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Namaskar, I am Gunjan Grover and today we will talk about Cryptocurrency. Nowadays cryptocurrencies are in the news, bitcoin, dogecoin, etherium, etc. What is a cryptocurrency and how is it different from fiat currencies? What are its advantages and disadvantages? What is blockchain technology? How is it mined? Is it legal in India? What is the latest news? We will discuss all this but before this don't forget to like this video and subscribe to Groww What is Cryptocurrency? but before that, we need to understand what is currency? Currency is a medium of exchange. In the earlier days, it was a barter system where people used to exchange goods and services for other goods and services. like giving potato in exchange for a tomato, or doing work in return for the other But this system was not that efficient and not everyone wanted the same thing.
Then came currency, notes, and coins which used to be backed by gold, but that system also became obsolete And now it is Fiat currency which is issued by the govt and is not backed by gold or any other commodity It is different from commodity or representative money. Commodity money is created from gold/silver while representative money represents a claim on a particular commodity Now this Fita currency is not supported by any physical commodity It is rather supported by the faith of its holders and virtue of the govt declaration If you give a Rupee note to anyone, its a promise by the govt that you will get stuff for that value It is mentioned on the note as I promise to pay the bearer a sum of Rs 100 It is also signed by the governor, the govt is the central authority that regulates the circulation and supply of the currency. If the govt wants, they can print money, but there's a catch, the more they print the more the value of the currency decreases
meaning inflation will rise, and the purchasing power of the Fiat currency decreases One more special aspect is that for any type of transaction, we need the bank that verifies them For example, you want to send money to America, you will go to the bank which will verify the receiver, sender and charge a fees This happens in all the Fiat currencies but not in cryptocurrencies It can be sent directly from peer to peer, without any bank or intermediary in between It can be broken into two words, crypto meaning hidden and currency meaning medium of exchange In simple language, it is a digital form of cash, meaning it can be saved in your computer or phone Now let us discuss the advantages of Cryptocurrencies.
It has no controlling central authority with no transaction limits with no financial intermediary Some cryptos are limited and you cannot print more like there will be always only 21 billion bitcoins On the other hand, we have cryptos like Etherium which has a constant flow of assets which makes them inflated Most of them are transparent, anybody can view that form where did they come and where did they go. All of these revenues are in a public chain called the blockchain The charges are also low to transfer bitcoin as compared to the Fiat currency and consumes less time. If we observe this transaction, someone sold 161500 bitcoins in April 2020 which amounted to $1.1 billion that took only 10 minutes with a fee of only $0.68 Let us now see the disadvantages, the biggest being that these transactions are irreversible.
If you send it to the wrong person, you won't get it back and was possible if it had a financial intermediary but its not possible in crypto As there is no central authority, no one is there to keep a check and hence can be used in illegal activities such as drugs, terrorist org It is very volatile, and the common man doesn't know much hence it is risky too It is stored in your digital wallet, and if you lose your password or private key, there is no way to retrieve it meaning all your crypto is gone. According to a study, 20% of all the cryptocurrency is lost Also, it is not environment friendly, it needs a lot of energy to mine them Now let's talk about blockchain technology, what is blockchain technology? It is a chain of blocks that stores some information which is regarding the transactions, sender, receiver, number of cryptos
When one block gets filled, the other starts storing info, and the important thing is that the new block points the previous one Now how, every block contains its own and the previous blocks reference number and hash meaning all the blocks are linked, hence the name blockchain. It is important because if you try to remove or alter one block, the whole chain gets disrupted. Hence it is safe. If we see, bitcoin was developed 10 years back and has had billions worth of transactions that are valid Its database has never been hacked and is very useful with multiple uses Let us now talk about how is it mined and who are these miners? Let us take an example, I Gunjan, want to send my friend Soniya 10 bitcoins
and bitcoin is the most popular, a message is sent to the whole network that I want to send 10 bitcoins I sign this message with a password which is called the private key, The current computers in the crypto network will get the notification as all of them have a copy of the current database Now this transaction goes into a waiting room where there are many others like mine waiting for settlement Now here is the entry of the bitcoin miner, miners are computers that are scattered around the world Their job is to assemble these transactions and propose them and these are a part of the blocks
Now thousands of these computers are competing to settle the transactions And this competition is to solve challenging mathematical puzzles and these miners can propose a new block only when they solve and the first one to do so, gets reward in the form of newly minted bitcoins which is 6.25 per valid blocked mine but this reward is changed every 4 years or after 210,000 blocks are mined and gets reduced by half each time According to CoinMarketCap, there are more than 6000 cryptos in the world and every month new come in Most of them have less assets, but the popular ones are valued at more than $1 billion So why do we need so many coins? Blockchain is software used the same but can be programmed for different purposes
Consider this analogy, Microsoft and Oracle are two software companies but their products are different So every coin has a different agenda, Bitcoin was envisioned to replace traditional money Etherium was made to use smart contracts using its own currency, Ripple targets inter-bank transfers So does the existence of soo many cryptos damage the scarcity of bitcoin? The answer is no Its like a foreign currency doesn't affect the scarcity of Rupee, the same way new crypto cannot replace an old one Are cryptocurrencies in India legal? In 2018, there was an article issued by RBI stating that no bank should provide service to any digital currency The SC took this order back and then HDFC, ICICI, Yes, and SBI resumed their transactions
Cryptocurrency is not a legal tender in India but the buying and selling of the same is not illegal Contrary to the popular notion, cryptocurrencies are not expensive At the time this video was made, the value of one bitcoin was $50479 meaning 36,97,234 Rs Many people think that they wouldn't be able to afford it and stay away but they don't know that it can be bought in small fractions too There are many exchanges in India, that allow to invest in crypto at a small amount as Rs 100 Now you would ask why can't we invest in crypto through Groww, the reason is that there is no regulator On Jan 20, 2021, the govt announced that they will pass a bill to launch a sovereign digital currency The recently revived industry realizes a second threat that they are not the first ones to talk about sovereign currency
Now how is this digital currency different than cryptocurrency? The main difference is that digital currency will be centrally issued and will be backed by the central banks whereas cryptocurrency isn't. As we said earlier cryptos are transparent wherein digital currency is not You cannot choose the wallet destinations and cannot see the transactions in digital currency but has a central authority that can deal with problem or issue For example, they can freeze or hold any transaction on the request of any participant or authority Let us now talk about what is latest in the crypto market In 2021, Tesla announced that they bought bitcoin worth $1.5 billion which was a big boost for the coin But recently they announced to reject bitcoin due to the environmental issue of insane amount of energy being used to mine it
And refused to accept crypto as a form of payment for their electric cars because it came at a big cost to the environment Due to which it slumped by 17%. One more crypto is making news, Dogecoin In 2010, a Japanese kindergarten teacher posted their dogs picture which became a meme Jackson Parmer in 2013, who was an Adobe employee tweeted a joke to invest in Dogecoin He has tied up with Billy Marcus, an IBM developer to create the crypto What started of as a joke became a phenomenon in the digital world By 2014, dogecoin became the 5th largest cryptocurrency and today it has jumped by 130% times this year Now let us talk that should you invest in crypto or not
They are very volatile in nature, for example, bitcoin was at $19,650 in Dec 2017 it went down to $3,417 in Feb 2019 and right now it is at $50,429 Since they are a risky class, invest only that much which you are ready to lose All of this is for educational purposes and we do not recommend to invest in any crypto or stock.
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