Nowadays it a burning question what is cryptocurrency? As the word is gaining popularity at a rapid pace through news portal and social media.
Cryptocurrency is an encrypted digital currency. Blockchain technology and highly encrypted method are used to generate units of currency and to verify the transfer of funds.
Individuals can buy, sell, transfer the digital currency and all the transaction data store in a ledger existing in form of a computerized database.
To control, generate more coin and secure the transaction, the cryptography method is used. The most interesting fact is that there is no central regulator to control cryptocurrency.
Let go in details how it works and challenges associated with it specifically for in India.
How cryptocurrency works?
According to coinmarketcap.com, a market research website, more than 6700 different cryptocurrencies are publicly traded. As of April 13, 2021, the total value of the virtual currency is 2.2 trillion, and Bitcoin the most popular digital currency pegged at 1.2 trillion.
To buy cryptocurrency you will need a wallet, an online app that can hold your currency. Then you can transfer real money to buy cryptocurrencies.
In USA one can buy, sell and transact digital currency as it is legal there. But in India they are not legalized yet, even the apex bank warned that any type of cryptocurrency transaction is an offence.
Challenges associated with Cryptocurrencies
- Cryptocurrency value fluctuates very frequently and the rise and fall are very high.
- As there is no central regulator, it is uncontrollable, that poses risk in operation as well as trust among cryptocurrency holder.
- The security of encryption may be breached by hackers and this may end up losing huge money for crypto investors.
- If cryptocurrencies are legalized, it may destroy all central and commercial banks of any country that is extremely bad for a country.
Challenges for India in handing cryptocurrencies
- Online use of cryptocurrency without border restriction resulting danger to the integrity and sovereignty of the nation.
- Central banks use various policy to control liquidity, inflation, monetary rates; the use of cryptocurrencies will be out of control and will create an economic crisis.
- As virtual currency is anonymous over the internet; it may rise antinational activities, from terror funding to fraudulent activities, and it will be difficult to track the transaction and catch the offence.
As it is extremely volatile and there is no central controlling authority, every government is thinking hard before giving it not accepting digital currency. India should construct a high-level authority to get a better understanding, how it works and the awareness campaign about cryptocurrency by the government may increase awareness about it.
Recently Elon Musk ban accepting cryptocurrency and China also rejected trading in it that’s why there is a huge plunge in cryptocurrency value. India should not totally legalize accepting and trading in virtual currency as the weightage of cons is more than that of pros.
Read also: Elon Musk’s Journey to the Billionaire Club