THE WORLD OF CRYPTOCURRENCIES

Cryptocurrencies are what will be majorly discussed in this write-up, but before switching to them, let us
first discuss how the concept of currency goes and what are its effects. We are very much aware of the
fact that the Government of India announced the demonetization of all 500-rupee and 1000-rupee notes
of the Mahatma Gandhi series on 8 November, 2016. Had we continued our transactions via 500-rupee
and 1000-rupee notes against the government’s order, we would have given birth to a parallel economy
and that economy would have run on the basis of those notes. Basically, it is us who give value to a
currency. Similarly, we can create other currencies on the basis of people’s consensus, i.e., they agree
upon having trust in a particular system and accepting it as a currency. So, if we have brought a particular
currency into being, and let’s say that currency is cryptocurrency, people will accept it and starting
working in return. Therefore, the currency will get a value and transactions will be made on the basis of
it.

In 2008, the U.S. had to face a financial crash as its people didn’t pay their debts to the banks. In order to
bail its banks out, it gave them money for recovery. People in the U.S. had to face a major loss due to
currency depreciation. This laid the foundation for Cryptocurrency. Cryptocurrrency is an Internet-based
digital currency whose exchange doesn’t take place physically. Bitcoin was the first properly working
cryptocurrency that came into existence in 2009. It is based on the theme of Cryptography which
involves certain encryption and decryption techniques. Cryptocurrency doesn’t require a central
authority to control the transfer or generation of a new currency. It is a digital medium used in
exchanges, and is cryptographically secure. It is a distributed system because the data is not stored at
one place; it is present at many places. Cryptocurrency is decentralized because it doesn’t need a central
authority for its functioning. It has a “Peer-to-Peer” feature, i.e., it can be transferred from one person to
another. Cryptocurrency can solve the problem of mutual distrust. We can have the feature of
anonymity, i.e., the amount of a particular cryptocurrency that we have earned can be kept under the
bounds of confidentiality. Cryptocurrency is based on Block Chain Technology, which is a distributed
database. The copy of one register (ledger) is sent to millions of computers and hence, there will be no
central authority governing transactions. The concerned person has to trust the register which is present
in the majority of systems. There are certain safeguards to ensure that a unique value is maintained.