The Future of Cryptocurrency in India
Gartner, a prominent research and consulting company, had forecasted that blockchain cryptocurrencies would bring about $1 billion in business value to the banking sector by 2020. Despite the tumultuous events of 2020 that impacted various industries, blockchain and cryptocurrency managed to endure and gain greater significance. You’ve likely heard about the resurgence of Bitcoin, a well-known cryptocurrency. But what exactly is cryptocurrency? Cryptocurrency is a form of digital or virtual currency secured by encryption, a technique used to safeguard data during storage and transmission. Digital currencies have no physical assets or liabilities tied to them.
Key Facts About Cryptocurrency
Cryptocurrencies are not issued by any central bank or central authority, making them resistant to government interference or manipulation. This characteristic contributes to their security and potential for real-world applications. Cryptocurrencies can be bought and traded on specialized exchanges, and several such exchanges have emerged in India over the last decade. They rely on private and public keys for protection, making them highly resistant to counterfeiting.
The first cryptocurrency, Bitcoin (BTC), was created in 2009, and since then, over 5000 alternative cryptocurrencies, often referred to as “altcoins,” have emerged. While each altcoin has its unique name, they all function in a similar manner. As of 2020, some of the most popular cryptocurrencies globally include Bitcoin (BTC), Bitcoin Cash (BCH), Litecoin (LTC), and Ethereum (ETH), among others. With increasing interest in digital currency trading, the list of cryptocurrencies continues to expand, and global digital currency exchanges are broadening their offerings.
Fundamental Cryptocurrency Technology
Cryptocurrencies are stored on a geographically distributed network of computers known as nodes, utilizing blockchain technology. Unlike traditional relational databases that organize data in tables, blockchain stores data in blocks, which are fixed storage units used to record transactions. When a block is filled with data, it is linked to the previous block, creating a chronological chain of data. All blocks have a unique hash and retain the hash of the previous block, ensuring data integrity. When a new block is added to the blockchain, the entire blockchain ledger is updated across all nodes in the network, creating multiple copies of the blockchain. This redundancy ensures that even if one node is compromised, the data remains intact.
Public keys and private keys are stored in a wallet, with the public key used to access cryptocurrency and the private key employed to initiate transactions on the public ledger, such as transferring cryptocurrency to another party.
The Future of Cryptocurrency in India
In 2018, following the Indian government’s demonetization move, the Reserve Bank of India imposed a ban on cryptocurrency trading due to reported fraudulent activities. However, cryptocurrency enthusiasts filed a legal challenge in the Supreme Court of India seeking to lift the ban. After nearly two years, the ban was lifted in March 2020, allowing cryptocurrency trading to resume in India.
As of 2020, there are approximately ten cryptocurrency exchanges in India, providing investors with opportunities to trade in digital currencies. Experts believe that with proper legislation and additional regulations ensuring owner authentication, cryptocurrency adoption could become widespread, serving multiple applications.
Cryptocurrencies have the potential to disrupt various aspects of traditional financial systems when fully leveraged. However, several technological challenges must be overcome to establish a comprehensive cryptocurrency ecosystem. Financial institutions are gradually exploring ways to incorporate cryptocurrency into their portfolios.
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