A PROJECT REPORT ON

"Study on Bitcoin and Cryptocurrency"

A PROJECT SUBMITTED TO

THE UNIVERSITY OF MUMBAI

for partial completion of the degree

of Bachelor of Management Studies

Under the faculty of Management

By
Mr. Abdul Wahab

UNDER THE SUPERVISION OF

Ms. SONAL JAIN

ROLL NO. 5.

REENA MEHTA COLLEGE OF ARTS, COMMERCE, SCIENCE &

MANAGEMENT STUDIES.
BHAYANDER (WEST), THANE-401 101

ACADEMIC YEAR 2021-2022

1
 A PROJECT REPORT ON

"Study on Bitcoin and Cryptocurrency"

A PROJECT SUBMITTED TO

THE UNIVERSITY OF MUMBAI

for partial completion of the degree

of Bachelor of Management Studies

Under the faculty of Management

By
Mr. Abdul Wahab

UNDER THE SUPERVISION OF

Ms. SONAL JAIN

ROLL NO. 5.

REENA MEHTA COLLEGE OF ARTS, COMMERCE, SCIENCE &

MANAGEMENT STUDIES.
BHAYANDER (WEST), THANE-401 101

ACADEMIC YEAR 2021-2022

 DECLARATION

I the undersigned Mr. ABDUL WAHAB here by, declare that the work embodied
in this project work titled “Study on Bitcoin and Cryptocurrency” forms my own
contribution to the research work carried out under the guidance of Ms. SONAL
JAIN is a result of my own research work and has not been previously submitted to
any other University for any other Degree / Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been obtained
and presented in accordance with academic rules and ethical conduct.

ABDUL WAHAB

Certified by
Ms. Sonal Jain
(Project guide)
 CERTIFICATE

This is to certify that Mr. Abdul Wahab has worked and duly completed his project
work for the Degree of Bachelor of Management Studies under the faculty of
Management in the subject of FINANCE and his project is entitled " Study on Bitcoin
and Cryptocurrency "under my supervision.

I further certify that my entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any degree or diploma of any
University.

It is his own work and facts reported by his personal findings and investigations.

Principal Coordinator Project guide

Dr. (Mrs.) Satinder Kaur Gujral Ms. Sonal Jain Ms. Sonal Jain

Internal Examiner External Examiner

Date:-

Place:-
 ACKNOWLEDGEMENT
To list who all have helped me is difficult because they are so numerous and depth is
so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.

I would like to thank my Principal, Dr. (Mrs.) Satinder Kaur Gujral for providing
the necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator Ms. Sonal Jain, for her moral
support and guidance.

I would also like to express my sincere gratitude towards my project guide Ms. Sonal
Jain, whose guidance and care made the project successful.

I would like to thank my College Library, for having provided reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly and indirectly helped
me in the completion of the project especially my Parents and Peers who supported
me throughout my project.
 INDEX

Sr. No. Particulars Page No.

1 ABSTRACT 7

2 INTRODUCTION 8

3 METHODOLOGY OF RESEARCH AND ITS 15

LIMITATION

4 LITERATURE REVIEW 16

5 VALUING CRYPTOCURRENCY 17

6 CRYPTOCURRENCY IN INDIA 30

7 GENERAL PERSPECTIVES ON VIABILITY 42

8 COMPARISON OF CRYPTOCURRENCY VERSUS 46

OTHER INVESTMENTS

9 ANALYSIS OF CRYPTOCURRENCY IN TODAY'S 48

ENVIRONMENT

10 FUTURE ROAD 59

11 CASE STUDY 60

12 DATA ANALYSIS 65

13 CONCLUSION 78

14 BIBLIOGRAPHY & REFERENCE 79

 1. ABSTRACT

Cryptocurrencies represent an alternative method of managing today’s financial

world. Operating in the block chain network, these alternative methods of finance
provide disintermediation in a digital world where all users are anonymous. The
existence of cryptocurrencies has been a threat to current financial institutions, and
governments are trying to figure out how to manage their usability in everyday life.

Due to the rapid development of information and communication technologies, many

activities in our daily life have been merged online and they become more flexible and
more effective. A huge growth in number of online users has activated virtual word
concepts and created a new business phenomenon which is cryptocurrency to
facilitate the financial activities such as buying, selling and trading. Cryptocurrency
represent valuable and intangible objects which are used electronically in different
applications and networks such as online social networks, online social games, virtual
worlds and peer to peer networks. The use of virtual currency has become widespread
in many different systems in recent years. This paper investigates the user’s
expectations of the future of cryptocurrency. It also explores the users’ confidence of
dealing with cryptocurrency in a time that using such virtual money is not fully
controlled and regulated. Besides, the paper is aimed to measure the spread of
cryptocurrency use to have a clear picture from the practical view. The paper also
analyses the way in which 21 different countries have responded in terms of
regulations & legislations towards cryptocurrencies to develop a clear picture of its
impact on various laws in India in order to regulate it.
 2. Introduction

Cryptocurrencies are defined in Merriam Webster dictionary as: “any form of

currency that only exists digitally, that usually has no central issuing or regulating
authority but instead uses a decentralized system to record transactions and manage
the issuance of new units, and that relies on cryptography to prevent counterfeiting
and fraudulent transactions”. While not technically money, their value is tied to real
world currencies which from the very beginning has placed them in a very precarious
situation.

The cryptocurrency as we know it today might not exist had there not been the
economic crash of 2008. What Mr. Nakamoto saw was the banking industry losing its
core purpose and becoming an overtly greedy money-producing mechanism. Because
the banks had lost sight of their boundaries and relative power, he felt that there had
to be an alternative.

As a result, Bitcoin came to fruition in 2009 when Satoshi Nakamoto, whose true
identity has never been revealed, launched the first blockchain network into the
world. Alongside his new network, Nakamoto had published a book where he went
into extensive detail explaining why cryptocurrencies are a superior choice and better
solution to our current financial system. This book is called “Bitcoin: A Peer-to-Peer
Electronic Cash System, hailed by the most fanatical of cryptocurrencies as a
manifesto of sorts.

“What is needed is an electronic payment system based on cryptographic proof

instead of trust, allowing any two willing parties to transact directly with each other
without the need for a trusted third party” (Nakamoto 2009: 1).

The first issue that he identifies is the interference of financial intermediaries in

nearly every transaction that has been made in our economy. There is always a third-
party present when money is transferred or moved from point A to point B. This
third-party is often a bank or other financial institution given the responsibility to
regulate and provide surveillance to the economy. He explains that not only does
this waste time,
the added fees that are charged by these intermediaries are essentially an unwanted
burden on us. The second thing Mr. Nakamoto identifies is that our current system
requires the financial institution because there exists a fundamental lack of trust
between two parties who do not know each other. To combat this, Satoshi Nakamoto
would see the end of the intermediation of financial institutions by building a
network whereby the concept of “trust” can be skipped due to the very nature of the
network itself. This network, called a blockchain, functions on a ledger based
system whereby all transactions are done peer-to-peer and recorded simultaneously
throughout the chain. As a result, every transaction is recorded and documented in
one unifying code, erasing any need for a third party to “validate” something that is
seen to all. By skipping out the middle-man, the transaction speeds would be
instantaneous and “fool proof”. These alternative forms of finance are tackling and
at- tempting to reach “disintermediation”; the attempt to reduce the influence of an
intermediary, therefore bridging the gap between a producer and consumer.

Mr. Nakamoto decided that Bitcoin should not resemble modern currencies, and
instead have a “limited supply” of 21 million bitcoins. Nobody can predict the exact
year that the last bitcoin will have been “mined”, but if the mining power stays
relatively constant, the projected year is in 2140 (Bitcoinwiki.com 2018). He explains
that bitcoin should resemble the same system that gold had previously enjoyed; a
limited resource that will serve as the basis of value for other commodities. With the
progression and exponential growth of technology, it is interesting that his intention
was to revert to an idea like the gold standard. While one could argue that the
ideology and purpose of bitcoin alongside the blockchain network is admirable and
inspiring, the way it has been enacted and implemented has left more to desire. The
spread of an uncontrolled and ambitious market has been flooded with illegal
activities. This is because all owners and users of cryptocurrency have the option to
remain anonymous. Logically, the reputation of the entire technology has been
damaged and stained to many.

A crypto currency is a digital asset designed to work as a medium of exchange that

uses cryptography to send its transactions. In the current Digital era, cryptocurrency
is moving fast led by Bitcoin which was created in 2009 was the first decentralised
crypto
currency. Bitcoin is followed by Ether, Litecoin etc. are all taking the financial storm
and influencing the public to invest and buy these currencies.

Government of various countries are much concerned about crypto currency such as
Bitcoin. The significant feature of these currencies are payments can be made without
the involvement of banks. Customers can transfer the huge sum of money through the
digital wallets.

Central bank of various countries like Bank of England and Bank of Israel are trying
to launch their own digital currencies. This will help people using the official system
which has the benefit of both traditional and crypto currencies.

The traditional system for electronic payments and transfers and security checks on
each transaction by banks consumes much time and cost. Whereas the crypto
currencies help to process these transactions much faster and the transactions would
be recorded instantly and need not be cleared by Banks instead technology known as
Block chain is used.

Government can access and have control of tax evations and money laundering.
Miserably the transaction of block chain is kept outside as a public record which
might be possible for the other people to access the the informations. The risk is quite
high if the money is been kept in the form of crypto currency. The banks usually safe
guard the assets and it will be released on the customer’s request, similarly the credit
cards companies insure them against the fraud if the account is hacked. But in case of
crypto currency money is stored in independent digital wallets which can be lost or
broken. In such a situation there will be no one to help us.
2.1 History of Cryptocurrency
In 1983, the American cryptographer David Chaum conceived an anonymous
cryptographic electronic money called ecash. Later, in 1995, he implemented it
through Digicash, an early form of cryptographic electronic payments which required
user software in order to withdraw notes from a bank and designate specific
encrypted keys before it can be sent to a recipient. This allowed the digital currency
to be untraceable by the issuing bank, the government, or any third party.
In 1996, the NSA published a paper entitled How to Make a Mint: the Cryptography
of Anonymous Electronic Cash, describing a Cryptocurrency system first publishing
it in a MIT mailing list and later in 1997, in The American Law Review (Vol. 46,
Issue 4).

In 1998, Wei Dai published a description of "b-money", characterized as an

anonymous, distributed electronic cash system. Shortly thereafter, Nick Szabo
described bit gold. Like bitcoin and other cryptocurrencies that would follow it, bit
gold (not to be confused with the later gold-based exchange, BitGold) was described
as an electronic currency system which required users to complete a proof of work
function with solutions being cryptographically put together and published. A
currency system based on a reusable proof of work was later created by Hal Finney
who followed the work of Dai and Szabo.

The first decentralized cryptocurrency, bitcoin, was created in 2009 by

pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic
hash function, as its proof-of-work scheme. In April 2011, Namecoin was created
as an attempt at forming a decentralized DNS, which would make internet
censorship very difficult. Soon after, in October 2011, Litecoin was released. It
was the first successful cryptocurrency to use script as its hash function instead
of SHA-256. Another notable cryptocurrency, Peercoin was the first to use a
proof-of-work/proof-of-stake hybrid.
2.2 Architecture of Cryptocurrency
Decentralized cryptocurrency is produced by the entire cryptocurrency system
collectively, at a rate which is defined when the system is created and which is
publicly known. In centralized banking and economic systems such as the Federal
Reserve System, corporate boards or governments control the supply of currency by
printing units of fiat money or demanding additions to digital banking ledgers. In
case of decentralized cryptocurrency, companies or governments cannot produce new
units, and have not so far provided backing for other firms, banks or corporate
entities which hold asset value measured in it. The underlying technical system upon
which decentralized cryptocurrencies are based was created by the group or
individual known as Satoshi Nakamoto.

As of May 2018, over 1,800 cryptocurrency specifications existed. Within a

cryptocurrency system, the safety, integrity and balance of ledgers is maintained by a
community of mutually distrustful parties referred to as miners: who use their
computers to help validate and timestamp transactions, adding them to the ledger in
accordance with a particular timestamping scheme.

Most cryptocurrencies are designed to gradually decrease production of that currency,

placing a cap on the total amount of that currency that will ever be in circulation.
Compared with ordinary currencies held by financial institutions or kept as cash on
hand, cryptocurrencies can be more difficult for seizure by law enforcement. This
difficulty is derived from leveraging cryptographic technologies.

2.3 Advantages and Disadvantages of Cryptocurrency

The advantage of digital currency is very large. When you talk about transaction
using Cryptocurrency then there are no limits. Cryptocurrency is readily available to
the general public. Making payment using cryptocurrency is very easy. It provides an
easier way to transfer funds between two parties in a transaction. These transfers are
facilitated through the use of public and private keys for security purpose. With
minimal processing fees these fund transfers are done. Cryptocurrency transaction
allows users to avoid the steep fees charged by most banks and financial for wire
transfers. The inter country transaction is extremely easy with cryptocurrency
because
its function is not under any central bank. There is no third party involved like a bank
on whom you need to trust. You are the master of your money. Nobody can steal
your personal information from merchants, which ensure the privacy of your
sensitive data. All your transaction will be secure as it is using NSA created
cryptography. All the advantage does not mean that there is no risk involved in
investing in cryptocurrencies. There are disadvantages of bitcoin also. Here we
discuss the disadvantages of cryptocurrencies. Cryptocurrencies are relatively new in
market and come with learning curves. Many people are not aware of how to use
cryptocurrency and hence open themselves to hackers. People invest in
Cryptocurrency without proper knowledge and hence lose money to something they
did not learn about. Not many websites and companies accept cryptocurrency yet.
Very few countries have legalized the use of cryptocurrencies. There is no way to get
a refund of the amount paid if you mistakenly pay someone by using cryptocurrency.
The major drawback of cryptocurrency is it has no significant reception but now
slowly and steadily it is consolidating its position.

2.4 Cryptocurrency in India

India tops in usage of smart phones, social media etc. and financial institutions are
digitalizing the transactions very fast. From 2015 India was trading Bitcoin, but it
gave a real entry only in November 2016 when government demonetized 86% of
paper currency overnight. This was due to people having bulk paper currency of
untaxed and black money, were in search of innovative ways for laundering money to
avoid government interference and to avoid paying tax. This paved way to buy
Bitcoins to conceal their money so that these transactions would not be under scrutiny
by the government.

Another reason for getting into Bitcoin trading was that Indians were in a fear to trust
bank and government as at any time their paper currency would become valueless
overnight. People lost the trust on the government. People dealing with online
transactions found that cryptocurrency were free from banks and government & so
these transactions are done through blockchain. This made people encourage bitcoin
as swap to government currency.
Though there was steady increase in dealing with bitcoin transactions in India, it was
more expensive as compared with rates prevailing in international markets. This was
due to lack in mining of Bitcoin and was lacking in generating new Bitcoins. Due to
government restrictions on cryptocurrencies, Indians find it difficult to do trading
Bitcoins. RBI has taken measures to regulate Bitcoins. RBI warns Indians about the
risk involved in trading cryptocurrency. Due to lack of knowledge about the working
of cryptocurrency transactions, it has let to fraudulent transactions and losing the
investment made in the same. RBI has set up a committee and Indian government
would release a cryptocurrency name ‘LAKSHMI’ to compete with Bitcoin.

If India fails to regulate bitcoin, then this will become a easy way of funding terrorist
With the decision of the government to legalize it, the service providers of Bitcoin are
able to expand the scope of usage. Presently, Bitcoins are useful in making purchases
via mobile apps, buy gift vouchers, for airtime top up, and even for paying bills. By
2018, an enhanced structure is likely to support the transfer of funds occurs in the
county while providing other online financial solutions for India`s unbanked and
underserved population. With the help of Bitcoin, it`ll become easy to send a small
remittance back home and save a fee up to billions paid to third parties for a country,
like India - known as the largest remittance market in the world at over $60 Bn
annually. In a country, like India, the time is perfect to leverage the Bitcoin
revolution, especially through the roof, when Bitcoin prices are surging. Few
months ago, all previous records have been Bitcoin broken out - as the new milestone
is achieved. For the very first time in history, the rise in the value of Bitcoin -
reaching $2,000 per coin.

This paper aims to address the effect of cryptocurrencies on Indian economy relation
to how it has been perceived by the largest stakeholders; financial institutions,
governments, and academics. To arrive at a proper conclusion, there will be an
analysis on the response of the consumers, sellers, Government and RBI on their
stance on both the blockchain technology and the currencies that currently operate
within the technology.
 3. Methodology of research and its limitations

The primary focus of this thesis is to provide an analysis on effect of cryptocurrency

on Indian economy in relation to how it is beneficial or detrimental to Indian
economy. As it stands there is an abundant source of literature available in this topic,
but the difficulty is that there is no unifying or outright central theme that all can
agree on. Further- more the existence of bias should always be considered heavily, as
well as the purpose of writing regarding this topic. Another layer adding to the
difficulty of objectiveness is that the timelapse between present day and the first
cryptocurrency is merely 10 years. The last 10 years have showed extreme variance
in the perception of digital currencies; therefore, the date of publication needs to be
considered in relation with what happened that year in the crypto markets.
A great disservice to cryptocurrency and the blockchain technology is that there is no
public spokesperson or figurehead providing answers to our questions. Mr.
Nakamoto is an anonymous figure, and no one has taken the steps to take his role.
The result is that the “crypto community” has split into different groups campaigning
for different objectives. Meanwhile, governments and financial institutions have
organized in a better manner and tackled cryptocurrencies with greater unity.
Research in this topic shows there to be more objectivity from traditional finance-
oriented author, and more subjectivity from a proponent of cryptocurrency. We can
attribute this to the lack of an organization for cryptocurrency and its relatively
young age. Nevertheless, the author of this paper recognizes that cryptocurrencies
need to be approached with an open mind and that the current financial institutions
are reluctant to let these new forms of finance take off independently. Another
limitation is the technological intricacies of blockchain. The author has taken time
and effort to understand how it operates, but to truly comprehend how it functions
means to understand it on a computational and engineering-oriented level. The
author understands that while this is a limitation, the general user and researcher of
cryptocurrencies is unlikely to understand this technology and its very miniscule
details either.

The last true limitation of this topic is that each cryptocurrency has its own story,
identity and core purpose. There are currently over 1,624 cryptocurrencies according
to coin- marketcap.com with a total market cap of $ 313,345,441,440 as of May 28,
2018. It would be ludicrous to analyse each individual cryptocurrency for this reason.
As a result, this paper
will primarily focus on Bitcoin when discussing cryptocurrencies due to its over-
whelming dominance in the cryptocurrency markets.

Figure 1 CoinMarket Cap showing trading volumes (Coinmarketcap.com)

4. Literature Review

Alexander D’Alfonso, Peter Langer, Zintis Vandelis (2016) has concluded in their
study that Bitcoin has a very positive and higher expected value as compared with
Ethereum which has a better future and in growth path for the next five years. It is
also inferred that the blockchain application for fintech shows positive approach to
ethereum than Bitcoin. the study overall concludes that Bitcoins are regularly
performing better than ethereum. Also the investment result projects that investment
should be made 69% in Bitcoin and 31% in Ethereum in the next five years to
maximise the return.

Dr.Garrick Hileman and Michel Rauchs (2017) opined in their study that majority of
the cryptocurrency mining are carried out by only two countries china and US. The
study also reveals that large miners are not concerned with the legal and regulatory
risk factors compared with small miners.

The literature review consists mainly of journal articles, guidelines, and legislature
provided by experts and stakeholders with knowledge in the topic. Furthermore, I
decided to take datasheets that detail how cryptocurrencies operate in theory by
models, as well as historical data of pricing and other variables. To arrive at a suitable
conclusion, the data and research gathered will help us to understand how it is
beneficial or detrimental to Indian economy.
The analysis of the status and identity of cryptocurrencies will be based on statements
from experts and the usage of economic theory. Comparison of different arguments
on the status of digital currencies will be addressed alongside ongoing drafts on its
legality. The purpose of this data is to understand a reasonable future road for
cryptocurrencies as it stands, not as it should be. Because each form of regulation
attempts to classify these coins under a certain category, this dissertation is
essentially attempting to find out if government’s can incorporate cryptocurrencies
into their financial policies. The paper also addresses the financial institutions stance
and leverage in politics and the financial markets, because they have a great deal of
influence in legislature.

5. Valuing Cryptocurrency

5.1 Cryptocurrency mining and hash rate

The technical methodology that partially determines the value is the hash rate /
mining rate at which these currencies are mined at. The premise is that as more and
more people with greater technological capabilities continue mining these currencies,
the more difficult the algorithms that give the chance to obtain one become. Even
with scarcity increasing, the value does not rise, but can even plummet. To combat
this, many miners have joined together and created large “pools” where all the
computer processing power is invested to, and each one gets a share relative to their
output and energy consumption. Below is a chart depicting the path that Bitcoin will
undergo assuming that rate of mining stays relatively constant until its last coin will
be mined.
Figure 2 Controlled supply of Bitcoin by bitcoin.it/wiki (2018)

As the reader can see, the controlled supply of bitcoin will stagnate at around the 20
millionth bitcoin. The block height consequently is an inverse of the supply. The
controlled supply chart does not present information on the difficulty, hash rate, or
rate at which bitcoin is mined.

5.2 Revolutionary properties

If you really think about it, Bitcoin, as a decentralized network of peers which keep a
consensus about accounts and balances, is more a currency than the numbers you see
in your bank account. What are these numbers more than entries in a database – a
database which can be changed by people you don‘t see and by rules you don‘t
know? Basically, cryptocurrencies are entries about token in decentralized consensus-
databases.

They are called Cryptocurrencies because the consensus-keeping process is secured

by strong cryptography. Cryptocurrencies are built on cryptography. They are not
secured by people or by trust, but by math. It is more probable that an asteroid falls
on your house than that a bitcoin address is compromised. Describing the properties
of cryptocurrencies we need to separate between transactional and monetary
properties. While most cryptocurrencies share a common set of properties, they are
not carved in stone.
5.3 Transactional properties

I. Irreversible:
After confirmation, a transaction can‘t be reversed. By nobody. And nobody means
nobody. Not you, not your bank, not the president of the United States, not Satoshi,
not your miner. Nobody. If you send money, you send it. Period. No one can help
you, if you sent your funds to a scammer or if a hacker stole them from your
computer. There is no safety net.

II. Pseudonymous:
Neither transactions nor accounts are connected to real-world identities. You receive
Bitcoins on so-called addresses, which are randomly seeming chains of around 30
characters. While it is usually possible to analyse the transaction flow, it is not
necessarily possible to connect the real world identity of users with those addresses.

III. Fast and global:

Transaction are propagated nearly instantly in the network and are confirmed in a
couple of minutes. Since they happen in a global network of computers they are
completely indifferent of your physical location. It doesn‘t matter if I send Bitcoin to
my neighbour or to someone on the other side of the world.

IV. Secure:
Cryptocurrency funds are locked in a public key cryptography system. Only the
owner of the private key can send cryptocurrency. Strong cryptography and the
magic of big numbers makes it impossible to break this scheme. A Bitcoin address is
more secure than Fort Knox.

V. Permission less:
You don‘t have to ask anybody to use cryptocurrency. It‘s just a software that
everybody can download for free. After you installed it, you can receive and send
Bitcoins or other cryptocurrencies. No one can prevent you. There is no gatekeeper.
5.4 Types of Cryptocurrency

I. Bitcoin

The one and only, the first and most famous cryptocurrency. Bitcoin serves as a
digital gold standard in the whole cryptocurrency-industry, is used as a global means
of payment and is the de-facto currency of cyber-crime like darknet markets or
ransomware. After seven years in existence, Bitcoin‘s price has increased from zero
to more than 650 Dollar, and its transaction volume reached more than 200.000 daily
transactions.
There is not much more to say: Bitcoin is here to stay.

II. Ethereum

The brainchild of young crypto-genius Vitalik Buterin has ascended to the second
place in the hierarchy of cryptocurrencies. Other than Bitcoin its blockchain does not
only validate a set of accounts and balances but of so-called states. This means
that Ethereum can not only process transactions but complex contracts and programs.
This flexibility makes Ethereum the perfect instrument for blockchain -application.
But it comes at a cost. After the Hack of the DAO – an Ethereum based smart
contract – the developers decided to do a hard fork without consensus, which
resulted in the
emerge of Ethereum Classic Besides this, there are several clones of Ethereum, and
Ethereum itself is a host several tokens like DigixDAO and Augur. This makes
Ethereum more a family of cryptocurrencies than a single currency.

III. Ripple

Maybe the less popular – or most hated – project in the cryptocurrency community is
Ripple.

While Ripple has a native cryptocurrency – XRP – it is more about a network to

process IOUs than the cryptocurrency itself. XRP, the currency, doesn‘t serve as a
medium to store and exchange value, but more as a token to protect the network
against spam.
Ripple Labs created every XRP-token, the company running the Ripple network, and
is distributed by them on will. For this reason, Ripple is often called pre-mined in the
community and dissed as no real cryptocurrency, and XRP is not considered as a
good store of value.
Banks, however, seem to like Ripple. At least they adopt the system with an
increasing pace.

IV. Litecoin

Litecoin was one of the first cryptocurrencies after Bitcoin and tagged as the silver to
the digital gold bitcoin. Faster than bitcoin, with a larger amount of token and a new
mining algorithm, Litecoin was a real innovation, perfectly tailored to be the smaller
brother of bitcoin. “It facilitated the emerge of several other cryptocurrencies which
used its codebase but made it, even more, lighter“. Examples are Dogecoin or
Feathercoin.
While Litecoin failed to find a real use case and lost its second place after bitcoin, it
is still actively developed and traded and is hoarded as a backup if Bitcoin fails.

V. Monero

Monero is the most prominent example of the cryptonite algorithm. This algorithm
was invented to add the privacy features Bitcoin is missing. If you use Bitcoin, every
transaction is documented in the blockchain and the trail of transactions can be
followed. With the introduction of a concept called ring-signatures, the cryptonite
algorithm was able to cut through that trail.
The first implementation of cryptonite, Bytecoin, was heavily premined and thus
rejected by the community. Monero was the first non premined clone of bytecoin and
raised a lot of awareness. There are several other incarnations of cryptonote with their
own little improvements, but none of it did ever achieve the same popularity as
Monero.
Monero’spopularity peaked in summer 2016 when some darknetmarkets decided to
accept it as a currency. This resulted in a steady increase in the price, while the actual
usage of Monero seems to remain disappointingly small.

Besides those, there are hundreds of cryptocurrencies of several families. Most of

them are nothing more than attempts to reach investors and quickly make money, but
a lot of them promise playgrounds to test innovations in cryptocurrency-technology.

5.5 What are miners doing?

Principally everybody can be a miner. Since a decentralized network has no authority
to delegate this task, a cryptocurrency needs some kind of mechanism to prevent one
ruling party from abusing it. Imagine someone creates thousands of peers and spreads
forged transactions. The system would break immediately.So, Satoshi set the rule that
the miners need to invest some work of their computers to qualify for this task. In
fact, they have to find a hash – a product of a cryptographic function – that connects
the new block with its predecessor. This is called the Proof-Of-Work.

In Bitcoin, it is based on the SHA 256 Hash algorithm. You don‘t need to understand
details about SHA 256. It‘s only important you know that it can be the basis of a
cryptologic puzzle the miners compete to solve. After finding a solution, a miner can
build a block and add it to the blockchain. As an incentive, he has the right to add a
so- called coin base transaction that gives him a specific number of Bitcoins. This is
the only way to create valid Bitcoins. Bitcoins can only be created if miners solve a
cryptographic puzzle. Since the difficulty of this puzzle increases the amount of
computer power the whole miner’s invest, there is only a specific amount of
cryptocurrency token that can be created in a given amount of time. This is part of the
consensus no peer in the network can break.

5.6 Monetary properties

I. Controlled supply: Most cryptocurrencies limit the supply of the tokens. In

Bitcoin, the supply decreases in time and will reach its final number sometime around
the year 2140. All cryptocurrencies control the supply of the token by a schedule
written in the code. This means the monetary supply of a cryptocurrency in every
given moment in the future can roughly be calculated today. There is no surprise.
II. No debt but bearer: The Fiat-money on your bank account is created by debt, and
the numbers, you see on your ledger represent nothing but debts. It‘s a system of
IOU. Cryptocurrencies don‘t represent debts. They just represent themselves. They
are money as hard as coins of gold.

To understand the revolutionary impact of cryptocurrencies you need to consider both

properties. Bitcoin as a permission less, irreversible and pseudonymous means of
payment is an attack on the control of banks and governments over the monetary
transactions of their citizens. You can‘t hinder someone to use Bitcoin, you can‘t
prohibit someone to accept a payment, you can‘t undo a transaction.
As money with a limited, controlled supply that is not changeable by a government, a
bank or any other central institution, cryptocurrencies attack the scope of the
monetary policy. They take away the control central banks take on inflation or
deflation by manipulating the monetary supply.

5.7 Market expectation

While the hash rate and mining efficiency determines the rate of bitcoin
accumulation, the primary source for valuing cryptocurrencies is market expectation.
The crypto mar- kets have long been studied and researched to find any logical
trends, with very little results. Because there has not been any clear indicator of how
the crypto markets react to outside variables, coupled with the relatively short amount
of existence, cryptocurrency prices fluctuate and change frequently daily. These
prices are predominantly based on how the largest currencies relative to market share
are valued. For example, Bitcoin and Ethereum have been the two giants whose
prices in return have affected the prices of the rest of the coins. Even though there is
no monopoly, the fact of the matter is that the largest currencies are the ones who
shift the market itself.

What historical prices and trends have indicated is that the cryptocurrency exchanges
go through frequent periods of bullish behaviour. A bullish market is one where
prices and expectations increase over a short period. What happens afterwards some
argue to be a “dip” “crash” or even “stabilization” in which prices go down hard and
fast, recovering back to a comfortable medium within the next few days. Some view
the bullish behaviour and its frequency as an indicator of insider-coordination within
large “whales”, or pools of people owning bitcoin. As a result, some claim that the
price of bitcoin to be manually controlled by these large coin holders. This in return
has called for more involvement from authorities and supervision.
5.8 Supply of Bitcoin

Bitcoin aims to become the leading currency in the digital world and be compared to
as the new “gold standard”. Like gold, the limited supply should reduce issues with
inflation and historical value. However, unlike gold, bitcoin is not traded at high
volumes and its liquidity as an “asset” is low. Furthermore, whilst the gold industry
can control the rate at which it mines, bitcoin mining is based on a mathematical
algorithm that operates at a specific rate. Therefore, bitcoin cannot respond to
changes in demand by altering the amount that is accumulated. As a result, the price
of bitcoin is volatile because even if the demand rises, the only way to increase
supply accordingly is through selling it.

Figure 3 Timeline estimation of Bitcoin’s future supply by bitcoin.it/wiki (2018)

The linear line that represents plausible projected trends depicts that by the year 2140,
the last bitcoin should have been mined. What we can derive from this is that the
trend indicated a gradual rate of block height accumulation as time goes on. There is
a certain number of bitcoins in each block, and it decreases as each block is mined. It
is interesting to note that in the year 2018, we have already mined approximately 16,8
million bitcoins, around 80% of the total supply (Zuckerman 2018). The remaining
20%, or 4.2 million bitcoins will take more than 100 years to yield.
If the decrease in rate of mining continues, and we assume that there is a limited
supply, shouldn’t bitcoin experience an increase in value as time goes on? This is
where con- temporary economic theory doesn’t apply anymore, and the
expectations market shows its sway. This might explain why researchers and
individuals with a strong background in economics are hesitant to immediately
promote cryptocurrencies; economic theory and patterns are not applicable to these
forms of finance. On the other hand, just as new technology and progress demands
new ways of thinking and doing things, cryptocurrencies are revealing that maybe
they aren’t meant to fit into current moulds.

5.9 Bitcoin circulation

Figure 4 Timeline of Bitcoin circulation according to www.blockchain.info

The controlled supply chart above represents the different projected outcomes for
obtaining all block heights, and the chart here shows the reality. Note that between
July 2012 and January 2013, approximately 10,5 million or 50% of the bitcoins had
already been mined.

This graph shows the timetable of bitcoin supply and how much can be in circulation.

What we can derive from this is that Bitcoin circulation truly took off in 2010 and
began to slow down after 2013. What we cannot see here is the difficulty associated
with mining bitcoin, but we can infer that the decrease in rate of circulation can be
associated partially with the hash rate; or its mining rate. The circulation does not
necessarily affect the pricing, as we will see later in this section.
 Figure 5 Historical price of Bitcoin up until the 27th of April 2018.
(coindesk.com/price)

Figure 5 above shows that Bitcoin was a relatively cheap and arguably, an unknown
virtual currency that only saw its popularity grow in 2017. The sharp rise in its price
occurred in the span of around 3 months between October-December. It was quickly
followed by a crash in the beginning of 2018. A fair argument could be made to state
that the unrealistic and frankly, ridiculous rise in its price resulted in a bubble. This is
not the first-time bitcoin has crashed; below is a short list of the largest crashes
throughout its history.

Figure 6 August 17 2012- August 19 2012 (coindesk.com/price)

Figure 6 above represents the crash in 2012 occurred due to unknown circumstances,
and prices did not increase to above $ 15 for the remainder of the year. While many
might see this as a simple 6 dollar decrease in price, it needs to be taken into
consider- ation relative to the market itself. Amounting to around a 57% decrease in
“share price” is a crash in price. This was one of the first big crashes that
Bitcoin experienced

.
Figure 7 April 10 2013-April 12 2013 -83% (coindesk.com/price)

After- wards owners and people who follow the crypto markets became aware of how
delicate the market is to sudden changes, even when there is no clear consensus as to
what caused it.

Figure 7 shows the reader what a bullish market looks like. Mt. Gox, a leading
cryptocurrency exchange experienced the highest volumes of trading of all time.
Subsequently, the servers slowed down and ultimately had to be shut down for 8
hours to “update”. The panic of server shutdown and the rise in price due to bullish
behaviour led to a major crash. Many investors began panic selling because they saw
the “server failure” as a sign of unsustainability or their money tied to an unreachable
location, dumping their investment as fast as possible.
 Figure 8 November 30 2014 - January 14 2015 -87% (coindesk.com/price)

Figure 8 depicts how the Mt.Gox exchange began to halt withdrawals, leading to the
most known crash in bitcoins current lifetime. There was never an explanation as to
why withdrawals were halted. Panic selling ensued.

Figure 9 December 17 2017-February 6 2018 -70% (coindesk.com/price)

Figure 9 represents the most recent crash that most attribute to being the result of the
crypto bubble having popped. Governments such as South Korea viewed this as an
indicator of caution and instability.
5.10 Implications of historical prices

What we can derive from the historical data and some of the largest crashes of bitcoin
is that the market is still young and fragile. Many opponents of cryptocurrency argue
that these datasets prove how unstable and short lasting this alternative form of
finance is. On the other side we have the proponents who claim that the
cryptocurrency market is experiencing growing pains, therefore must often adjust and
correct the pricing. Were the cryptocurrency market based on raw output, its value
would be based on the number of users trading and mining relative to the hash rate.
The pricing is more subject to change via outside forces and market expectations.

6. CRYPTOCURRENCY IN INDIA

In India bitcoins has been available since 2012.And at present in India there are 11
trading platforms and around 1 million users of bitcoin. At the movement RBI has
banned the transaction of bitcoins in India. So, one cannot use the cryptocurrency for
the payments of goods and services. Recently in 2018 during the union budget
declaration the Indian government declared that cryptocurrencies such as bitcoins
were not a legal tender. There is no protection available to those using and trading
them or dealing in them. In recent days finance minister Arun Jaitely said when asked
by the media the Government views on cryptocurreny he said the government was
aware that the cryptocurrency is being used for the illegal activities such as terrorism,
cryptocurrencies function within the community and they enjoy the trust of that.

According to the Indian government people using these types of currencies should
take certain caution because there is no lawful protection for these currencies. And no
help can be gained by the people from the government side if some fraud is faced by
the people. Regarding the future of cryptocurrencies in India an expert committee
also constituted to measure the risk involved in it. This committee will examine the
action of cryptocurrencies and release the report in few months. Some countries are
accepting the cryptocurrencies while some are not, some of them are yet to make
their decision. Cryptocurrencies has its own set of complications.
6.1 INDIAN GOVERNMENT’S STAND
Most governments don’t recognise bitcoin as currency. In fact, most governments
don’t even classify these as anything at all. These can be passed off as computer code
(which is the literal truth) or as digital curios (ities). Japan is one of the few
exceptions – the Bank of Japan imposes stringent restrictions on use but Japan does
recognise bitcoin as legal tender. South Korea also has rules for bitcoin-denominated
payments and transfers. Whatever governments may say, bitcoins are a currency
simply because people accept them as a medium of exchange for goods and services.
Apart from being accepted for normal transactions, crypto-currencies like bitcoins are
also used for cross-border money transfers, for money-laundering and ransomware
payments, and for drug deals and targeted assassinations on the Dark Web. Initial
coin offerings, commonly known as ICOs, have become popular as well, since these
bypass the usual regulations about raising “cash” for a new business. Bitcoin prices
went through the roof last year as trading volumes zoomed. In January 2016, bitcoin
was trading at $429 per coin – it peaked out at $4,969 this month, just before China
came down like a ton of bricks on coin-trading. Ethereum, another crypto-currency,
did even better than the bigger bitcoin. Ethereum was trading at $2.84 in January
2016 and it hit a recent high of $394. In India, the Mumbai film industry seems to
love bitcoin, given the number of celebrities who have burbled about it. But the
Chinese crackdown and fears that India might see a similar crackdown have led to
wild swings in rupee-values of bitcoin. The bitcoin was trading at Rs 3.01 lakh on
September 1, it dropped to Rs 1.95 lakh on September 15 as panic took hold, and it is
back to Rs 2.58 lakh on September 20.

The Reserve Bank of India (RBI) has been consistent in warning citizens of the risk
associated with cryptocurrencies and traders of its perils, Indian Prime minister, Sri
Narendra Modi, indirectly promoted Bitcoin, on July, 2, 2015, with his ambitious
Digital India. Plans included digitizing government data, improving India’s digital
infrastructure, and optimizing its online connectivity. The Finance Minister in the
country has labelled cryptocurrencies are not being legal tender. In recent time a
debate has emerged within the country as to whether profits from crypto transaction
should be taxed or not. Last week, India’s Department of Economic Affairs in its
Ministry of Finance met to discuss how Bitcoin could be regulated. The committee
suggested the following, that cryptocurrencies should be governed by the Reserve
Bank of India Act
of 1934, that Bitcoin investors should be taxed, that guidelines for buying and
investing in cryptocurrencies should be drafted.

As per business standard report the Indian government is going to introduce its own
Cryptocurrency similar to bitcoin. They also added that the government might its
cryptocurrency “Lakshmi”.

In a move to regulate the cryptocurrency market in India, Finance Minister Arun

Jaitley today cleared that it is not legal tender and it will discourage its use. However,
he mentioned that the government will look at the utilization of blockchain
technology. During the run-up to the budget, there have been talksthat the
government could come out with a roadmap to regulate the cryptocurrency market.
There has been rising craze among investors to put in their hard-earned money into
the highly volatile cryptocurrency market setting off alarm bells in the government.
Even before the budget Jaitley had already said that the Cryptocurrency is not legal
tender in India. The recent action of conducting survey by the IT department over all
the major exchanges has also triggered issuance of income tax demand notice by the
department to the users of these exchanges. There have been reports that several
banks have frozen account cryptocurrency exchangesin India, while the registrar of
companies (ROC) has stopped registering companies intending to act as such
exchanges.

6.2 ENTRANCE OF RBI:

Will the Reserve Bank of India try to regulate bitcoins and other crypto-currencies?
Almost certainly. No government that imposes capital account currency controls can
afford to ignore non-fiat currencies. Will the Indian government mess up attempts at
regulation? Almost certainly. The RBI doesn’t have a shining track record in terms of
its recent actions and it could fumble this task, for sure. In fact, the RBI is supposedly
considering setting up its own crypto-currency, which is a step in the wrong direction.
Crypto-currencies work for people who want anonymity and who are seeking
alternative stores of value. No fiat currency, crypto or not, can reasonably offer this
combination. What’s more, crypto-currencies have features (and bugs) that fiat
currencies don’t and that’s precisely why users love them. The blockchain system of
generating an exact increase in money supply gives comfort to speculators. This
eliminates worries about inflation caused by a sudden expansion of money supply by
the central bank since there is no central bank and the money supply is governed by
pure maths. This also makes fractional reserve banking cumbersome since currency
swaps or exchanges are always required for such actions. Also, while bitcoin,
ethereum, and other crypto-currencies can be banned by government decree, these
cannot be withdrawn from circulation except by peer-to-peer consent. A fiat crypto-
currency – well, that could be deleted in a minute at the whim of an oligarch. Indians
started trading in bitcoins and other crypto-currencies enthusiastically after Nov 08,
2016, precisely because they became wary about such possibilities. It’s hard to see a
fiat crypto-currency catching on.

6.3 What are expert’s views?

Experts across the world are coming to the conclusion that cryptocurrencies are here
to stay. The experts say the only way to bring value to the cryptocurrency is by
issuing the real money instead of it. The experts also talk about the risk trading
cryptocurrencies because here is no law on the fraud done in these types of digital
currencies and also the cyber crime can be its biggest demerit as it all works online.
According to the experts and many research papers the copy of cryptocurrency can be
made and a false transaction can be done so the trading would not be a safe one.
There is still a lot and lot of analysis to be done on this and a healthy result would
come out from it which would tell us a brief idea about the usage of cryptocurrency
its pros and cons, and why it can swap the physical money in the market.

6.4 So how do they do this?

One method is to deal in art objects. Buy a curio in local currency. Then sell that
curio abroad in a foreign currency. Even if they do not make a profit, they at least
would own some foreign exchange, having bypassed exchange regulations. Suppose
the curio in question is just a few lines of computer code? So buy some lines of
computer code in local currency, and sell those lines for foreign currency. Even
better, if they can do this transaction anonymously, for that would ensure that their
stash of foreign exchange would not even come to the knowledge of the snoopy
authorities. Welcome to China (did you think I was referring to someplace else?),
a large prosperous nation with
currency controls and a one-party government. Welcome to bitcoin, ethereum,
litecoin, et al, - computer codes that are curios and crypto-currencies.

6.5 companies using Bitcoin

According to CEO and the co-founder Sathvik Vishwanath many merchants in the
Bangalore area accept bitcoin through the Bangalore-based Unocoin which is one of
the largest bitcoin exchanges in the country and also provides merchant services. Five
of India’s largest companies including Dell accepted the cryptocurrency as payment.
The number grows day by day. In India Bitcoin is far from popular and most Indians
prefer fiat money but a recent Forbes article reports Bitcoin's craze is catching on and
that, to date, there are more than 600,000 users in the country. Recently two Indian
companies jumped into Bitcoins business, they came up with Wallet-Exchange
concept and they accept Indian Rupee.  Zebpay  Unocoin

6.6 It’s Rise in India:

India with a population that is over 1 billion strong has been on something of an
economic renaissance in the last few years. Such has been the extent of the country’s
growth that the IMF has called it the fastest-growing emerging economy. More than
40 percent of the country’s population has access to telecoms and internet
services. A country steeped in mystery, history, and culture, it is also not one to fall
behind when it comes to technological advancement. Bitcoin and other
cryptocurrencies have been operating within the country for a number of years now.
This article looks at the state of the Indian cryptocurrency market. As early as 2012,
small scale Bitcoin transactions were already taking place within the country. These
were still early days in the development of Bitcoin when only crypto hobbyists were
interested in Bitcoin. By 2013, Bitcoin was beginning to gain a level of popularity
that was spreading across many countries. That year, a few businesses began to
accept Bitcoin payment.

A vintage era pizza shop called Kolonial in the Worli area of Mumbai became the
first restaurant service in India to accept Bitcoin payments. In a short space of time,
cryptocurrency exchanges began to spring up within the country. Pioneers like
BtcxIndia, Unocoin, and Coinsecure began offering cryptocurrency exchange and
trading services in India. Over time, others like Zebpay, Koinex, and Bitcoin-India
were added to the list. With the proliferation of crypto trading and exchange
platforms, the crypto market in India has grown from its modest level in 2013 to what
it is today. Apart from these online exchanges, there are also a number of over-the-
counter (OTC) crypto shops in the country. Add to this, numerous Bitcoin ATMs in
major Indian cities and you have the makings of a crypto economic hub.

On November 8, 2016, Prime Minister Narendra Modi announced the

commencement of a demonetization policy. The move by the government to
demonetize approximately 86 percent of the country’s paper currency sent
shockwaves all across the subcontinent of India. People with large cash holdings
required a new means of holding such wealth without incurring significant tax
burdens and sundry government scrutiny. It became common practice for some to
buy large orders of Bitcoin or other cryptocurrencies and then sell them at a later
date. This meant that they were effectively circumventing what would have been
considerable taxes if they had tried to circulate their wealth through the banking
system. The demonetization policy also led to widespread criticism of the mainstream
financial scene in the country. In the space of 24 hours, 86 percent of the country’s
paper currency in circulation had been rendered valueless by virtue of a single
government proclamation. Realizing that fiat money isn’t exactly “real” money since
it isn’t backed up by anything, Indians began to seek alternative currency models.
Many Indians, especially those in the 40 percent bracket with access to the Internet
began to take up Bitcoin and other cryptocurrency investments. The 2016
demonetization policy may have spurred the adoption of cryptocurrencies among a
considerable portion of the population but realities soon began to emerge that have
stifled the growth of the market in the country. Despite its vast population, India only
contributes 2 percent of the total global cryptocurrency market Name Price Market
Cap Bitcoin $8254.8 $ 142.2 B Ethereum $ 528.33 $ 52.97 B Ripple $ 0.65492 $
25.92 B Litecoin $ 151.22 $ 8.52 B Monero $ 208.7 $ 78.16 M Neo $ 58.98 $ 260.1
M capitalization. The small role being played by such a large economy can be
attributed to the high cryptocurrency prices & the RBI-led government crackdown.
The general level of prices of cryptocurrencies in India is on the high side. Market
rates are relatively higher by as much as 5 to 10 percent compared to the global
average. This means that Indians can only get involved in peripheral participation in
crypto trading
as far as international crypto exchange platforms are concerned. Lack of large-scale
mining facilities & strict government restrictions on international money flow also
make it significantly difficult for Indians to transact with many of the large foreign
crypto exchange platforms. The Reserve Bank of India (RBI) has been consistent in
warning citizens of the risk associated with cryptocurrencies. While the government
of the country hasn’t banned cryptocurrencies, they haven’t exactly been endorsing it.
The coming months will reveal the direction in which the crypto market will move as
far as India is concerned.

6.7 Benefit of Cryptocurrency in Indian Economy

The benefits of cryptocurrencies are many. But the biggest advantage comes from the
fact that these currencies, by their nature, are secured and are easy to transact.

Today countries like India are trying to regulate the cash economy and move the
country toward digitalization. But while the efforts are noble, the fact is that
digitization is now totally dependent on cell-phones. Today, there are around 300
million smartphones in the country and the number will double to 700 million by
2020. According to the Morgan Stanley report – ‘The Next India- India’s digital
leap’, there is scope for visible shifts in economic activity starting in 2018 eventually
leading to India being a) the third-largest economy in the world with a GDP of US$6
trillion, b) among the top five equity markets in the world with a market
capitalization of US$6.1 trillion and c) the country with the third-largest listed
financial services sector in the world with a market-cap of US$1.8 trillion by 2027.

Morgan Stanley also expect India’s consumer sectors to add about US$1.5 trillion to
their current market cap of US$500 billion over this period.

6.8 Cryptocurrencies as the Big Game Changer

So while we talk of digitization that will be guided by Jan-Dhan accounts, Aadhaar
and mobile phone connectivity, the big game changer could be cryptocurrencies.
Today,
digitization in India is driven through POS machines or internet payments. While the
cost of transactions for internet payment is coming down the fact is that there are
intermediaries involved in internet payment. These intermediaries which are normally
banks act as third parties and add to the cost of the transaction. POS terminals are
also costly for most merchants. The number of POS terminals is increasing but still
the demand is high but merchants are not showing enough interest.

So can these small merchants use cryptocurrencies at a lower cost and solve the
problem of connectivity or digitization? The answer is yes. As long as data gets
cheaper on the mobile phone, cryptocurrencies can be used to do transaction even
with small merchants.

Here are some of the benefits that cryptocurrencies can offer to digitization:

I. Real Estate:
Cryptocurrencies will be very beneficial in the area of real estate. This is because
bitcoin, one of the leading cryptocurrencies, is powered by blockchain. The
blockchain is a decentralized ledger that allows users to transact with each other
directly and the biggest benefit of a blockchain is that a transaction can never be
reversed. Thus the chances of fraud get minimized. In the case of real estate, in most
developing countries, land records are in a mess. Tracking these records is not easy.
Many times these records are tampered. Once these records go on a blockchain it will
not be easy to tamper the records and this could ideally solve a major problem for
most Indians who lock their wealth into real estate. Poor people with no land records
can be benefited through the use of cryptocurrency.

II. Immediate Settlement:

In the case of an absence of a middle man, the cryptocurrency typically becomes a
peer to peer transaction. In such a situation, the contracts can be settled immediately.
III. Transaction Done at Fraction of a Unit
Cryptocurrencies can be done at a fraction of a unit. Thus even when someone wants
to do a transaction for a few rupees or a few dollars, there will not be any additional
cost. Typically, banks charge more for smaller transactions and less for larger
transactions.

IV. No Theft in Transaction

There can be no identity theft in a cryptocurrency transaction. So while India can go
digital on the basis of Jan-dhan and aadhar, there are huge chances of criminals
hacking into Aadhar or even the jan-dhan accounts. That won’t be possible in a
typical cryptocurrency transaction. The person who wants to send cryptocurrencies is
in total control of their transaction as compared to a credit card transaction, where the
third party bank is in control of the transaction.

V. They are Global

Cryptocurrencies are truly global and are not bound by the boundaries of any country.
Thus, transactions become very easy. Secondly, there is no third party that can block
your account in case the account has been misused. In the case of cryptocurrencies,
the owner owns the private key and thus no third party can take away your money,
unless you lose the private key.

Cryptocurrencies allow you the ultimate ownership of your own money. Thus while
people are worried that digitalization will allow the governments to take control of
your bank account, the scope of such a thing happening with cryptocurrencies is
limited because the entire operation is decentralized.\

6.9 Cryptocurrency Regulations in India

I. Cryptocurrencies: Not legal tender
Cryptocurrency exchanges: Effectively illegal – regulations being considered
Cryptocurrencies are not legal tender in India, and while exchanges are legal, the
government has made it very difficult for them to operate. Although there is currently
a lack of clarity over the tax status of cryptocurrencies, the chairman of the Central
Board of Direct Taxation has said that anyone making profits from Bitcoin will have
to pay taxes on them. Other Income Tax Department sources have suggested that
cryptocurrency profits should be taxed as capital gains.
 II. Exchanges
Cryptocurrency exchange regulations in India have grown increasingly harsh. While
technically legal, in April 2018 the Reserve Bank of India (RBI) banned banks and
any regulated financial institutions from “dealing with or settling virtual currencies”.
The sweeping regulation prohibited trade of cryptocurrencies on domestic exchanges
– and gave existing exchanges until 6 July 2018 to wind down.

III. Future Regulation

India’s government seems to be looking at the possibility of less prohibitive
cryptocurrency regulations. In 2017, the Special Secretary of Economic Affairs
formed a committee to suggest ways of dealing with the potential AML/CFT and
consumer protection issues related to cryptocurrencies. In 2018, reports suggested
that a government committee was drafting new legislation which introduced greater
cryptocurrency protections for “the common man”.

6.10 The Future of Cryptocurrencies in India

“Bitcoin the next big thing since Internet itself”
With regards to the Blockchain, India can’t be overlooked. It is an incredible nation
with more than a billion people who recently experienced demonetisation. That is the
time that numerous Indians started capitalizing their cash in Bitcoin and proceed to
owe them now. This spike drove some tech-savvy citizens to purchase Bitcoins as
well as accomplish something with the blockchain protocol itself.

Calling bitcoins, the “next big thing since the internet and computing” themselves are
major statements to make. Bitcoin and other cryptocurrencies may not be much of a
threat to fiat currencies today.
“Virtual currencies are in a different category because they provide their own unit of
account and payment systems. These systems allow for peer-to-peer transactions
without central clearinghouses, without central border-less activities, from your local
bank branch to quantum-encrypted global transactions” as stated by Christine
Lagarde

This year, we have seen the crypto network growing at a rapid pace. While until
today there is no clear policy or regulation on cryptocurrency. The government and
courts
stand have been unclear. Though entrepreneurs in the country are making the most of
the opportunity.
In a country like India, where we value everything by its monetary worth, the sure-
shot way to beat cash is to make currency that is more valuable than cash.
Apart from that, there is no one who understands Indian consumers better than native
companies. A crypto exchange and a wallet that would allow hundreds of millions of
citizens to become part of the crypto economy will be a great leap for the entire
blockchain community.

I. What about the challenges ahead?

One of the most challenging battle that humanity has ever faced would bring the
masses to the blockchain. In the current times, we understand that there is no need for
hierarchy. There will always be bureaucrats, politicians and corporates who may not
like it over giving up the control or power. Thus, making it a tough journey.
In fact, blockchain and cryptocurrencies can’t be prohibited without banning the
internet itself. What if in future a nation decides to declare blockchain or
cryptocurrency to be illegal? While it would probably be impossible to identify
everyone, who owns crypto assets and put them behind bars, a move such as this
could disincentives merchants, businesses, and websites from advertising their
willingness and putting put up a banner saying, “Cryptos accepted here.” When that
happens, in my view, you take away an entire leg for an economy to stand on.
Without merchants to accept crypto, its value proposition as a replacement for money
goes away.
In India, there are no regulations around cryptocurrencies yet. It is also less likely that
the country will bring its own cryptocurrency. Also, government and courts stand
have been unclear. Nobody knows which way the camel will sit. It can become an
opportunity to put the nation as a forward-thinking one or remain an incumbent.

II. What does the future hold?

It’s been nearly five years since its India début, bitcoins are now coming of age here,
with traders gearing up for a giant leap. Indian exchanges of the digital money are
gearing up to launch bitcoin futures early next year; but first, they want to integrate
other cryptocurrencies such as Ethereum, Ripple and Bitcoin Cash (BCH) on their
platform.
This follows the launch of bitcoin futures and the subsequent rise of the
cryptocurrency’s value in the global markets — its value hit an all-time high of
nearly
$8,000 in November.
There are about 1,000 alternative coins in the global market out of which Ethereum
being the most popular one. Many Indians are trading in cryptocurrency due to their
higher volatility. Right now, people buy bitcoins from Indian exchanges and then
convert them into other cryptocurrencies from international exchanges.

Going by the current trend, it might not be wise to invest in Bitcoin, but you can very
well invest in Ethereum, BAT, STRAT, etc. These are going to go higher giving you
good returns if you invest now.

Acquiring cryptocurrency is only the first step towards building a blockchain enabled
India. There is scope for more applications than there are actual blockchain use cases.
In this context, registering with the best exchange will take you there before anyone
else.

III. Where will crypto be in the future?

According to me Bitcoin, or the technology behind it, that is, the blockchain will have
a prosperous future. Its importance goes far beyond bitcoin and payment transactions
as this is just one – and the banalest – of its application.
Davide Menegaldo, COO at Helperbit, said, “I would imagine this scenario: in the
future financial instruments linked to bitcoin will be finally approved. High finance
will invest into the cryptocurrency (more than the 300M expected for the bitcoin ETF
approval). I’m thinking about 5-10 times the current price. Bitcoin will not
necessarily be used as a method of payment (it depends also on how the size block /
Segregated witness / LN matter will proceed or will not), but primarily it will be used
as a store of value. However, there will be much more competition as a payment
method because some banks could issue their own cryptocurrency, while the current
ones will remain a handful. Ethereum will consolidate as the second most important
infrastructure, and 99% of ICO tokens will have any value”
The emergence of Bitcoin has sparked a debate about its future and that of other
cryptocurrencies. Despite Bitcoin’s recent issues, its success since its 2009 launch
has inspired the creation of alternative cryptocurrencies such as Litecoin, Ripple and
MintChip.

The future of blockchain based cryptocurrencies is bright and I am confident that

blockchain is the way ahead. Decentralised and hybrid apps will take over the market
in the coming years. For that, you need to be prepared to have some cryptocurrencies
in your kitty. Very soon companies might even start paying salaries in bitcoin/ethers
or other cryptocurrencies.

7. General perspectives on viability

The viability of cryptocurrencies is tied to its purpose. The purpose is based on how
it is classified in each country. Because there is no consensus on agreeing how it
should be approached, arguments on its future are based on how it will fit into the
economy. This boils down to how economic theories align with cryptocurrency in
general. The argument over cryptocurrency is not in its technology, but in its
ideology and place in the world. An economist with libertarian views might see
Bitcoin as the future of money and an indicator of the progression and evolution of
the financial industry into a more “free” and “capitalist” model. A Marxist might
see the value in digital money because it unshackles itself from the constraints of
intermediaries, therefore making it a fair and equal option for the masses. However,
most economies in the world operate under some sort of capitalist model with a
large focus on state control and other counter-measures that dissuade the economy
into “free fall”. Based on this method of operation, Bitcoin poses a threat to the
existing structures. It should come as no surprise that traditional economic
researchers and intellectuals might find cryptocurrencies absurd in comparison to
our current le- gal tenders.
 7.1 Bitcoin as fiat money

Melissa L. Pattinson explains in her book; “Buying into Bitcoin, an Austrian Analysis
of the Virtual Currency’s Sustainability”, the disadvantages and problems with
bitcoin. She explains that a traditionally Austrian economic perspective does not find
bitcoin to be legitimate because it fails Ludwig von Mises’ famous Regression
Theorem (Pattinson 2011: 9). Ludvig von Mises’ RegressionTheorem states that
money isn’t a product or service, but instead is a way to get something of value.
Because the “supply” of money exists by the amount in circulation and doesn’t exist
because it is only a means to an end, there is no set price for it. What ends up
happening is that because people accept money for goods and services, others will as
well. Bitcoin fails the Theorem due to two main reasons:
1. Cryptocurrency has no commodity value

2. Does not have exchange value because it did not have value prior
to being used as money

Coinciding with this is the argument that Bitcoin is “essentially a fiat currency”
(Pattinson 2011: 8). A fiat currency is any currency that has no intrinsic value. Her
stance on the matter is simple, bitcoin shouldn’t be considered a viable path for future
financial institutions because of its core features.

A counter statement to this is that the current economic system functions through the
usage of fiat money; all government issued currencies have been credited as legal
tenders, but they are based on the faith and credit of the economy. These currencies
used to be tied to a physical commodity; gold, but since the decoupling of the US
dollar from gold in 1971, are essentially without a physical counterpart. The key
difference here is that Bitcoin was created out of nothing, whilst government issued
currencies had their origins in physical assets. Furthermore, Pattinson argues that
much of the inherent downsides of bitcoin are in its function; losing the original
database of the user’s bitcoins would mean losing the bitcoins themselves, seeing as
they cannot be accessed anymore. She goes onto criticize the “fool proof” system of
the blockchain, citing the IP address tracing done by US government officials on a
black-market website called SilkRoad, which utilized bitcoins to trade. Pattinson
also states that
because virtual currency is relatively untraceable, non-taxable, and is popular among
the grey market, its reputation has mixed results.

The argument is based on an Austrian economic perspective and conflicts with the
EU’s official stance on accepting bitcoin and other forms of cryptocurrency, which
will be dis- cussed later in the paper. Her concluding words are; “Because it has no
foundation in correct monetary theory, Bitcoin is not sustainable and is unlikely to
survive in today’s economy” (Pattinson 2011: 22).

7.2 Disintermediation

Assuming that financial disintermediation was a good thing, all is still not crystal
clear. Isaac Pflaum and Emmeline Hateley co-wrote a dialogue called: “A bit of a
problem: national and extraterritorial regulation of virtual currency in the age of
financial disinter- mediation”. “for the potential benefits of disintermediation in
financial ser- vices to be realized, regulatory authorities in the United States and
elsewhere must address the risks posed by the regulatory gap that will be created by
cutting out the middlemen.” (Pflaum & Hateley 2011: 1194).

To paraphrase; the 3rd party that currently operates as a financial institution such as a
bank can be taken out of the equation, but the trench created needs to be filled by
safety measures.

What further escalates the issue is that not all owners of bitcoin have a bank account.
Assuming cryptocurrencies would be accepted similarly to dollars, one would need a
“safe” where to store the coins. Currently there is the digital wallet, which is noth-
ing more than an encrypted location in the blockchain network where the individual’s
“balance” is stored. This location is not tied to the person’s private information and
losing the password or code to the digital wallet means permanently losing access to
that ac- count.

However, Pflaum and Hateley do give Bitcoin merit by mentioning of its abilities in
remit- ting to developing countries, due to its fast speed and next to no transaction
cost. Unfortunately, this can be risky because the funds can end up being used in
funding
terrorism, illicit drugs, and other activities in the black market. The authors explain
that even the Financial Crimes Enforcement Network (FinFec) and Securities and
Exchange network (SEC) are “ill-equipped to deal with the disruptive potential of
Bitcoin (Pflaum & Hateley 2011: 1199). This is primarily due to the nature of the
blockchain and its new technological capabilities; it is simply too new and too
unknown to navigate.
There has been precedence for implementing an alternative way of making
transactions, with some even become highly popular and legal. One of these cases is
Paypal, a world- wide online payments system for online money transfers. It is an
alternative to traditional payments such as checks and money orders. In 2002, Paypal
initiated its IPO and as a result is an actively traded stock in the New York Stock
Exchange. There are grounds for comparing the roadmap that digital currencies are
currently undergoing to the historic path that Paypal took.

7.3 Consensus today

Currently in 2019, the status of digital currencies has been rocked back and forth by
an ideological tug of war. One side is the economic thinkers with strong foundations
in classic economic theories. They abide by the principle that all theories should be
realized equally in the real world and are therefore disappointed by this alternative
form of fi- nance. The status of bitcoin and other cryptocurrencies as fiat currency
hinders its legitimacy. Furthermore, many might see the surge of digital crypto
markets as nothing more than an attempt to disrupt the status quo of currently
operating financial markets. Lastly, the fact that much of active trading and spread of
content within the blockchain network occurs within an illegal network for products
and services that otherwise would not be obtainable, stains its reputation. On the
other side countering the traditional economic thinkers are institutions and stake-
holders who wish to see a shift in the global market’s foundations. “Risky” investors,
proponents of the blockchain technology, and certain governments (to be discussed
later in the paper) have faith that they are early adopters of a new era of finance.
Instead of comparing new technology to the structures of the past, many proponents
see a progression that solidifies the digitalization of our world. Libertarian ideologies
and full-fledged capitalists have put their stakes in believing that bitcoin is here to
stay.
Cryptocurrency can still be a viable source of investment if the investor is willing to
take on extra risk on top of the market volatility. The case for its existence can only
strengthen as more officials and influencers can validate its usage, which it currently
lacks severely. Its potential outcome should be compared similarly to gambling
whereas small investments with little loss can prove to be beneficial. The paper will
go into more detail ex- plaining how different stakeholders and regions have received
this new digitalized financial system and market.

8. COMPARISION OF CRYPTOCURRENCY VERSUS OTHER

INVESTMENTS

8.1 Cryptocurrency vs gold

Since ancient times, gold is usually the most popular choice of people for investing.
Many people invest in gold as most of the time it gives profit to the investor. Though
gold is the first choice of investors, cryptocurrency is much better than gold. As
Cryptocurrency can easily carry no matter in how much quantity it is, on the other
hand, to carry gold from one place to other place is difficult and not at all safe. User
can easily access their Cryptocurrency wallet from anywhere by using a computer,
laptop or a Smartphone this is not possible with gold. Chances of forgery are possible
in gold, whereas it cannot be possible with Cryptocurrencies. The government can
confiscate gold but can never confiscate Cryptocurrencies. When you think about
Cryptocurrency Vs Gold as Investment then it’s better to consider Cryptocurrency.

8.2 Cryptocurrencies vs bonds

A bond is where the investor lends some money to a corporation for a certain time
period at a fixed interest rate. This option for investing is not safe as it depends upon
a third party, whereas Cryptocurrency is independent where a user doesn’t depend on
a third party. Cryptocurrency allows the user to be powerful on their own.
Cryptocurrency seems to give you better when you talk about Cryptocurrencies Vs
Bonds. Cryptocurrency vs shares and stock If one chooses shares and stock for
investment it means they are buying shares of a company at a price that is fixed by a
company. Buying more stocks means your power and ownership in company
increases which will result in more profit. The profit of the investor completely
depends on the profit of the company and it also takes time to make the profit such as
two or three years, whereas cryptocurrencies make the profit instantly it will only
take few weeks or months. There is one more advantage of investing in
Cryptocurrency which is not available in other investments, that is if you invest in
Cryptocurrency you doesn’t have to pay tax but if you invest somewhere else you
have to pay tax.

8.3 Cryptocurrency vs Mutual Funds

Well, it depends, whether you are a seasoned investor or recently started buying and
how much you know about the crypto market. Approach for investing in financial
instruments is much different than investing in the cryptocurrencies. Everything that
happens in the coin market is in one way related to the demand and supply, and also
other factors such as legalization, the technology behind a coin, popularity and what
future it holds. Whereas in the mutual funds, the performance is calculated based on
the type of resources it is investing into, the top holdings, age and how the overall
performance has been for the past three to five years. At Gross, if you open any of the
portfolio or mutual funds you can see all the factors that are affecting returns on your
investment, whereas with the crypto coins factors change within minutes and prices
fluctuate every second. Second, it also depends on risk appetite of the person, if the
person is in his old age and wants to invest his savings in regular income schemes
then cryptocurrency investment is not an option for him. On the other hand if the
person doesn’t want to take too much of risk and invest in schemes which give really
good returns he may consider the option of investing in equity mutual funds, in which
if remain invested for a longer period give good amount of returns.
9. Analysis of Cryptocurrency in today’s environment

The author of this paper has chosen to utilize the SWOT and PESTLE analysis
methodology to successfully examine what cryptocurrencies can and cannot offer for
the world, and with what cost. The SWOT analysis enables the reader to understand
the basic premise of what cryptocurrency has to offer and provides an overview from
a non-nation- oriented perspective. The PESTLE analysis also deems itself valuable
because it takes into account the outside forces that are affecting cryptocurrency’s
status. It must be mentioned that these two tools of analysis are meant to offer
perspective from a worldwide standpoint, because every country and region has its
own stance on this. The author recognizes this and felt it best that both methods of
analysis should be represented each as one large chart. The alternative was to make a
chart of each country separately, which the author felt to be too repetitive and
structurally straining. Furthermore, looking into cryptocurrency today means to
understand how quickly and unpredictably its status can change. Therefore, it is best
to analyse these currencies from a concrete standpoint; these are features that are
integral to its functionality. Important to remember is the fact that because the
cryptocurrency “climate” is so unpredictable and reactive, the analysis provided
investigates cryptocurrencies from the first half of 2018, basing its opinion purely
from this time- period. This needs to be emphasized because the analysis has data and
critical aspects that could possible be removed or altered in the near future.

9.1 SWOT Analysis

Strengths

•Peer-to-peer network

•Transaction speed

•Blockchain Technology

• Disintermediation

Weaknesses

• Lack of regulation
•Tarnished image

• Increasing transaction costs

•No central figurehead or spokesperson / community fragmented •Oversaturated by

new currencies and initial coin offering's
Opportunities

•Digital payment system

•Replace current legal tenders

•Can be beneficial to third world countries •Similarity to gold standard era

Threats

•Current financial system

•Government regulation

•Grey and black market funding

•Susceptible to bubble

9.1.1 Strengths

As was discussed in the introduction of this paper, the key strength and differentiation
that cryptocurrency has to offer is the utilization of its blockchain technology,
operating in a peer-to-peer network. Blockchain technology can offer a more secure
and efficient platform for any network that requires daily usage. Marco Iansiti and
Karim Lakhami wrote a journal article on the subject of blockchain in the Harvard
Business Review say-ing that;
“With blockchain, we can imagine a world in which contracts are embedded in
digital code and stored in transparent, shared databases, where they are protected
from deletion, tampering, and revision. In this world every agreement, every process,
every task, and every payment would have a digital record and signature that could
be identified, validated, stored, and shared. Intermediaries like lawyers, brokers, and
bankers might no longer be necessary. Individuals, organizations, machines, and
algorithms would freely transact and interact with one another with little friction.
This is the immense potential of blockchain.” (Iansiti and Lakhami 2017)
The widespread adoption of such a system would transform our daily lives from the
ground up. As it so happens, cryptocurrencies are the first large scale “product” that
operate in this technology. On the other hand, block- chain does not need digital
currencies to function, therefore the strength of cryptocurrency lies in the platform it
utilizes. Without blockchain, bitcoin would not be as appealing.
Transaction speeds are another aspect provided by the blockchain, in- creasing the
velocity at which “money” can be transferred between two points. Traditionally
intermediation occurs when money is wired through be- cause it must be approved
and qualified by a bank or other financial institution, who take a small fee for this as
well. These speeds are subject to the limitations of peer-to-peer networks, which
fortunately have great functionality under larger workloads.
The decision to call disintermediation a strength is a personal choice by the author
who realizes that not everyone sees it this way. It is a strength be- cause the
shortening of money transfers, communication, and extra third parties is found to
increase efficiency and decrease costs. Furthermore, the author finds that any
company or organization that attempts to place the direct seller closer to the buyer to
be a positive thing.

9.1.2 Weaknesses

The most prominent and public problem that has been tarnishing the image of crypto-
currency is the prevalent and widely utilized TOR-networks who conduct highly
illegal business and use cryptocurrency as method of payment. The reputation that
bitcoin has carried out in the past is slowly improving, but that does not change the
fact that the platform and attributes that cryptocurrency provides are ideal for the
black market. Anonymity, difficulty in tracing source, and digitalization can be used
for the wrong purposes. This has been the primary argument from governments that
require a great deal of changes to the network itself before it could be implemented in
a correct manner.
Going alongside the bad reputation, the lack of regulation within the cryptocurrency
network is further pronounced when it becomes clear that there is no central figured
head or spokesperson. Satoshi Nakamoto for all intents and purposes is just an alias
without an identity. A fragmented community that suffers from legitimacy will have
problems achieving satisfactory legitimacy in the eyes of the public and the
governments. This is further highlighted by the lack of any effort to compromise or
discuss potential changes to be made for crypto. As effective and efficient the
blockchain network is, it too has its limitations. The last 5 years have shown us that
when it is placed under intense workload, the transaction speeds decrease by a large
amount. The effect of this in the past has been that certain exchanges have
temporarily shut down their servers or informed of issues in the stability, causing
quick and sudden price dips. Increase in daily trading and user base means that the
block chain platform needs more resources to function at the same level, which in
return has caused the transaction price to rise. Originally there were no transaction
costs because the user base was so low, and transaction speeds were as ideal as can
be. It is ironic that the popularity of crypto-trading means that ex- changes have
begun to require transaction costs and the transaction speeds have slowed down; the
very things that the blockchain aimed to get rid of.
The next big weakness of cryptocurrencies is the over saturation of its market by too
many new entrants. As was mentioned in the very beginning of this paper, there are
over 1,624 cryptocurrencies currently circulating in hundreds of exchanges. The
surge in rate of initial coin offerings gives rise to unnecessary tokens. As is evident
from the chart below, the total market capitalization of all “others” is only 20%.
Granted, it has increased greatly since 2016, and Bitcoin has lost market cap, but it
seems that this is because of injecting new coins into the market and not because the
previous coins have increased in trading value and volume.
 Figure 10 Total Market Capitalization 2013-2018 (coindmarketcap.com)

What also seems quite evident here is that with the decrease in Bitcoins’ market
dominance in terms of capitalization, the increasing availability for new ones can
cause price fluctuation and market capitalization for existing ones. Ripple, much like
its name implies, seems to go through rippling effect where it will see great demand,
only to afterwards dwindle down. The author believes this to have a negative
consequence to the crypto- currency market, because long-term valuation of any
existing cryptocurrency cannot be based upon historical data with precision.
Furthermore, this chart also highlights just how dominant the few big
cryptocurrencies truly are.

9.1.3 Opportunities

Progressing further into digitalization through block chain is highly plausible, and
crypto- currencies could very well tag along for the journey. It is very possible that
cryptocurrencies can change our current financial system from the ground up. What
these digital currencies can offer is a more transparent network that puts the buyer
and seller closer to each other. These opportunities are assumed to be possible should
their status be improved into mainstream usage.
A primary opportunity for cryptocurrencies is to be a long-term solution in an
increasingly digital era. As we see payment methods and transactions becoming
faster, shorter, and more efficient, digital currencies can meet this demand.
The possibility that a new gold standard would arise from the utilization of these
digital coins could provide much needed stability in currency valuation. While a
ridiculous thought in the current day and age because of cryptocurrencies’ price
volatility, it could be an outcome given time and awareness of blockchain. The author
believes that the deviation from the gold standard was one of the principle examples
of the financial system losing sight of its purpose.

9.1.4 Threats

Cryptocurrencies in 2018 have many hurdles to cross. The primary threat are existing
financial institutions and their foundations. Because there has been no indication of
flexibility from the proponents of cryptocurrency, banks and other institutions are
reluctant to co-exist or adopt these new tokens. Governments prefer stability and
long- term strategy, something cryptocurrencies cannot currently provide.
The position of the current financial system has its roots deep in our everyday lives.
Most of us do not question the practices and edicts, but rather have accepted them as
is. Long term planning for many involves financial obligations, and as such it would
be quite a transition moving to a cryptographic standard. In addition, the government
regulation required for implementing cryptocurrencies into our everyday life are a
threat to the core values they represent.
The stubborn nature of crypto-communities has led to the development of a highly
professional yet illegal black market. The vendors that operate through anonymity
provide a marketplace for funding in terrorism, drug trade, and other cases where
human and animal rights are violated severely. The author would like to point out a
fair comparison that could be argued between the similarities that a blood diamond
shares with digital currencies; the end user does not necessarily realize or know the
origins of their asset.

The last big threat that the author argues for is the imminence of a bubble, or the
susceptibility of cryptocurrencies in forming one. What the second half of 2017
showed through charts is that the value of coins such as Bitcoin and Ethereum sky
rocketed
into unreasonable heights, only to be met by a crash in the very end of 2017. The
speculative market was fuelled by investors expecting to get rich quick, and as such a
bubble was formed. Future bubbles can form again, especially when the expectations
market is the dominant variable that determines cryptocurrency value.

9.2 PESTLE analysis

Political

• Government regulation

• Taxation

• Classification

Economic

• Fiat money

• Comparison to current legal tenders

• Physical vs digital

Social

• Anonymity

• Representation of crypto community

Technological

• Blockchain technology

• Server stability

Legal

• Black market
• Conflict of interest for banks

Environmental

• Price of electricity

• Location of "mining factories"

• Digital footprint

9.2.1 Political

The political factors that play a role in cryptocurrency are dependent on the region.
What we can mostly see from throughout the world is that certain countries such as
Switzerland are optimistic and willing to build around cryptocurrency, while
countries such as China are more hesitant to give more fuel to the growth of the
markets unless the state has more authority over it. In the middle ground we find the
European Union and the United States, both whom struggle with figuring out the
legal framework for it by trying to construct it around federal level. South Korea has
had a mixed reception with these currencies because the government has begun to
tighten the grip on its control, even when trading has been very active in the Korean
peninsula. What the political structure needs is proper taxation, classification, and
regulation.
The political landscape is hesitant to make reforms for a widely speculative and
unruly digital asset. Cryptocurrencies themselves carry a slightly political message
with promoting disintermediation and greater individual privacy. Governments that
many regard as authoritarian are less likely to adapt or adopt cryptocurrencies, while
governments that are seen as promoting policies that support individuality are more
likely to be flexible in the matter. Ultimately cryptocurrencies have no real political
support from any large political faction throughout the world because they are still
seen as unstable and highly risky to invest in. The outliers in politics might make a
case for cryptocurrency, but it is also fairly obvious that the status of cryptocurrencies
is not something many care to campaign for.
9.2.2 Economic

The economic aspect of cryptocurrency discusses its status in our world. Some argue
it to lack the features that make it a potential candidate to current legal tenders,
namely the reference to it being fiat money. On the other hand, currencies such as
bitcoin are being compared to gold, because there will be a limited supply in
circulation. In addition, the author recognizes that its usability in the digital network
is superb, but its inability to be in physical form might be an issue. Because a large
percentage of the human population does not have daily access to computers or
devices that allow the user to access their digital workspace, they would find it very
difficult to manage their finances. Unfortunately, this cannot be alleviated because if
cryptocurrencies were to be made physical money, they would essentially become
similar in status to current legal tenders. This is exactly what they are not supposed to
be and go against their idea. The economics of cryptocurrency cannot be predicted for
certain, and its valuation is based most notably on the expectations market. As a
result, the research and economic theory behind cryptocurrency is still
underdeveloped due to its relatively short span of existence. Cryptocurrencies wish to
be seen as a limited resource that will became scarcer and more difficult to obtain as
it nears its last “mineable” coin. In addition, this should scale the value and price of
these digital assets according to its supply, and the demand of the market.

9.2.3 Social

The social aspect of cryptocurrency is interesting to discuss, because the ideal user is
anonymous, therefore the social networks would be very different from what we
imagine. In the ideal crypto-world, each user has an encrypted user-id and their
location would be untraceable. However, the reality is that this is a utopian
perspective because in today’s societies, one’s digital footprint is only growing, not
shrinking.
The little representation of the crypto-community has contributed to a negative and
un- coordinated roadmap where we see segmentation occur depending on each
currency. Coins such as Bitcoin Cash have been created to fix the “shortcomings”
that Bitcoin has, with many users having originally used bitcoin. The author finds this
to be an erratic and reckless way to represent cryptocurrencies.
9.2.4 Technological

The greatest aspect, as mentioned in the SWOT analysis, is the technological

framework and foundation that cryptocurrencies are based on; block chain
technology. The accessibility and scalability of the block chain means that
cryptocurrencies can thrive in their platform. What the author found is that server
stability is crucial for cryptocurrencies to be traded and used daily. This means that
resources in building larger servers and new mining factories will directly influence
the traffic that cryptocurrency experiences.
Cryptocurrencies are also the ambassadors of the blockchain technology, a
technology that will find itself useful in any network requiring peer-to-peer
connection. Supply chain management, medical record database, and other functions
that have large databases could and should find ways to implement aspects of
blockchain into their current operating network. It is the blockchain technology that
provides all technical and pragmatic uses of cryptocurrencies.

9.2.5 Legal

Legal framework for cryptocurrency is unevenly developed worldwide, with certain

regions apprehensive and dismissive, while others flexible and optimistic. It is
difficult to define the legal standard that cryptocurrency needs to have, and the author
suspects that within the next few years it will become evident where cryptocurrencies
will have a future, and where they will be outlawed. The legality will be affected by
the political dis- position of the target country, as well as the predominant economic
theory that steers the countries markets. Most important is to settle the jurisdiction of
the classification of cryptocurrency. If they were to be lawfully stated as an asset,
commodity, or service, could their legitimacy see support from the law. The author
realizes that each classification makes it behave and operate differently and chooses
to abstain from classifying it personally. This is because the author believes that it is
not the exact classification that matters, rather that it gets classified.
9.2.6 Environmental

While no natural resources are “mined” in the process of accumulating

cryptocurrencies, there is a real cost to the environment. Large mining factories are
built which in return draw a great deal electricity to operate and function properly.
These mining factories utilize computer components that are made up of expensive
metals and minerals such as nickel, gold, and aluminium. The ideal location for
mining cryptocurrencies is in a region where electricity is cheap, and the climate is
cooler than average in order to de- crease heating issues that occur from the mining.
Furthermore, the noise level that these factories create is incredible high because the
fans that spin in unison create a “jet-en- gine” like sound. This is not ideal for local
communities or wildlife habitats because it disrupts the ecosystem and region as a
whole. Lastly, the expiration and life span of these electronic parts is finite, and
recycling it is complicated. As a result, the broken and omitted equipment often goes
straight to the trash or gets thrown into large wastelands.
10. Future road

Cryptocurrencies are striving to outlive the current financial system and as Mr.
Nakamoto had hoped, replace them with a completely cryptographic and digital
network. There are many variables to consider, all creating a fork in the road for
crypto. The zero-sum game nature of cryptocurrency means that it will face a path
with many dead ends. By looking back in history can a realistic expectation and
projection for cryptocurrency’s future be made. Within the last 10 years of its
existence, cryptocurrency has facilitated and grown a mar- ket for something that has
no innate value. Furthermore, this market has matured and gone through numerous
hardships to keep developing. The growth and status of the cryptocurrency exchanges
has initiated governments and financial institutions to look ahead to the future of
finance. The fact is that governments recognize the possible viability and offering that
crypto’s have, but the current climate is not hospitable enough.
The author estimates that cryptocurrency standards and legislation will find
convergence in a worldwide scale once the largest stakeholders have come to an
agreement together. Without a unified agreement, cryptocurrency will remain in a
grey territory whereby its legality varies from region to region. The future road of
cryptocurrency will be decided by governments and other large institutions. The
classification of cryptocurrencies still re- mains a mystery, with the most probably
options being as an asset, commodity, or ser- vice.
Why cryptocurrencies cannot and will not enjoy the status of legal tenders as a
currency is because governments and large banks are not willing to see large scale
changes or reforms to the current financial system. If Bitcoin were to become a
digital asset, suddenly it would not threaten the dollar or the euro anymore because it
wouldn’t directly compete in the same market.
The author believes that cryptocurrencies will remain in our daily lives, growing in
users daily, but will not threaten the survival of current legal tenders. Instead,
cryptocurrencies will be classified as an asset or commodity, and remain a choice of
investment.
11. Case Study:

“Rise of P2P cryptocurrency platforms in India and ineffectiveness

of the RBI ban”

11.1 Problem
RBI first issued warning bell against cryptocurrencies (referred to as virtual or
decentralized digital currencies) back in Dec’ 2013 . This was way before most
regulators in other prominent countries had yet to issue an official stance on
cryptocurrencies. The circular outlines 5 major risks. Since that time RBI has been
closely following the growth of cryptocurrencies in India and issuing warnings.

In Dec, 2017 the finance minister of India announced that “Bitcoin is NOT a legal
tender”. This led to massive confusion amongst the general populace. Finally in Apr
2018 in 2 separate circulars the Govt announced that -

“Reserve Bank has repeatedly cautioned users, holders and traders of virtual
currencies, including Bitcoins, regarding various risks associated in dealing with such
virtual currencies. In view of the associated risks, it has been decided that, with
immediate effect, entities regulated by RBI shall not deal with or provide services to
any individual or business entities dealing with or settling VCs. Regulated entities
which already provide such services shall exit the relationship within 3 months.”

As expected by the close of the 3 months deadline all regulated and legit
cryptocurrency exchanges stopped deposit and withdraw of INR

Even today many investors have their cryptocurrency on the exchange and it is stuck
and they cannot convert it to fiat currency
There are multiple petitions and court cases against the ban in different courts in India
Sept 11, 2018 was the day when the Supreme Court and RBI will announced India’s
official stance on cryptocurrency.
RBI has set up a committee to explore cryptocurrencies and its regulations in depth
Biggest concern is consumer protection
RBI suggested to have a close watch on trading shift from exchanges to P2P, as a
result of banking ban, which involve increased usage of cash. It also raises concern
over AML/CFT and Tax issues due to possible migration of exchanges to dark
pools/cash and to offshore locations.

11.2 List of prominent cryptocurrency exchanges in India

Zebpay
Unocoin
Coinsecure
Koinex
WazirX
Bitxoxo
PocketBits
Coindelta
Buyucoin
Bitbns

11.3 Unocoin Approach

Unocoin is one of the earliest and biggest cryptocurrency exchange in India. Unocoin
created 2 separate business entities — Unocoin (existing one) and Unodax. Unocoin is
primarily as of now as a BTC and ETH wallet. They have enabled many services like
bill payments and movie ticket purchase using Bitcoin. So the merchant always
receives fiat payment and the buyer uses cryptocurrency to buy. Unocoin works like a
brokerage converting BTC to INR and then using that INR for payment. Unodex is
their altcoin exchange something similar to Poloneix with no fiat support and multiple
tokens listed. They also support 1 stable coin (TrueUSD). However Unocoin, as of
today, does NOT have any solution to fiat funding and withdrawal. Zebpay is
suffering the same fate.
 Screenshot of CoinDelta

11.4 Rise of P2P Platforms (mostly by existing exchanges)

There is absolutely no ban nor it is deemed illegal in any way to hold cryptocurrency
or buy directly with fiat. The rise of P2P platforms was obvious.

LocalBitcoins: The most popular global P2P platform. Local Bitcoins works on a
Bitcoin escrow model.
Coindelta Flux: They have simple, effective solution. They have a basic P2P
marketplace for 4 cryptos- Ripple, USDT, BTC, ETH (4 of the highest volume
cryptos in India). User can send the 4 cryptos to Coindelta primary altcoin exchange.
Typically users trade USDT on P2P exchange with fiat (INR) and then from the
acquired USDT they will buy additional cryptos on the primary exchange which is
non P2P. Escrow is for whichever crypto is being traded
WazirX P2P, Koinex Loop: They are similar to Coindelta where they give support to
one stable coin and/or cryptocurrency from their own P2P platform. Users, once they
acquire the stable coin can then deposit it to their altcoin exchange and convert to
other cryptocurrencies.
Houbi P2P (India): One of the major exchanges, Houbi, is entering India with its own
P2P marketplace as well.
Other Considerations and Business opportunities
Depending on your business model you may have to first apply to be a eWallet in
India with the regulators. There are 3 primary types — Closed eWallet (Amazon Pay),
Semi- closed (Airtel Pay) and Open eWallet (Visa)
Move dev operations AND/OR support to India: India is the haven for customer
support and overall back office operations. India also has the largest pool of skilled
software developers and students graduating with a computer science degree. Already
the bright ones are upgrading their existing skillset with emerging technologies like
Blockchain, AI, Machine Learning etc. Moving your dev shop to India not just helps
cost but you get wide pool of brilliant developers.

Indian consumer still perceives Bitcoin as a high risk trading commodity

Indian cryptocurrency consumer mindset
Indian consumer perceives cryptocurrency just as a High risk Trading commodity
The Libertarian values are alien to Indian culture. So no one is ideologically
motivated unlike the west. In fact almost every Asian language does not have a word
for ‘libertarian’
General populace still perceives it as scam.
Consumers do not have access to quality and unbiased opinions, knowledge and
information
 Volumes increased and then just dropping in the recent past since announcement of
ban from RBI. Source: Localbitcoins India Volume

11.5 Abbreviations
RBI — Reserve Bank of India (Regulators at federal
level) INR — Indian National Rupee (India’s currency)
 12. Data Analysis

12.1 Respondent details:

Chart1: age-wise distribution pie diagram

Interpretation:
from the above pie diagram it can be seen that there are 66.4% respondent are
between 20-40 years of age, 21.5% of respondent are below 20 years of age and rest
12.1% are above 40years.
 Chart2: occupation wise distribution pie diagram

Interpretation:
from the above pie diagram it can be seen that 70.1% i.e. majority of them are student,
26.2% are currently working, remaining few are home maker and retired.
 Chart3: People aware of cryptocurrency

Interpretation:
from the above pie diagram it can be seen that most of them (82.2%) are aware of
cryptocurrency and few of them (17.8%) of them are not aware of crypto currency.
 Chart4: Most known Cryptocurrency graph

Interpretation:
from the above graph it can be seen that more than 90% respondent are aware of
Bitcoin followed by Ripple with huge difference of only 26.2% of respondent, Bitcoin
cash (BTC) is also known by 23.4% of respondent ,22.4% of respondent are aware of
Ethereum, awareness of litecoin is 18.7%, monero is 11.2%.
 Chart5: Level of people invested in Cryptocurrency pie diagram

Interpretation:
from the above pie diagram it can be seen that 75.7% of respondents never invested in
cryptocurrency, only 24.3% of respondents invested in cryptocurrency.
 Chart6: awareness of exchange wallet distribution graph

Interpretation:
from the above graph it can be seen that most of the respondent i.e. 87.5% are aware
of Zebpay exchange wallet, unocoin wallet are also known by 43.8% of respondents.
 Chart7: level of people feel safe to invest in cryptocurrency in India

Interpretation:
from the above pie diagram it can be seen that 22.4% respondent felt safe safe to
invest in cryptocurrency in India, 17.8% respondent don’t feel safe to invest in
cryptocurrency in india, rest 59.8% people voted for maybe.
 Chart8: Views of people pie diagram

Interpretation:
from the pie diagram it can be seen that when asked views on future of cryptocurrency
in India to the respondents, 52.3% of them gave neutral response, followed by 22.4%
respondents gave positive response, 13.1% negative views, whereas 7.5% respondents
gave extremely positive response, remaining few gave extremely negative views.
 Chart9: views of people in RBI releasing Ban pie diagram

Interpretation:
from the above pie diagram it can be seen that when asked views from respondents on
RBI releasing ban of buying/selling cryptocurrency majority of respondents gave
positive views with 59.8% of respondents rest 40.2% gave negative views.
 Chart10: people still trading in crypto currency

Interpretation:
there was 107 response in the survey out which only 11 respondent selected yes when
asked if they still trade in crypto currency. 10.2% (11/107*100) of respondents are
currently trading in crypto currencies.
 Chart11: storage of crypto currency pie diagram

Interpretation:
from the above pie diagram it can be seen that 72.7% of investors store their
cryptocurrency(s) in exchange wallets, 27.3% store their cryptocurrency(s) in online
software.
 Chart12: preference of cryptocurrency pie chart

Interpretation:
from the above pie diagram it can be seen that most of the respondents prefer to invest
in ripple than in ethereum, litecoin, bitcoin, monero.
12.2 Findings:

1. Majority of respondents are of 20-40 years of age

2. 70.1% of them are student
3. More than 82% are aware of cryptocurrency
4. 97 out of 107 were aware of bitcoin
5. 24.3% had traded in cryptocurrencies some time/ or still trading
6. 14 of them were aware of zebpay exchange wallet
7. Majority of respondents said “maybe” when asked if they feel safe to invest in
cryptocurrency in India
8. Majority of respondents said “neutral” when asked views on future of
cryptocurrency in India
9. 59.8% of respondent gave positive response on RBI releasing ban of
cryptocurrency in India
10. 11 out of 107 still trade in cryptocurrency(s)
11. 72.7% respondents store their crypto currency(s) in exchange wallets
12. Majority of respondents prefer ripple to invest at present.

12.5 Observations:

Most of the respondents are aware of cryptocurrency but unaware of rules and
regulations, many of them are confused of exact ban of RBI and taxation policy to
keep cryptocurrencies, they are also aware of benefits and drawback of
cryptocurrencies. Bitcoin is most famous in India as it was the first cryptocurrency,
awareness of other currencies like ethereum, ripple, litecoin is still marginally less.
Very less people know that there are exchange wallets to purchase and sell
cryptocurrency like zebpay and unocoin. Responds gave positive response when
asked views on RBI releasing ban on cryptocurrency.
13. Conclusion

Cryptocurrencies have stirred the finance world by provoking a thought; is the current
framework and foundation truly the best option? Originally created to represent as a
solution to the shortcomings of current financial institutions, digital currencies
operating in the block chain have created a peer-to-peer network that operates
completely in the digital world. The most popular currency is Bitcoin, and over a
thousand have followed since.
The purpose of this paper is to find out Effect of Crypto Currency in Indian Economy.
Cryptocurrency offers a new, effective and attractive model of payment methods that
can boost companies and operators revenues. It also provide alternative method of
payment, apart from real money, that enable users to make financial activities such as
buying, selling, transferring and exchanging easily. Although cryptocurrency
platforms open many channels for digital financial transactions and provide a new
form of currency with different mechanisms and methods, they are not
controlled and regulated as they deserved. The research analysed cryptocurrency
platforms and extracted many concerns and challenges that put such financial system
under the risk. The lack of legislations is considered as the main concern in
cryptocurrency systems. Almost a clear picture of the size of cryptocurrency use
has been drawn from my analysis of the current cryptocurrency literature and from
the conducted study. Although the pilot study has been conducted with relatively
small sample, but the results showed me a preliminary perception about the use, the
growth, the trust of using and future expectations of cryptocurrency. I can now realize
many indications that can provide initial answers to the research questions. My
analysis indicates that cryptocurrency is very likely to be the next currency platform
due to the large volume of cryptocurrency that is flowing in different systems, the
huge expanding and
growing of using and implementing cryptocurrencies and the opportunities that
cryptocurrency systems offer. Moreover, the confidence and trust rate of using
cryptocurrency is noticeably high as it can be seen in several cases that have been
stated in this paper besides the survey results. However, users have not realized
the full picture of using cryptocurrency. In fact, many cryptocurrency forms do not
deserve that much of trust yet. Many concerns, challenges and issues are existing
in many cryptocurrency platforms and they are clearly outlined in the above
sections of
this paper. Until cryptocurrency is being well regulated and controlled, users need to
take extra precautions of using such virtual money. The future of Cryptocurrency
concept is promising, revealing more opportunities to bring positive changes and
progress to e-Business and e-Payment sectors. With the rapid progress and improve
of technology, cryptocurrency will not stop progressing. There are advanced steps
towards improving and expanding the cryptocurrency concept since our study was
conducted. More and more vendors are accepting payment with different types of
cryptocurrency and many people are now more aware of potentials and opportunities
that CC can offer. New forms of virtual currency have also been emerged and spread
around the world recently. M-Pesa as example, which is a form of CC that offer a
secure payment, has been introduced in Kenya in 2007 and now, it has been
expanded into many other countries in Africa, Asia (including India) and Europe
creating a highly popular payment service. The Cryptocurrency field creates a lot of
research opportunities and many studies need to be done in order to provide scientific
contents. The correlation between the real financial laws and the legislative status of
implementing cryptocurrency platform needs to be studied further from various
different prospectives. Moreover, the adoption and acceptance level also needs more
consideration and more analysis with large samples. Trust and confidence are
important factors that need to be investigated further in terms of using and trading the
Cryptocurrency forms. The further research scope can be extended to developing use-
cases for applications of cryptocurrency across different sectors in India.

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1.www.investopedia.com

2.www.blockgeeks.com

3.www.coinmarketcap.com

4.www.coindesk.com

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