Lecture -3
Cryptocurrency
Science
&
Technology
LECTURE OUTLINE
Key Learning Points
Syllabus - Pre and Mains
PYQ
What are Cryptocurrecy ?
What is the technology used in Cryptocurrency
Features of Cryptocurrency
Cryptocurrencies in India
Issues Associated Cryptocurrencies
Way Forward
Practice Questions
Syllabus
Prelims
Crypto currency
Mains
Recent developments in information and
communication technology - Crypto currency
PYQ
What is Cryptocurrency ? What are its advantages and disadvantages ?
क्रिप्टोकरेंसी क्या है ? इसके फायदे और नुकसान क्या हैं ?
NEWS
What are Cryptocurrecy ?
Founded by - Satoshi Nakamoto - 2009
It is any form of currency that exists digitally or virtually and uses
cryptography to secure financial transactions
Features of Cryptocurrency
Funds transfer between two parties will be easy without the
need of third party like credit/debit cards or banks.
It is a cheaper alternative compared to other online
transactions.
Payments are safe and secured and offer an unprecedented
level of anonymity.
The Password is only known to the owner of the wallet.
Funds transfers are completed with minimal processing fees.
Features of Cryptocurrency
Decentralised
Don't have a central issuing or regulating authority
Based on Blockchain Technology
Technology used in Cryptocurrency
How does cryptocurrency work?
Cryptocurrency runs on blockchain technology which is simply a digital
ledger of transactions.
This ledger (or database) is distributed across a network of computer
systems.
No single system controls the ledger and instead, a decentralized network of
computers keeps a blockchain running and authenticates its transactions.
Bitcoin and other cryptocurrencies are essentially codes recorded on a
blockchain that gets longer and longer as more people use them.
Working of Blockcahin
Benefits of Cryptocurrencies
Inherent security: The identities are hidden
Low transaction cost: Very low fees and charges for transactions.
Lack of interference from the banking system: Outside ambit of
banking systems.
Lower Entry Barriers: No entry barriers, unlike conventional banking
systems
Universal recognition: Lots of cryptocurrencies are acceptable in
many nations.
Benefits of Cryptocurrencies
Facilitate E-commerce - Global Currency
Facilitate faster settlement - No need to wait for
payment processing
Issues Associated with Cryptocurrencies
Difficult to understand
Uncertainty and Volatility
Security risks: Cyberattacks on wallets, exchange
mechanism (Cryptojacking).
Shield to Crime: Used for Illicit Trading, Criminal
Activities, & organised crimes.
Threat to the domestic currency: If a large number of
investors invest in digital coins rather than domestic
currency based savings like provident funds, the
demand of the latter will fall.
Cryptocurrencies - India
India and Cryptocurrency
2009: First cryptocurrency, Bitcoin launched in 2009 by
Satoshi Nakamoto.
2018: RBI banned banks and other regulated entities from
supporting crypto transactions
2019: Inter-ministerial committee recommended banning
all private cryptocurrencies
2020: SC struck down the ban on the trading of
cryptocurrency as unconstitutional
Cryptocurrencies - India
India and Cryptocurrency
2021: Cryptocurrency and Regulation of Official Digital
Currency Bill, 2021 introduced
Finally, Cryptocurrencies, though unregulated, are not
illegal in India
Cashaa launches crypto bank in Jaipur
Way Forward
Regulation is the Solution - Cryptocurrency and Regulation of Official Digital
Currency Bill, 2021, Central Bank Digital Currency (CBDC)
Strong KYC Norms
More investor awareness
Ensuring Transparency
Require international collaboration - India Stands 4th in Global Crypto
Adoption Index 2022
Crypto is an integral part of the Fourth Industrial Revolution, Indians
shouldn’t be made to simply bypass it.
Stablecoins - Type of cryptocurrency that are designed to maintain a stable
value relative to a particular asset, such as a fiat currency or commodity
Practice Question
1. What is cryptocurrency ? (2 Marks)
2. What are the benefits and drawbacks of using
cryptocurrency as a form of payment? (5 Marks)
3. What is the future of cryptocurrency, and how might it
change the financial landscape? (5 Marks)
Thank
you!!
