Why Is Crypto So Important And Should I Care?
Why Is Crypto So Important And Should I Care?: Cryptocurrency is nothing but a modern form of payment that can be used to exchange goods and services online. In simple words, think about casino chips or arcade tokens, using them you can purchase some limited things. And now this same kind of virtual token named cryptocurrency is getting popular. Cryptocurrencies are based on a technology called a blockchain. The part of this technology is its security. Blockchain is a decentralized technology divided between several computers that record and manage transactions ( or a widespread ledger enforced by a disparate network of computers).
What Is Cryptocurrency? Here’s What You Should Know
A cryptocurrency is a virtual or digital currency and is secured by cryptography, this makes it very difficult to double-spend or counterfeit. A describing feature of cryptocurrencies is that no central authority has control over it as they are not issued by them and it remains unaffected by the government’s manipulation and interference.
In some senses, Crypto also refers to the various cryptographic techniques and encryption algorithms such as hashing functions, elliptical curve encryption, and public-private key pairs that safeguard these entities.
Cryptocurrencies are always designed by keeping in mind that they should be free from government control or manipulation. These virtual currencies or tokens are typically developed as code by the developers with other controls and a mechanism for issuance (though anyone does not get these always but sometimes through a process called “mining”)
Why are cryptocurrencies so popular?
There are a variety of reasons for you to appeal to cryptocurrencies. Some of them are discussed below.
Cryptocurrencies are still under their period of development, but a larger proportion of the population is looking at the crypto as the unified currency of the future and are running to buy them now before they attain more value in the future to make some good profit.
Some people are liking these Cryptocurrencies because Cryptocurrency has no control from the central bank’s side in controlling the money supply since with time these banks reduce the value of money due to inflation.
While some people like the blockchain technology behind Cryptocurrencies, because of their recording system and decentralized processing they are more secure than traditional money transfer systems.
And in last there are the investors, for them, Cryptocurrencies are a good option to invest and earn huge profits and have no real interest in actual Cryptocurrency.
The oldest Cryptocurrency based on blockchain was Bitcoin (BTC), which is still the most valuable and popular Cryptocurrency. Bitcoin was launched by a group or individual known by the pseudonym “Satoshi Nakamoto” in 2009. To date March 2021, Bitcoin has a market capitalization of $927 Billion with over 18.6 million bitcoins in circulation.
In the last few years, the market has already seen thousands of different Cryptocurrencies with different specifications and functions. Some of them are cloned to Bitcoin and some are built from scratch.
Other competing Cryptocurrencies that come into the picture by the runaway success of Bitcoin are known as “altcoins” such as Ethereum, Litecoin, Namecoin, Peercoin, and more. The entire market capitalization of Cryptocurrencies is around $1.5 trillion with Bitcoin having a share of more than 60% of the entire value.
Is Cryptocurrency A Good Investment?
With the increasing popularity of Cryptocurrencies, there is a big question people usually ask whether Cryptocurrency is a safe and good investment or not. The answer to this question is not that simple because crypto is a good investment and at the same time could be bad, you can end up either becoming filthy rich or you can end up losing all your money. Just like any other investment, Cryptocurrency comes with lots of risks but also.
So if you want to know more about how good and safe this investment is then keep reading.
Why should you consider investing in Cryptocurrency?
There is no doubt that Cryptocurrencies are alluring, though investing in Cryptocurrencies like Bitcoin and Ethereum is tagged as “high-risk” because the price of these virtual currencies is quite volatile. Some can get great returns, some can go wrong, and some can fall into scams. If you are concrete about investing in Cryptocurrency then you need to find a genuine and trustworthy trading platform. There so many out there with reviews you can consider any one of them
Although investment in Cryptocurrencies is tagged as high risk, one thing is pretty sure that Cryptocurrency is here and it is not going anywhere soon because many businesses are now accepting payments in crypto. Tesla, Starbucks, and some top casinos are the ones that have accepted Crypto payments. This proves that Cryptocurrency will soon find its way to other big brands too, making it a worthy investment. However, you need to be active, fast, and smart while dealing with Cryptocurrencies. And the best thing is to divide your investment into different things instead of putting it all on a single gamble. And invest only when you are ready to bear the loss if things go wrong.
Risk in Investing Cryptocurrency
- They are volatile.
- They are unregulated.
- They are susceptible to hacking and error.
- They can be affected by discontinuation or forks.
Is crypto a decent long-term investment?
As we already conclude that, just like any other currency, Cryptocurrency is also a place to hold money. It cannot be considered an investment in the true sense.
Ok, first we define the term investment so that picture to get a clear picture. Anything that you buy and hold today has the potential to increase its value and generate cash flows with time, even if you do not sell them then that can be called an investment.
Or in other words, we can say that investment is about putting your money to make money for you.
For example, You buy land and put it in the work of farming, never sell it, but you keep making money by selling farm products. You buy a house, never sell it, and keep getting money from rent.
On the other hand, when you buy Cryptocurrency, gold, or fiat currency, their prices are just the results of availability and demand and their prices fluctuate, these fluctuations indicate that whether they are good or bad investments, they do nothing and produce nothing.
Another thing to understand here that a currency should never be a thing of investment, else people will start hoarding up that currency and will not use it for purchasing things. When you know that if you don’t use cryptocurrency (bitcoin) to buy a laptop and hold it with you, bitcoin will appreciate much more than what you could have made by using the laptop, you would never use bitcoin to buy anything.
For Cryptocurrencies to be accepted as a currency and people to use them regularly, they must be very stable. Many adherents argue that it takes some time but in the future Cryptocurrencies like Bitcoin will be stable and are good for a currency.
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Even if we agree on the prediction that Cryptocurrencies like Bitcoin will become stable in the future, we can not ignore the fact that there is no control of any financial organization on Cryptocurrencies and it is very difficult to control the supply of Bitcoin in the market. Until and unless central banks do not get a serious role in controlling the supply of Bitcoin they would not be eligible and able to control the deflation and inflation during an economic bust or boom and this can be damaging for a nation.
At last, the word Cryptocurrency itself holds the word currency and is good that investment in Cryptocurrencies remains limited, and we all use it for the purpose it is made i.e. ease of fund transfers instead of putting money in it and making huge profits and loss.
What Does the Future Hold for Cryptocurrency?
Cryptocurrency has become quite popular and a topic of discussion in recent years, although there are still so many things to be learned about this developing technology. Many worries and questions are revolving around the technology and its potential to replace traditional financial systems.
Cryptocurrency’s future interpretation is still a question. Adherents see limitless potential, while for critics these are all about risk and vain.
Advantages and Disadvantages of Cryptocurrency
Without trusting any third party like a credit card company or a bank Cryptocurrencies ensure the easy transfer of funds directly between two parties without any disparity. These transfers are unlike secured by the use of private keys and public keys and different forms of incentive systems, like Proof of Stake or Proof of Work.
In modern systems of cryptocurrency, a user’s wallet or account address has a public key, while the private key is used to sign transactions and is only known to the owner. Allowing users to avoid the high fees charged by the financial institutions and banks for wire transfers, crypto allows fund transfers with minimum processing fees possible.
There’s no doubt that Cryptocurrencies have so much to offer and have great potential but the semi-anonymous nature of cryptocurrency makes them a perfect platform for illegal activities, such as tax evasion and money laundering.
However, for example, Bitcoin is relatively the last choice for conducting illegal activities because forensic analysis of Bitcoin has emerged as a good tool and helped the responsible authorities to arrest the criminals involved in these malpractices. Other than Bitcoin some Cryptocurrencies are more privacy-oriented, and at the same time, some Cryptocurrencies are difficult to trace.
One thing to remember, Cryptocurrencies are still under development and we are still figuring what potential they hold. So for now you have to be very careful with Cryptocurrency and you can not go reckless with them.
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What does the future of cryptocurrency look like in India?
There has been so much news and reports are roaming around whether the Government of India will ban private Cryptocurrencies or all it. While the truth is banning Cryptocurrencies will not prevent users from dealing with crypto but will become extremely difficult if users get defrauded.
To understand the ongoing instability and controversy over Cryptocurrency we need to go back a little in the past.
In 2008: An article titled ‘Bitcoin: A Peer To Peer Electronic Cash System’ was published by Satoshi Nakamoto, a pseudonymous developer.
In 2010: When a customer swapped 10,000 Bitcoin for two pizzas, the first item was purchased using Bitcoin and thus assigned a cash value to Cryptocurrency for the very first time.
In 2011: Other cryptocurrencies like Swiftcoin, Litecoin, & Namecoin, started emerging.
Meanwhile, Bitcoin stocks are in a controversy that some groups are using Cryptocurrency on the dark web to pay for drugs and guns.
From 2012-2017: Cryptocurrencies are started getting popular and the price of 1 BTC shoots up from $5 to $1,000 from the start of 2012 to the end of 2017
This is the period when Cryptocurrency exchanges bloomed in India and many exchange platforms such as Koinex, Unocoin, Pocket Bits, Zebpay, and Coinsecure emerged.
And at the same time, it is bookended by two RBI press releases on these Cryptocurrencies issues. The first date on Dec 24, 2013, says: Virtual currencies are not backed by a central bank. Their value is a matter of speculation and is not underpinned by an asset.
The second press was dated on Feb 1, 2017, raised the same concerns.
Tit for tat! The experiment of demonetization in 2016 due to its unexpected consequences, even more, sparked the use of cryptocurrency exchanges and drove enthusiastic customers towards alternatives to traditional online Bank tech.
On Oct-Nov 2017: Supreme Court gets 2 PILs, one regarding ban on buying and selling Cryptocurrencies in India and the other asking them to regulate them by financial institutions.
Therefore, in November, the government forms a committee to study the issues, cases, and possible outcomes around digital currencies.
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In Dec 2017: The Ministry of Finance and the RBI issue statements on Cryptocurrencies, comparing them with Ponzi schemes.
On April 6, 2018: Suddenly, everything changes. The RBI issues a circular preventing commercial and co-operative banks, payments banks, small finance banks, NBFCs, and payment system providers from:
Suddenly the RBI issued a circular that restrict cooperative and commercial banks, NBFCs, Small finance banks, payments banks, and payment system provides from:
1. Providing any services to any entity which deal with crypto exchanges
2. Dealing or trading in digital currencies.
Due to restrictions in banking services, trading volume crippled by 99%, and by Aug 2018 95% of jobs related to this vanish.
On May 15, 2018: Several exchanges filed a petition in Supreme Court after facing an existential threat.
In July 2019: A report from the committee got released demanding a ban on private Cryptocurrencies circulating in India.
On March 4, 2020: The final resort. The Supreme Court turned down the RBI’s banking ban on Cryptocurrencies, considering it unconstitutional. SC says Cryptocurrencies are just unregulated but not illegal in India. Apart from this, there are few reasons more to turn down this ban. After this, the dying crypto market gets revived once again.
Crypto exchanges recorded a sharp increase after the removal of the ban and at the same time, the price of Bitcoin increased by more than 700%.
On Jan 29, 2021: The government of India proposed that they will bring a bill to create indigenous digital currency and at the same time ban all private Cryptocurrencies.
The government further says: The upcoming bill on Cryptocurrencies will prohibit the functioning of private Cryptocurrencies in India. However, there are certain exceptions in the bill to promote the technology involved (i.e. blockchain) and its uses.
However, it is not clear yet what the committee and Indian Government are up to and it is suggested to be careful with Cryptocurrencies until the picture gets crystal clear. Do not invest heavily so that in the future it becomes difficult for you to remove your money back.