Cryptocurrency in India: Everything You Need To Know!
Created on 23 Sep 2020
Wraps up in 7 Min
Read by 18.9k people
Updated on 17 Aug 2022
In the early stages of the human, there was a barter system of exchange which later on diminished due to its inherent flaws in it, and from then many types of research has been made to make Digital money and slowly the paper and coin currency have been introduced and got popular all around the world.
Today in the modern economy, we have real money in paper and coins form and also the Digital money in the form of electronic wallets, debit and credit cards, etc. which are controlled by central or common authorities.
Cryptography is a similar concept for digital currency but in a decentralized manner i.e., no servers involved for processing transactions and no central authority to govern.
What is Cryptocurrency?
Cryptocurrency is a digital kind of currency that is used in trading and transactions. It is just like paper currency, only that it is not physical. A fun fact is that a cryptocurrency is a decentralized form of money, meaning it is not and cannot be regulated by any government or group of governments.
It mainly works on the principles of cryptography (a method of protecting information and communications through the use of codes so that only those for whom the information is intended can read and process it.) The prefix' crypt' means 'hidden' or 'vault' and the suffix 'graphy' stands for 'writing.'
It is believed that it is impossible to involve in the duplication of the transactions or involve counterfeit currency in this mechanism. Many cryptocurrencies are decentralized networks based on blockchain technology; it is a list of records that are growing all the time. They are known as blocks that link and secure each type of cryptocurrency. Then there is a single network called mining, in which all the funds are kept. In other words, a process by which the cryptocurrency is validated is called mining. Some of the popular cryptocurrencies are Bitcoin, Litecoin, Ethereum, Z-cash.
How Cryptocurrency is purchased?
So, the answer is that in order to purchase a cryptocurrency, you must open a digital wallet. This is the place where you can use your currency and can purchase or sell goods or services.
So, whenever the term cryptocurrency is used, Bitcoin comes hand in hand. The original and first form of cryptocurrency was called Bitcoins, after which other forms like; Ethereum, Litecoin, Dark coin, dash, and the likes were brought on stream.
Bitcoin hit the market first in 2009 and has been flooding the business world ever since. The drastic rise in bitcoin was so much that its value went from $1000 to over $19,000 in 2017 alone. This is the first and most popular of all forms of cryptocurrency.
Ethereum is another form of cryptocurrency that kick-started in 2015. Its uniqueness is that it allows for smart contracts and DApps usage without any glitch or scam. Not to omit that it regulates interaction from third parties, and it does not give downtime.
Litecoin, another form of cryptocurrency, started in 2011 and rose to be the silver to bitcoin's gold. This is because it is very similar to bitcoin, only that it has a faster transaction rate.
Why are cryptocurrencies so popular in India?
The demand and popularity for cryptocurrencies have grown steadily In India and here are some of the reasons why cryptocurrencies are so popular:
1. No Human Involvement
Cryptocurrencies are great and most preferable for online international transactions without any glitch whatsoever. Since it is a digital currency that is decentralized, there wouldn't be any need to go through any government body when participating in any international financial transaction.
It fosters any business interaction without the interference of any government body, which has been one of the issues some businesses face when they go international.
With cryptocurrency, all of the worries of being denied access to some funding due to government regulations, do not apply. This has made it a kind of currency to be reckoned with all over the world.
2. Ease of use and transparency
In the monetary markets, cryptocurrency has identical dynamics as equities. Since the costs of cryptocurrencies are also being traded within the market, there may be a possibility for humans to make investments and have interaction in arbitrage as they make use of blockchain technology. This is because it gives better returns compared to different investments, making a lot of people tap into the advantages of crypto.
Its usefulness has birthed different startups and has made different companies to develop software programs for the blockchain for use in this digital age. This has delivered and encouraged recognition and acceptance of crypto in the digital society.
3. Secured transaction
Many professionals identify cryptocurrencies and the blockchain as truly unhackable. Since cryptocurrency runs on what we call the blockchain, one of the majorly acknowledged blessings of cryptocurrency is the prevention of fee scam, as data is available to everyone, encouraging transparency.
With a shared ledger, it fosters immunity to any sort of tampering; all data shared is accurate and updated each second. This reduces any possibility to duplicate fraud. Furthermore, as soon as affirmation is finished on a cryptocurrency transfer, the transaction may not be reversed, unlike credit cards wherein there are hacks attached.
This is a safety measure in opposition to fraud, which shows that there is proper management of transactions without any third-party interference and manipulation. Not to omit that, it does protect the identity of the person making the transaction, which further justifies the fact that it is unhackable.
4. Speed of transaction
Cryptocurrency has been verified to be a very fast means of transaction, as fast as light. It can also do multiple transactions at a time without any mix-up whatsoever. For this reason, people have adopted this method of transaction, as it makes the business move as quickly as possible.
The rise in acceptance of cryptocurrency has been ground-breaking, and it keeps soaring as the best means of transaction in this digital age. This has given rise to conclusions that it is the future of currency, which is currently growing, and will most likely be so. However, there have been different debates about the rules and criteria governing the operations of this "unique" kind of currency.
Are cryptocurrencies legal in India?
As cryptocurrency's usefulness kept rising in China and spreading through all of Asia, India, as a country, has been actively using it as one of the major means of the online transaction. Just when the acceptance of cryptocurrency was peaking in the country, India's federal government planned to ban trading in this currency.
The Reserve Bank of India (RBI) is specifically worried about investors' protection. It is worried about the anonymity of cryptocurrency transactions and the lack of intrinsic values of the currency, as they are not backed by assets.
This might allow for a new level of scamming and internet fraud, the government feels. Moreover, as more transactions keep happening in the country and internationally, there can be more use cases that can boost cryptocurrency's intrinsic value.
While the RBI banned commercial banks from servicing to crypto traders and exchanges in 2018, India's Supreme Court overruled the ban in march 2020 after much solicitation, and it happened just when the coronavirus pandemic hit the world.
During this period, most parts of India were faced with lockdown and movement restriction. This is a sense that fostered the sharp growth in the use of cryptocurrency in the country again.
Crypto exchange was reported to have grown over 10 times as it used to be giving a 47% growth for Q1 2020. More so, the United States-based crypto market exchange liaised with that of India, giving access to crypto-to-crypto conversion and trading services from April. A lot of investors found safety in digital currency as traditional assets declined due to the coronavirus pandemic.
Regardless of all of this growth, in June 2020, the government reconsidered banning cryptocurrencies based on a report that was moved by the finance ministry for inter-ministerial consultation. However, the crypto exchange executives reverted that cryptocurrencies can be regulated as commodities, and the nation will suffer rivals from business, traders, and enthusiasts based on their constitutional rights.
Top 10 cryptocurrencies by market capitalization
Data current as of September 2, 2020.
The Bottom Line
The continuous rise in the usage of cryptocurrency has sparked different debates not just in India, but all over the world. The whole world is clearly divided when it comes to cryptocurrency; there are few famous personalities like Bill Gates, Al Gore (a Nobel prize winner), Richard Branson who support the cryptocurrency in increasing the store value of money.
On the other side, we have people like Warren Buffett, Paul Krugman, Richard Shiller, who are completely against it; they call it a Ponzi scheme and means for criminal activities.
In the future, there is going to be a conflict between regulation and anonymity since several cryptocurrencies have been linked with terrorist attacks, government would want to regulate how cryptocurrencies work; on the other hand, the main emphasis of cryptocurrency is to ensure that their users are kept anonymous.
Futurists believe that by 2030, cryptocurrencies would occupy 25% of national currencies, which means that a significant chunk of the world would start believing in cryptocurrencies as a mode of transaction. It's going to be increasingly accepted by merchants and customers, and it will continue to have a volatile nature, which means prices will continue to fluctuate as they have been for the last few years.
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