Due to the rapid development of information and communication technologies, many activities in our daily life have been merged online and they become more flexible and more effective. The use of virtual currency has become widespread in many different systems in recent years . There is no doubt that the era of information and communication technologies have created many golden opportunities in several aspects. One of the fields that benefit from these technologies and online connections is the financial and business sector. A growing number of online users has activated virtual world concepts and created a new business phenomena. Thus, new types of trading, transactions and currencies have been arising. One of the remarkable financial forms that have been emerged in the past few years is Cryptocurrency . Cryptocurrency (CC) can be defined as any medium of exchange, apart from real world money, that can be used in many financial transactions whether they are virtual or real transactions . Bitcoin has maximum dominance in the cryptocurrency market with around 45% of market share & market capitalization of $142.2 Billions (Rs 9.25 Trillion). Its market price is $ 8254.8 i.e Rs 5,35,767. Other cryptocurrencies excluding bitcoins are referred collectively as altcoins, it includes other 1550 currencies that are traded . some of them are Etheriun , Ripple , litecoin , Monero , Neo etc. India with a population that is over 1 billion strong has been on something of an economic renaissance in the last few years. More than 40 percent of the country’s population has access to telecoms and internet services . Bitcoin and other cryptocurrencies have been operating within the country for a number of years now. In 2012, smallscale Bitcoin transactions were already taking place within the country. By 2013, Bitcoin was beginning to gain a level of popularity that was spreading across many countries. That year, a few businesses began to accept Bitcoin payment. A vintage era pizza shop called Kolonial in the Worli area of Mumbai became the first restaurant service in India to accept Bitcoin payments. On November 8, 2016, Prime Minister Narendra Modi announced the commencement of a demonetization policy. People with large cash holdings required a new means of holding such wealth without incurring significant tax burdens . It became common practice for some to buy large orders of Bitcoin or other cryptocurrencies and then sell them at a later date . Despite its vast population, India only contributes 2 percent of the total global cryptocurrency market . Lack of large-scale mining facilities & strict government restrictions on international money flow also makes it significantly difficult for Indians to transact with many of the large foreign crypto exchange platforms. The Reserve Bank of India (RBI) has been consistent in warning citizens of the risk associated with cryptocurrencies. While the government of the country hasn’t banned cryptocurrencies but also they haven’t exactly been endorsing it.

 One thing that has been in the news constantly in the recent times is the COVID-19, however, you might have noticed the terms like ‘Bitcoin’, ‘Crypto’, ‘Dogecoin’ pop up on the news briefly or as you scanned the newspaper. If you have ever wondered as to why Elon Musk’s tweets have been going viral in the economic world, this article is for you. If you are someone who is totally unaware of what cryptocurrencies are, this article is for you.

What exactly is cryptocurrency ?

The word cryptocurrency is made up of 2 smaller words. Crypto(Encryption) and Currency. Let’s talk about currency. Over time, the currencies have changed a lot. From simple barter systems, nickels, gold, paper. We as humans have assigned some value to these objects, which become our currency. The paper money which we hold has a certain value agreed upon by the entire nation. It is the government’s duty to make sure that the value of these notes is maintained. If the government wishes, it could print more money. Due to this unlimited amount, the value of the money could decrease over time since there will be more of it in circulation. This concept is known as inflation.

Here we can identify 2 problems with paper money. It is unlimited and centralised. In order to solve these 2 problems, we have cryptocurrency. Cryptocurrency is basically digital money, that can be stored on your computer, and transferred to one another without the intervention of banks or any other intermediaries.

Advantages of Cryptocurrency

1. Decentralised: Nobody controls the currency
2. No transaction restrictions: Available to everyone of every nationality
3. Secure: It has an unalterable record of every transaction
4. Privacy: You can make anonymous transactions
5. Limited: Finite amount

How it functions:

Since there is only a limited amount of a particular cryptocurrency, there are 2 ways to obtain some of it.

1. Mining
2. Buying

Mining for crypto currencies is an entirely different process from traditional mining. One has to solve complex mathematical equations and problems to get hold of cryptocurrency. The more the number of people trying to solve these problems, the more complex these equations get. Hence, it also increases the price of the currency.

For those who do not have the resources, skill set or means to earn cryptocurrency, they can buy some from ‘Hodlers’(crypto holders).

Since the number of people who are trying to get cryptocurrencies such as bitcoin are increasing, the value of the currency increases. This is because the currency becomes scarce. When some big companies like Tesla started to accept payments in bitcoin, the this asset was considered to be very valuable by the people. This explains why the tweets of Elon Musk are affecting the prices of Bitcoin.

I strongly believe that cryptocurrencies are going to be the currencies of the future, however it is very important to gain substantial knowledge before formulating your opinion. There are many celebrities and entrepreneurs who have invested in cryptocurrency, and at the same time, there are many who haven’t. One such notable example would be Warren Buffet, who thinks that cryptocurrency is ‘contrary to the interests of civilisation’.

Some famous crypto currencies: Bitcoin, Ethereum, Dogecoin, Tether, XRP.