Bitcoin Will Transform Global Trade

In recent years, Bitcoin has emerged as a disruptive force in the worlds of technology, finance and economics. While it was initially viewed with skepticism and uncertainty, its potential to transform global trade can no longer be ignored. With its borderless, decentralized nature, Bitcoin has the potential to revolutionize the way businesses and individuals conduct trade, reducing transaction overheads and treasury risks, increasing efficiencies and adding dimensions of transparency and sovereignty that were never before possible. 

This short post will examine the key ways in which Bitcoin could transform global trade and the challenges that must be overcome to fully realize its potential.

Open and Borderless

Bitcoin stands apart from traditional fiat currencies and their legacy payment rails.

Bitcoin is open, censorship resistant, and accessible by anyone, anywhere in the world, 24/7. This presents a unique opportunity for businesses looking to engage in international commerce by eliminating many of the challenges associated with cross-border transactions. 

Traditional methods such as wire transfers or credit card payments, often involve high fees, long wait times, and complex regulations that can make conducting business overseas incredibly painful.

Bitcoin, on the other hand, is borderless. There are no “international payments” on the Bitcoin network. Such arbitrary delineations don’t exist. There are just UTXOs and associated addresses. 

As such, businesses can easily send and receive payments from anywhere in the world without the need for intermediaries, permissions, complications or a Rube Goldberg machine designed to rent seek. This all significantly reduces transaction costs and streamlines trade.

Additionally, because Bitcoin is decentralized and not subject to control by government or financial institutions, it is less susceptible to political and economic volatility. Look no further than the Russia and Ukraine War. An entire nation was cut off from the SWIFT system, the ramifications being bad for Russia in the short term, but likely worse for the West in the long run due to its impact on global energy markets, supply chains, and increase in alternative trade alliances.

Transparency and Security

In addition to its borderless nature, Bitcoin offers businesses the opportunity to enhance financial transparency and security. Bitcoin's timechain, better known as blockchain, technology enables secure, immutable, time-ordered transactions that can be easily tracked and audited. This means that businesses can more easily ensure the accuracy of not only their financial records, reducing the risk of fraud or other malfeasance, but they can know in real time their financial position, who has paid what, and what funds have been settled with finality

The legacy financial system cannot compete, because it is a mix of modern, oftentimes incompatible technology solutions built atop multiple decades old mainframes that are not designed to provide real-time or global services.

Beyond just transparency, because Bitcoin is a decentralized network leveraging math and the laws of cryptography for security, it is not susceptible to the same kinds of honeypot cyber attacks that traditional banking, payments and financial services are.

There are other risks, of course. Being a bearer asset means new security models come into play, but instead of the responsibility and trust being handed to a third party, the controls actually move back into the business owner’s hands. The business becomes more sovereign - a topic we shall continue to explore in the future..

At Lucent, our goal is to empower businesses to build out the Sovereign Stack and arrive at a place where they are not only securing and controlling their funds, but are comfortable doing so.

Faster and More Efficient

Transactions conducted on the Bitcoin network have finality, meaning that once a transaction is confirmed, it cannot be reversed or altered. Furthermore, this finality is fast, relatively speaking. Nic Carter wrote a brilliant piece on this in 2019 entitled “It’s the settlement assurances, stupid”, that explains the speed and assurance of settlement finality.

Excerpt below:

Similarly, as Nick Szabo has said, blockchains are computational amber. Amber starts life as tree sap, only later becoming hardened, in the process storing bits of information (insect DNA and so on) within it. The essential process of burying past changes to the ledger under unforgeable cost, provided by proof of cost incurred, provides the same slow-moving settlement assurances. As more blocks accumulate, the gravity of the blockchain exerts itself, and makes distant rewrites colossally expensive and unwieldy.

What this translates into is the elimination of time-consuming and costly settlement processes that are required for traditional financial transactions. The convoluted duct-tape and pipe solutions that legacy “fintech” products deliver are largely irrelevant on a Bitcoin standard. When you are paid, you can count that money as received. You won’t have to factor in some sort of clawback model for a percent of sales due to disputed, erroneous or fraudulent (friendly or otherwise) transactions. There is no bank that’s going to “dock” something from your account. Bitcoin payments are one-way functions.

Additionally, and beyond Bitcoin's base layer “Timechain” are second layer, abstracted networks being used to increase transactional throughput and scale payments, without needing to undermine the settlement assurances and guarantee of finality found on the base layer.

Bitcoin’s throughput scaling occurs in these layers, and while some antagonists toward bitcoin are perpetually stuck in 2017, complaining about “expensive transactions” the technical and entrepreneurial communities have developed a number of second-layer protocols that solve this; the most prominent being the Lightning Network. 

The Lightning Network is a layer 2 protocol that operates on top of the Bitcoin network, enabling fast, low-cost, and secure transactions between parties. By leveraging the Lightning Network, businesses can conduct transactions instantly and at a fraction of the cost of traditional payment methods, making it an ideal solution for businesses engaging in direct to consumer commerce both locally and internationally. And once again, because the Lightning Network is a protocol and not a product or service offered by a company, it is less susceptible to censorship or control by any one entity, further enhancing its appeal for businesses looking to operate in a more secure and transparent environment.

Breaking Barriers

Despite its many advantages, Bitcoin still faces challenges that must be addressed to fully unleash its potential. One significant obstacle is the regulatory environment and the perception of what Bitcoin is by said regulators.

Governments around the world have taken varying approaches toward Bitcoin, with some countries embracing it while others have imposed strict regulations or outright bans. These regulatory barriers don’t affect Bitcoin per-se, but they can create uncertainty for business owners and make it more difficult for them to engage with Bitcoin. 

To overcome these challenges, more businesses should seek to embed Bitcoin into their operations and treasury. The larger this number, the more complicated it is for regulators to view it as something either nefarious or detrimental. This is in fact why we built Lucent Labs and are pioneering BitOps. The same way that enterprises have business and financial operations, they will need Bitcoin operations who understand the field, understand the business and can establish “Sovereign Stack” solutions that give the business an edge in the marketplace.

This will all of course take time. Bitcoin is young and the price is volatile - but that is all changing. Bitcoin evolved from being seen first as worthless internet tokens, to “dark web money”, and then a pump and dump Ponzi. Today it is still perceived as a speculative asset, mainly for retail investors with a low aversion to risk, but it is also a treasury asset with $35 billion held on the balance sheet of publicly listed companies, the most famous being MicroStrategy and Block Inc.

This transition will continue and as Bitcoin gains greater mainstream acceptance, the price will continue to increase, as will the market capitalization, and as a result, the volatility will slowly dampen and decrease. 

In Closing

Bitcoin has the potential to revolutionize global trade by enabling faster, more efficient, and more secure transactions. By leveraging its borderless and decentralized nature, businesses can reduce transaction costs and streamline the process of conducting both local and international commerce. However, to fully unleash its potential, businesses need to begin transitioning onto a Bitcoin standard and can accelerate time to value by adopting the BitOps framework.

The future is bright for those who move early, in much the same way that businesses who chose to go digital, or develop an internet-enabled division dominated in the two most recent decades.

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