The blockchain in the manufacturing market is expected to render revenue worth $766.2 million in 2030, according to Verified Market Research.
With a market value of $40 million set in 2021, this sector is anticipated to record a compound annual growth rate (CAGR) of 80% during the forecast period between 2022 and 2030.
Per the announcement:
“Increasing worldwide energy demand motivates energy and power firms to explore blockchain solutions that can help them improve productivity while reducing maintenance and downtime.”
Therefore, the energy, electricity, and industrial sectors are anticipated to spur demand in this industry. The report added:
“The global blockchain in manufacturing market is expected to increase due to the incorruptible nature of the blockchain, as well as the expanding number of applications that use it.”
The other significant drivers include the growing usage of blockchain technology in supply chain management and retail.
Some of the key developments in this market include using the IBM Blockchain Transparent Supply (BTS) platform to track the entire fabric manufacturing process in the textile industry.
By application, blockchain in the manufacturing market is categorized into different fields, such as counterfeit management, predictive maintenance, business process optimization, quality control and compliance, and asset tracking and management.
Meanwhile, a recent report by Research and Markets pointed out that the global blockchain distributed ledger market was expected to hit $20.6 billion by 2027, thanks to rapid digitization.
Since a blockchain distributed ledger entails a decentralized database, it stores transactions and resources through a peer-to-peer network. Furthermore, cryptography is used to protect data.
The urge to streamline operations and track assets with unprecedented precision are some of the factors expected to make the blockchain in the global manufacturing market hit $17.047 billion by 2027, according to a report by Research and Markets.
This market was worth $717.6 million in 2021 and is anticipated to record a compound annual growth rate (CAGR) of 66.4% during the 2022 to 2027 forecast period. Some of the key market players in manufacturing have been deploying blockchain technology to generate smart home solutions like smart meters.
Therefore, the need to revamp manufacturing processes to lower production costs and lead time is expected to enhance the growth of this market. Blockchain is also being leveraged in manufacturing to offer significant visibility into the supply chain. Per the announcement:
“Suppliers are integrating internet of things (IoT) sensors with blockchain to create a tamper-proof record of shipping conditions on cargo containers. This, coupled with the increasing application of blockchain technology to store and analyze data of manufacturing equipment and products, is positively influencing the market.”
The use of smart contracts availed by blockchain technology is also helping trading partners in the manufacturing sector undertake transparent processes.
Per the report:
“The rising utilization of blockchain technology for payments and digital identities of individuals in the manufacturing sector is projected to strengthen the growth of the market in the coming years.”
Meanwhile, the deployment of blockchain technology in e-commerce websites has spurred growth in the blockchain in the supply chain market, according to Research Dive. Furthermore, blockchain is anticipated to revamp the supply chain market in the coming years by rendering product traceability, quality control, and transparency in manufacturing processes.
The urge to streamline operations and track assets with unprecedented precision are some of the factors expected to make the blockchain in the global manufacturing market hit $17.047 billion by 2027, according to a report by Research and Markets.
This market was worth $717.6 million in 2021 and is anticipated to record a compound annual growth rate (CAGR) of 66.4% during the 2022 to 2027 forecast period. Some of the key market players in manufacturing have been deploying blockchain technology to generate smart home solutions like smart meters.
Therefore, the need to revamp manufacturing processes to lower production costs and lead time is expected to enhance the growth of this market. Blockchain is also being leveraged in manufacturing to offer significant visibility into the supply chain. Per the announcement:
“Suppliers are integrating internet of things (IoT) sensors with blockchain to create a tamper-proof record of shipping conditions on cargo containers. This, coupled with the increasing application of blockchain technology to store and analyze data of manufacturing equipment and products, is positively influencing the market.”
The use of smart contracts availed by blockchain technology is also helping trading partners in the manufacturing sector undertake transparent processes.
Per the report:
“The rising utilization of blockchain technology for payments and digital identities of individuals in the manufacturing sector is projected to strengthen the growth of the market in the coming years.”
Meanwhile, the deployment of blockchain technology in e-commerce websites has spurred growth in the blockchain in the supply chain market, according to Research Dive. Furthermore, blockchain is anticipated to revamp the supply chain market in the coming years by rendering product traceability, quality control, and transparency in manufacturing processes.
Cody Wilson at a firing range near Austin, Texas disploying his “zero percenter” firearm.
Forbes
While President Joe Biden vowed to stem the growing market in “ghost guns,” the man who invented untraceable 3D printable weapons said he’s selling as many as 55 a week.
“I expect that to keep going,” said Cody Wilson, 34, the former law student and registered sex offender whose exploits once earned him the title of one of the most dangerous people on the internet.
Biden wants to expand the definition of a firearm to include a “weapon parts kit that is designed to or may readily be assembled, completed, converted, or restored to expel a projectile by the action of an explosive.” The president, speaking during an event Thursday with New York Mayor Eric Adams, promised federal backup in the battle against the weapons. “If you commit a crime” with a ghost gun, the president said, “not only are state and local prosecutors going to come after you, but expect federal charges and federal prosecution as well.”
Ghost guns are a small, dark corner of the market for weapons in a country with more firearms than any in the world. The appetite for them, however, is going gangbusters. From 2016 to 2020, the number of “suspected” ghost guns that state and local law enforcement have reported each year has jumped to 8,712 from 1,750, with a total of more than 23,000, according to the U.S. Bureau of Alcohol, Tobacco and Firearms. Biden’s threat comes as a Justice Department white paper outlines a new strategy that would include an ATF “ghost-gun coordinator” in every field division.
For nearly a decade, Wilson has pioneered 3D-printed guns and weapons made with computer numerical control milling, or CNC, a machining process that produces a custom-designed product. For $2,500, Wilson sells a CNC-milling kit aptly named Ghost Gunner 3, with an update that allows for a 12-ounce block of aluminum, or a “zero percenter,” to be made into a functional weapon. Wilson also sells the raw aluminum, for $25.
If certain guns are banned, “the only way you can keep going is through 3D printing or zeros,” Wilson told Forbes on Thursday, referring to his own zero-percent product. “And you know the guy who invented both of those.”
Wilson said that sales of the Ghost Gunner 3 are humming along. “We’re shipping 50 to 55 a week,” he said.
Christian Heyne, vice president of policy at the nonprofit gun-control group Brady United, said the Biden administration’s plan would train a “cadre of prosecutors on enforcement issues, specifically around the use of ghost guns and crimes.” The ATF is close to finalizing the rule, he said.
Legal experts say that Wilson, who has continued to operate largely unabated, may finally hit a dead end if the plan is enacted.
Paul Helmke, a professor of public and environmental affairs at Indiana University, a former Brady Center president and a former Republican mayor, said that Wilson’s legal analysis — that this new rule would not affect the milling of “zeros” — may be flawed.
“If Smith & Wesson decided this is how they are going to manufacture guns, the rule would certainly be written in such a way that it would apply to Smith & Wesson,” Helmke said.
“Just because [Wilson] is doing this as an individual or making them available to open source doesn’t change the intent of the regulations or the intent of the law. If his argument held true, then Smith & Wesson could say that ‘we don’t have to follow any of the regulations because we will do it this way,’ and that’s not going to happen.”
Cody Wilson is hunkered down in a dimly lit warehouse behind the headquarters of Defense Distributed, the Austin, Texas company best known as the maker of the first 3D printed plastic gun. As a film crew shines a spotlight on him to record a demonstration of his new Zero Percenter desktop software, a vast library containing 11,000 books, films and 3-D printable gun blueprints appears from the blackness behind him. His new software is capable of turning a raw block of aluminum into the receiver for an AR-15 assault rifle in just three hours.
Wilson, who describes himself as a crypto-anarchist, relishes shock value. He shows his visitors a collection of hunting pelts: zebra, wolf, coyote, and deer, and then makes allusions to the perpetrators of the January 6, 2021 assault on the U.S. Capitol, which left five dead and 700 facing criminal charges. “January six was an insurrection,” says Wilson, 33. “Except on January six, it was fake horns for fake,” he adds, smiling wryly. “In mine it’s real for real.” On the shelves behind him are a mix of books ranging from the Hardy Boys, to a treatise on Nazi Doctors. A bundle of a half-dozen steel-tipped spears and a police riot shield lean against the wall behind him.
The Biden administration recently proposed new regulations defining exactly what constitutes a firearm and which specific parts are required to have ATF-issued serial numbers for tracking. If enacted, Federal Firearms licensing and serial numbers will be required on many gun components that heretofore could be bought and sold without regulation. Wilson’s new software, which he intends to release later today, is designed to circumvent those controls by converting a 1.5 inch by 8 inch block of aluminum into the essential component of a firearm using one of Defense Distributed’s $2,500 Ghost Gunner 3 desktop printers.
Dubbed the Zero Percenter, because it can turn a completely untouched piece of aluminum into a firearm, the software and a few accompanying components are Wilson’s answer to what he considers government overreach. He seems to care little about the “open source” terrorism and crime it might unleash. So-called privately made firearms or ghost guns, the type Wilson has long championed, have confounded law enforcement officials for years. According to the Bureau of Alcohol Tobacco Firearms and Explosives, from 2016 through 2020, some 23,906 suspected ghost guns were recovered from crime scenes, including 325 homicides or attempted homicides.
“There’s always going to be this mystical platonic line where a component becomes more like a gun than not a gun, and to regulate those intermediary steps of manufacture in any serious level completely disrupts modern American manufacturing, the American system,” says Wilson, dressed in black and brandishing a 24-carat gold ring, embossed with the initials DD. “They are literally trying to control the world. But as the Zero Percenter demonstrates, blocks of metal are also guns.”
Cody Wilson stands at a firing ranges outside Austin, Texas, holding an AR-15 assault rifle, the central part of which, called a receiver, was carved from a raw block of aluminum using his Zero Percent software.
Forbes
Cody Wilson was born in Little Rock, Arkansas, the son of an attorney who moonlighted as a preacher and his mother, a network administrator for an insurance brokerage. In middle-school his father gave him a copy of economist Friedrich Hayak’s Road to Serfdom, about how centralized economic planning homogenizes the working class. From there he studied, Karl Marx, Vladimir Lenin and Michel Foucoult, undergoing what he calls a “self-radicalization” culminating in the discovery of Timothy May’s 1988 Crypto Anarchist Manifesto, about how cryptography can empower individual rights.
Convinced that the U.S. founding fathers had prioritized freedom above democracy, he started to experiment with what he describes as “poisoning” the electoral process, by undermining the 2012 presidential election. He filed paperwork to found a Political Action Committee with the expressed purpose of funding campaigns on behalf of poorly funded House of Representatives candidates. To “turn people completely off to the electoral and political process,” as he wrote in his 2016 book, Come and Take It. To “play by the rules, but ruin the game to show the absurdity of it all.”
Wilson’s rhetoric ranges from destructive to bizarre. “A mature reading of all the history of political science is rescuing governments from democracy, especially ours,” says Wilson, adding that he believes the founders didn’t want a democracy and hoped to avoid it. “And so in that respect,” he says. “I’m just thoroughly American in my point of view. How can we prevent democracy from happening or ruin the democracy that has broken out?”
In June 2012, after a year studying law at the University of Texas, Wilson gave up on trying to undermine the system from within after the Supreme Court upheld the Affordable Care Act, something he believes is an affront to his freedom. “I realized I had to become a pirate,” he says. “Hoist the black flag.” Four months later he founded Defense Distributed to create the first 3-D printable plastic gun, The Liberator, and give the code away.
Initially Wilson wasn’t concerned about generating revenue from the idea, but after 26 people, mostly children, were gunned down at the Sandy Hook Elementary School in December 2012, his business got an unexpected boost. While the rest of the world was in shock or mourning, gun enthusiasts flocked to his website fearing a government crackdown on firearm ownership. After the blueprints for his Liberator 3D printed gun “dropped” in May 2013 Wilson began earning about $20,000 a month from Google Ads, he says. “That’s the start of all this.”
Wilson claims he’s always has his guard up, equally concerned about legal ramifications if his products are used in a shooting and the personal concern of knowing his work was used to harm someone. But in his 2016 book, he describes a cartoon depicting a character crying out, how many more children will have to die before you support gun control? The cartoon ends with a helmeted angel and a camouflage face coming down from heaven answering: “All of them.”
Wilson’s potentially deadly innovations have faced dozens of legal battles over the years. He highlights his lawsuits against the U.S. State Department and the State of New Jersey, as the most important thanks in part to the impact they could have on his argument that his gun making code is protected as free speech. His inclusion of the code in his library is designed to demonstrate the point. Nevertheless, Wilson’s websites have been forced to close multiple times over the years following U.S. state lawsuits alleging they violate gun control regulations.
Besides his legal entanglements over his ghost guns, Wilson pled guilty to Injury to a Child in 2019 after he was was arrested for paying $500 to have sex with a 16-year old girl he met on a website called Sugardaddymeet.com. Wilson is now a registered sex offender and is serving seven years of probation. As a Texas resident, his guilty plea to a felony has so far had little effect on his firearms business, and part of his plea deal allows him to continue to own guns. “I’m on felony probation,” says Wilson. “I didn’t get prosecuted and I’m thankful for that.”
The spark that drove Wilson to create Zero Percenter was ignited soon after Biden won the election in November 2020. At about that time, gun control activist Christian Heyne of Brady United proposed that Biden and Kamala Harris use their executive power to broaden the definition of firearms to include unfinished frames—called 80 Percenters by gun rights groups. These frames or receivers need additional fabrication to be made into finished firearms, and therefore avoid serial numbers and tracking by the ATF. 80 Percenters are widely available via online dealers and are used by DIY gunsmiths to make dozens of models ranging from Glock style semi-automatic handguns to assault rifles like the AR-15.
Heyne argued that, besides evading law enforcement, ghost gun makers were effectively stealing from the legitimate firearms manufacturers in the $63 billion industry. “By shutting down this market, which is undermining the firearms industry, ultimately it allows that industry to operate as it should, with responsible gun dealers,” Heyne says.
Two mass shootings in March 2020 were apparently enough to get the Biden administration moving on Brady’s proposals. The following month the Department of Justice published a 72-page proposal for regulations that would change ATF’s definition of a firearm eliminating the loophole that has allowed the 80 Percenters to flourish. Registered serial numbers would be required on nearly every part of a gun.
Cody Wilson holds an uncut bar of aluminum before it is turned into an AR-15 receiver at Defense Distributed’s Austin, Texas headquarters.
Forbes
Wilson believes his Zero Percenter puts the new government regulations in check mate. In addition to being made available on USB memory sticks he plans to release the file containing this software at no extra cost to paying members of Legio, a group of “supporters” he describes as a fraternity, founded in 2018. Legio members, who pay between $5 and $8 per month, are the only ones who can access Wilson’s DEFCAD, a Napster-like website hosting 16,000 files for making firearm and gun components. Besides his Ghost Gunner fabrication machines, Wilson’s Defense Distributed also sells 80% receivers on his site for between $50 for an AR-15 to $176 for one fitting a Glock made by Nevada-based Polymer80. According to Wilson, Defense Distributed generated $4 million in revenues in 2020, and is on track to bring in $5 million in 2021.
While Wilson initially hoped to release his Zero Percenter software on January 6th, to mark the one-year anniversary of the insurrection, is expected to be unveiled later today at the Hereticon “conference for thoughtcrime,” hosted by Peter Thiel’s Founders Fund.
Speaking from a firing range on the outskirts of Austin, the man who was twice named to Wired’s list of most dangerous people in the world, expects the new ATF definition of a firearm will “double or triple” the size of his company. By the ATF’s own reckoning in the proposal, the regulation will likely force many of what Wilson estimates are his “dozens” of competitors in the self-made firearms industry to become licensed manufacturers. Others will reduce the kinds of products they sell, or be put out of business. He believes Joe Biden’s new rules will pave the way for his market dominance among homemade gun enthusiasts.
“When I first started the company I felt more,” says Wilson, interrupted by a burst of gunfire a few yards away, “ I would tell my team, this is our vehicle to run into the ground, to crash into the tower. This company is a weapon.” He adds. “Now I don’t feel I can play it that way. People have families. I’m a man in my thirties. I have a bookkeeper.”
Defense Distributed uses two massive computer numerical control (CNC) machines to churn out parts for the desktop versions of his new Ghost Gunner 3 printers, already selling briskly in anticipation of Biden’s rule changes. Taking a page from Apple’s ecosystem approach, owning Wilson’s latest 3D printer is required for anyone wanting to take advantage of his Fed-evading Zero Percenter operating software.
“Only Three can do the work,” he says, noting that Defense Distributed has shipped 2,700 Ghost Gunner 3’s since last year and has 800 more on back order. While the final prices of the Zero-Percenter software kits have yet to be determined, Wilson has already made 100 of them, and is waiting to gauge demand before making more.
“This is no niche thing,” warns Wilson. “We’ve made millions and millions of dollars and been able to stay in federal court for years. We have no billionaire Adelson partner. We don’t have investors…And I’m quite a toxic personality.”
Data-driven “Asset as a Service” business models are increasingly finding their way into the manufacturing industry and starting to disrupt the financial value chain. What role will the tokenization of industrial goods play in the future?
Tokenization of industrial goods such as tractors opens up new possibilities.
Flexible usage and billing models are a key trend of digitization. Hence, it comes as no surprise that they also becoming increasingly important in the manufacturing industry. More and more companies are no longer buying capital goods, opting instead to pay for their use within the framework of pay-per-use or subscription models. This is made possible by the use of IoT sensors that provide accurate usage data for billing.
Manufacturers of capital goods can tap into new revenue sources and customer segments, among other things, by developing corresponding “asset-as-a-service” offerings. However, these benefit-based business models imply that parts of the capital goods produced are no longer sold, remaining on the manufacturers’ balance sheets. This extension of the balance sheet leads to capital requirements that have to be covered by equity or debt capital.
“Asset-as-a-service” business models lead to capital requirements
The Austrian tractor manufacturer Lindner has recognized the opportunities of such a benefit- or data-based business model and, in addition to its sales offering, has built up a rental fleet of more than 70 vehicles for its customers. Telemetry units installed in the vehicles collect a wide variety of usage data and send it to Cash on Ledger.
The Cologne-based startup has developed a fully automated asset lifecycle management system that enables billing, payment, and accounting to run fully autonomously without human intervention. The resulting data streams form the basis for cash flow and return considerations as well as corresponding risk assessments and residual value calculations for each vehicle. At the same time, this data can form the basis for the necessary refinancing, both by means of debt and equity.
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Refinancing via pay-per-use credits
Based on the continuously collected usage data, refinancing can be done via a data-based investment loan, also known as a pay-per-use loan. The repayment amount of such a loan is flexibly determined by the utilization of the capital goods: at times of lower utilization and thus lower sales, the financing installment to be paid is reduced by a certain extent, thus conserving liquidity. If capacity utilization rises again, the financing rate is again made payable in full or in excess. The utilization data required for calculating the financing rate must be agreed in advance and their – ideally automated – transmission to the bank must be ensured.
Refinancing via special purpose vehicles (“SPV”)
Instead of taking out bank loans, however, a new asset class can also be formed on the basis of the utilization data, which can subsequently be used for refinancing.
On the one hand, refinancing could be carried out by means of SPV structures. The capital goods, i.e. the tractors, are transferred to the fixed assets of the SPV, and the purchase price is refinanced on the capital market, for example, by issuing securities. The disadvantages of SPV structures are the enormous amount of work involved, the complicated construction, and the associated costs. They are therefore only economically viable when there are high capital requirements and a long investment period. This structure is generally aimed at large institutional investors. For private investors, these constructs are usually difficult to access, among other things, due to minimum investment amounts.
Refinancing via tokenization of industrial assets
Tokenization can be an alternative to securitization, where appropriate. According to the German Federal Financial Supervisory Authority, this is “the digitized representation of an (asset) value, including the rights and obligations contained in this value, as well as its transferability made possible by this.”
In this case, the assets of the single-purpose company would be digitally mapped in the form of tokens on the blockchain, with each token representing a company share and a claim to a portion of the cash flow of the underlying assets. Tokens can be transferred to another party at any time, digitally and without intermediaries, and the transaction history and resulting ownership are immutably stored on the blockchain. Distributions to shareholders can be automated using smart contracts.
An advantage of tokenization is that the investment amount can be as small as desired. This removal of minimum investment requirements means that different, and new investor classes, such as private investors, can be addressed. In addition, token investments are not necessarily associated with a long holding period due to their uncomplicated tradability, allowing for more flexibility and improved diversification.
However, a highly fractionalized investment could also be associated with an increased sales effort, as significantly more individual investors have to be approached and convinced of the profitability of the investment, as well as demonstrably educated in the case of private investors. And while the settlement and distribution infrastructures, as well as the regulatory framework, are already in place for established financing instruments such as asset-backed securities, the establishment of an ecosystem in terms of processes, structures, and standards for tokenization are still in their infancy.
Usage data enables new forms of refinancing for industrial goods
Companies and banks will soon be able to develop new, data-based financing approaches and business models through the tokenization of industrial goods. At the same time, new asset classes and thus opportunities for portfolio diversification are opening up for an expanded circle of investors.
However, there are still some prerequisites to be met before the benefits associated with tokenization can be realized. These include, for example, the establishment of a blockchain-based settlement infrastructure, the creation of suitable regulatory frameworks, and the development of a comprehensive understanding of tokenization and its opportunities and risks among all stakeholders. Pay-per-use loans, on the other hand, as well as the issuance of asset-backed securities, data-based refinancing options are already ready for use today.
Dr. Philipp Sandner, Head of Frankfurt School Blockchain Center (FSBC) at Frankfurt School of Finance & Management.Maximilian Forster, Co-Founder CashOnLedger Technologies GmbH and member of many boards and associations.Lukas Schmidt, SVP Strategy & Business Development CashOnLedger with over 8 years of experience in banking.Katharina Schott, Managing Consultant at the interface between IT and business, DLT Talent of the Frankfurt School Blockchain Center.
Over the first three years of the Forbes Blockchain 50, our list of billion-dollar companies making meaningful use of the technology popularized by bitcoin, has become a bellwether of institutional adoption. Our list shines light on how large corporations—often household names like Walmart and Novartis— are using blockchain tech to improve business processes and become more efficient and profitable. Now is your chance to help us find the best possible honorees for next year.
Each year’s list, which requires that members be valued at $1 billion or more, or generate $1 billion in revenue, has demonstrated the technology’s wide and growing geographic and industry reach. Over time, it has shifted from a focus on early stage proof of concept projects to functioning technology with giant transaction volumes. And it has increasingly featured consumer-facing companies, rather than only B2B players.
In other words, the distributed ledger technology that lets a group of users agree on a single truth, and prove that a digital object is only in one place at a time, is actually being used. And it’s not only being used by nimble startups with little to lose, but also by generations-old enterprises with some of the best known and trusted names in the world: Fidelity, Honeywell, Visa and the NBA.
Forbes Blockchain 50 – Inside The Class Of 2021
With the rapid rise of bitcoin, which this year reached an all time high of $64,000, the number of companies aiming to capitalize on the original digital asset has surged. What began with cryptocurrency exchange Coinbase, which made the first list in 2019 when bitcoin was only worth $5,000 and went public this year with an $86 billion direct listing, has expanded to include companies such as business analytics firm MicroStrategy, which essentially turned itself into bitcoin ETF by holding more than $5 billion worth of bitcoin.
“There is going to be more change in the next 5 years than we have seen in the last 30 years in the financial system,” said Dan Schulman, the CEO of Blockchain 50 lister, PayPal, speaking at last year’s Blockchain 50 Symposium. “And I think digital currencies are going to lead the way.”
Forbes
Know a company whose blockchain innovation is under-appreciated? Let us know now, and help us spread the word using #Blockchain50 on Twitter. Has your company been overlooked in the past, or fallen off the list, but is breaking new ground by making real strides with blockchain? Let us know how. Do you work at one of the nine firms that has been on the list all three years, and is still leading the way? We want to know what the company is doing that merits it remaining on the list.
The nomination deadline is Friday, November 5. Once the nomination period ends, a team of Forbes reporters and editors will sort through the nominees, looking for the most mature blockchain programs run by the most talented teams in the world. Winners will be revealed in a 2022 magazine issue, and online.
“You know what the trouble is, Brucey? We used to make shit in this country, build shit. Now we just put our hand in the next guy’s pocket.”
-Frank Sobotka, “The Wire”
It is no secret that the United States’ manufacturing production has declined over the past few decades. The days of the Industrial Revolution are long gone, as the United States has transformed into a consumer-based economy. This divergence really became clear around the turn of the 21st century. According to the U.S. Bureau of Labor and Statistics, United States manufacturing jobs have dropped from around 17.5 million in 2000 to around 12.5 million today.
Source
When you look at the United States imports versus exports as a percentage of GDP, a similar trend emerges:
A Shift In Manufacturing Production
So, where has all of this manufacturing gone? To China, and more recently, other developing Asian nations. Many of these countries have implemented export-led growth strategies in order to take manufacturing share from America. These governments tend to offer attractive tax breaks for foreign companies to bring their manufacturing plants in. On top of that, these developing nations have comparative advantages against developed countries like America. Export-dependent nations like China have fewer labor restrictions, allowing their workers to be more productive for less pay than most developed country employers.
While there are many factors at play that give China a manufacturing edge over other countries, arguably its most important comparative advantage is in currency. China consistently devalues the yuan in order to have its exports priced cheaply for foreigners. When Chinese exports were down 8.3 percent in 2015, the People’s Bank of China took drastic measures to devalue the yuan in order to support their export led strategy.
Historically, China was competing with other fiat currencies in order to offer the most attractive pricing. However, with the recent rise of the global and permissionless cryptocurrency bitcoin, many industries are transforming at a rapid pace.
Will bitcoin compete with fiat currencies as a payment option within global manufacturing and trade? And, if so, how will this new payment option affect the current power dynamic within the global trade ecosystem?
Bitcoin: New Currency Of Global Trade?
Using bitcoin with international transactions has some clear advantages over its fiat counterparts. Bitcoin possesses unique qualities that are not available in government currencies.
While bitcoin gets a lot of heat for its transaction processing time, its final settlement is much more efficient than the archaic foreign exchange process. The average bitcoin transaction settles in around 10 minutes. Compare this to the global foreign exchange market where most currency exchanges settle two days after the trade date, with a few settling one day later. Transacting in bitcoin is more efficient, as both parties would be dealing with just one currency, and the payment would settle faster than it would through the international banking system.
When analyzing large value transactions in bitcoin, it is clear that bitcoin offers more attractive fee options than the fiat banking system. Fiat currencies have wire fees moving from one bank to the other, and also conversion fees for the party converting into its own nation’s currency. Bitcoin simply has miner fees with each transaction. As of February 2021, the average bitcoin transaction fee was $23. Bitcoin is clearly the cheaper option for high-value transactions. Bitcoin transactions are also irreversible, giving transactors assurance once the money hits their wallet. Bitcoin is also permissionless, it can be traded anywhere at any time.
Common pushback on the idea of transacting in bitcoin is that no one in their right mind would want to give up a currency that is expected to appreciate so much in value. But here is where the game theory comes into play. Entrepreneurs that want bitcoin will look to entice others to give their bitcoin away (see “Everyone’s A Scammer”). Earning bitcoin allows individuals to avoid burdensome know your customer (KYC) laws, as well as save money on exchanges and transaction fees. Are there businesses out there willing to undercut their competition to be paid in bitcoin? And can they find a trading partner that is not a believer in the currency, but are looking for an immediate discount in fiat terms?
Only time will tell. Companies like Zap, with its Lightning Strike app, and Square, with its Cash App, are revolutionizing payments. They integrate both bitcoin and fiat payment systems into users accounts, allowing both bitcoin and fiat to be sent interchangeably all over the world. Perhaps the decision for a 10 percent discount in bitcoin won’t even force the buyer to own bitcoin, but will allow for a seamless transition in payments between bitcoin and fiat currencies.
Will Bitcoin Alter Power Dynamics In Global Manufacturing?
Presently, bitcoin is attempting to prove its worth as a store of value. Recently, the currency surpassed $1 trillion in market capitalization, and institutions are starting to pile in. If bitcoin is established as a store of value, many believe that the currency will then begin to evolve as a more widely-used medium of exchange. It would be interesting to see how the implications of a hard money standard like bitcoin could affect global trade and manufacturing.
If we got to the point as a society where bitcoin became the universally-accepted payment network, nations with weaker currencies like China would lose their comparative advantage. With this would come the cat-and-mouse game between regulators and manufacturing companies. Many countries whose economies rely on exports may view bitcoin as a threat to their comparative advantages. On the other side, you will have manufacturers that want to receive bitcoin for their goods. Could there be a migration from traditional export-driven nations to ones that are welcoming to bitcoin?
America and much of Europe was on the gold standard during the late 19th century and into the 20th century. This time period was known as the “Gilded Age” in America, where the United States became the global leader in manufacturing. Many credit the deflationary effects of a hard money standard for technological discoveries and industrial innovations during this time period.
Perhaps another hard money standard in the form of bitcoin can promote further innovation within manufacturing. If the 21st century develops along the same lines as the 19th century, the countries that are on a hard money standard will benefit the most in manufacturing and global trade.
This is a guest post by Jackson Forelli. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.