THIS IS ALSO CALLED OR KNOWN AS VIRTUAL CURRECY OR DIGITAL CURRENCY
IN GENERAL CRYPTOCURRENCY MEANS :
LEGAL FORM OF EXCHANGE IN ALL OVER THE WORLD
NOT LINKED TO ANY GOVERNMENT OR CENTRAL BANK.
LESS EXPENSIVE THAN TRADITIONAL BANKING SERVICES.
VALUE GROWTH POTENTIAL & LOW VOLATILITY.
FULLY SECURED E-WALLET
KYC PROTOCOL FOLLOWED IN ALL TRANSACTIONS.
ONE LINE MARKET PLACE.
CENTRALIZED DATABASE AND BACKUPS THROUGH CRYTOGRAPHY.
NO DUPLICATION OR FEAR OF THEFT OR DAMAGE
DIGITALY CREATED THROGH THE USE OF COMPUTERS LIKE ANY OTHE OPERATING SYSTEMS AND SOFTWARES.
ONECOINE IS STILL IN ITS EARLY STAGE
STRONG FOUNDER DR. ROJA IGNOTAVA
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A Cryptocurrency OR Virtual Currency is a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Cryptocurrencies are a subset of alternative currencies, or specifically of digital currencies.
OUR LAST RBI GORVERNOR MR. RAGHURAM RAJAN HAS HINTED IN ONE OF HIS SPEECHES THAT VIRTUAL CURRENCIES WILL BE POPULAR IN THE FUTURE.
INTRODUCTION TO CRYPTO CURRENCY
It is not ironic that Milton Friedman, author of a leading treatise on the interaction of currency, macroeconomics and governmental action prophesized of a time when the internet would help evolve a new currency. Most of the currencies in the world at present, including the reserve currencies, are fiat currencies.
The term 'fiat currencies' refers to currencies that are issued by a government, and the government promises to pay the holder of such currencies an equivalent amount in gold, if needed.
Thus, these currencies usually have a central regulatory body which issues them, and are consequently called 'centralized'. In fact, at the end of the day, they have the value they have, because somebody said so.
The modern state can make anything it chooses as acceptable currency, without any further backing of any kind, even without a connection with gold.
A cryptocurrency is a medium of exchange that uses cryptography to manage the creation of new units as well as secure the transactions.
These are a subset of digital currencies.
One of the most striking features of cryptocurrency is that it weeds out the need for a trusted third party such as a governmental agency, bank etc. The cryptocurrency system collectively creates the units. The rate at which such units are created is defined beforehand and is publicly known unlike the traditional currencies where the government or the authorized banks control the supply. The fundamental system on which most cryptocurrencies are based today was created by Satoshi Nakamoto founder of Bitcoin.
The production of most cryptocurrencies is designed to gradually decrease, eventually placing a cap on the number of units that will ever be in circulation. This can lead the currency to mimic the scarcity that is usually seen in the supply of precious metal, thus avoiding hyperinflation.
The cryptocurrencies today, are pseudo-anonymous, though newer currencies like Zerocoin have been suggested to allow for complete anonymity.
In 2008, in the aftermath of the subprime mortgage crisis, the confidence in the government issued currency and governments' and bank's ability to manage the economy, the supply of money had almost hit rock bottom. Millions of dollars were used to bail out banks and insurance companies after the "quantitative easing" measures adopted by the Federal Reserve. This essentially meant that money was being printed in order to stimulate the economy. The glut of currency backed with little or no economic productivity led to a global recession ultimately precipitating a sovereign debt crisis in several countries. The price of gold was constantly rising. At this point, the paper by Satoshi Nakamoto was published online describing the Bitcoin for the first time.
In the opinion of Nakamoto, the major problem with conventional currency today was that trust was required to make the system work. He makes it clear in his paper, that while looking at the history of fiat currencies, one can see that it is full of breaches of such trust. He further goes on to state that banks use the currency entrusted to them to lend it out in 'waves of credit bubbles', with hardly anything left in reserve.
Thus, Nakamoto's ideologies in creating Bitcoin would seem to be entirely political. Supporting this argument is the fact that he introduced the currency just a few months after the collapse of the global banking sector.
His Bitcoin software would allow its users to send money over the internet directly to each other without an intermediary, and no outside party could create Bitcoin entirely cutting out the role of central banks and governments in online transactions. As Nakamoto said, 'everything is based on crypto proof instead of trust '.
Furthermore, unlike banks and governments which can print more money whenever they deem fit, the bots that are currently creating Bitcoin are supposed to stop doing so in or around the year 2140 according to their programming itself.
And unlike fiat currencies, whose value is derived through regulation or law and underwritten by the state, Bitcoin derive their value through the simple principles of supply and demand - they have no intrinsic value and no backing, and their value depends entirely on what people are willing to trade for them. Hence, no faith or trust towards the financers or politicians was required in case of Bitcoin, but only in Nakamoto's well-designed algorithms. Not only the public ledger of Bitcoin, i.e. the 'block chain' seemed to fend off fraud, but also kept the money supply of Bitcoin growing at a predictable rate due to the prearranged release of the virtual currency.
The Bitcoin network came into existence with the release of open source Bitcoin client and with the issuance of the first Bitcoin Satoshi mined.
The first 50 Bitcoin which are famously known as the "Genesis Block". In the same year the exchange rate of Bitcoin was first published by liberty standard at $1 for 1,309.03 BTC.
Within a couple of years, around February 2011, Bitcoin achieved dollar parity and was now being accepted all over the world as a mode of payment for a plethora of products.
Even Wikileaks and other organizations started accepting Bitcoin as donations. Although, during the same year, Bitcoin suffered a security breach in one of the largest Bitcoin exchanges, Mt. Gox and crashed. But, it also bounced back being stronger than before. Since then, Bitcoin have been extremely volatile but have not seen any major security breaches.
Nakamoto had created the first working cryptocurrency, making it as different from the existing fiat currencies as possible. It was meant to be an alternative to them, a new method of transaction, entirely free of government control, and, perhaps a challenge to it. It was to challenge the governments, to make people rethink the existing economic systems, to question their faith in it.
This paper examines legal aspects in relation to Bitcoin specifically and as corollary to cryptocurrencies generally and analyses transactions respecting Bitcoin in India.
"Bitcoin is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value." Eric Schmidt, CEO of Google
The idea of a digital currency - expedient and imperceptible, freed from the supervision of banks and the government has been one of the most discussed and strived for ideas since the advent of the modern internet. Many proposals for such a currency were floated but none were successful. In order to understand Bitcoin, it is important to understand the type of financial instrument it represents. Bitcoin, is a peer-to-peer digital system of payment. As Satoshi Nakamoto, the creator of Bitcoin puts it - "an electronic cash system".
Payments are recorded in a public ledger using its own unit of account. When the algorithm was created by Nakamoto, a finite limit of 21 million on the number of Bitcoin that would ever exist was set.
The number of Bitcoin mined has skyrocketed since 2009. The system was intended to be set up in a way where the difficulty of mining every next Bitcoin is greater than the previous one. The final Bitcoin will be mined in the year 2140, at the current rate.
Designing of a digital/virtual currency, involves many challenges. One of the most fundamental challenges is that of double spending. Since the unit of this currency is just information, free from physical structures of metal or paper, there is nothing much to keep people from reusing that piece of information more than once. This would result in spending the same unit of currency more than once. The usual answer for such a problem would be to depend on a central clearing house that would keep a real-time record of all transactions done in that particular currency. This would ensure that the same unit of the currency could not be spent again. Although, this solution would prevent fraud, but it would also require a trusted third party for its administration. This was the problem in the first place that led to the birth of Bitcoin. It is clear from Nakamoto's paper that this currency, unlike all the others, was based on math/cryptography and not trust.
To tackle this fundamental but crippling problem faced by the virtual currency, Nakamoto used "block chains". A block chain is a ledger that is shared publicly where all transactions are recorded. This way transactions could be verified and the problem of double spending could be kept under a check. The chronological order and the authenticity of the block chain are also maintained through a process called cryptography.
Cryptography is used to protect information by converting it into an unreadable format (encryption), called cipher text. Each such encryption is secured by a unique key. Only those who have the key can decipher the message into plain text (decryption). Sometimes these messages can be accessed by cryptanalysis (code-breaking), although modern cryptography techniques are practically unbreakable. Ordinarily, cryptography systems can be classified into: i. symmetric-key systems that use a single key that both the sender and recipient have, and ii. public-key systems that use two keys, a public key known to everyone and a private key that only the recipient of messages uses. Obtaining BitcoinThere are three primary ways to obtain Bitcoin: i. mining new ones. ii. buying on an exchange; and ii. accepting them for goods and services. 'Mining' is discovering new Bitcoin. In reality, it's simply the verification of Bitcoin transactions.
In order to make sure a Bitcoin is genuine, miners verify the transaction.
There are many transactions that individuals are trying to verify and not just one. These transactions are gathered into boxes with a virtual padlock on them which make up the 'block chains'. 'Miners' run software to find the key to open that padlock. Once the computer finds it, the box pops open and the transactions are verified.
Hence, it can be said that while Bitcoin are "mined" by individuals, they are "issued" by the software. A 'centralized' currency system is one where all of the currency is monitored by a central agency.
Certain centralized forms of virtual currencies also exist in centralized forms, such as Facebook credits.
These are also subject to similar regulation, and are monitored by banks and governments.
The central authority makes controlling and monitoring customers and their transactions much easier. Since, money is traditionally centrally regulated, the surge in Bitcoin has invited mixed reactions from regulators across the globe. It has been treated differently in different parts of the world as regards to taxation and other issues.
The recent past has seen an enormous growth in Bitcoin as a form of payment. This is because the fee charged in case of making payments with the use of Bitcoin is lower than the general 2-3% interest imposed by credit card processors.
In India, entrepreneurs have shown enthusiasm towards the Bitcoin system and all eyes are on the Reserve Bank of India (RBI), which has not yet come out with an ultimate verdict. Although, RBI has issued a press release cautioning users, holders and traders of Virtual currencies, including Bitcoin, about the potential financial, operational, legal, security related risks that they are exposing themselves to.
Pending this, it is also time to think about the tax treatment of Bitcoin as the transactions in virtual currency are increasing in India.
According to Nishith Desai, Bitcoin per se are not illegal in India and this is in consonance with an international approach. Bitcoin creation and transfer are based on open source cryptographic protocol managed in a decentralized manner, and, if harnessed properly, Bitcoin could deliver many benefits to the Indian economy.
Today, real currency is being used to purchase and sell Bitcoin at the current exchange value. Once the purchase has been made the value of the particular amount of Bitcoin is transferred from one wallet to another.
Since every wallet has its own unique 33 characters and all Bitcoin wallets are synchronized, thus a false entry by any single person being made is almost impossible.
Although pseudonyms are used for trading purposes, the history of every transaction in the form of continuously updated block-chain information is stored in the wallets.
These Bitcoins have become very expensive to buy now. Accordingly a strong Competitor by the name and style of ONECOIN has entered the market with additional following features.
Uses more advanced and more secured Algoritum (SCRYPT).
Small denominations makes coin more usable.
One exchange provides due to its centralization.
Higher liquidity and less volatility.
Dedicated Management team responsible for strategy, attracting merchants and building the ONECOINE brand.
ONECOINE uses KYC procedure and therefore cannot be abused for illegal purpose.
ONECOINE is still in its early stage.