CRYPTOCURRENCY

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                                      CRYPTOCURRENCY

In order to visualize, the study of Cryptocurrency, in the current context, let us part, with the study of this subject, under the following heads: -

1. Introduction.
2. Cryptocurrency.
3. Characteristics of Cryptocurrency.
4. Blockchain – Concepts.
5. Characteristics of Blockchain.
6. Cryptocurrency Mining.
7. Cryptocurrency on Legal Turf.
8. Conclusion. 

Let us now perceive towards the study of the subject accordingly.

1. Introduction

People who have encapsulated the field of Cryptocurrency need special reference at the start. In the year 1983, "David Chaum" an American cryptographer, conceived an anonymous, electronic money, called ecash. In the year, 1995, he implemented it through Digicash. In 1997, a British Cypherpunk, by name "Adam Black" released a plan called hashcash, which claimed to have solved some of the problems that stalled the digital cash project. In 1998, "Wei Dai" published a description of ‘b-money’. Thereafter, "Nick Szabo" is credited for describing bit gold, from there on various type of cryptocurrency came into existence. The first blockchain-based, decentralized cryptocurrency was created, in the year 2009, by an individual or group known by the pseudonym, "Satoshi Nakamoto".

2. Cryptocurrency

A cryptocurrency, crypto currency or crypto is a virtual currency / digital assets used as a medium of exchange, by virtue of digital platform, which is again paperless, the ownership of each coin is stored in digital ledger called the blockchain, its utility is strongly cryptography /cryptology, in order to secure transaction records, to control the future creation of additional coins, and to verify the transfer of each coin ownership.

 3. Characteristics of Cryptocurrency

1. The word “cryptocurrency” is derived from encryption techniques which are used to secure the network.
2. Blockchain technology, which are organizational methods for ensuring the integrity of transactional data, are an essential component of many cryptocurrencies.
3. Cryptocurrency lacks a centralized authority; it is maintained through distributed consensus.
4. This system works by keeping an overview of cryptocurrency units and their ownership.
5. This system defines whether new cryptocurrency units can be created. If new cryptocurrency units can be created, the system defines the circumstances of their origin and how to determine the ownership of these new units.
6. The ownership of cryptocurrency units can be proved exclusively cryptographically.
7. The system allows transaction to be performed in which ownership of the cryptographic units are changed.
8. If two different instruction for changing the ownership of the same cryptographic units are simultaneously entered; the system performs at most one of them.
9. Cryptocurrency workability: In modern days in a cryptocurrency system, a user’s wallet or account address, holds a public key / password, while the private key / password, is known only to the owner, and is used to sign transactions. Funds transfers are completed within a minimal processing fees, allowing users to avoid the steep fees charged by banks and financial institutions for wire transfers.  

4.  Blockchain – Concepts

In the year, 1991, blockchain technology was brought to light by two researchers namely "Stuart Haber" and the other "W. Scott Stornetta" in order to implement a system, were document timestamps could not be appended or edited. The real utility of this blockchain technology was felt after the lapse of two decades, that is, in January 2009,when for the first time Bitcoin was launched, that was the very moment that blockchain marked its first ever real-world application. Thus, the main purpose behind blockchain technology in terms of utility is to allow digital information to be recorded and distributed, but not to be appended or edited.

5.  Characteristics of Blockchain

1. Blockchain is a special type of Database.
2. Blockchain Database differ from any general/typical database, by virtue of its method of storing data, the peculiarity in blockchain of storage of data can be perceived from the point of view, that it, stores the data in blocks, and, thereafter, these data are chained together in a chronological order.
3.  As soon as a new data is entered into a new block, when this block is exhausted with data entry, it gets chained onto the previous block, which forms a data chained together in a chronological order.
4. The most common used information stored in the blockchain has been in the form of ledger for transaction. However, the blockchain is capable of storing different data as well.
5. In the case of Bitcoin’s, blockchain are used in the decentralized way, in order to avoid any individual or group control – with the notion that all user collectively retain control.
6. The significance of decentralized blockchain, is that it is immutable, which means that the data entry cannot be appended /edited or in other words it is irreversible. As far as Bitcoin is concerned this means that the transactions are permanently recorded and the viewership is available to anyone.
7. The concept of Decentralized Finance or DeFi is a concept for any given financial products, which is available on public decentralized blockchain network, making it accessible to the public, whereby, the trust barrier, intermediaries like, middleman or banks or any financial institution, is whittled down completely, making them redundant in a transaction between two individuals.

However, it must be born in mind that the concept of blockchain technology is very complex, it has been acknowledged that blockchain along with related technology has the potential to disrupt many industries, including finance and law.

6. Cryptocurrency Mining

Under cryptocurrency transactions are recorded on a blockchain. A blockchain is a database shared by, and maintain by a community, which is averse to centralized entity, in other words it is decentralized.

Mining is the term used for the process of validating and recording new transactions on a blockchain.  

A blockchain “block” is a chunk of data containing 2 things:

1. Some relevant data to be added to the database. (For example, all the bitcoin transactions that occurred within the last 10 minutes.)
2. The ID of the block before it in the chain.

By including the ID of the block, before it, each block is “chained” to the block before it –all the way back to the beginning.

To add a new block to the blockchain, a computational puzzle / mathematical equation must be solved to encrypt the block’s data. Mining is the act of solving this puzzle / equation.

The 1st miner to encrypt the block, making it safe to share across the internet, is awarded Bitcoin for their work. The winner shares their results with all the other miners, who verify the encryption is safe and the work is done. This is called “proof of work.”

Once verified by the other miners, the winner securely adds the new block to the existing chain.

Amongst the many cryptocurrency mining methods few are mentioned below: - 

a) Cloud Mining.

b) Central Processing Unit (CPU) Mining.

c) Graphic Processing Unit (GPU) Mining.

d) Application – Specific Integrated Circuits (ASIC) Mining.

The best of method to mine cryptocurrency, is generally, Cloud and GPU mining. CPU mining is slow and tedious, while ASIC mining is very unpredictable. Speaking about some favorite’s cryptocurrency to mine, would be Bitcoin, Ethereum or Dash. Bitcoin, being very popular, is probably the trickiest of them all, as a result earning becomes difficult. However, the best bet would probably would be to stick with Ethereum or some other less-popular cryptocurrency. The final word of caution that needs to be adhered too, is to keep in mind, to get a secure and reputable Wallet, this is the most important task when starting with cryptocurrency mining.

7. Cryptocurrency on Legal Turf 

• Countries like Algeria, Bangladesh, Bolivia, Ecuador, Iran, Kyrgyzstan, Nepal, Thailand and Saudi Arabia have banned Bitcoins and has termed its use as illegal. Bangladesh went to the extent of equating it to money laundering.
• Countries like Belgium, Brazil, Chile, Columbia and Cyprus are neutral about use of Bitcoins. Argentina permits use of Bitcoins but does not deem it to be currency.
• European Union and Bulgaria recognize and regulate it as virtual currency. As of recent news, the European Central Bank (ECB), President 'Christine Lagarde,' in her, Bloomberg TV interview on 31st March, 2021, said that within next four and half years, times, she will be able to place a regime of central bank digital currency, before the European Parliament and then the ECB’s decision-making Governing Council will meet to give its final decision. She went on to add that, we’re not going to break any system, but will do everything, to enhance the system, cash system will continue to operate as usual. She also said that she is keeping a close watch on the recent roll out of digital currency by the Bahamas, called Sand Dollar.
• China, had recently, been in the news, stating, that its working to lunch its own cryptocurrency.
• Australia treats Bitcoin as property and has allowed the use of Bitcoin as barter. United Kingdom permits trading in Bitcoins. United States of America treat Bitcoins as currency.
• As far as India is concern, amongst the latest pronouncement on cryptocurrency, that comes to mind, is the case law, entitled as, Writ Petition (C) No. 528 of 2018:Internet and Mobile Association of India -Versus- Reserve Bank of India; (2020) 10 SCC 274, the date of pronounced was 04th March 2020, by a three Judge Bench of the Hon’ble Supreme Court of India, Bench headed by Justice Rohinton Fali Nariman along with his two brother judges namely Justice Aniruddha Bose and Justice V. Ramasubramanian. Under this case law the petitioner points of challenged we’re two-fold, against the Reserve Bank of India (RBI), statement dated, 05th April, 2018 and the same statement was followed by a circular dated 06th April, 2018, by these circulation RBI tried to restrict virtual currencies trade in India, the detail is produced below: -

1. Firstly, “Statement on Developmental and Regulatory Policies” issued by the Reserve Bank of India (RBI) dated 05th April, 2018, Para 13 of which directed the entities regulated by RBI (i) not to deal with or provide services to any individual or business entities dealing with or selling virtual currencies and (ii) to exit the relationship, if they already have one, with such individuals / business entities, dealing with or settling virtual currencies.
2. Secondly, RBI, following the statement, issued, Circular dated 06th April, 2018, in pursuant to its excises of powers conferred by Section 35-A read with Section 36(1)(a) and Section 56 of the Banking Regulation Act, 1949 and Sections 45-JA and 45-L of the Reserve Bank of India Act, 1934 and Section 10(2) read with Section 18 of the Payment and Settlement Systems Act, 2007, directing the entities regulated by RBI (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.

This Supreme Court judgment was delivered by Justice V. Ramasubramanian, through his extensive reasoning, held, that, "the Writ Petition is allowed and the impugned Circular dated 06th April, 2018 is set aside on the touch-stone of proportionality principle". Further, held that, "the Statement dated 05th April, 2018, not being in the nature of a statutory direction, hence the question of setting aside the same does not arise". In a nut-shell, this judgment doesn’t ban cryptocurrency in India.

However, Indian Parliament, since 2013 has been grappling to come out with a Regulation that can govern the regime of cryptocurrency in India.

 8.  Conclusion

Today, there are thousands of alternate cryptocurrencies with various functions and specifications. Some of these are clones or fork of Bitcoin, while others are new currencies that are built from scratch. Bitcoin’s even as on date remains the most popular and valuable cryptocurrency. On March 2021, it’s estimated over 18.6 million bitcoins in circulation with a total market cap of $927 billion approximately. The success story of Bitcoin’s encouraged the growth of other competing cryptocurrency such as Altcoins, includes Litecoin, Peercoin & Namecoin, as well as Ethereum, Cardano & EOS. The aggregate value of cryptocurrency in existence as of today is estimated to be $1.5 trillion of which more than 60% is occupied by the Bitcoin. Cryptocurrencies faces criticism for a number of reasons, including their use for illegal activities, exchange rate volatility and vulnerabilities of infrastructure underlying them. However, they have been praised for their portability, divisibility, inflation resistance and transparency.