Cryptocurrency: its introduction, working, applications, and flaws

There’s an air of ambiguity and uncertainty around cryptocurrency. Most consider bitcoin to be the first on the scene-setting the pace for the new-fangled blockchain technology. Launched in 2008, a programmer who went by Satoshi Nakamoto published a nine-page document on the then-new currency bitcoin- a decentralized digital currency. Not much is known about the programmer, but bitcoin has been growing exponentially over the past 10 years to now where it stands as a household name for getting rich quick schemes, wall street wannabes, and others who have successfully made money off of it; to that as-well who have been outspoken against its use. Undeniably cryptocurrency is the future and the nine-page document along with bitcoin launched the tidal wave of evolution of digital trade-ables/ currency.

Bitcoin is dynamic, ever-changing, its value is on the rise because the supply is fixed. There can only ever be 21 million bitcoin in circulation and even that number is expected in 2140. Bitcoin only increases through mining. like the California gold rush, bitcoin miners work to find more bitcoin; however, the way in which bitcoin is mined is quite peculiar, bitcoin miners have to solve mathematical puzzles to add blocks to the blockchain and for every added block to the chain, they get to award a fixed amount of bitcoin. To put it simply, the puzzle they solve is verified by other programmers on the network, who then authorize it on the network adding another block. This in turn removes any centralized authority, making the networked self-governed.

A huge part of bitcoin is the blockchain technology it stands on. Blockchain consists of many units, which are linked together, the only way to add new units is through solving their puzzle and attaining the old unit’s key which then links it to the chain adding new currency to the circulation. Bitcoin’s blockchain is public and anyone who possesses the key can access transactions made on it. However, blockchain has found users in different spaces, due to it being well encrypted making it virtually impenetrable. Blockchain technology is now employed in the travel industry to protect users’ data as well as by making information easily accessible, using the key, it makes the operation smoother. For similar reasons, it can also be employed in healthcare systems. Blockchain technology would also reduce election fraud if used for voting, as its encryption would protect the voters.

Bitcoin has also served as an inspiration to many other coins such as lite coin and Ethereum two of the most successful ones.

However, the price for anonymity and decentralization is the uncertainty and lack of control which makes governments lukewarm in the adoption of bitcoin worldwide. The autonomy over bitcoin also makes its future uncertain, the government believes the currency is too volatile to be considered as an alternative. Other problems include it being a universal medium of exchange, which makes it the first choice for compensation for the underworld and shady activities conducted by people who are trying to stay anonymous.

Its adoption in India has been rocky as the government has taken a firm stance against the prospect of letting a decentralized currency take charge of the economic operations of the country. India is also outspoken on the use of such currencies worldwide and they called for solidarity among the democratic nations to keep in check such platforms and to stop such currencies from falling in the wrong hands and potentially ruining the youth. The RBI governor Shaktikanta Das has also raised concerns, flagging it as a major threat to India’s economic and financial stability, and demanded a complete ban. To some extent the legalization that is being debated right now does believe in the same ideals; however, they do not intend on putting an end to the technology that is employed in creating and supporting cryptocurrency and bitcoin. Furthermore, a complete ban was ruled out as the PM feels optimistic but somewhat reserved about the unregulated markets for cryptocurrencies.

The solution to this was launching a digital currency distributed by RBI- which would provide an adequate check to the current wild west in the crypto market. Another measure to secure the interests of the nation comes in the form of regulating crypto by treating it as assets and commodities. This makes them subject to their respective laws and keeps them in check. The worst fears of the nation lie in the fact that crypto has been seen as a preferred method of payment for terror financing as well as an avenue for money laundering. These reasons make the legislation imperative, but it is a difficult balance to maintain as too much control would create a stranglehold on the new and emerging climate of investing in this sector and the development of technology which has already proven to have application in other areas and as a valuable resource for the country. The optimism with a cautious and conservative approach has been in the works for a while as it is not an easy task and as such can not be rushed; however, it has created an anxious climate among the investors and these coins have seen a clear impact from each press release that showers some light on the situation causing a cautious and safe approach in the market as it quite clearly can go both ways.

Cryptocurrency is undeniably the future. But there have been ample examples of scams, Terror financing, money laundering, and general misuse of the currency which make jumping in headfirst without doing our due diligence quite asinine. It is quite clearly a double-edged sword that can bring prosperity if employed correctly and havoc if left to the hands of those with malice.

It cannot be viewed as a get-rich-quick scheme as every other investment goes both ways.