Bitcoin and cryptocurrency markets, where not only common people but influential figures in politics and the CEOs of massive companies all over the world take an interest, are currently considered an important part of the economy. It is suggested that bitcoin be acknowledged as a major currency; it has found its niche in the capital market and is no longer viewed as a means of speculation from a negative point of view. In Korea as well, people are having a heated argument about cryptocurrencies and the investment frenzy, particularly concerning Bitcoin. At present, the cryptocurrency market is no longer a minority player: It has established itself as an essential element of the current market economy.

Here is the question: What is Bitcoin? Why is it a controversial issue in our society?

Cryptocurrency and Bitcoin’s history. Firstly, let’s clarify the dictionary definitions of virtual assets and virtual currencies to understand the concept of Bitcoin accurately. Specific financial information laws amended in 2021 specify that virtual assets are ‘electronic vouchers that can be transacted or transferred electronically as having an economic value,’ meaning virtual assets are only traded online without notes, coins, etc. Bitcoin, commonly referred to as a cryptocurrency, is a cyberasset that falls within the category of virtual assets. Based on their characteristics, virtual assets can also be classified as cryptocurrencies. Cryptocurrency has the characteristic of protecting ownership using digital technology. Bitcoin is a virtual asset belonging to the category of cryptocurrencies, and blockchain technology, which provided the opportunity for Bitcoin to attract attention, is also considered a characteristic of cryptocurrency.

Blockchain technology, which is the core of cryptocurrency, distributes transaction details proving ownership of assets to networks around the world as there are no issuing institutions like banks. The online space where transaction details and other data are stored is called Block, and cryptocurrency is given to the people who help store the data by creating blocks. Mining refers to the act of receiving cryptocurrency based on the creation of such blocks.

To sum up, Bitcoin is a type of virtual asset, a cryptocurrency, which is paid for acts referred to as mining. Of course, there are various kinds of cryptocurrencies. Cryptocurrencies are often collectively referred to as Bitcoin, but Bitcoin is only one of the most widely known cryptocurrencies. Cryptocurrencies, excluding Bitcoin, are commonly referred to as alternative coins, or “altcoins.” Ethereum and Ripple are two popular altcoins. In addition, there are many terms and types, such as coins and tokens, within the category of cryptocurrencies, but as this article will focus on Bitcoin and altcoins, other details will be omitted.

As we have seen before, it is technically incorrect to refer to cryptocurrency and virtual assets as Bitcoin. Nevertheless, there is a reason why Bitcoin is recognized as the leader and representative cryptocurrency. This can be understood by looking at cryptocurrency’s and Bitcoin’s history. This is because Bitcoin was the first cryptocurrency. Bitcoin was first developed by an anonymous programmer using the nickname Satoshi Nakamoto in 2009, followed by altcoins in 2011. Bitcoin has gradually made its name known to the public since 2013. As the era of the Fourth Industrial Revolution arrived and attention was focused on future technologies, Bitcoin also began to be recognized for its value. Decentralized Bitcoin could replace existing currencies whose value is controlled according to central governments’ political intentions, some thought. In addition, as Bitcoin is gradually used as a means of trading in various markets, the view that Bitcoin is a currency has also begun to emerge. Since then, the functional value of Bitcoin has increased the investment value of Bitcoin, and, as a result, it has become widely known to the public as it has shown a high return on investment.

Korea’s cryptocurrency market. The first recognized domestic Bitcoin transaction in Korea was made at the Paris Baguette at Incheon City Hall Subway Station in 2013, but it had already piqued citizens’ interest due to its high return on investment, increased use in overseas markets, etc. Bitcoin, which has been gradually increasing its market size in Korea since the early 2010s, is in the spotlight today for its high return on investment. In addition, altcoins, which have higher yield and volatility than Bitcoin, are also enjoying great popularity in Korea.

Bitcoin and altcoins are likely to change their trends depending on the government’s regulatory policies and market conditions henceforth, but it would not be an exaggeration to say that they are at the center of the Korean cryptocurrency market right now. Regardless of generation, people are investing a lot of money in the cryptocurrency market, and stories related to investment in cryptocurrency, both online and offline, are being talked about every day. The news that cryptocurrency transactions have exceeded the total amount of transactions in the domestic stock market shows that the cryptocurrency market surely has the most prominent position at present.

This investment craze can be attributed to investors’ expectations of high earnings amid the slowing national economy. Inflation also plays a major role. Only a few years before rises in investments in the cryptocurrency market, there was a surge in investment in the general stock market, demonstrating high expectations for short-term high returns. This fervor has now shifted to the cryptocurrency market. People believed it enables higher returns than the stock market. Illustrating this is altcoins, which have higher volatility and higher profit expectations than Bitcoin and accounts for 90 percent of transactions in the cryptocurrency market.

However, amid this craze for investment in the cryptocurrency market, government regulations have recently emerged as a hot topic. Not only the Korean government but also the newly formed Biden government in the U.S. will implement regulations on the cryptocurrency market due to high volatility and concerns about decentralization. As a result, the cryptocurrency market briefly shrank due to the recent intervention by the central government. Although the cryptocurrency market soon recovered from the lull, the central government's intervention has emerged as a major issue, leaving room for future intervention in the cryptocurrency market.

To sum up, the domestic cryptocurrency market is currently attracting great interest, seeing continuous growth since the investment craze hit. However, as the central government shows its intention to intervene in earnest, concerns over changes caused by government intervention are growing.

Stances: Positive & Negative

At this time when there is a possibility of decisive government intervention, people have been expressing various views on the cryptocurrency market. These perspectives can be seen as having an impact on the positive and negative views that people hold on cryptocurrency.

People who take a positive stance on cryptocurrency first emphasize the advantages of blockchain technology. Transaction details can be recorded on interconnected online blocks to secure ownership, and stability and transparency of the transaction process. Furthermore, this raises the argument that cryptocurrency, with its guaranteed stability and transparency, can play a key role. It is also suggested that the value of decentralized cryptocurrencies cannot easily be manipulated like other standard currencies, for instance through exchange rate manipulation and quantitative easing, etc. In addition, some argue that Bitcoin is a valuable asset because it can act as an alternative currency in countries where the value of their domestic currencies has plummeted, in countries hit by economic crises such as Greece, and in poor countries where normal economic transactions are impossible.

On the other hand, those who take a negative stance on cryptocurrency point out the price volatility of cryptocurrencies as a key problem. Although stability can be secured in proving the transaction process and ownership, it is less stable than existing currencies when it is used as a means of trading. The sharp price fluctuation in the cryptocurrency investment market, currently the center of controversy, is a big problem. The price volatility of cryptocurrency is very high as the value is determined solely by the market. It is also receiving a lot of attention as an alternative currency, but the problem is that Bitcoin is not often used in real transactions. As a latecomer as a means of exchange, a cryptocurrency needs to be used more often in real transactions to replace existing currencies. Accordingly, critics say that it is not suitable enough to replace existing currencies. In addition, the fact that actual transactions are taking place mostly on black markets and for illegal purposes is also raised as a major basis for criticism. A cryptocurrency was used in 714 crimes, such as graft, tax evasion, and illegal overseas remittances, during 2015-2017. In addition, there is also a view that instability issues are being raised such as disappearances of cryptocurrencies from the exchanges or theft of cryptocurrencies through hacking. It has also been suggested recently that the reason cryptocurrency is attracting attention is not because of its functional value, but because of the belief of those who expect high short-term profits.

Wrapping up

As it has not been long since the cryptocurrency market came into being, we need to look at cryptocurrencies cautiously and try to solve disputes adequately. It is clear that by considering only one aspect of the positive or negative arguments and trying to address the problem accordingly, you will not find the right answer.

Also, from a longer-term perspective, with the advent of the Fourth Industrial Revolution and the focus on the digital world and technology, cryptocurrency is likely to receive much attention as an investment or trading tool in the future. For this reason, we should make efforts at the individual and social level to manage cryptocurrency in a way that is helpful to society rather than taking an extreme position on cryptocurrency or responding with indifference.

Looking back on history, since those who have used the new technology in a relatively cautious manner have generally benefited more than those who have ignored it or responded to it extremely, efforts should be made to seek ways to help individuals and society adopt a prudent position on cryptocurrency, a new weapon in the financial market.