Written by Mayank Monani, Member of SIGMA — The Business Club, NIT Trichy
In March 2018, the word cryptocurrency was introduced in the Merriam-Webster dictionary.
According to Jan Lansky, a cryptocurrency is a system that meets six conditions:
1) The most important feature of a cryptocurrency is that it doesn’t require a central authority, the present state is maintained by distributed consensus.
2) The function of main system is to protect and keep an overall overview of cryptocurrency unit and the information of their ownership.
3) The system is so advance that it itself defines whether new cryptocurrency units can be created or not? If it is accepted, cryptocurrency unit is made up and the mainframe defines the circumstances of their origin and how to determine the ownership of those new units.
4) If you have a cryptocurrency unit, then it’s ownership can be proved only by cryptographically.
5) The mainframe allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving current ownership of these units.
6) If there are two different instructions for changing the ownership of the same cryptographic units are simultaneously entered, the system performs at most one of them.
Types of Cryptocurrency
When we look the blockchain based cryptocurrency, the first was Bitcoin which is still the most popular and the most valuable. Today there are hundreds of alternate cryptocurrencies with various functions and specifications. Many of these cryptocurrencies are clones and forks of Bitcoin, while others are new currencies that were built from scratch.
The bitcoin was launched in 2009 by an individual or group of people known by pseudonym “Satoshi Nakamoto”. As of latest data of Nov. 2019, there were over 18 million Bitcoins that are in circulation with a total market share of $146 billion.
As we see many of the competing cryptocurrency that were spawned by Bitcoin’s success, they are known as “Altcoins”. The Altcoins include Litecoin, Peercoin and Namecoin as well as Ethereum, Cardano and EOS. Till date, the aggregate value of all the cryptocurrency in the global market is around $214 billion — of which Bitcoin alone represents more than 68% of the total value.
Market Analysis
Major market growth drivers:
1. Transparency of distributed ledger technology.
2. High growth of remittance in developing countries.
3. High cost of cross border remittance.
4. Fluctuations in the monetary regulations.
5. Growth in venture capital investments.
While there are countries like Japan, who have recently recognized Bitcoin and approved it as a legal payment method. But they are treating Bitcoin as an asset instead of currency is another twist in the story. A huge Bitcoin demand can be seen Japan. Similarly, in Estonia, the Government has actually started implementing this blockchain technology for banking services, health care and they are motivating the citizens in order to become e — residents.
Advantages
1) Cryptocurrencies make a promise to transfer money between two parties without intervention of a trusted third party like a bank or credit card company. These transfers are secured and protected by a system which uses Public keys and Private Keys as well as different forms of incentive system, like proof of work, etc.
2) In the era of cryptocurrency main systems, there is a term “wallet”, which refers to account address of the customer and has a Public Key, while the Private Key is known only to the owner and is used to sign or validate a transactions, also fund transfers are completed with minimal processing fees, it allows users to avoid the steep fees charged by banks and financial institutions for doing a wire transfer.
Disadvantages
1) The encrypted or semi — anonymous nature of cryptocurrency transactions makes them the top priority for a host of illegal activities, which consists of money laundering and tax evasion. However, cryptocurrency advocates often highly value their anonymity, citing benefits of privacy like protection for whistle blowers or activists living under repressive Governments. It often stated as some cryptocurrencies are more private than others.
2) If you want to do an illegal activity, let me tell you one thing that Bitcoin, is relatively poor choice for conducting illegal business online, since the forensic analysis of the Bitcoin blockchain has helped authorities to arrest and prosecute criminals. More privacy — oriented coins do exist, however such as Dash, Monero, or ZCash, which are far more difficult to trace.
Conclusion
Once the regulatory guidelines will be framed for cryptocurrency, investments and trading growth in these countries will be exponential and eventually it will take a good market share. Even in India, no Indian exchanges are providing digital assets and other cryptocurrencies. From the graph, we see that Indians have started buying Altcoins and ICO tokens.
If Indian regulators will provide beneficial guidelines for trading and investing, this trend will be continue, then and then only India will also become a favorable regions for cryptocurrencies.
