There was a time when people used pepper and cocoa as currency. Then came the gold coins. All of these were gifts of nature which humans traded. There was no regulation on it. And finally, with evolution, humans started bringing in regulation.
Everything around us is regulated now.
Our food is regulated by The Food Safety and Standards Authority of India.
Our behaviour is regulated by law.
Likewise, our money is regulated by central banks.
Are you thinking about how this story is related to crypto? Wait, we have a point here. Did you notice one word repeating again and again in this story?
Regulated
Here starts the crypto story. Banks are our current trusted systems regulating money. Whatever method you use to transfer money, Paytm, Google pay, UPI, NEFT, it goes via banks. But cryptocurrency does not conform to this existing regulation. Cryptocurrency is an independent digital currency not managed by current systems. Let’s see an example.
As per the example, when Rahul sends money using Paytm UPI, the request first goes to his bank. Then, the National Payments Corporation of India (NPCI) processes the payment. And finally, money reaches Shruti’s bank account. After a successful transaction, Shrutis’ bank sends a notification to her.
One payment goes via many touchpoints as per existing regulations. Cryptocurrency challenges this system. When you transfer crypto, it goes directly to the person without crossing any third party as shown in the above image.
Cryptocurrencies are decentralized digital money(money only in electronic form) secured by cryptography. Cryptography is the technique of protecting information by transforming it into a secure code format. In 2009, programmer(s) under the pseudonym Satoshi Nakamoto invented the cryptocurrency. At the core, this currency uses blockchain technology and runs on the concept of mining. Banks maintain a centralised ledger for transactions. Unlike banks, crypto uses blockchain, which is a decentralised public ledger. So, a transaction record is stored in multiple locations at once. As the record is public, miners are networks of specialised computers that run on the web, validate the transactions and generate new coins.
There are many cryptocurrencies, but the popular ones are
- Bitcoin: Bitcoin is the first, most valuable and most popular(A lot of adjectives, but truth) currency
- Ethereum: Ethereum is the second most valuable crypto after Bitcoin. Its technology is considered even better than bitcoin, so corporates notice it more.
- Binance Coin: Binance is the biggest cryptocurrency exchange in the world. Binance exchange launched Binance coin as their native crypto. Binance platform gives special offers for using Binance coin for transactions on the platform. As it’s the biggest exchange, the platform is able to create a monopoly.
- Tether: Tether aims to create a stable cryptocurrency whose value matches 1 US dollar. It can be easily converted to dollars and is popular among users who want to keep risk levels low.
- Solana: Solana is one of the fastest cryptocurrencies out there. It’s fast-growing crypto and worth investing in.
Pros and Cons of Cryptocurrency
Now we know what cryptocurrency is. Then shall we check its pros and cons? Let’s start with good ones? Aha! We heard the yes. There you go, here are the pros. Crypto saves us from
- Technical glitches of banking systems
- Limiting hours of transactions set by banks
- Transaction limit sets by banks
- Online hacking
But, there are cons too.
- Any regulatory body does not manage crypto. So, you have no central body to report to in case of any cybercrime.
- As there is no controlling body, the money can be used for illegal work like terrorist activities.
Investing in Crypto
The crypto market also has crypto exchanges working like a broker, similar to stock marketing. Crypto exchanges are the platforms for buying or selling cryptocurrency. India’s top crypto exchanges are WazirX, CoinDCX, Coinswitch Kuber and Unocoin.
Steps to start investing using these crypto exchanges are:
- Download their app
- Sign up and complete KYC
- Start buying or selling crypto
These apps have a simple user interface to make your investing process easier.
Indian Government’s Stand on Crypto
Finance minister, Nirmala Sitharaman, said cryptocurrencies are high-risk areas, and can be used for illegal purposes. But what does the Indian government say about crypto on paper? Currently, there is neither any regulation nor any ban on cryptocurrencies. Therefore, trading in crypto is still going on, which means you can buy or sell crypto. But you cannot purchase any products or services using your cryptocurrency. There is a bill pending for discussion on crypto which
- Suggests ban on private cryptocurrencies(leaving a few big ones to keep the ball rolling on crypto investing).
- Brings in a regulation system for crypto.
- Continues to treat crypto as an asset and not currency. It means you can buy or sell crypto but cannot purchase anything from it.
As per the Union Budget 2022-23, you must pay a 1 % tax while purchasing any cryptocurrency. And for selling any crypto, a whopping 30 % tax is applicable. The tax will be charged on the profit earned by the sale.
For example: Assume that you invest in bitcoin worth 200000 INR. So, while buying, you have to pay 1 % tax.
You will pay 200000 + 2000 = 200200 INR
A couple of months later, you plan to set this bitcoin. And the market rate has gone up to 300000 INR.
Your profit: 300000 – 200000= 100000 INR
This profit amount(100000 INR) is taxable as per the new crypto taxation rule. Therefore, 30 % of the profit, 30000 INR, will be the tax amount.
Career Options in Crypto
The Crypto industry works like any other IT industry with the below roles.
- Developers
- Quality Assurance Managers and Testers
- Marketing team- Content writer, Technical writer, Content strategist, Graphic designer, Video editor and Marketing manager
- Support – HR, IT, Finance, Legal experts
- Data scientists
- Networking experts
- Machine learning experts
- Cybersecurity experts
- Legal team
- Financial analysts
Cryptocurrency at its core uses Blockchain technology. Whenever you transfer money to someone using online banking, the banking system maintains the transaction details. But in crypto, Blockchain takes care of maintaining the transaction details. Blockchain is like a digital ledger where all the transaction information is saved. This technology is predominantly used in the crypto industry, giving birth to new roles.
1. Blockchain developer: They create a system for secure digital transactions.
2. Blockchain solution architect: They take care of the design of the application.
3. Blockchain tester: They make sure the system is working fine without any technical or data glitch.
4. Blockchain manager: They manage the entire project like any other project manager. The only difference is they understand blockchain technology which makes them eligible to manage a project at a crypto firm.
To conclude:
With much news of banking scams in recent times, it is clear that there is regulation but little transparency in how banks operate. Crypto looks like the future of money, but the government does not have a clear stand on it yet. Therefore, both career and investment in crypto is high risk and high returns.
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