What is a cryptocurrency? What benefits and challenges do cryptocurrencies pose? (250 Words)

Mentors Comments:
1. Define cryptocurrency. Giving examples of Bitcoin and Libra recently
2. List the economic, security, governance and technological benefits offered by cryptocurrencies
3. Mention the challenges posed by mainstreaming them – governance, security and crime-related
4. Provide suggestions to gain from them while not succumbing to the side effects

https://www.livemint.com/opinion/online-views/cryptocurrencies-could-constrain-a-country-s-choices-1567447742065.html

Answer:

A cryptocurrency is a digital or virtual currency that uses cryptography for security. Many cryptocurrencies are decentralized systems based on blockchain technology. The most common cryptocurrencies are Bitcoin, Ethereum, etc.
However, The Inter-Ministerial Committee on Virtual Currency constituted under the Chairmanship of Subhash Chandra Garg has recommended that cryptocurrency cannot be used as legal tender or currency at any place in India.

The Cryptocurrencies are gaining popularity due to benefits it provides which are as follows-
1. Privacy Protection: The use of pseudonyms conceals the identities, information and details of the parties to the transaction – perquisites for privacy enthusiasts.
2. Cost-effectiveness: They have single valuation globally, and the transaction fee is extremely low, being as low as 1% of the transaction amount. Cryptocurrencies eliminate third party clearinghouses or gateways, cutting down the costs and time delay. All the transactions over cryptocurrency platforms, whether domestic or international, are equal.
3. Lower Entry Barriers: Cryptocurrencies lowers entry barriers, they are free to join, high on usability and the users do not require any disclosure or proof for income, address or identity.
4. Alternative to Banking Systems and Fiat Currencies: Cryptocurrencies offer the user a reliable and secure means of exchange of money outside the direct control of national or private banking systems.
5. Fast and efficient: Fund transfer is easier and faster with cryptocurrencies as compared to conventional.
6. Open Source Methodology and Public Participation: A majority of the cryptocurrencies are based on open source methodology, their software source code is publicly available for review, further development, enhancement, and scrutiny.
7. Immunity to Government-led Financial Retribution: Governments have the authority and means to freeze or seize a bank account, but it is infeasible to do so in the case of cryptocurrencies. For citizens in repressive countries, where governments can easily freeze or seize the bank accounts, cryptocurrencies are immune to any such seizure by the state.
8. Counterfeiting: It is created by cryptography and uses blockchain technology and hence is much harder to counterfeit than paper currency.

The associated concerns are as follows-
 Despite these numerous advantages and user-friendly processes, cryptocurrencies have their own set of associated risks in the form of volatility in valuation, lack of liquidity, security and many more.
 Fluctuation in value: cryptocurrencies has seen very high fluctuation in their values because it depends on supply and demand. This results in fluctuation in the wealth of cryptocurrency holders.
 Cryptocurrencies are being denounced in many countries because of their use in grey and black markets. There are two sets of interconnected risks; one being to the growth and expansion of these platforms in the uncertain policy environment, and the other being the risks these platforms pose to the users and the security of the state.
 They also have the potential use for Illicit Trade and Criminal Activities and can be used for Terror Financing.
 They also have the Potential for Tax Evasion.
 Energy consumption: With an increase in mining of cryptocurrencies, there has been an increase in energy consumption as well. It was reported that, on November 2017, the power consumed by the entire bitcoin network was higher than that of Ireland. This will have an impact on power production, consumption, power prices, global warming, etc.

The future and further success of cryptocurrencies depends upon the way regulatory frameworks are devised. Different countries have approached this innovation in different ways, and therefore the regulatory environment remains uncertain. The government will have to take considered steps, given the risks from possible use of cryptocurrencies in terror financing, money laundering and tax evasion.

21 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Blitzkrieg
Blitzkrieg
3 years ago

Please find attached

photo_2019-09-04 15.38.07.jpeg
Wasim
Wasim
3 years ago

Pls review
Payment ID – MOJO9731S00A34242506

New Doc 2019-09-04 23.53.56_1.jpg
New Doc 2019-09-04 23.53.56_2.jpg
New Doc 2019-09-04 23.53.56_3.jpg
Anmol
Anmol
3 years ago

Please review and revert.

Anmol
Anmol
3 years ago
Reply to  Anmol

MOJO9902Y00D71079365
please review

Sumona Dey
3 years ago

MOJO9727T00D60304985

Prem S
Prem S
3 years ago

please give me feedback on whether we can write crips points first under subheading and discuss the point breifly afterwards as i tried in the answer in the benifit section

sahithya kasiraju
sahithya kasiraju
3 years ago

Payment ID: MOJO9802W00A98715356
Please review

crypto_1.jpg
crypto_2.jpg
crypto_3.jpg
Abhigyan
Abhigyan
3 years ago

MOJO9903Q00A58015795

Murari Jha
Murari Jha
3 years ago

MOJO9731E00D34250209

Ashraf Ali
Ashraf Ali
3 years ago
Kanchan Prakash
Kanchan Prakash
3 years ago

Payment ID: MOJO9731Y00N34245077

15680217385061574373620346691407.jpg
15680217557437810527622027287630.jpg
Yogeshkumar Prajapati
Yogeshkumar Prajapati
3 years ago

Mojo id-MOJO9908R00A36163556