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Over the past year, Cryptocurrency has attracted hype from across the world. The reason behind this is the COVID-19 Pandemic which caused several countries to print trillions of dollars worth of fiat currency which resulted in the devaluation of paper currency. According to the US Federal Reserve, the American central bank printed a little more than 3 trillion dollars in order to counter the Covid 19 Pandemic. This amount is more than the total GDP of India. Several instances suggest that banks have made plenty of bad loans resulting in bondholders shifting their store value. This very situation portrays our dependency on the banking system. The faltering of banks impelled individuals to have their savings in the bank to pay the price. Even the stockholders could not receive adequate returns due to the upheaval in the stock markets.
This highlights the current need for a reliable store of value for our money and a decentralized system for our transactions. Hence, various types of cryptocurrencies like Bitcoin and Ethereum gained importance. Bitcoins act as a store of value similar to gold or real estate and work on cryptography and blockchain technology. The defining feature of both these technologies is that they provide anonymity along with complete transparency. Meaning, an individual is entitled to view the complete ledger of a transaction taking place anywhere in the world excluding the identities of the importer and exporter.
Big corporations like Google and Facebook hold the majority of power because of the amount of data they have of their users. Currently, the data regarding our search history on our browsers are used for the purpose of advertising. This very data could be manipulated for malignant purposes as well. In order to curb this problem, blockchain technology allows users to directly send data without going through any layers. The same concept was applied to financial transactions when an anonymous Japanese finance enthusiast calling himself Satoshi Nakamoto created a form of digital asset called Bitcoin. The main purpose of which was to distribute the power of data to those involved in transactions. Meaning, a transaction through bitcoin can take place between two people directly and safely without any layers or a middleman.
This blockchain technology has an advantage, it uses asymmetric cryptography to secure transactions between users. In this system, each user holds a public and a private key. These keys are random strings of numbers that are cryptographically assigned. This makes it mathematically impossible for a third party to guess another user’s private key. Thus a transition here is super secure, easily accessible and decentralized.
Another strong advantage of cryptocurrency is that unlike most banks it does not discriminate. A typical bank would prefer a client with a strong business instead of a poor peasant. Blockchain on the other hand is an algorithm treating everyone equally. This makes it easier for the poor to finance a loan without passing the layers of bureaucracy. The stance of the Indian government hasn’t been favorable towards Blockchain Technology. The reason behind this is the possibility of this technology to fuel malicious activities like terrorism funding or money laundering. However, this very feature is a boon as well as a bane. Talking about the price volatility, bitcoin experienced a drop in its price whereas Ether reached its highest at 40$ per unit. Although Ether can’t be used as a direct payment method, it seems to have a brighter future ahead. The scarcity of bitcoins and Ether add an advantage of diversification to one’s portfolio. Visa has been working with 35 big crypto wallet companies to create a system where bitcoin can be used for transactions via a visa debit card. Elon musk invested 1.5 billion $ worth of Tesla stocks in bitcoin just as a store of value. Galaxy Holdings, an investment company, claimed that its $176.4 million dollar investment in bitcoin was worth $718 million after 6 months approx.
The world is moving towards blockchain technology and India must not lag behind. Multiple companies predict a lot of potential in cryptocurrency in the coming future. Mr. Anurag Thakur recently mentioned that the Indian Government is working on a bill regarding Cryptocurrency. To conclude I would state that had we blocked the internet, our economy wouldn’t have grown the way it has. This is why adopting new technologies always proves to be beneficial for every citizen of the country.
Written by- Divyansh Saxena, Ramjas College, DU
Edited by- Ushma Doshi, PDEU
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