Cryptos decoded.

Banned, frowned upon, illegal, but money making.

Cryptos have been a frowned upon the topic in India. However, it has been a gold mine internationally. But what is this new industry of fugazi (something that doesn't exist) money everyone is going crazy over?

Cryptocurrency is digital assets which behave as a medium of exchanging money. They work in the same way as shares in the share market and gold in the consumer market. Cryptos are valued at a certain amount of money. After purchasing it, you hold x amount of money in cryptos. If I buy DogeCoin at $80 today, and wait for the crypto to bull and sell it later at $100, then I make $20 as my profit.

Just as the share markets work, Cryptos' values are based on supply and demand. Today Bitcoin is worth $36,000+; that is purely because the demand for Bitcoin is rising and the supply is not keeping up with it. So the prices are increasing naturally in the market to discourage the increasing demand.

However, one thing remains: how did these currencies come into the market, and why do people have a problem with it?

A major frowned upon aspect is that Cryptos are digital; they are not real money. UPI based transfers follow the same pattern. If I credit my Paytm account with $10, I have not put any physical cash anywhere. However, due to mass hypocrisy, the artificial nature of Cryptos come under more fire.

Another aspect which makes Cryptos problematic is that there is anonymity. RBI, Paytm, Google Pay and Share Market follow close identifiable records. This means that all these platforms where national currencies are converted to digital money or shares or any other assets are recorded with the national identification system. Today if I want to trade shares I have to register my Aadhaar Card, if I want to invest into properties, I will do so through my bank account linked to the Pan Card. However, in the case of Cryptos, I can call myself dabber420 and purchase any asset quantity. There is no linking back to the buyer.

This is a significant concern for global legal teams. Cryptos use Cryptography, which is a fancy name for another Fort Knox security system. Cryptography is the code through cryptos are created that is why they are called "Crypto" currency. Cryptography limits the identification of a buyer and a seller. This increases anonymity and reduces regulations. Governments cannot tax someone who is not buying/selling in their nation's sovereign borders. However, today I can use the Cryptography locate myself in a tax haven location like Luxembourg; or I can choose not to declare my location at all. This limits the regulation and governmental tracking, which means only one thing; black market.

Actually no, some people, however, can surely use the Cryptos for Black Market dealings. If there is no track record of who is selling to who and who is buying from whom, I can send millions of dollars without any form of the transaction. This is because of Cryptos function on blockchains.

Blockchains create another reason for raising your eyebrows at this asset. Blockchains are ledgers which are moderated by miners (accountants/coders that supply crypto). These ledgers are decentralised with no single point of authority or failure. There is no headquarters, no founder, no face. Nobody has made Bitcoin and nobody runs Bitcoin. Similarly, the majority of the Cryptos are created with faceless coders.

This decentralised nature of Cryptos creates this problem of no leads. Today even if the governments try to legalise this currency, they cannot because no one runs it.

Now explaining some basic facts/questions about Cryptos:

How are Cryptos made? Cryptos are created through a process called mining. Generally, there is a fixed number of Cryptos that are produced every year. Bitcoins are just computer codes which have a decreasing rate of production. When these Bitcoins are created, they are not put in the market and given to anyone, the miners that work on auditing the transactions receive Bitcoins or the Crypto they are working on as a reward. They can then chose to sell these Bitcoins, which makes them profits.

Can cryptos ever cease to exist? Theoretically, as long as you have internet and connectivity with any miner then no. However, there is one problem which can arise, which is called a "chain split". As a Blockchain is a ledger, funds x come from here and then are sent there, meaning Bitcoin number 1028731487304 is coming from y user and is being sent at value ABC to z user. This procedure requires only one thing—the compatibility of software.

Bitcoin, DogeCoin, and all other Cryptos have their software. However, in light of a change in the software's version or update or network changes; until the whole procedure of the change is conducted, some people will operate in different versions of the currency's software at once. This will cause a Chain-Split because Bitcoin number 1028731487304 from user y cannot go to user z as user z does not have the required software to accept the transaction. In this process there is a chance your Bitcoin or any Crypto vanishes or ceases to exist as the ledger will show that user y no longer has possession of Bitcoin number 1028731487304, but, that Bitcoin never reached someone.

Cryptos can be manipulated like stocks. That is true. The stock market is based on demand. If Tata releases 1,00,000 shares today and there are 10,00,000 buyers, the value of each share rises. Just like that, if today an individual with many rat accounts (accounts that are under the name of person 'g' but is controlled by person 'h' who attempts to manipulate the price by increasing supply or demand and sells the assets in an attempt to earn profits) can however manipulate the stock. It does require mass communication and effort, but it is undoubtedly possible, in theory.

Conclusively, Cryptos are a bane and boon at the same time. There are high volatility and adrenaline, which is involved with its trading. You can make a lot of money; you can invest, bull or bear, it is basically a stock market. However, at the same time, it is a nightmare for governments. To counteract, these nations are bringing out their own Cryptos like Venezuela's Petro; only time will tell if other countries follow suit and make their regulated digital gold.