Going the Digital Way
November 4, 2021From time immemorial; the world and its ways have evolved over and again. Same is the case with humans. When we talk about money, we can see the evolution from barter system to copper coins and then upgrading to gold and silver coins and finally simplifying to paper and plastic currencies and digital money in the form of debit/credit cards. Money has started to evolve into its next stage recently. The whole world is turning digital and digital currency has been the talk of the town for quite some time now. Over the last 5 years, digital currency has been in news quite often. As the money evolved the flaws diminished along with it. Cryptocurrency; in simple words; means a digital form of currency that can be used for trading and investments. This is similar to paper currencies with the difference that it is not physical in form. As the name suggests, the details of the people are crypted or hidden making them anonymous. Cryptocurrencies are kept in a single network called mining and use blockchain technology. Some of the popular cryptocurrencies prevalent are Bitcoin, Ethereum, Litecoin.
There is an unprecedented demand and hype for cryptocurrencies in India nowadays. Being a digital currency, it will be useful for online international transactions. The transactions need not go through any government bodies during international transactions which can boost international business without interference from any government. Its usefulness and transparency have resulted in software programs being developed with blockchain technology. Cryptocurrencies have better security and privacy that the normal physical currencies. More importantly it protects the identity of the person handling the transaction. Cryptocurrency are mainly decentralized and that helps the currency to be stable and secure unlike the currencies handled by government and also withstand inflation to a good extent. Cryptocurrencies can be bought with many currencies available like US dollar, Euro, Indian rupees, Japanese Yen etc.
Even though there are advantages, it has its own share of disadvantages too. The security and privacy being high for cryptocurrencies, it is highly difficult for the government to track in case of any illegal or suspicious transactions. As we have been seeing, security is prevalent but in case the customer loses the key code to his private wallet, there is no chance of retrieving the coins inside which will be locked in the wallet. Another one concern, is a mistaken transfer where a person might transfer the money to a wrong account accidentally after which it is highly impossible to retrieve back the same which increases the risk of being subjected to cheating. Another one disadvantage is the ecological front. Since mining of cryptocurrencies will need plenty of power and electricity; there will be a huge carbon print on the same. The crypto currencies might be secure but the exchanges dealing with the same might not necessarily be. The wallet data of users can be stolen by hackers giving them access to the full accounts. No matter how secure anything may be; there is always a possibility of hack anytime.
With the popularity of cryptocurrency across the world, there was considerable amount of interest in India as well. By the time, it started gaining acceptance, RBI banned the same on 2018 fearing the security of investors and newer scams. But the Supreme Court of India overruled the ban in 2020 after much debate after the corona pandemic took centre stage. Due to the restrictions imposed across the country, cryptocurrency is slowly regaining the path back to prominence. But setting aside the legal ambiguity, India has the largest number of crypto owners in the world at 10.07 crores. 7.30% of the total population in India owns crypto*. India’s crypto market is witnessing high trade volumes not only from the metro cities but from the entire country. Trade volumes from smaller cities show a high level of penetration in India. The whole world is divided when it comes to cryptocurrency. With people like Bill Gates and Richard Branson supporting it stating the increasing storage value of money; people like Warren Buffett, Paul Krugman, Richard Shiller are strongly against the same stating it a Ponzi scheme and haven for criminal activities. We are not still at a level as to decide the authenticity of crypto currencies. But as the economies keep expanding, crypto currencies are going to play an important and volatile role.