Cryptocurrency UPSC PDF | Advantages | Disadvantages | RBI Stand

Cryptocurrency UPSC PDF For Prelims & Mains | Advantages | Disadvantages –  Cryptocurrency Is A Burning Issue all Over The World . In some Countries It is Legal And In Some Countries it is Illegal . There Are So Many Crypto Currencies All Over The World. In this Post We Will Discuss Bout What Is Cryptocurrency , types Of Cryptocurrencies , Advantages And Disadvantages Of Cryptocurrencies, Indian Government And RBI Stand On It . Full Details Are provided Below.

Cryptocurrency UPSC PDF For Prelims & Mains | Advantages | Disadvantages
Cryptocurrency UPSC PDF | Advantages | Disadvantages | RBI Stand

Cryptocurrency UPSC PDF For Prelims & Mains | Advantages | Disadvantages

  • What Is Cryptocurrency ?
  • Types Of Cryptocurrency
  • Advantages
  • Disadvantages
  • Regulation In India
  • RBI Stand On Cryptocurrency In India

What Is Cryptocurrency?

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

  • Cryptocurrencies are systems that allow for secure payments online which are denominated in terms of virtual “tokens,” which are represented by ledger entries internal to the system.
  • “Crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

India Year Book 2021 Pdf Download Free Eng & Hindi UPSC

Types of Cryptocurrency | Cryptocurrency UPSC

  • The first Blockchain-based cryptocurrency was Bitcoin, which still remains the most popular and most valuable.
  • Today, there are thousands of alternate cryptocurrencies with various functions and specifications. Some of these are clones or forks of Bitcoin, while others are new currencies that were built from scratch.

Bitcoin was launched in 2009 by an individual or group known by the pseudonym “Satoshi Nakamoto.

Alternative Cryptocurrency Coins (Altcoins)

Altcoins usually refer to any coins that are not Bitcoins. Bitcoin is a popular digital currency that’s produced by computational solutions to complicated math problems. It works separately from a central bank or state entity (i.e., government-backed Treasury).

Some Altcoins include:

  • Peercoin
  • Litecoin
  • Dogecoin
  • Auroracoin
  • Namecoin

In fact, the name “altcoin” actually means “alternative to Bitcoin.” Namecoin is considered the very first altcoin, created in 2011.

The Most Common Types of Cryptocurrency

  1. Bitcoin
  2. Bitcoin Cash
  3. Litecoin
  4. Ethereum
  5. Ripple
  6. Stellar
  7. NEO
  8. Cardano
  9. IOTA
Cryptocurrency Explanation 
 

 

Bitcoin Cryptocurrency 

  • Bitcoin is a type of digital currency; it is “cash for the internet.”
  • More specifically, it’s considered cryptocurrency since cryptography facilitates Bitcoin creation and transactions.
  • Bitcoin is a cryptocurrency invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto.
  • The currency began use in 2009 when its implementation was released as open-source software.
  • Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part.
  • Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.
  • Fast peer-to-peer transactions
  • Worldwide payments
  • Low processing fees
 

 

Bitcoin Cash Cryptocurrency

  • Bitcoin cash (BCH) is both a cryptocurrency and payment network.
  • It was created as a result of a hard fork with bitcoin in December 2017, with the aim of increasing the number of transactions that could be processed.
  • The official bitcoin cash website describes the cryptocurrency as a “peer-to-peer electronic cash for the internet.
  • It is fully decentralised, with no central bank and requires no trusted third parties to operate.”

 

 

 

Litecoin Cryptocurrency

  • Litecoin was released via an open-source client on GitHub on October 7, 2011 by Charlie Lee, a Google employee.
  • He later became Engineering Director at Coinbase.
  • The Litecoin network went live on October 13, 2011.
  • It was a source code fork of the Bitcoin Core client, differing primarily by having a decreased block generation time (2.5 minutes), increased maximum number of coins, different hashing algorithm (scrypt, instead of SHA-256), and a slightly modified GUI.
 

 

Ethereum Cryptocurrency

  • Ethereum is a decentralized, open-source blockchain with smart contract functionality.
  • Ether is the native cryptocurrency of the platform.
  • It is the second-largest cryptocurrency by market capitalization, after Bitcoin.
  • Ethereum is the most actively used blockchain.
  • Launched in 2015
  • Ethereum is an open-source,
  • Blockchain-based
  • Decentralized software platform used for its own cryptocurrency, ether.
Ripple  Cryptocurrency
  • Ripple is a real-time gross settlement system, currency exchange and remittance network created by Ripple Labs Inc., a US-based technology company.
  • Released In 2012
Stellar Cryptocurrency
  • Stellar, or Stellar Lumens, is an open source, decentralized protocol for digital currency to fiat money transfers which allows cross-border transactions between any pair of currencies.
  • Launched In 2014
NEO Cryptocurrency
  • Neo is an open-source blockchain decentralized application platform founded in 2014 by Da HongFei and Erik Zhang.
  • Since its rebranding to Neo from Antshares in 2017, the project’s vision is to realise a “smart economy” by utilizing blockchain technology and smart contracts to issue and manage digitized assets.

Advantages Of Cryptocurrency | Cryptocurrency UPSC

With the Industrialization and involvement of technology, digital currencies are gaining an upper hand over others. One such currency is bitcoins. Many of us are familiar with this well-known terminology. The only confusing thing is Cryptocurrency. What are its pros and cons? Is it worth investing in 2020?

If you have such questions, get them answered here. Below you will find the major advantages and disadvantages of Cryptocurrencies. Here Is the Full List of All Pros and Cons of Cryptocurrencies.

Advantages of Cryptocurrency :

  1. Protection from inflation
  2. Self-governed and managed
  3. Currency exchanges can be done easily
  4. Cost-effective mode of transaction
  5. A fast way to transfer funds
  6. Secure and Private
  7. Cryptocurrencies don’t use middlemen, so transactions are usually easier, faster and require less or no additional transaction fees.
  8. Each cryptocurrency transaction is a unique exchange between two parties, which protects users from issues like identity theft.

Governments manipulate prices of currencies. Their own currency as well as others’ currencies. American Financial Crisis of 2007 established that American Government cannot be trusted. Probably this was the important reason why Bit Coin was launched in the year 2008. Proponents of Cryptocurrency claim that unlike Fiat Currencies, CC cannot be manipulated by Governments.

Disadvantages Of Cryptocurrency | Cryptocurrency UPSC

  1. Can be used for illegal transactions
  2. Data losses can cause financial losses
  3. Decentralized but still operated by some Organization
  4. Some coins not available in other fiat currencies
  5. Adverse Effects of mining on the environment
  6. No refund or cancellation policy
  7. Susceptible to hacks
  8. Crypto Currency issuers claim no responsibility to stabilise the price of Cryptocurrency. Hence it is open to massive fluctuations

Future of Crypto Currencies

  • Most of them will crash leaving investors with big losses.
  • Then, the Regulators will come into action.
  • Prosecute people, arrest & so on.
  • Main sponsors would have disappeared.
  • Governments can sponsor CC as their currency.
  • Corporates can issue CC with full intrinsic value.
  • These developments can work very well.

Is there any country which has permitted use of cryptocurrencies?

Different countries have adopted different regulatory frameworks with respect to cryptocurrencies. Some countries have permitted the use of cryptocurrencies as a payment system while there is a complete ban on cryptocurrencies in some others. Note that no country has allowed use of any virtual currency as legal tender.

Country Regulatory Framework
Canada Permitted as a payment system and as a form of investment, income from it is taxed
Switzerland Permitted as a payment system (including consumer to government transactions) and as a form of investment
Japan Permitted and regulated as a payment system
China Use of cryptocurrency is banned for all purposes

 

Cryptocurrency and Regulation of Official Digital Currency Bill, 2021

With the likely scenario of India’s government banning private cryptocurrencies, the Reserve Bank of India (RBI) is planning to introduce an official digital currency for the country.

  • An earlier government bill on cryptocurrency in 2019 reportedly sought to ban cryptocurrency and criminalise its possession in India. However, it was not introduced in Parliament.
  • The detailed text of the bill has not been released in the public domain so far.
  • The bill also says that there will be a regulation to help RBI create its own CBDC (central bank digital currency).

What were the provisions of 2019 Bill?

Definition of cryptocurrencies:

The 2019 Bill defined cryptocurrency as any information, code, number or token, generated through cryptographic means or otherwise, which has a digital representation of value and has utility in business activity, or acts as a store of value or a unit of account.

Ban:

  • The 2019 Bill bans the use of cryptocurrency as legal tender or currency.
  • It also prohibits mining, buying, holding, selling, dealing in, issuance, disposal or use of cryptocurrency.
  • Mining is an activity aimed at creating a cryptocurrency and/or validating cryptocurrency transactions between a buyer and a seller.

In particular, the use of cryptocurrency was prohibited for:

  1. Use as a medium of exchange, store of value or unit of account,
  2. Use as a payment system,
  3. Providing services such as registering, trading, selling or clearing of cryptocurrency to individuals,
  4. Trading it with other currencies,
  5. Issuing financial products related to it,
  6. Using it as a basis of credit,
  7. Issuing it as a means of raising funds, and
  8. Issuing it as a means for investment.

Why has the Committee recommended banning of cryptocurrencies?

The Committee noted various regulatory concerns around virtual currencies, and cryptocurrencies in particular. These include:

  • Fluctuation in prices
  • Risk to consumers
  • Impact on power consumption
  • Potential use for criminal activity

Cryptocurrency UPSC Questions And Answers

  1. What are cryptocurrencies? Discuss various concerns related to cryptocurrencies.
  2. What is a cryptocurrency? Discuss the feasibility of a national cryptocurrency in India

Frequently Asked Questions About Cryptocurrency

Q1 -How long does it take to mine 1 Bitcoin?

  • 10 minutes
  • Regardless of the number of miners, it still takes 10 minutes to mine one Bitcoin.
  • At 600 seconds (10 minutes), all else being equal it will take 72,000 GW (or 72 Terawatts) of power to mine a Bitcoin using the average power usage provided by ASIC miners.

Q2 -Can Cryptocurrency be converted to cash?

  • If you want to cash out crypto using the app, it’s easy to do so: just go into your crypto account and hit ‘Exchange’ to convert your balance into the fiat currency of your choice.
  • You can convert up to $50,000 per day and spend the money using your Wirex card; alternatively, you can withdraw from an ATM.

Q3 – Is Crypto Real Money?

  • Cryptocurrency is virtual money based on software.
  • Your token represents a specific amount of cryptocurrency you own based on the current market value.
  • You can sell that token, or you can cash it out at market value.
  • Unlike centralized currency, which is government controlled, cryptocurrency is decentralized.

Q 4- Will Cryptocurrency replace traditional money?

  • While it is unlikely that Bitcoin will replace existing currencies, the emergence of ‘cryptocurrencies’ and ‘stablecoins’ has prompted exploration of central bank digital currencies.

Q 5- What countries have banned Cryptocurrency?

  • Bolivia
  • Bangladesh
  • Iran
  • Nepal
  • India
  • Denmark
  • Ecuador And Many More

Q 6- Which country uses Bitcoin most?

  • The United States
  • Romania
  • China
  • Spain
  • Japan
  • Switzerland
  • South Korea And Many More

 

 

 

 

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