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
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:
- Startups are widely using Cryptocurrencies. Venture capitalists can purchase the cryptos of start-ups in exchange for equity assistance.
- Cryptocurrencies are not owned by any individual therefore, any person can deal with it free from any interference.
- Some of these currencies do not cost platform fees for any transaction including any international transaction.
- 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.
- 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.
- 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.
- 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
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
Authentication No: JL357718204149-30-0723