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Crypto is quite popular and favorite  topic particularly  among the young generation. It is observed  that both  retail as well as institutional investor's craze ,on the subject, is steeply heading towards  northward. People who are  not even interested in trading  or investing in virtual currency, are also curious to learn about it   just to  enrich their   knowledge .  Of late, much interest has been generated  by the Budget's   statement  on taxation on virtual  digital assets (VDAs).  Hence, the article to discuss and understand concept of cryptocurrency in simple and layman term's.

 2.Presumably a pseudonymous person called Satoshi Nakamoto, along with  a group of programmers was the first to  invent,  develop and launch the world's first cryptocurrency - Bitcoin (BTC) -a decentralized digital currency in  January, 2009. In fact it  has been so  designed to have a limit of 21 million. Rate

                                        

of generation is also pre-decided. Accordingly, the last BTC is to be mind in the year 2140.

 3. Now try to understand  technical terms  frequently  used in Crypto:

Cryptocurrency: Cryptocurrency-(virtual currency)- is a medium of exchange that is digital, encrypted  and de-centralized. There is no central authority that manages and maintains value of currency. 

Altcoins: Alternative Coins. As discussed, BTC was the first coin invented in cryptocurrency. Other coins  in cryptocurrency such as Ethereum ( ETH), Ripple, Tether and Litecoin( LTC) are known as  Altcoins. At present,  over 14000 altocoins (as on November, 2021) have been created, worldwide. 

Blockchain: The  blockchain   is a core underlying component of cryptocurrency networks. It store data in  blocks (records) that are then linked together via  cryptography. Decentralized blockchain is immutable that is   the data once entered therein is irreversible.  It means that the blockchain   allow digital information to be recorded and distributed. But  transaction so  recorded cannot be edited, altered, deleted or defaced. It is also known as distributed ledger technology (DLT).

Mining: Mining is not simply to create/generate of new tokens.  Its  vital role is   to validate cryptocurrency on a blockchain network and add to distributed ledger.

Miners: Minors are special computers that add blocks to the blockchain. In fact, they are the backbone of the of the Block Network.  They validate transactions and ensure network security.

 Blockchain Nodes: As discussed here above, blockchain consists of a number of blocks of data. These blocks are stored in nodes. These are  comparable to small servers. All the nodes are inter-connected  on a  blockchain and exchange  information with each other. In this way,  all the nodes on blockchain remain updated. Here it is important to be aware that each node is distinguished from other by a unique identifier.

Crypto Exchanges: Also known as Digital Currency Exchanges (DCE). It is a platform  to trade crypto currencies for other  assets such as fiat money and other  digital currencies.

CoinSwitchKuber, WazirX, Zebpay and CoinDCX are a few popular Crypto Exchange in India.

Digital Wallet : It is a software programme in which the private and public keys of those who own virtual currencies are stored. A private key - the  password -  give you  access to your own  digital currencies. It authorizes you to spend, withdraw, transfer or carry out any other transaction from your  account.  The  public key is a cryptographic code used to facilitate transactions between the parties.  In simple terms, the public key can be described as your email address ( which can be safely shared with others to receive/ send funds). It is  just like your  account number. 

There are different types of wallets such as paper wallet, mobile wallet, web wallet , desktop wallet and hardware wallet.

Fiat Money: It is the money that is declared as a legal        tender backed by the Government of the country . It is not    backed by physical commodity. In other terms it is the            currencies that derive the value largely through trust in the    governments that issue them. Indian Rupee, US Dollar, Euro and British Pound are the examples of fiat money 

 Initial Coins Offering (ICO): ICO is a popular way to raise funds for products and services related to cryptocurrency. It means that a company seeking to raise money to create a new coin, app or service can launch an ICO as a way to raise funds. In an ICO, the investors  receive a digital coin or token in return for their investment. 

Peer-to-Peer(P2P): P2P refers to the direct exchange of some assets, such as digital currency, between individual parties without the involvement of a central authority. In fact, P2P exchange was the primary goal driving creation of BTC.

Non Fungible Tokens (NFT): Non Fungible Tokens are cryptocurrencies that are mostly used as certificates of ownership of digital assets like art, audio or photo.

4. Legality of   cryptocurrency in India

It would be appropriate to recall that the RBI in their circular issued on 06.04.2018 directed the entities regulated by it  (i) not to deal in virtual currencies nor to provide services for facilitating any person or entity in dealing with or settling virtual currencies  and (ii) to exit the relationship with such persons or entities, if they were already providing such services to them. The validity of circular was challenged before the Hon'ble Supreme Court by crypto-trading agencies. The Apex  Court in their judgment dated 4th March,2020 set aside the circular  under reference. 

Currently , the legal status is in 'grey zone' as there is no legal back or ban. However, recently  the  Union Budget proposed that any income from transfer of any virtual digital asset shall attract 30%  tax.

         5.Conclusion:

It is to  be clearly understood  that  the crypto is a technical, cumbersome and a bit risky business. The blog is  an attempt to give a  very brief and quick introduction to understand the very basic concept on the issue. In  fact, trading crypto requires deep reading and understanding of the business coupled with proper home work and specific skills. 

I would like to conclude the blog with the  undernoted observation made by RBI Governor, Shaktikanta Das in his  recent post - monetary policy interaction with media on private cryptocurrency: 

"The investor in cryptocurrency need to keep in mind that whatever they are investing is at their own risk. There is no underlying to cryptocurrency, not even a tulip."

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