Cryptocurrency introduced by Satoshi Nakamoto in 2008. Since then it has gained much significance and grew from $1 in 2010 to $65,000 in 2021. More than 2000 cryptocurrencies are there and still many more are developing everyday. Some of the famous cryptocurrencies are Bitcoin, Ethereum etc. There can be many reasons for its increasing popularity like easy transactions without third party involvement, transparent, decentralized, and one can make huge profits depending upon its value with minimum regulations.
So what is the Cryptocurrency?
Cryptocurrency like Bitcoin and Ethereum is a digital currency working as a medium of transaction between its user within a network. It doesn’t involve banks in its transactions. It uses a technology called ‘Blockchain technology’ which is a decentralized technology. Blockchain means a chain of block that manages and record every transaction between the users in public ledger. This is an intangible currency and you can keep your cryptocurrency in your digital wallet.
The data is available publicly and is not control by a single entity. One can easily access his wallet by entering the private key into his account.
How to get a cryptocurrency?
There are few possible ways to get this digital currency and the major one is ‘Mining’. Mining is the process to introduce and add new coins to blockchain public ledger by solving computational puzzles. There are total 21 million bitcoins and 2.5 million are still left to mine.
Trading is the another method to own a cryptocurrency in which one can trade cryptocurrency in exchange of dollars, euros and any other currency.
Hodling refers to buy and hold strategy with respect to cryptocurrency. Buying a cryptocurrency when its price is low and don’t plan to sell it in future is what hodlers do.
Some other methods are ICO investing and Master nodes. But the above mentioned methods are the most followed.
How secure are these digital currencies?
Every transaction in blockchain technology requires a two-factor authentication process. E.g. While entering your username or password, you need to enter the authentication code that has sent to your phone. The digital ledger of cryptocurrency is almost impossible for hackers to deal with.
What is the situation of cryptocurrency in India?
Cryptocurrencies are not illegitimate in India. But in a Budget speech of 2018-19, Finance minister Nirmala Sitharaman made it clear that government in India does not consider cryptocurrency as a legal tender. Government is even trying to introduce Cryptocurrency and Regulation of official Digital Currency Bill, 2021 to create its own digital currency and banning the existing one. However, no official ban yet because Indian investors are already holding 10,000 crore in digital currency. Perhaps, it is not possible to completely ban crypto from India. Crypto transactions are already taxable in India.
What is the RBI’s position on Cryptocurrency?
Back then in 2018, RBI hold a more restrictive position. It had warned people who invest in cryptocurrency in past time and advised all the entities (banks or individuals) to not to deal in virtual currencies. However, the Supreme Court verdict in March 2020 overruled the RBI’s circular, allowing banks to handle virtual currencies transactions and exchanges.
In may 2021, RBI made it clear that It will not block 10,000 crore of digital currency of Indian investors. and also said that banks cannot take action against investors who are investing in virtual currencies. This changing position of RBI shows us the cryptocurrencies like Bitcoin are becoming an integral part. The government doesn’t want to be left behind in the new era of tech revolution. Now RBI is working on its virtual currency.
If you are planning to invest in cryptocurrencies, you need to be ready for the volatility. So be ready for the ups and downs. Investment in digital currency may look a good option right now, but one thing we need to remember that it is still in its initial stage. Do research before making any plan for investment in cryptocurrency.