What is Crypto Currency? Can we use it as cash? Is it legal in India?
What is CryptoCurrency?
Cryptocurrency work as a medium of exchange. In simple words, cryptocurrency is digital cashthat allows us to transfer money directly or without getting the involvement of a third party. Because the currency is transferring directly it charge us a very less amount of money.
The records of the transition are stored in the ledger. All the data stored is in the form of cryptography which is a process of converting text into unintelligible text which means the data can only be read by those for whom it is intended. Using ledger it is easy to maintain the database. For accessing the data people use special computers and software.
Is cryptocurrency in India is legal?
In 2018 RBI imposed a banking ban for making a relationship with crypto companies but the same banking ban was lifted by the supreme court in 2020 and because of which banks were allowed to have banking services and business relationships with an exchange of cryptocurrency. Cryptocurrency in India is legal but it is not a legal tender which means we can’t use it instead of Indian rupees. We can Hold, trade and invest in cryptocurrency.
- Charges are very less
- No geographical barrier
- Very fast
- No intermediary required
- Used as Illegal activities
- Transactions are irreversible
Blockchain is comprised of two words block and chain. Block is a database that stores lots of data. Data like who was the sender? Who is the receiver? When was the money sent? How much the money was sent? etc.. when one block is fully filled with the information another block will come which will point out or joint from the last block of transactions. And when this block will be filled then again a new block will come and point to the last block of transactions. It will repeat again and again, one transaction block will be filled another block will be linked or point to the last block. All these blocks are linked together that is why it is called a blockchain. A chain contains blocks full of data of transactions.
Why Blockchain is immutable?
The data which is stored in these blocks cannot be deleted. Why? We know that every block is linked with the last block so if we delete the last one, the space of the block will remain which is empty so, we can easily see that some data is missing and which will break the blockchain.
|Bitcoin Crypto Currency|
Bitcoin is a type of cryptocurrency ( Digital Cash/Currency). It was founded in 2008 and launched in 2009 by Mr Santoshi Nakamoto. The most popular cryptocurrency all over the world. Bitcoin has a limited amount of supply which is 21 Million all over the world. Currently 18.6 million are in circulation. Cryptocurrency price – 1 Bitcoin in Indian Rupees is 42,76,847 rupees. We can buy it in fractions also.
How Bitcoin’s price is decided?
It is already defined how many coins (Bitcoins) will be produced. Bitcoin is a fixed amount so the cost of bitcoin depends on its demand. If there are more buyers of bitcoin the cost will be increased and if there are fewer buyers then the price of bitcoin will be decreased.
People who are maintaining the public ledge are called Miners. The process of maintaining the transactions and validating is called Mining. It is all system generated process but, special computers and softwares are needed. In return for the time and money involved in mining, miners get some reward in the same currency. Whenever a transaction is take place it is all recorded in the ledger and maintained in the blockchain. Only the person who sent the bitcoin and the person who received the bitcoin can only see the transaction. All other people can see it in some typical code that can’t be understood by human beings, which is known as Cryptography. But if someone has deleted or trying to take control or delete the transaction it can be seen by all the people which are miners. So it is very safe to send Bitcoin without a third party. This is developed because everyone needs their privacy. People have problems that why other parties can see their money balance. That’s why people love cryptocurrency which is private and nobody is the owner of it. It can be maintained by all.
Crypto wallet is a monitoring tool used to interact with the blockchain. These wallets are divided in three parts which are software wallet, hardware wallet and paper wallet. Depending on their working mechanism they may also be referred as hot wallet and cold wallet.
How did they work?
Crypto wallet don’t really store cryptocurrency instead they work as a gateway and provide the tools that you need to communicate with the block chain. These wallets can generate all the information you need to use cryptocurrency. When a new wallet is created the program generates multiple pairs of public keys and private keys with several blockchain addresses. The public key is used to generate a unique blockchain address. The blockchain address is used for transferring the bitcoins by which the user can receive money. Bitcoin never leaves the blockchain it just transferred from one address to another. Private key is used for signing new transactions. It give access to the funds of wallet. By using private key we can get access the coin in any device. This key should not be disclosed otherwise someone can steal the funds. Private key can also be use for recovering the public key and blockchain addresses. It is the most important element of a cryptocurrency wallet because it proceed all the other components.
Hot wallet is any wallet that is connected with the internet. These are convenient for traders and frequent users because they are easy to setup and the funds are quickly accessible.
Cold Wallets are much safer than the Hot wallets because they have no connection to the internet. They use physical medium to store the keys offline. This make them very resistance to the hackers. This method is also known as cold storage. It is suitable for long term investors.
It comes with three different types these are web wallet, desktop wallet and mobile wallet.Web wallet allow us to interact with the blockchain via a browser interface. It resist downloading anything in the computer.Desktop wallet are wallets that are downloaded in the computer to execute locally in the machine. These wallets are safer than the web wallets. Mobile wallets work like desktop wallets but they are designed specifically as mobile apps.
Hardware wallets of physical electronic devices that use a random number generator to generate public and private keys. The keys are stored in the device itself without any internet connection. Hardware wallets are more secured alternatives for cold storage specially for long term holders. The funds in the hardware wallets are less accessible so they are somewhat inconvenient to traders and frequent users.
Paper wallet is a piece of paper in which the private key and block chain are printed physically usually as QR codes. This present numerous flaw so their usage is now discouraged. A major flaw of paper wallet is that they are not suitable for sending funds partially but only the entire balance all at once.