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Sprouting of Cryptocurrency

In the earlier era, there were comparatively low choices to invest in the financial market. The rapid growth of the digital world has uncluttered various ways to earn return on investments. Every individual desires to get his wealth to give him return multiple times. In cases where an investor is in his middle-aged group say, 20-50 years desires extremely fast methods to get multiple times to return on his investments.

Therefore, in such scenarios, people tend to move towards the share market or the recent origin digital currency sector known as cryptocurrency. Cryptocurrency has become widely popular. The article is dedicated to discussing the sprouting of cryptocurrencies in the digital world.

What is Cryptocurrency?

Cryptocurrency is a digital currency unlike shares or other securities in the financial market. In other words, Cryptocurrency only exists on a computer platform. It is a decentralized currency in toto that is used in exchange for buying goods or services. There is no central ledger on which data on trading in cryptocurrency can be maintained. The data can only be maintained at a computer source based on the demand and supply of such currencies. Cryptocurrency is based on Blockchain Technology.

This method has been founded in the year of 1919. The recent most used Cryptocurrency in the world is Bitcoin which is created by Satoshi Natamoko in the year 2000. Other cryptocurrencies which are being used widely by the world are Cosmos, Dai, Ethereum, Tether, Tron, etc.

The Mechanism for Cryptocurrency to Function

Blockchain Technology is the backbone of every cryptocurrency, which maintains the record. Blocks are connected with Unique Identifier Codes (Hash Algorithm). It is a series of blocks. Blockchain technology is a matrix of certain combinations, primarily including, hash functions and previous block hash function. The currencies are altogether intertwined with each other. Every currency contains a distinct hash function simultaneously with a previous hash function and this continues up to such number of limited blocks contained by such cryptocurrency.

Since the nature of Cryptocurrency is decentralized, every data of such blocks is stored and revised in all the computer devices connected to the system. This decentralized nature renders it with the most secure form that is if someone changes a single hash or code in one block has to revise all the previous blocks since, since, all blocks are intertwined. Therefore, if one has to hack the system, cannot do the same without creating another block which is rarely possible due to its limited number of blocks.

Instance as to how Blockchain technology protects the data

Say, there are 5 crypto coins B1, B2, B3, B4, and B5. All these coins are separately considered a block. Every block contains a combination of hash function and a previous block hash.

Say, Block 1 or B1 has a hash function, that is A34z6 and a previous hash function will be 0000 (since it is the very first block). B2 has a hash function, that is B9m45 and a previous hash function (B1) will be A34z6. B3 has a hash function, that is C67D5 and a previous hash function (B2) will be B9m45. Similarly, this continues till the 5 Blocks.

Advantages of Cryptocurrency

With the striking expansion of the digital world, certain tasks have been completed in the blink of an eye. Cryptocurrencies are being used widely for exchange as a substitute for money or other forms of consideration. There are various reasons for its wide acceptability some of these are enlisted below but are not restricted thereto:
  1. Startups are widely using Cryptocurrencies. Venture capitalists can purchase the cryptos of start-ups in exchange for equity assistance.
  2. Cryptocurrencies are not owned by any individual therefore, any person can deal with it free from any interference.
  3. Some of these currencies do not cost platform fees for any transaction including any international transaction.
  4. It is highly secured by blockchain technology. Therefore, the transactions which take place through cryptocurrencies are error-free. Moreover, the data is secured and linked with each block, therefore, the chance of any human or machine errors is a nullity.
  5. The identity of the persons between whom the transactions take place is secreted by the secured mechanism. For instance, "S sent 3B" can be seen as "4fdmD5hhmctdS2rfdl3DHiwu" sent 3B.
  6. It is entirely impossible to hack blockchain technology as referred to in the above example, hacker cannot do so without creating one additional block which is B6.
  7. One can purchase Cryptocurrency in fractions. For instance, there are only 21 million Bitcoins and they can be divided up to 8 digits i.e., 0.00000009.

Major Issue Possessed by Cryptocurrency

Cryptocurrency is indeed the smartest and most secure mechanism. The major issue in Cryptocurrencies is, it does not have any regulator whilst it involves a larger public interest. More than 20 years have lapsed since the introduction of cryptocurrencies to the financial market been made to the world hitherto there is no uniform international legislation or treaty with respect thereto.

Similarly, India does not have any legislation to regulate the cryptocurrency market. Due to its unregulated nature, it becomes an unreliable investment sector to the general public. So far, worldwide used cryptocurrency Bitcoin has been given legal recognition by only two countries, these are El Salvadore and Central African Republic.

In today's world people are bending towards cryptocurrencies, there may be situations where the market crashes down and there will be no resolution. The middle-aged group has been attracted to the cryptocurrency sector due to its high return expectancy rate. This leads to an upsurge in the fluctuation rates of cryptocurrencies.

The reason for its high return expectancy rate is its limited number of crypto coins and its unregulated nature. The investment in cryptocurrencies shall be made by analyzing proper pros and cons and weighing all the measures available. Therefore, a legal framework is even more significant if the question of public interest at large involves.


Award Winning Article Is Written By: Ms.Soniya, Student, Law Centre II, Faculty of Law, University of Delhi
Ph no: +919540529281
Awarded certificate of Excellence
Authentication No: JL357718204149-30-0723

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