In an era of the Digital world and online transactions, Cryptocurrency is a term that has been in the limelight in the market since 2010. Initially, this was an ambiguous term which was very difficult to understand. It was understood as a platform of investment that suddenly erupted from the air however it is far from reality. It has its history and its special process of transaction. What is cryptocurrency? Why is it in the limelight? How it works? How safe is it for investments? The series of blogs shall cover the basics of cryptocurrency that evolved. First, we shall delve into its evolution to understand why it came into the market. Then we shall move towards its fundamentals and its social aspects. We shall cover this complex phenomenon easily in some series of blogs.  

Evolution of cryptocurrency 

In any economy, the production and distribution of material wealth is something to be considered as the primary goal. Everyone here requires a variety of material goods but cannot produce everything. Thus, we tend to get involved in the exchange process. This exchange process has its stages: – 

Barter system: –  

When the economy was in its initial stage people used to exchange goods and services in return for goods and services. It means that If I need a cat and I have shoes then I must find a person who needs shoes and is ready to give his cat in exchange. It seems to be a very difficult and time-consuming task that demands a further revolution in the market. 

Entry of metal coins 

Thus, we tended to find some representations of the value of goods that can be carried. No one has the time to find a person who needs a cat. Thus, we found some metal coins which can act as denotations of value paid. These metals, since they are limited in numbers, can have their value which can equate to the value of goods and services and thus can be exchanged altogether. It was also a decentralized system used for the transaction process. 

Evolution of banks and currency notes.

Then with time, institutions such as banks evolved which led to the generation of currency as legal tender. It means that a place will be specified where everyone can put their money and can withdraw on demand in case of ‘demand deposits’. The method of transaction here changed to currency notes and coins which themselves have no value. They are valuable just because the government claims that they are valuable. As in the case of demonetization, if one day the government claims that from now on this note is not a legal tender, that currency will lose its value. 

Currency notes, depending on the demand and supply of goods and services, international trade and the overall economic situation of a nation, can gain and lose their value.

Currently, because of the strong economic and political dominance of the USA, US dollars are taken as the standard for whether the currency of a nation has appreciated or depreciated and in what ratio. However, this trend is now changing and the Chinese yen, Russian rubles and Indian rupees are also in the limelight for standardization to decrease the polarization towards the USA.  

Thus, it is the bank here that keeps the record of transactions, and they are under the control of the Central Bank. Central banks work under the government thus making the transactions and value of money depend on the system working there. 

Rise of cryptocurrencies 

One of the major problems with using the currency (legal tender) and banking system here is that they have control of our money. Banks have complete data that shows how much money I have, where I am spending it and how much raise I am getting. Even in some special cases, if the government wants it can restrict its uses. It means till now, we have just earned and given our money to a centrally controlled system to keep it safe and tend to use it as per our requirements. 

However, such kind of transactions have created a sense of dissatisfaction among the wealth holders. The problem is that if I have earned the money, why should a system have control over it? Thus, it leads to the emergence of a need for a decentralized system to control the money we have. 

After the sudden dissimilation of computers, it created an idea why not have a system of records that would work on Unanimous Consensus.

It means rather than providing records to banks let’s have a unanimous record of transactions and a decentralized system that will entirely work based on demand and supply. Here the government will not have any control and we can freely use this currency as per the market principles. 

Here is the place where cryptocurrencies are raised. This is the same principle that follows and solves this raised problem. 

What is cryptocurrency? 

In an era of this digital world, we created a system where we hold a form of digital and decentralized currency known as cryptocurrency. It works with cryptography to maintain security. Cryptography is a field of study where we convert plain text to a code or cypher text that we can’t understand with our known language. Thus, programmed language ensures the security of data in public spheres.

It means if we have done any transaction with this currency. When it tends to get stored publicly it will have a specific code that will contain the data for security here. 

Just like UPI payments in India, these kinds of currencies are accepted as a medium of payment in many countries. It is somewhat the same, however, the difference is that Upi payments happen through banks which are centrally controlled whereas cryptocurrency is a decentralized medium of transactions. Many such currencies exist such as Bitcoin, Ethereum, Litecoin etc.  

In a nutshell and way towards part 2 

This is an aspect that does require some detailing to have an insight.  In this blog first, we had a glimpse at why the need for cryptocurrency arose and how it evolved. Thereafter we have understood what this cryptocurrency is. However nowadays it is a platform of investment. So, what made it a platform of investment? What is the technology behind it and how viable is it to invest? All such aspects shall be covered in the next part of the blog provided below: – https://www.dutimes.com/what-is-cryptocurrency/

References

pexels, https://www.drishtiias.com/to-the-points/paper3/cryptocurrency-9

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The previous blog dealt with the basic evolutionary aspects of cryptocurrency. This currency interestingly has its functioning and mechanisms to work. The technology in which it works is referred to as blockchain technology. It works on peer-to-peer connections. This technology can also be used in health, education etc. wherever we need to deal with data.  

Blockchain technology behind cryptocurrency

Blockchain is a distributed ledger that contains all the data of transactions that you do with cryptocurrency. A ledger is a public place where the record of transactions exists. For instance: – If any transaction is conducted, every system that contains that ledger will record the transaction thus limiting any fraud here as every node will include it.  This is like the record book that banks keep but here it is completely decentralized and isn’t controlled by any authority. In other words, it works on the common consensus of users to use cryptocurrency. Those who maintain such ledgers are known as miners who get payment in the form of cryptocurrency only. 

There is a specific block that gets created with a public and a private key. Each block will contain the data of your transaction.  Public keys will be visible on the platform and private keys will be with you to match your identity there. It’s a kind of signature there that you use. Each block relates to the previous block with a specific code thus any alteration will tend to alter the entire chain there. This prevents any fraud there and makes it a safe platform for transactions.  

With this technology, the transactions can be done even by transcending the borders of countries. The number of cryptocurrencies is fixed beforehand thus making transactions depending on the demand and supply of the market. To use cryptocurrency using this technology, one must have a digital wallet that will store the public and private keys. 

Investment

 Because these cryptocurrencies are fixed in number, it depends on market demand and supply. For instance, when Tesla declared that it would accept Bitcoin as a medium of payment, the demand for Bitcoin suddenly increased. Thus, its value increased significantly. Thus because of the tendency of market fluctuations, it makes it an important platform to invest in and diversify our portfolio. 

Types of cryptocurrencies 

In 2024 nearly 8985 cryptocurrencies were active. Thus, making it a volatile platform for investment. The major and popular cryptocurrencies include: – 

1. Bitcoin 

It was the first well-known cryptocurrency introduced in the market in 2009. It started with an idea to have digital currency thought by Satoshi Nakamoto and was released in open-source software. There is a total of 21 million bitcoins existing in the market. Many countries also accept it as a medium of exchange. 

2. Ethereum 

• It is also an open-source cryptocurrency that enables the creation of smart contracts and decentralized applications (Daps). It uses its cryptocurrency, Ether, as a means of payment for transaction fees and services on the Ethereum network. 
  

  3. Litecoin 

  

•  It is also similar to bitcoins working on the same line but with faster transaction confirmation times.

4. Ripple 

International money transfers seem to be very costly through banks. Thus, ripple makes it easier cheaper and faster international money transfers through cryptocurrency. Ripple can be used to transfer any currency, including USD, EUR, and Bitcoin, and it can also be traded on digital currency exchanges. 

The legal status of Cryptocurrency in India 

The legal status of such a currency because of its decentralized nature is somewhat ambiguous. Earlier RBI issued several notices to investors regarding the risk involved in Bitcoin as it is not legal tender However in 2018 Supreme Court struck down the decision of RBI which bans financial institutions from dealing with Cryptocurrency. Also in 2022, the government imposed 30 per cent taxation on the income from cryptocurrencies. Also, the government is planning to have Central Bank Digital currency in future.  

Challenges involved regarding investments in cryptocurrency 

1. Investments in cryptocurrency should be with the known fact that the market here is volatile here. It means risk calculation plays a vital role when we want to invest here. Thus, heavy amounts or amounts of loan must not be invested in the market without prior calculation of risk 
2. There is apprehension of fraud as crypto wallets are suspectable to hacking attacks. Thus, one must use a secure wallet while engaging in such transactions 
3. The maintenance of such programs requires heavy machinery and powerful computers. It leads to huge electricity consumption that is sometimes considered as not good for the environment. 
4. Also, there is a lack of regulation. Thus, the government and legal apparatus will not be responsible here for any kind of loss through mechanism. 

In a nutshell 

Thus, in a nutshell, we can conclude that cryptocurrency is a status that is ambiguous in India. Although it is not a legal tender investments in cryptocurrencies are something completely legal and constitutionally guaranteed right. However, investments here must be based on proper risk calculations. 

References

Freepik, pexels, https://www.drishtiias.com/to-the-points/paper3/cryptocurrency-9

The post What is cryptocurrency ? (part 2) appeared first on DU Times.

The adroit thought generates a natural passion in us which accelerates our move towards our goals. We all dream of conquering our ambitions but rarely do we ponder upon the path that would lead us to conquest our destination. Whatever we accomplish is treasured but more prized is how we actualize that acquisition.  If the aisle to the pinnacle is execrated, priceless achievement turns valueless. If the methods of achieving goals are flawed, then the ultimate consequence is downfall.

The most common element which deviates passionate minds from their values is their avarice for minting more and more silvers. Most of the people have their targets hoisted on the flagstone of their gluttony for money. It is because they have forgotten that, ‘money doesn’t compose man but it is the man who has composed money.’ So, it is not the money mind that needs to be implanted, but it is the mankind that needs to be pursued.

Achievements are worth only when our soul commemorates. Understanding the value of money is essential but overestimating its value gives rise to the thirst of money and this thirst dries up the stream of morals. And when this thirst for money attains zenith, our morals summon to the nadir. This is the horizon where our thoughts deviate to a criminal mindset. Once this thirst is fulfilled, he gets what he wanted but loses what he needed. Money could never equal the warmth of the mothers love, the tenderness of a father’s care, the amity of siblings, and the blessings of elders. One can earn them only with the values one possesses; money could only buy you a transient materialistic comfort. So loosing values at the cost of these unfaithful silvers is unworthy.

The body is immortal, but our existence could be made over lasting by pursuing a life that becomes an epitome of inspiration for others. Decades will pass and no one will bother to remember what we earned but they may somewhere recall what we did. So, liberate yourself from the clutches of this never-ending thirst of money and rise on the staircase of morals towards the gleaming sky where the crest of success dazzles. Let the life commemorate your living.

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