Since India’s economy is one of the largest in the world and until recently was one of the fastest growing in the world, India needs to see the changes in the global economy and the advent of newer technologies and innovations. One such newest and arguably the most modern technology is considered cryptocurrency made possible by the creation of blockchain technology.
Cryptocurrencies are basically digital currencies that are digital assets and function like normal currencies as a medium of exchange. This is considered to be very safe and reliable as in this type of system individual coin ownership records are maintained in a ledger that exists in the form of a computerized database, using strong cryptography to protect transaction records, monitor the production of additional coins, and verify the transfer of coin ownership.
Such cryptocurrencies are considered to be decentralized currencies meaning there is no central authority that controls or regulates the value, distribution, or creation of the currency. They function using Distributed Ledger Technology that serves as a public financial transaction database. This creates transparency as this database is available to every user in the world, which means that any attempt at illegal hacking or interference with the ledger would be next to impossible as the information is individually available to everyone.
As mentioned before this currency works on blockchain technology. Blockchain is a database wherein a large amount of information is stored in a structured manner. It is a digital ledger that organizes data into groups called blocks, each of which contains a collection of data. Blocks have specific storage capacities, and when they are filled, they are chained onto the previous block, creating a data chain known as a “blockchain.” All new information introduced after the newly added block is compiled into a new block, which is then added to the chain.
The way it works is that every block has three components, the data, the hash of that block, and the hash of the previous block. This means that when there is a change or any interference in the block the hash of the block changes which causes the subsequent blocks to get altered as well which makes it almost impossible to be hacked or otherwise meddled with due to the existence of the Distributed Ledger Technology with which everyone can cross-check the hash of the blocks and find the mismatch with the block that has been tampered with.
To succeed in such a hack, the hacker will have to manipulate and change at least 51% or more of the blockchain copies at the same time, making sure that their new copy becomes the majority copy and therefore the agreed-upon chain. An attack like this would cost a lot of money and energy because they’d have to redo all of the blocks as the timestamps and hash codes will be different now.
The difficulty of pulling off such a task would most certainly be immense given the scale of Bitcoin’s network and how quickly it is increasing. This would not only be extremely costly, but it could also be futile as such actions would not go unnoticed by other network members, who would note such significant changes to the blockchain and may then split off to form a new chain.
This blockchain technology in today’s world is revolutionary in terms of being a decentralized and independent system that is immune to external electronic interference. This means that it can be used in many different fields such as banking, currencies, elections, etc.., where it can be seen as a reliable and trustworthy system.
India’s Crypto Ride
In India unfortunately, not a lot has been done by the government or the regulatory authorities to promote cryptocurrencies. The discussions around cryptocurrencies have been around since 2013 but the central bank RBI has been reluctant to allow any cryptocurrencies in India. The government has instead planned to ban all private cryptocurrencies in India under a new bill by the name ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’.
The main reasons for the ban according to RBI are the problems with volatility in these virtual currencies, lack of authorized central agency or framework to regulate them, susceptibility to hacking, cyberattacks, and leakage of information as well as the fear of illegal activities such as money laundering, terror financing, etc.
But the Supreme Court of India gave a landmark judgment on March 4, 2020, where it lifted the ban levied by the RBI Circular in Internet and Mobile Association of India V. Reserve Bank of India (“Judgement”), with a three-judge bench consisting of Justices Rohinton Nariman, Aniruddha Bose, and V. Ramasubramanian. The court looked at the case primarily from the lens of Article 19(1). (g) of the Indian Constitution which guarantees the freedom to practice any profession, or to carry on any occupation, trade, or business, and the doctrine of proportionality.
But it still may not mean that cryptocurrencies would be allowed because the government has, as mentioned, planned to bring about a new law to ban all private cryptocurrencies.
In conclusion, it is not very clear whether these cryptocurrencies like dogecoin, bitcoin or Ethereum would be successful in the near future due to the inherent problems which exist such as lack of a proper regulatory body or the fear of hacking cyberattacks, financial frauds, money laundering, terror financing, etc, but one thing which does seem clear at this moment is that irrespective of how these cryptocurrencies perform, their future in India is going to remain bleak.