South Korea, a country known for its technological advancements and high-speed internet, is now considering a significant move in the world of digital currencies. The South Korean government is contemplating a ban on credit card transactions for cryptocurrencies, a move that could have far-reaching implications for the global crypto market.

The Current State of Cryptocurrency in South Korea

South Korea is one of the world’s largest markets for cryptocurrency trading. According to data from CoinMarketCap, the country accounts for a significant portion of the global trading volume of cryptocurrencies like Bitcoin and Ethereum. The popularity of cryptocurrencies in South Korea is largely due to the country’s tech-savvy population and the high level of internet penetration.

Why South Korea is Considering a Ban

The South Korean government’s consideration of a ban on credit card transactions for cryptocurrencies comes amidst growing concerns about the risks associated with cryptocurrency trading. These concerns include potential financial instability, the risk of fraud, and the use of cryptocurrencies for illegal activities.

• Financial Instability: The volatile nature of cryptocurrencies can lead to significant financial losses. This is particularly concerning for credit card users, who may be tempted to borrow money to invest in cryptocurrencies, potentially leading to a cycle of debt.
• Fraud: The anonymity of cryptocurrency transactions makes them a prime target for fraudsters. There have been numerous cases worldwide of cryptocurrency scams, leading to significant financial losses for investors.
• Illegal Activities: Cryptocurrencies can be used for illegal activities, such as money laundering and financing terrorism, due to their anonymous nature.

Implications of the Potential Ban

If South Korea does implement a ban on credit card transactions for cryptocurrencies, it could have significant implications for the global crypto market. South Korea is a major player in the crypto market, and a ban could lead to a decrease in global trading volumes.

Furthermore, a ban could also impact the perception of cryptocurrencies worldwide. South Korea is seen as a leader in technology and innovation, and its actions could influence other countries’ policies towards cryptocurrencies.

Case Study: China’s Cryptocurrency Crackdown

China, another major player in the cryptocurrency market, has already taken steps to crack down on cryptocurrency trading. In 2017, China banned initial coin offerings (ICOs) and shut down local cryptocurrency exchanges. This led to a significant drop in global cryptocurrency prices and served as a stark reminder of the influence that regulatory decisions in one country can have on the global crypto market.

Conclusion

The South Korean government’s consideration of a ban on credit card transactions for cryptocurrencies is a significant development in the world of digital currencies. While the potential ban is driven by legitimate concerns about financial instability, fraud, and illegal activities, it could have far-reaching implications for the global crypto market. As the world continues to grapple with the challenges and opportunities presented by cryptocurrencies, the actions of countries like South Korea will undoubtedly play a crucial role in shaping the future of digital currencies.

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The article below is an excerpt from a recent edition of Bitcoin Magazine PRO, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

The traditional use of the Bitcoin network for on-chain settlement is extremely efficient by settling transactions approximately every 10 minutes. Bitcoin might be most closely related to the Fedwire Funds Service which only settles about 200 million transactions per year compared to Bitcoin’s trailing 1-year figure of 98.5 million transactions.

Link to embedded tweet.

As it stands today, the Bitcoin network is on pace to settle $3.5 trillion worth of change-adjusted value over the course of 2023, for costs of just $198 million, an equivalent fee rate of 0.006% for the average transaction. While average transaction costs are obviously skewed by the largest transfers in the data set, we can look at the median transaction settlement value and account for the median transaction fee, and still see that on-chain bitcoin transactions are a tremendously efficient way to send and receive value in a trustless manner over the internet.

Despite bitcoin’s extreme efficiencies as a global immutable settlement network, it remained unideal for minuscule and instantaneous transfers, as the 10-minute block interval target adds a latency to the settlement of transactions. This is okay for large sums of money, evidenced by the incumbent financial system, where net settlement of funds between financial intermediaries often don’t finalize for days or weeks on end — think MasterCard or Visa settling their books on a net basis with a banking institution like JPMorgan.

However, the need for a sound internet money that could settle instantaneously for nearly no cost was still there. With the advent of the Lightning Network, the latency involved with sending a bitcoin transaction, particularly for micropayment settlements, has all but vanished. This has brought about a whole new use case for bitcoin, as the monetary medium is now finding itself being inserted into the tech stacks of web applications and services across the globe.

As a refresher and overly simplified description, the Lightning Network works by node runners doing an on-chain transaction to open up payment channels with other nodes. This adds liquidity to the network and creates a network of channels when enough users open channels to one another. Lightning payments are sent from one node and hop across other nodes who have enough liquidity in their channels until the payment reaches its intended destination.

By doing one on-chain payment to open a channel, funds on the Lightning Network are able to move with less friction and settle without waiting for 10-minute periods between blocks for each transaction, until the channel gets closed with another on-chain transaction. These channels allow for lower fees as payments only pay to hop across nodes that have liquidity in their channels.

With a refresher on the technical workings out of the way, let’s take a look at the costs of the Bitcoin settlement stack compared to current retail settlement options like credit cards and focus on the massive efficiency gains of the Lightning Network in particular. Shown below, we compare the upper- and lower-bound costs of legacy payment processors to the median settlement cost of a Bitcoin on-chain transaction — median fee paid divided by median transaction volume — and the Lightning median fee rate percentage for sending the equivalent of 1 BTC.

We acknowledge that the comparison between the median cost of a bitcoin on-chain transaction to legacy payment processing costs isn’t quite an apples-to-apples comparison because credit card processors allow for near instantaneous payments to be made (but not settled!). That being said, this is where the vast efficiencies of the Lightning Network come into play.

The same chart above is also displayed below, in logarithmic scale, in order to provide a more representative visual. 

The two charts above demonstrate how much more cheaply the Lightning Network is settling payments when compared to credit card processors.

Yes, legacy payment processors facilitate the transfer of trillions of dollars a year, which dwarfs the Lightning Network’s settlement volume. As a side note, it isn’t possible to quantify the transfer volume of Lightning like it is with on-chain transactions. Given the relative size of the Lightning Network, it is vital to remember that the network has continued to grow exponentially, while facilitating instantaneous transfer for near-to-no cost, all the while growing ever more connected.

In addition to cheaper settlement, the Lightning Network is also facilitating payments 60,000% to 140,000% more efficiently than credit cards.

While it may be a bit of a stretch to directly compare the median lightning payment fee to that of a multinational credit card processing firm, particularly given the minuscule micropayments of many Lightning transactions, the nature of public Lightning channels and transactions means that this technology is very capable of scaling to accommodate much larger transactions if/when needed. There is already indirect evidence of this happening with the average size of public channels pushing all-time highs in both BTC and USD terms at the time of writing. 

Much of our recent focus has been on the economic opportunity of bitcoin in terms of the total addressable market of stocks, bonds and other stores of value, but we find the current development and growth of the Lightning Network to be extremely compelling. 

The Lightning Network has a flourishing ecosystem that is continuously growing, with micropayments being integrated into paywalled media content, value-for-value platforms, crowdfunding opportunities, tipping on social media (Hello nostr), bitcoin derivative marketplaces such as LN Markets (which is seeing trading volumes at all-time highs) and more. 

Final Note:

First enabled by the Segwit soft fork in 2017, the Lightning Network has gone from a conceptual idea to a flourishing global ecosystem in the span of less than six years. Reminiscent of the early days of the internet, Lighting Network nodes and user participation has gone from niche hyper-technical software developers to the edge of mainstream adoption in a short amount of time.

While the Lightning Network may not be headline news, the technology enabled by Lightning — the ability to direct a digitally native bearer asset in a trustless manner across the internet for nearly no cost — is an extremely significant development in the history of payment networks, and it is the first to do so in an open and decentralized manner.

We are extremely bullish on the continued development and adoption of the Lightning Network, and think that the advent of a common open-standard for sending and receiving internet-native value instantaneously for extremely low costs may be the killer app that brings bitcoin to a billion people.

It’s helpful to compare the early days of the internet to where Bitcoin is in its lifecycle. Looking at the growth of the two networks below can give us a small glimpse into where Bitcoin and Lightning may be heading as adoption increases.

How the internet started:

How its going:

How the Lightning Network started:

How its going: 

That concludes the excerpt from a recent edition of Bitcoin Magazine PRO. Subscribe now to receive PRO articles directly in your inbox.

Relevant Past Articles:

• Lightning Network Adoption

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On April 18, former U.S. president Donald Trump announced a second series of his digital Trump card collection, following the “great success” of his initial non-fungible token (NFT) trading cards. Despite selling out rapidly, Trump stated on Truth Social that he maintained the initial card prices for the new collection.

Trump Unveils Series 2 NFT Collection With Mar-a-Lago Dining Opportunity

Trump is back with a new NFT collection featuring 47,000 digital cards minted on Polygon. His first NFT collection, launched in mid-December 2022, sold out within hours. The cards’ value performed well on secondary markets and also surged following Trump’s indictment by a Manhattan grand jury.

On March 30, 2023, Trump was indicted with 34 felony counts of allegedly falsifying business records related to ostensible payments to adult film star Stormy Daniels. Trump pleaded not guilty and his legal team has requested a spring 2024 trial. On Truth Social, Trump unveiled his second NFT collection just 19 days later. Cards are priced at $99 each and are intended as “collectible items for individual enjoyment only, not for investment vehicles.”

Each card features a “unique pre-assigned rarity.” Customers who purchase 47 of Trump’s NFTs will have the opportunity to dine with the former president. In a Truth Social post, Trump said: “I am pleased to inform you that, due to the great success of my previously launched digital trading cards, we are doing it again, Series 2, available right now.” He also pointed out that he kept the card prices consistent despite their success in the secondary market.

“I hope everyone notices, [and] I’m sure the fake news won’t, that I’m leaving the price of the trading cards the same as last time, even though they are selling for many times more (it’s called the market!), [and] sold out almost immediately, because I want my fans [and] supporters to make money, [and] have fun doing it,” Trump said. “I could have raised the price much higher, [and] I believe it still would have sold well, with a lot more money coming to me, but I didn’t choose to do so. I will be given no ‘nice guy’ credit?”

According to nftpricefloor.com, Series 1 Trump cards have a floor price of approximately 0.17 ether on April 18, or $353.58 using current ethereum (ETH) exchange rates. This gives the Series 1 Trump NFTs a market cap of about $15.91 million or 7,650 ether, and ranks the collection at #68 among top NFT compilations. In contrast, the Bored Ape Yacht Club (BAYC) NFT collection holds the #1 position in terms of floor value, valued at $1.1 billion, or 530,500 ether.

What are your thoughts on the recent launch of Donald Trump’s second NFT collection? Share your opinions in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.