A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
Widely seen as a disruption for the traditional banking and financial institutions, cryptocurrencies have gained a significant traction over the last half a decade, at the same time creating a regulatory nightmare for banking regulators across the globe. At present, there are around 969 cryptocurrencies in existence across the globe, with a total market capitalization close to 116 billion US$. A cryptocurrency is a digital currency created and stored electronically. Unlike monetary currency, the supply of cryptocurrency is not determined by any central bank or authority and the network is completely decentralised.
A cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units and to verify the transfer of assets. Cryptocurrencies are a type of digital currency, alternative currency and virtual currency. Cryptocurrencies use decentralised control as opposed to centralised electronic money and central banking systems. The decentralised control of each cryptocurrency works through a block chain, which is a public transaction database functioning as a distributed ledger.
- A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.
- The word “cryptocurrency” is derived from the encryption techniques which are used to secure the network.
- Blockchains, which are organizational methods for ensuring the integrity of transactional data, are an essential component of many cryptocurrencies.
- Many experts believe that blockchain and related technology will disrupt many industries, including finance and law.
- Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. However, they also have been praised for their portability, divisibility, inflation resistance, and transparency.
Types of Cryptocurrencies:-
The first blockchain-based cryptocurrency was Bitcoin, which still remains the most popular and most valuable. Today, there are thousands of alternate cryptocurrencies with various functions and specifications. Some of these are clones or forks of Bitcoin, while others are new currencies that were built from scratch.
Bitcoin was launched in 2009 by an individual or group known by the pseudonym “Satoshi Nakamoto.”As of March 2021, there were over 18.6 million bitcoins in circulation with a total market capitalisation of around $927 billion. Some of the competing cryptocurrencies spawned by Bitcoin’s success, known as “altcoins,” include Litecoin, Peercoin, and Namecoin, as well as Ethereum, Cardano, and EOS. Today, the aggregate value of all the cryptocurrencies in existence is around $1.5 trillion—Bitcoin currently represents more than 60% of the total value.
Advantages Of Cryptocurrency:-
- As compared to our conventional currencies, the transactions of cryptocurrency are quicker, safer as well as cost-effective.
- The technology that is used in cryptocurrencies is fully encrypted, which makes the personal data of its users anonymous and it also protects the user from cybercrime, fraud along with maintaining privacy.
- There are low transaction fees because miners of cryptocurrency are simply rewarded some amount of cryptocurrency from the network itself so there are no fees or typically little fees for core transactions.
- You can only access your own part of the cryptocurrency via a digital key.
- Cryptocurrency is used as a Free flow and Global reach-Cross border Accessibility.
- The Counterfeiting of Cryptocurrency is also very tough.
Disadvantages of Cryptocurrency:-
- As the transactions are anonymous, some persons may use cryptocurrencies for illegal activities like selling drugs, weapons, and child pornography, etc.
- There is no central agency for regulating the transactions of cryptocurrency so, it makes it harder for RBI as well as the government to manage the monetary policy.
- Transaction of cryptocurrency can be done only through the internet. But uneducated people and people who do not have proper internet facilities will not be able to take advantage of it.
- The rates of cryptocurrency are very volatile, which can cause huge losses or benefits in a very short time. Due to this, speculation or betting can also be promoted.
- Cryptocurrency can also prove to be a threat to official currency and monetary systems.
- People can also use cryptocurrency for avoidance of tax compliances.
Future Of Cryptocurrency:-
The future and further success of cryptocurrencies depends upon the way regulatory frameworks are devised. Different countries have approached this innovation in different ways, and therefore the regulatory environment remains uncertain. The government will have to take considered steps, given the risks from possible use of cryptocurrencies in terror financing, money laundering and tax evasion.
Despite all the risks, the encrypted technology in cryptocurrency can prove to be an asset for the financial marketplace. Most countries are opting for a regulation on cryptocurrency rather than banning it. If India also regulates these cryptocurrencies and invest in DLS technology then it will prove to be good for the future. A “Digital Rupee” (INR) perhaps could be the future/ solution.