The Impact Of The Crypto-Currency On The International Trade

CASE STUDY: International Trade

How International businesses can benefit from cryptocurrencies? How the cryptocurrencies will affect the international trade.

1. Introduction

Before the crypto-currency appeared it was difficult for entrepreneurs to reach the international markets and they were strictly sticking to the national markets in some countries. There are two macro-scale factors underline the trend towards greater globalization. The first is to remove barriers to facilitate cross-border trade (eg the free movement of goods and services, and capital, called “free trade”). The second is technological change, in particular the evolution of communication, information processing and transport technologies. But we will focus on the first factor where we will also explain how crypto is there to make trading easy.

Today’s cryptocurrencies are the most way cheaper to use to execute international transactions and making transactions faster and accurate, there are less chances of fraud. How International businesses can benefit from cryptocurrencies? In addition the positive effects of cryptocurrency on international businesses (the transaction freedom, always markets opened, security and the possibility of outsized returns).

How the cryptocurrencies will affect the international trade. With the cryptocurrency there are increasing of capital investment opportunity for individuals and businesses a like to protect their profits against economic forces of inflation and deflation in real time. What is the difference between both?  The main objective of this editorial is to analyse in depth the concept of "cryptocurrency" and the mechanisms allowing multinationals to know their value and Impact in international businesses.

2. Keys Definitions And Main Characteristics

2.1. Blockchain technologies

Blockchain, considered to be the second greatest innovation after internet (Drescher, 2017, 1), is a decentralized cryptographic data and distributed ledger technology allowing peer-to-peer communication. According to Nakamoto (2008), blockchain expresses data blocks cryptographically chained to each other like the rings of a chain (Nakamoto, 2008: 2).

Blockchain basically could be considered as a distributed database. It is like a huge, global digital board operating in billions of computers. Since it is an open-source technology, everyone could change the code and see what is going on. Transactions are implemented peer-to-peer. In other words, there is no need for powerful intermediators in approval or finalization of the transactions. Blockchain solves the doublespending problem and allows humans and businesses to trust each other with a need for banks, credit card companies, governments, unions and notaries (Tapscott, 2016; Macedo, 2018: 87-88).

Blockchain is a decentralized peer-to-peer technology recording and verifying transactions in a cryptographically safe fashion. The technology has implementation and applications promising hopes for various sectors including international trade, supply chain and financial services (Macedo, 2018: 92).

2.2. Bitcoin and Ethereum cryptocurrencies

Inspection-impossible virtual currencies, generated through encryption method, are so called as cryptocurrencies. Today, Bitcoin is the most famous cryptocurrency. It was put forth for the first time by Satoshi Nakamoto (nick named) in 2008 as “Bitcoin: Peer-to-Peer Electronic Cash System”. According to Nakamoto (2008), bitcoin is an “electronic currency allowing peer-to-peer online payments without the use of any financial organizations” (Nakamoto, 2008:1).

Bitcoin cryptocurrency with a great contribution to popularity of blockchain technology emerged with America-originated crisis in 2008. With this crisis, emerged through operations of the authorities sharing the information about mortgage real estate loans with unrealistic data, distrust to central authorities arisen. Bitcoin, emerged as a reaction to such distrust, eliminated central authority and recommended peer-to-peer transactions (Takaoğlu et al., 2019: 262).

Cryptocurrencies are written with the use of blockchain technology, they are not subjected to any regulations, written with the use of a special algorithm, there is no need for an intermediary. Therefore, not only the private companies, but also public institutions are interested in cryptocurrencies. Today, several public institutions are working on blockchain applications. Dubai (Emcash), Venezuela (Petro), Estonia (Estcoin), Russia (Crypytoruble), Sweden (E-Krona), Japan (J-coin)-like countries have already produced their own cryptocurrencies and made available them for the use of public under state guarantee (Takaoğlu et al., 2019: 269).

Because of increasing interest in blockchain technology, an alternative cryptocurrency “Namecoin” was produced based on Bitcoin protocols in 2011 and “Ethereum” was produced with the use of blockchain technology apart from bitcoin protocols in 2011. Today, more than 1500 cryptocurrencies have been produced (Seyithanoğlu, 2019: 20).

Majority of the studies conducted on blockchain technology deals with bitcoin. However, Ethereum is also as much popular and strong as bitcoin. Like bitcoin, Ethereum is also an open-to-public blockchain. As compared to bitcoin, Ethereum has broader advantages and effects. Ethereum initiated smart contracts and a way to conduct actions based on the rules specified in these contracts. Ethereum is considered to be a global computer to which everyone could access. While bitcoin is offering a platform for a decentralized currency, Ethereum offers applications able to be operated without a need for reliable third parties (central servers) (Tubitak, 2017). 

Blockchain Technology for International Businesses Today, large technology companies are intensively investing in blockchain technology. For instance, IBM with more than 1.000 employees invested 200 million dollars in blockchain-supported Internet of Things (IoT) system. Besides, venture capital investments for blockchain start-ups had stable increase and reached to 1 billion dollars in 2017 (Carson et al., 2018: 2).

2.3. Blockchain technology for international Business

International Business Machines (IBM), Microsoft and SAP-like companies are searching for possible uses of blockchain technology in international businesses. IBM has already been testing blockchain in two pilot projects. These projects are Singapore Customs Declaration initiative and offshore transportation operation of flowers from Mombasa (Kenya) to Royal Flora (Netherlands). Singapore Customs Declaration initiative is managed by blockchain innovation center of IBM in Singapore jointly with Singapore organizations including Singapore Monetary Authority (MAS), Singapore Port Authority, Singapore Infocomm Development Authority and PSA Singapore Terminals. According to IBM, blockchain technology used to improve commercial operations in different sectors is the first cooperation made with private sector and more than one public authority of the same country (Macedo, 2018: 89).

Blockchain technologies offers fully distributed and decentralized large scale and systematic cooperation. In this sense, blockchain could be considered as a global management tool able to manage large-scale social interactions and refuse traditional central authorities (Bambara and Allen, 2018: 2).

Such a case then contributes to international businesses in playing efficient role in global trade. With the aid of decentralized management, anonymousness and sustainable attributes, blockchain technology had a potential for radical conversions in traditional business management perceptions (Avunduk and Aşan, 218: 381). Transparent traceability is among the most important advantages provided to businesses by blockchain technology. Especially in crisis cases, unrealistic information share of finance institutions and hidden costs reflected to customers will be eliminated with the use of blockchain technology, trust to institutions will increase and even the smallest cost reflected to customers without the consent of them will be known by everyone (Takaoğlu et al., 2019: 269).

3. Some Variety of Benefits That Crypto-Currency Offer

For those who import or export goods and services across borders, crypto-currency offers a variety of benefits. Some of the crypto-currencies like Bitcoin, Ethereum, and Blockchain technology are poised to transform international trade finance. So it's time for international businesses people to start looking at how crypto currency will affect global finance and how crypto-currency will affect international trade business.

After years of scepticism about their safety, value, and staying power, crypto-currencies like Bitcoin seem poised to take over global markets. Investment firms such as Goldman Sachs provided their clients with information about investing in Bitcoin, and CBOE Holdings began selling Bitcoin futures. So it's time for international business people to start looking at how bitcoin and other crypto-currencies will affect global finance and how cryptocurrency affects international trade.

Cryptocurrencies are expected to change the way business is conducted and those who buy and sell across borders will benefit. Simply put, cryptocurrency is a digital financial exchange of goods and services, but crypto-currencies like Bitcoin are even more complex.

The most benefit of cryptocurrencies in international businesses is the facilitation of commerce, both domestically and internationally. Many of the barriers and limitations of international business are removed with crypto, and receiving payments in other currencies is simplified.

Inflation Protection - Inflation has caused many currencies to lose value over time. 

Mineable cryptocurrencies with a limited supply cap, like Bitcoin, Litecoin, and Monero to name a few, were traditionally thought to be good hedges against inflation. Because monetary inflation can occur when central banks and governments print more money( increasing the supply), things that are more scarce tend to appreciate in value.

Inflation and deflation

The difference is simply because inflation occurs when the price of goods and services increases, while deflation occurs when the price of goods and services decreases in real time.

Self-managed and managed

Some of the benefits of cryptocurrency extend people who don’t have access or perhaps don’t trust, the traditional financial system. Due to its decentralized and permission-less nature, anyone can participate outside of that system.

People don’t need permission from any financial authority or government to use the crypto ecosystem. (Though it’s worth nothing that bitcoin mining is banned in China, and that there may be other local rules and regulations to take not of.) Participants also don’t necessarily need to have a bank account. In case of Burundi also we use cryptocurrencies without the permission of government. There are billions of people today who are “unbanked,” meaning they have no access to the financial system, including bank accounts. With crypto, however, the only thing those people need is a smartphone, and they can essentially become their own bank.

Secure and private

Privacy

Privacy can be a big benefit of cryptocurrency, but crypto isn’t always as private as some people might think. Blockchains create a public ledger that records all transactions forever. While this ledger only shows wallet addresses, if an observer can connect a user’s identity to a specific wallet, then tracking transactions becomes possible

 Security

The honeypot it is a system build to attract the computer hacker, the most platforms such us Google, Apple use this tactic example when they create a new apps their tell people that there's a great reward to all who can succeed to hack the apps, what the great honeypot that you can have with a network platform who have $6 milliards on him? Or if you hack Bitcoin you'll have $6 milliards of honeypot but person don't yet succeed to hack Bitcoin and I think there's many groups of hackers and they try 24/7 weeks but the Bitcoin resist. The security of your crypto will depend with the type of your wallet.

Currency exchanges can be done easily

Cryptocurrencies have no regard for national borders. An individual in one country can send coins to someone in a different country without any difficulty. With traditional financial services, getting funds across international borders can take a long time and come with hefty fees, In some cases, doing so might not even be possible due to regulations, sanctions, or tensions between specific countries. When OTAN remove the Russia in the system swift the only system that the Russia used to pass around sanctions it was the cryptocurrencies.

But again, cryptocurrency gets around all of that, as users can engage in peer-to=peer transactions from anywhere in the world. 

Decentralized

In our current financial system the relationship between the Bank and its client is very similar to the master and slave relationship, the question we must ask "who is the slave"? Because in a system of debt one is always a slave,  the master will not be good to you and he uses himself is even because they are master

A money architecture where you have no control!

A money architecture where every interaction is mediated by a third party who has absolute control over that money.

Today if you go to an ATM the Bank can give you your money but also another day, they can refuse to give you. As we discovered the inhabitants of Cyprus, Greece, Venezuela, Argentina, Bolivia and Brazil.

Bitcoin is fundamentally different because in bitcoin you don't owe anyone anything and no one owes you anything, it's not a debt based system, it's an absolute ownership based system.

Profitable mode of transaction

Crypto transactions can be made easily generally at a low cost, and in a relatively private manner. Using a smartphone app, hardware wallet, or exchange wallet, almost anyone can send and receive a variety of cryptocurrencies.

Some types of cryptocurrencies, including Bitcoin, Litecoin, and Ethereum, can be purchased with cash at a Bitcoin at an ATM using cash, then send those coins to their digital wallet or phone. This may be a huge advantage for people who might lack access to the traditional financial system.

A fast way to transfer funds

Whilesome people may only want to invest in cryptocurrency to take advantage of (prospective) price appreciation. Others might find benefit in the ability to use crypto as a medium of exchange.

Bitcoin and Ethereum transactions can range from a few cents to several dollars or more. Other cryptocurrencies, like Litecoin, XRP, and others, might be able to be sent for less. Payment for most crypts settles within minutes, and some within seconds. Conversely, wire transfers at banks can cost significantly more, and often take three to five business days to settle.

 4. The Positive Effects of Crypto-Currency on International Businesses

The transactional freedom

Which is the one great positive effect on the international businesses and that can be used to exchange value between two parties. This can be done independently of any third-party, making the transaction about as free it can get. Banks can choose to cut off services to anyone for any reason. or other payment processors. This can make things difficult for some journalists, political dissidents, or other individuals working in nations with oppressive government regimes. Because there is no central authority governing Bitcoin or most crypto currencies, it's very difficult to stop anyone using them.

The Market is always opened

Stock markets, like the New York Stock Exchange (NYSE), are only open on weekdays during the regular business hours of 9:30 am to 40:30 pm Eastern Time.

During nights, weekends, and on holidays, most traditional financial markets are not open for business. Without taught about International financial markets in Africa

The markets of crypto operate 24 hours a day, seven days a week, without exception. Some of the only thing that could interrupt a person's ability to trade crypto-currency would be a power outage, internet outage, or centralized exchange outage.

Relatively secure

Because cryptocurrencies are rooted in cryptography and blockchain security, decentralized crypto currencies tend to make for secure forms of payment. As such, the relative security of crypto may be one of the biggest benefits for International Businesses and personal users.Bitcoin can be bought as a simple money exchange and then used as currency

Every time money is exchanged using Bitcoin or a similar crypto-currency, that transaction is recorded in a detailed public ledger. The ledgers form a long chain of chronologically verified transactions. These ledgers are called blockchains, and blockchains are a big part of what makes people so excited about the possibilities of cryptocurrencies.

The possibility of outsized returns

Bitcoin has been one of the best-performing assets of the last 13 years. When it debuted in 2009, Bitcoin essentially had no value, but in the following years, it would rise to a fraction of a penny, and then eventually to tens of thousands of dollars. This represents millions of percentage point’s worth of gains. By comparison, the S&P500 indexes of stocks returns an average of about 8% per year.

Some altcoins have outperformed Bitcoin by wide margins at times, although many of those later saw their prices collapse. Gains like these might be among the most well-known drawbacks. And that’s important to note, as crypto prices have fallen quite a bit, as of late. For example, during 2022, Bitcoin’s price has fallen by more than 60% as of September.

That type of volatility has characterized prices in the crypto space, which has been one of the key benefits of cryptocurrency for day traders and speculators, too. Taking advantage of the fluctuations in price can help traders earn returns, even if prices fall.(Brian Nibley 2022.7)

5.The Advantages of Crypto-Currencies in International Trade

Every time money is exchanged using Bitcoin or a similar crypto-currency, that transaction is recorded in a detailed public ledger. The ledgers form a long chain of chronologically verified transactions. These ledgers are called blockchains, and blockchains are a big part of what makes people so excited about the possibilities of crypto-currencies.

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