What is this hype around cryptocurrency? Why is everyone going gaga over it? Well, a cryptocurrency is a digital currency for the purchase of goods and services. The regulated currency ($, ₹, £) is converted into tokens, and by leveraging the decentralized blockchain methodology, users transact securely in the unregulated marketplace, such as casinos or the dark web.
Today, 2.8 million to 5.8 million global cryptocurrency users publicly trade in more than 4810 (CoinMarketCap entries) different cryptocurrencies. The exponential success of this virtual currency is credited to Bitcoin (BTC)—the world’s largest cryptocurrency. The total crypto market volume of April 22, 2021, is $206.31B. In India, as of Apr 22, 2021, 1 Bitcoin equals INR 40,22,284.91!
Top 5 Most Common Cryptocurrencies
Founded in 2009, Bitcoin is a digital asset and considered to be the world’s largest cryptocurrency. It offers low transaction costs compared to conventional methods and runs on decentralized jurisdiction, unlike government-based currencies. There is no physical form of bitcoins; instead, balance sheets are stored on a public platform, which anyone can access. A huge amount of computational power is used to verify all bitcoin transactions. Presently, there are over 18.5 million Bitcoin tokens in existence.
Bitcoin Cash (BCH)
Founded in August 2017, it is one of the earliest and most popular hard forks of the original Bitcoin. Bitcoin Cash (BCH) holds a significant position in the evolution of altcoins. In the cryptocurrency network, a fork occurs due to disagreements and debates between the developers and miners. When oppositions aren’t on the same page, the digital assets are divided between both parties. One chain stays true to the original code, and the new chain starts as a revamped version of the old chain.
Launched in 2014, Ethereum is a decentralized software platform that allows Smart Contracts and Decentralized Applications (DApps) to be developed and operated without the need for third-party intervention, downtime, fraud, or power. The essence of Ethereum is to develop a decentralized space of financial by-products that can be accessed by anyone in the world irrespective of their nationality.
Litecoin debuted in 2011 as one of the first cryptocurrencies to follow Bitcoin. An MIT graduate and ex-Google engineer, Charlie Lee, designed Litecoin, which is considered the “silver to Bitcoin’s gold.” Based on an open-source worldwide trading platform, there’s no central governing body for Litecoin. It uses “scrypt” algorithms decrypted by consumer-grade CPUs and a higher block generation rate for faster transaction confirmation time when compared to Bitcoin.
PolkaDot, created by Gavin Wood, is a one-of-a-kind proof-of-stake cryptocurrency that aims to provide blockchain interoperability. Its protocol connects permissioned and permissionless blockchains, including oracles, enabling networks to collaborate under the same roof. The distinct feature of PolkaDot is its relay chain, which provides interoperability.
Cryptocurrency: Legal Acceptance around the World
AMERICA does not approve of cryptocurrency as a legal tender. The Financial Crimes Enforcement Network (FinCEN) recognizes cryptocurrency exchanges as money transmitters.
AUSTRALIA approved cryptocurrencies as a legal tender in 2017. Australia has enforced strict laws around cryptocurrencies, digital currencies, and cryptocurrency exchanges for secure transactions.
CANADA does not recognize cryptocurrency as a legal tender, while digital currencies are allowed for transactions. Income Tax Act and other Canadian tax laws and policies correspond to crypto payment methods.
INDIA does not consider cryptocurrencies a legal tender and plans a carpet ban on the virtual trading crypto-assets that the government thinks will finance illegitimate activities.
JAPAN legalized cryptocurrency in 2017. As one of the world’s most progressive nations, Japan recognizes Bitcoin and other virtual currencies as legal under the Payment Services Act (PSA).
RUSSIA got President Vladimir Putin to sign a regulatory bill for cryptocurrencies in August 2020, which grants cryptocurrency legal status but forbids its usage as a payment method.
UKRAINE has vague policies regarding cryptocurrency, but they do not consider it illegal. Many organizations and independent firms use Bitcoin as an investment asset or as a payment tool.
CHINA, BOLIVIA, and ICELAND– These nations have prohibited the use of cryptocurrencies on all fronts. According to the laws in place, individuals committing crypto transactions will face harsh punishments.
Cryptocurrencies have the potential to make it a hassle-free process to move money/funds between various organizations without the interference of a third party such as a bank or credit card company. Skepticism is a valuable approach regarding a new product or service, but let that not limit your risk appetite, given that the most progressive nations of the world have already embraced cryptocurrencies. As discussed already, crypto transactions are protected by the use of public and private keys and various reward schemes such as Proof of Work and Proof of Stake.