Cryptocurrency and its future in India
Hey! Enthusiasts. Today, we will discuss Cryptocurrency and its future in India. So, instead of directly summarizing, we will conclude our topic with some knowledgeable things and points which you should consider. Let’s start!
A cryptocurrency is simply just a digital form of money or we can also say that it is a digital asset. The word Cryptocurrency is constituted by two terns. One is cryptography and the other is currency.
Cryptography is associated with the process of converting ordinary text into text which can’t be easy to understand and vice versa.
It is a method of storing and transmitting data in a particular format so that only those for whom it is intended can read and process it.
Cryptocurrency Digital form of cash or money / Digital asset
There is no complex system for Cryptocurrency.
For example, as the picture shows that a person from India and a person from Australia want to transfer assets. As seen, there is no medium like banks, no intermediary, no third party, and also as cryptocurrency is not in physical form so no conversions are required from country to country. This helps in less cost involved and easy process.
Talking about the advantages of Cryptocurrency, we have covered some of them but let’s mention them:
- No intermediary _ There is no institution or third party involved between two persons to take part.
- No geographical barrier _ There are no barriers of exchanges from country to country like there is no need to convert INR to USD.
- Fewer charges _ Due to no third party or intermediary, the charges are very less.
- Very fast transaction speed _ The transaction speed is very fast as compared to other systems.
After getting some advantages, it’s time to cover the disadvantages of Cryptocurrency:
- Transactions are irreversible _ The transactions can’t be canceled or undone, when they are done. So, it’s a big problem when transferring a large amount to the wrong person.
- Used for illegal activities _ As there is no medium or body which puts regulations, so to remain anonymous people use it for illegal activities.
Indian scenario – Is Cryptocurrency legal in India?
The straight answer to this question is yes but up to some extent. In India, trading in Cryptocurrency is legal but it is not used as a legal tender that means it is not allowed as a medium of payment. The reason behind it is that they can’t be tracked by a government body which also causes security issues.
As we are talking about Cryptocurrency, so let us learn about certain terms associated with it; blockchain and miners.
The information of various things regarding transactions of Cryptocurrency is recorded and stored in the form of blocks and when a particular block is filled then it is followed by another block and these blocks are connected and tied to each other like a chain. So, it is known as the blockchain.
When the block is filled then the last transaction record is also mentioned in the first place in a new block which makes the perfect chain.
The people who verify the transactions of Cryptocurrency and decrypt them are known as miners. They decrypt the transactions which are in cryptographic puzzle form and in return as a reward, they got some newly created coins (Cryptocurrency).
To get to the conclusion, one thing is also there to study and that is the stages of evolution of doing transactions.
Stages of Evolution
- Barter system
- Gold coins, the gold standard
- Currency notes (whose values are based on gold)
At this stage, there was no need to carry gold. The values of currency notes were based on gold that means gold was a standard. After the world war ended, the governments cut their ties with gold to pay war costs because they were in need of printing more currency notes.
After all these things happening in different economies, the concept of Fiat Money came into existence to solve the problem. In this, the currency of different countries attached with the US Dollar and was, in turn, pecked to gold as a fixed rate.
So, it is seen that every stage has a problem, and to improvise, a new system came into existence. The same is happening right now. There is a problem with the Fiat Money system.
The problem in this system is that when governments print too many currency notes then it results in inflation or sometimes hyperinflation.
To solve this problem, cryptocurrency came into existence in 2009 (bitcoin) where the supply of bitcoin tokens was capped at 21 million.
Cryptocurrency is having a limited supply of 21 million but only around 18.6 million are in circulation. Bitcoin has the largest market capitalization, around 65% of the total market.
Being a very pricey asset, people think that how one can buy a bitcoin. So, the solution to this is that you can buy it in fractions like 0.005
Some Practical Aspects
If we talk about the data in terms of compound annual growth rate i.e. CAGR then we will find that the CAGR of Bitcoin is much-much greater than any other investments be it from SENSEX, NIFTY 50, or Gold.
But, as we all know, high returns come from high risks. So, this makes Cryptocurrency very volatile. It is good to invest but it is advisable not to put your money blindly.
Taxation _ The return we get from an investment in Cryptocurrency is taxable under the head income from other sources. Unlike stock markets in which the capital after one year is taxable as a long-term capital gain.
Points to be considered…
PM Modiji, in his speech, indicates something like this (crypto). He actually talks about the technology of blockchain which is used in cryptocurrency. So he talked about blockchain, a method to be used in near future. Also, he mentioned that blockchain will help in ease of doing business by improving technology which helps in increasing transparency and reducing corruption.
At this point, we can’t say about cryptocurrency but yes blockchain technology is the future.
We do not claim but it is being heard that other cryptocurrencies may get banned and India will launch its own digital currency.
Despite all rumors and disparities in some statements, we are sure to say that there will not be a complete ban on cryptocurrency but yes, there will be things like cryptocurrency can’t be used for tender purposes and certain other things instead trading will be available.
One point of view is that, let’s say cryptocurrency will get banned next week then where will the Indian investors go who already invested their money in this. So, with this theory, we can conclude that cryptocurrency will not come to a complete end in near future and the rest of the things are discussed above.
I Hope, you must have learned a lot of things about Cryptocurrency and get to know about its future in India. So, this was all to share with you. Enjoy reading.