Why in the news?
Prime Minister Narendra Modi chaired a meeting on cryptocurrency at the Reserve Bank of India (RBI), Citing the unregulated nature of the crypto market, he called for taking progressive and forward-looking steps.
- China has declared all cryptocurrency transactions illegal, effectively imposing a complete ban.
- El Salvador has permitted Bitcoin as a legal tender.
- The Union government has not yet enacted any law on cryptocurrencies.
- After several rounds of discussion, the government largely wants to set limits on cryptocurrencies trading in India.
What is cryptocurrency?
- A cryptocurrency is a virtual currency used for financial transactions. It uses blockchain technology for various transactions. Earlier, the RBI has issued a circular prohibiting use of these virtual currencies.
- Cryptocurrencies typically use decentralized control as opposed to centralized digital currency and central banking systems.
- Bitcoin is the first decentralized cryptocurrency.
Various concerns related to cryptocurrencies:
- The privacy of users’ data is at stake. There is concern regarding privacy of users .Thus Hackers can easily observe how the money flows.
- Cryptocurrencies are prone to cybersecurity breaches and hacks. Various attacks are common, even companies and governments are not full proof of them.
- The possibility that the new money will nurture illicit activities and markets like drug selling, weapons etc. through Darknet is always high using cryptocurrency anonymously.
- Cryptocurrencies pose risks to consumers. They do not have any sovereign guarantee and hence are not legal tender.
- Bitcoin is a type of digital currency that enables instant payments to anyone.
- Bitcoin was introduced in 2009.
- Bitcoin is based on an open-source protocol and is not issued by any central authority.
- Bitcoin is a peer-to-peer currency. Peer-to-peer means that no central authority issues new money or tracks transactions.
- The Bitcoin software is completely open-source and anybody can review the code.
How does Bitcoin work?
- Bitcoins are generated all over the Internet by anybody running a free application called a Bitcoin miner.
- When you transfer Bitcoins, an electronic signature is added.
- After a few minutes, the transaction is verified by a miner and permanently and anonymously stored in the network.
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