What is cryptocurrency?
Unlike traditional banks and physical wallets, Cryptocurrency offers a revolutionary way to send and receive payment directly between individuals anywhere in the world. This peer-to-peer system operates entirely online and relies on a secure, decentralized network to verify transactions.
Instead of swapping paper bills or coins, cryptocurrency transactions exist as digital entries in a public ledger, recording every transfer with utmost transparency. These digital tokens, stored in secure digital wallets, are protected by robust encryption, similar to advanced coding that safeguards information. This encryption keeps your transactions secure and tamper-proof.
How Cryptocurrencies Work
Cryptocurrencies operate on a unique system called blockchain. It is essentially a public record of all transactions shared and verified by everyone in the network. It works as a digital ledger, constantly updated and accessible to all participants.
New cryptocurrencies are "mined" using powerful computers that solve complex mathematical puzzles. This process not only creates new units but also verifies existing transactions, adding them to the blockchain. Alternatively, you can purchase cryptocurrencies from brokers, similar to buying stocks.
Unlike traditional ownership of physical objects, owning cryptocurrency doesn't give you a tangible asset. Instead, you hold a digital key. This key allows you to transfer a unit of cryptocurrency from one person to another on the blockchain, all without relying on a central authority like a bank.
The world of cryptocurrencies, spearheaded by Bitcoin's launch in 2009, is still evolving. While currently used for financial transactions, the potential applications of blockchain technology extend far beyond. Experts predict it could revolutionize the trading of assets like bonds and stocks, opening doors for future financial innovations.
Legal Status of Cryptocurrency In India
The legal status of cryptocurrencies in India has been a topic of vast debate and regulatory consideration. Cryptocurrencies are not deemed illegal in India, allowing individuals to engage in buying and trading activities. Nevertheless, there is currently no comprehensive regulatory framework overseeing their operations.
The Indian government has initiated certain measures to regulate cryptocurrencies, such as mandating companies disclose their involvement in crypto trading and investments. The unveiling of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 aims to establish a framework for an official digital currency issued by the RBI (Reserve Bank of India) and regulate existing cryptocurrencies.
Acknowledging cryptocurrencies' borderless nature, the government has emphasized the necessity of substantial international collaboration in crafting any legislation concerning them.
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