The Cryptocurrency Regulation Bill is set to be introduced in the winter session of Parliament that begins in late November. Under the bill, the government will recognize certain crypto-currencies and introduce rules for the same. RBI is talking of a complete ban on crypto-currencies.
The RBI governor has termed crypto-currencies a threat to the country’s financial stability. The International Monetary Fund (IMF), the central banks of other countries, the RBI, and the government are all concerned about the increasing prevalence of crypto-currencies.
What is the reason for this concern? What is this crypto-currency that has confused even scholars so much? The whole world seems to be buzzing with crypto-currencies.
Before understanding this dilemma, it is essential to know what is crypto. Today, we will look at some of the technical aspects of crypto-currency.
How Cryptocurrency came into Existence
The first crypto-currency named Bitcoin was created in 2008-09 by a stranger named Satoshi Naka Moto. Cryptocurrency is also called virtual currency. To date, more than ten thousand crypto-currencies exist. With Bitcoin, there are Ethereum, Bitcoin, Binance, tether, Polkadot, DogeCoin, and countless more, to name there.
The first thing to note about crypto-currency is that it is a private currency. Crypto-currency is not the currency of any country, as the central bank makes money, such as Rupee, Dollar, Pound, Dinar, etc.
Just like our rupee note bears the RBI governor’s signature and says ‘I promise to pay…’, there is no legal seal or certainty on Bitcoin or any other virtual currency, yet people have accepted it.
In ancient times, stones or metals, gold and silver, and grains were used as money. These substances are exchanged without any legal basis.
The only reason for this is that everyone accepted the object or substance as money. Thus some people in the world have accepted virtual currency for exchange for their convenience.
Cryptocurrency – The Decentralised Currency
Secondly, no central bank has issued this money. Therefore, no one has control over it, the virtual currency is used to sell and purchase drugs or illegal weapons. Once the exchange is complete, it is not possible to trace the information. Thus the circulation of virtual currency increased.
Third, digital currency and crypto-currency are different. Digital money is the electronic form of money in a bank. Whereas crypto-currencies are protected by encryption – in everyday language using mathematical techniques.
Fourth, crypto-currencies are not managed by a single individual or company. It is a fully decentralized currency, which means that exchanging virtual currency does not require a bank or intermediary.
Typically, if a person wants to transfer money to another person, a bank account is required, and the bank will verify and approve the financial transaction.
Cryptocurrency Mining Process
There is no single central authority in cryptocurrency when one person pays Bitcoin to another person; somebody has to make sure it’s approved; this work can be done by anyone like me who is fond of solving maths puzzles. This process is called Bitcoin mining.
That is, every Bitcoin exchange has a mathematical puzzle (called an algorithm) attached to it, and if someone solves that puzzle on their computer, the exchange is complete. That person also earns Bitcoins for solving algorithms. That person is called a Bitcoin-Miner,
An advantage of the system is that a lot of time and money is saved due to the absence of intermediaries in financial transactions. If money is to be transferred from one country to another, a commission has to be paid to the financial institution, and the money is credited to the other person’s account after two to three days or more.
Convert Rupee to Dollar or Pound as per exchange rate. There are a lot of rules and taxes to be paid. There are no such hurdles to be crossed in cryptocurrency exchanges. A solved puzzle can transfer virtual money from one corner of the world to another.
How is the value of this crypto-currency determined?
On November 25, the price of one Bitcoin was around ₹44 lakh, while the next day, on November 26, the value went up to around ₹41 lakh. The volatility of this price is also a concern. There is SEBI in the stock market; there is a regulatory framework.
The volatility in the value of virtual currencies is very high. Such a jump in any financial asset would endanger the economic and financial stability of the country. Hence the interests of the investors are protected, and they have the provision of safe investments.
Conclusion
Last and most important thing, From the information we get about crypto, it is clear that anyone can invest, mine, and even exchange crypto through their commuter.
It is not possible to ban all these activities altogether. Investing in crypto can continue, regardless of legal lanes and restrictions.
Crypto-currency is the future! But instead of a private currency, each country’s bank will create its crypto-currency to monitor the liquidity of money or the exchange of money.
Read More: Pi Cryptocurrency Network : New Age Mining Platform
