The concept of cryptocurrency was shared with the world by Satoshi Nakamoto, a pseudonym, more than a decade ago in 2008. Nakamoto published a white paper called “Bitcoin: A peer-to-peer electronic cash system” online. The first cryptocurrency known as Bitcoin came into existence the following year. The basic idea of the digital currency was to exclude the third party from the electronic function and allow the sender and recipient to have complete control over their money.
Since the inception of Bitcoin, dozens of cryptocurrencies have emerged in the digital financial system. Currently, there are approximately 9000 different cryptocurrensets worldwide like Ethereum, Tether, Dogecoin, Solana etc. Among all these cryptocurrency currencies Bitcoin remains the most popular and valuable.
How cryptocurrency booming in Indian market
Finance Minister Nirmala Sitharaman has made two significant announcements in the Union Budget 2022-23 in the Indian crypto asset industry. The Indian government will levy a 30% tax on profits earned on crypto-assets, and the Digital rupee will be introduced in the 2022-23 financial year. After being nervous and hesitant to use cryptocurrency, the Indian government has finally decided to open a way for tangible money. There is still confusion about the future of cryptocurrency, but these announcements have given a clear signal to crypto aficionados that crypto is one step closer to being legal in the country.
Cryptocurrencies have been circulating since 2009 but over the past few years, unprecedented growth has been evident in this segment. Crypto assets are very popular among young investors who have better risk interest and are keen to get adequate financial education to reap the benefits of the ever-changing digital financial world. According to the Economic Times, about 20 million Indians are involved in cryptocurrency trading.
According to the 2021 Global Crypto Adoption Index released by Chainalysis, a company focused on blockchain analysis, the world has seen an 880% drop in crypto acquisition. The 0.37 index result earned India in second place in the index behind Vietnam. The Indian crypto market has grown by 641% per year. Clearly, the global crypto market is showing great potential and emerging rapidly. It looks like a promising industry in India as well.
Technology Involved
Cryptocurrency is a virtual currency encrypted using Blockchain technology. The encryption process makes the currency more secure than counterfeit. Currently cryptocurrensets are legal assets but countries are not known as legal tender except El Salvador which means, these assets have value but cannot be used to sell or buy assets at the moment. Finance Minister Nirmala Sitharaman clarified in an interview that as cryptocurrency can be issued by central authorities it does not have an internal value that makes money acceptable as a means of exchange. Thus, cryptocurrency is an asset, not a currency.
Feasibility of Financial Services
Regular financial services require a few non-payers and a recipient of financial services such as financial institutions that hold the bank accounts of both parties involved, a platform used for transactions etc. All of these players charge fees for providing their services that make transactions more expensive for customers. . The large number of mediators involved in the business process gives cybercriminals more opportunities to steal sensitive personal information.
Online financial transactions involving cryptocurrencies take place through a peer-to-peer network without interruption from another party such as a region or financial institution. With the help of Blockchain technology, both the sender and the receiver are able to transact freely through financial transactions. The elimination of mediators makes cryptocurrency transfers more expensive and safer.
The currency of any country always works according to the promise made by the central bank of that country. People hope that the big bank will be the provider of the money while performing its operations. This trust fuels economic activities. In the case of crypto transactions, cryptographic evidence produced by advanced technology replaces trust and eliminates the need for any central authority that makes the process completely fragmented. The cryptocurrency segmentation makes it accessible to users across the web. The process is completely democratic and transparent as everything that is done is recorded and broadcast via the blockchain. The blockchain acts as a distributed ledger system with all the records of all cryptocurrency users by code.
Crypto transactions include public and private keys. The public key is updated for each job and related information such as payer and recipient details, transaction value etc. stored on blockchain. The private key is different for each user. All of this information is encrypted.Adopting a digital currency system by the Indian state is a wise move considering the speed at which the crypto financial system is developing. Although, it can be a challenge for the government to create a system that allows cryptocurrency to operate without losing its essence.
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