blockchain-based data consortium in the field of banking is under consideration.
The fate of Bitcoin
There have been rising worries about the possibility of hard forks in cryptocurrencies (when a single cryptocurrency splits in two), but the hard fork needs the consensus of cryptocurrency communities.
Bitcoin exemplifies the case. Bitcoin was created in a limited quantity of 21 million. Issuing more than this set limit is possible but there would be little probability of success. It is difficult enough to gain the consensus of three separate people, so one can imagine the difficulties in attempting to persuade a whole Bitcoin community.
It might be possible if the hard fork justification is to repair and overcome technical and systematic errors, or to upgrade the system for future demand. This has been true for Bitcoin Cash, where the volume of Bitcoin blocks is increased to store more transactions and speed them up.
It is difficult to predict the prices of cryptocurrencies, especially Bitcoin, because the market is manipulated by a large number of speculators. 2018 and 2019 are heavily anticipated years with various developments in cryptocurrencies expected.
The market will be pulled by two opposition forces. One side is represented by management agencies, who will spare no efforts to try to control and restrict the risks emerging from cryptocurrencies, while the other side gathers disruptors, who usually are out to seek new applications operating on the blockchain technology.
If management agencies gain the upper hand, the price of Bitcoin will drop to zero. Another outcome sees governments worldwide declaring that Bitcoin is valueless, leaving Bitcoin players empty-handed. A glimpse into this possibility was seen when China made a statement like this six months ago and the price of Bitcoin plummeted.
On the other hand, if disruptors are able to build a strong enough network effect with no one to counter it, Bitcoin could retain a long-term growth. In short, the fate of Bitcoin completely depends on the forces of the market.