Colloquium 

File
Submitted in completion of the sixth semester of
Master of Computer Application

Submited To: Submitted By:

Mr. Ashish Mishra Shubham Sharma

Asst. professor AKTU Roll No:
MCA department 1843414931
Batch : 2018-2020

JAGRAN INSTITUTE OF MANAGEMENT

620-W Block Saket Nagar Kanpur
 ACKNOWLEDGEMENT
No learning is complete without proper guidance
This entitled “Digital Currency (Colloquium File)” could not be complete
without the guidance of Mr. Ashish Mishra (Asst. Professor) for their
invaluable inputs, guidance we deeply express our thanks to those who
have provided invaluable support and guidance that lead to its
successful completion.

I acknowledge with sincerity and a deep sense of gratitude, given to me

by my guide and faculty “Mr. Ashish Mishra”. His Suggestions and
discussions were enlightening and a constant source of inspiration
during the preparation of this file. His guidance and support
encouraged me for the betterment of the Colloquium file.

Thanking You

Student Name : Shubham Sharma

AKTU Roll No: 1843414931

Batch : 2018-2020
 Certificate

This is to certify that the project entitled, “Digital Currency”

submitted by “Shubham Sharma” in partial fulfillment of the
requirement for the sixth semester of “Master of Computer
Application” at the “ Jagran Institute of Management “ is an
authentic work carried out by him under my supervision and
guidance.

(Project Guide Name ): Mr. Ashish Mishra

(Designation, Name of Institution): Assistant Professor
Jagran Institute of Management
DIGITAL
CURRENCIES
INTRODUCTION

Digital currency (digital money, electronic money or electronic currency) is a

balance or a record stored in a distributed database on the Internet, in an
electronic computer database, within digital files or within a stored-value card.
Examples of digital currencies include cryptocurrencies, virtual currencies, central
bank digital currencies and e-Cash.

Digital currency is a form of currency that is available only in digital or electronic

form, and not in physical form. It is also called digital money, electronic money,
electronic currency, or cyber cash.

Digital currencies exhibit properties similar to other currencies, but do not have a
physical form of banknotes and coins. Not having a physical form, they allow for
nearly instantaneous transactions. Usually not issued by a governmental body,
virtual currencies are not considered a legal tender and more easily enable
ownership transfer across governmental borders.

These types of currencies may be used to buy physical goods and services, but
may also be restricted to certain communities such as for use inside an online
game. One type of digital currency is often traded for another digital currency
using arbitrage strategies and techniques.

Digital money can either be centralized, where there is a central point of control
over the money supply, or decentralized, where the control over the money
supply can come from various sources.

KEY POINTS
 Digital currencies are currencies that are only accessible with computers or
mobile phones, as they only exist in electronic form.

 Since digital currencies require no intermediary, they are often the

cheapest method to trade currencies.

 All cryptocurrencies are digital currencies, but not all digital currencies are
crypto.

 Digital currencies are stable and are traded with the markets, whereas
cryptocurrencies are traded via consumer sentiment and psychological
triggers in price movement.

Understanding Digital Currency

Digital currencies are intangible and can only be owned and transacted in by using
computers or electronic wallets connected to the Internet or the designated
networks. In contrast, physical currencies, like banknotes and minted coins, are
tangible and transactions are possible only by their holders who have their
physical ownership.

Like any standard fiat currency, digital currencies can be used to purchase goods
as well as to pay for services, though they can also find restricted use among
certain online communities, like gaming sites, gambling portals, or social
networks.

Digital currencies have all intrinsic properties like physical currency, and they
allow for instantaneous transactions that can be seamlessly executed for making
payments across borders when connected to supported devices and networks.

History :-
In 1983, a research paper by David Chaum introduced the idea of digital cash. In
1990, he founded DigiCash, an electronic cash company, to commercialize the
ideas in his research.

e-gold was the first widely used Internet money, introduced in 1996, and grew to
several million users before the US Government shut it down in 2008. Users of the
e-gold mailing list used the term "digital currency" to describe peer to peer
payments in various instruments. In 1997, Coca-Cola offered buying from vending
machines using mobile payments. PayPal launched its USD-denominated service
in 1998. In 2009, bitcoin was launched, which marked the start of decentralized
blockchain-based digital currencies with no central server, and no tangible assets
held in reserve. Also known as cryptocurrencies, blockchain-based digital
currencies proved resistant to attempt by government to regulate them, because
there was no central organization or person with the power to turn them off.

Origins of digital currencies date back to the 1990s Dot-com bubble. Another
known digital currency service was Liberty Reserve, founded in 2006; it lets users
convert dollars or euros to Liberty Reserve Dollars or Euros, and exchange them
freely with one another at a 1% fee. Several digital currency operations were
reputed to be used for ponzi schemes and money laundering, and were
prosecuted by the U.S. government for operating without MSB licenses. Q coins
or QQ coins, were used as a type of commodity-based digital currency on Tencent
QQ's messaging platform and emerged in early 2005. Q coins were so effective in
China that they were said to have had a destabilizing effect on the Chinese Yuan
currency due to speculation. Recent interest in cryptocurrencies has prompted
renewed interest in digital currencies, with bitcoin, introduced in 2008, becoming
the most widely used and accepted digital currency.
Digital currency as a specific type and as a meta-group name
Digital Currency is a term that refers to as a specific electronic currency type with
specific properties. Digital Currency is also a term used to include the meta-group
of sub-types of digital currency, the specific meaning can only be determined
within the specific legal or contextual case. Legally and technically, there already
are a myriad of legal definitions of digital currency and the many digital currency
sub-types.

Combining different possible properties, there exists an extensive number of

implementations creating many and numerous sub-types of Digital Currency.
Many governmental jurisdictions have implemented their own unique definition
for digital currency, virtual currency, cryptocurrency, e-money, network money, e-
cash, and other types of digital currency. Within any specific government
jurisdiction, different agencies and regulators define different and often
conflicting meanings for the different types of digital currency based on the
specific properties of a specific currency type or sub-type.

Digital versus virtual currency

According to the Bank for International Settlements' November 2015 "Digital
currencies" report, it is an asset represented in digital form and having some
monetary characteristics. Digital currency can be denominated to a sovereign
currency and issued by the issuer responsible to redeem digital money for cash. In
that case, digital currency represents electronic money (e-money). Digital
currency denominated in its own units of value or with decentralized or automatic
issuance will be considered as a virtual currency. As such, bitcoin is a digital
currency but also a type of virtual currency. Bitcoin and its alternatives are based
on cryptographic algorithms, so these kinds of virtual currencies are also called
cryptocurrencies.
Digital versus cryptocurrency
Cryptocurrency is a sub-type of digital currency and a digital asset that relies on
cryptography to chain together digital signatures of asset transfers, peer-to-peer
networking and decentralization. In some cases a proof-of-work or proof-of-stake
scheme is used to create and manage the currency. Cryptocurrencies can allow
electronic money systems to be decentralized. When implemented with a
blockchain, the digital ledger system or record keeping system uses cryptography
to edit separate shards of database entries that are distributed across many
separate servers. The first and most popular system is bitcoin, a peer-to-peer
electronic monetary system based on cryptography.

Digital versus traditional currency

Most of the traditional money supply is bank money held on computers. They are
considered digital currency in some cases. One could argue that our increasingly
cashless society means that all currencies are becoming digital currencies, but
they are not presented to us as such.

TYPES OF DIGITAL CURRENCIES

When digital currencies experienced their first major boom, a myriad of different
types began to dot the marketplace. But over time, a small handful have risen
above the rest, ultimately establishing themselves as the foremost digital
currencies in use today.

Digital currencies are the payment methods for the future. The currencies are
changing business, money and the world. As some governments accept the digital
currency as a mode of payment, we feel it is important for you to know some of
these digital currencies and how they operate.
1) Ethereum
Ethereum is a decentralized computing platform that features smart contract
functionality. It offers the Ethereum Virtual Machine (EVM), a decentralized
virtual machine that executes peer-to-peer contracts using a cryptocurrency
known as ether. The Ethereum platform allows multiple uses concerning smart
contracts. With Ethereum, you can safely do business with a person you don’t
know; because all terms are spelled out in a “smart contract” entrenched in the
blockchain.

Compared to other digital currencies like Bitcoin, Litecoin, or Bitcoin Cash,

Ethereum is a slightly different animal. That’s because it’s not purely a digital
currency; it’s also a distributed computing platform.

The Ethereum value token (Ether) serves as a digital currency just like any other.
But the Ethereum blockchain network also offers a platform for decentralized
application development – basically harnessing the power of thousands of
computers.

2) Ripple
Ripple is a real-time currency exchange, remittance network, and settlement
system. It offers instant, certain, low-cost international payments. Also known as
Ripple protocol or the Ripple Transaction Protocol (RTXP), it is built upon a
decentralized open source Internet protocol and native currency referred to as
XRP (ripples). Bases around public ledger, Ripple uses a consensus process to all
exchange, remittance and payments in distributed process.

3) Litecoin
Litecoin is a peer-to-peer cryptocurrency released under the MIT/X11 license. The
currency is Inspired by and technically almost identical to bitcoin. Litecoin
formation and transfer is based on an open source protocol.

Litecoin was developed and released by former Google employee Charlie Lee in
2011. It bears several commonalities with Bitcoin, and it’s built upon the same
open source cryptographic protocol (Blockchain). As a result, it’s considered an
“alt-coin” digital currency (alternative to Bitcoin).

4) Dash
Dash, formally called Darkcoin is a more secretive form of Bitcoin. It provides
more privacy as it operates on a distributed mastercode network that makes
dealings nearly untraceable. Launched in 2014, the currency has an increasing
fan. Created and developed by Evan Duffield, this cryptocurrency according to
Fernando Gutierrez from Dash.org, has X11 ASICs that presently mine Dash and
CPU mining is not profitable anymore since a while ago.

5) Peercoin
Also known as PPCoin, Peercoin was created by software developers Scott Nadal
and Sunny King. Lunched in 2012, it was the first digital currency to use a
combination of proof-of-work and proof-of-stake. At first, the coins are mined
using the proof-of-work hashing process. Over time, as the hashing difficulty
increases, the users are rewarded coins using the proof-of-stake algorithm that
requires minimal energy to generate blocks.

6) Dogecoin
Launched in 2013, Dogecoin is largely based on the Bitcoin protocol, but with
some modifications. The currency uses the technology of scrypt as a proof-of-
work scheme. Its block time is 60 seconds. There is no limit to the number of
Dogecoin that can be produced. The digital currency deals with many coins that
are lesser in value individually. Therefore, it has low entry barrier and good for
carrying out smaller transactions.

7) Primecoin
Primecoin was developed by Sunny King. Its proof-of-work is built on prime
numbers, and therefore, different from the common system of hashcash utilized
by many cryptocurrencies built on the Bitcoin framework. The currency involves
finding distinctive long chains of prime numbers and provides greater mining ease
and security to the network.

8) Chinacoin
Chinacoin is a litecoin-based digital currency that uses the scrypt password-based
key derivation function. At the moment, It’s generated in 60-second blocks with
an about 88 coins per block.

9) Ven
Ven is a global digital currency that is designed to allow trade among members of
Hub Culture. Launched in 2007, Ven is aimed at reducing the risk of inflation. The
Ven value is determined on the financial markets from a basket of commodities,
currencies and carbon futures.

10) Bitcoin
Bitcoin is a digital currency created by the mysterious Satoshi Nakamoto. Like
other currencies, bitcoin can be used to buy items locally and electronically. As a
new user, you can use Bitcoin without understanding all its technical details. Once
you install a Bitcoin wallet on your mobile phone or computer, it will generate the
first Bitcoin address and you can generate more whenever you need them. After
creating bitcoins, you can use them for all types of real transactions.

Bitcoin was the first viable digital currency ever introduced, and its open source
Blockchain software protocol is what sparked the explosion in other digital
currencies we’re witnessing today. Additionally, despite the growth of alternative
digital currencies, Bitcoin still maintains the highest exchange volume, market
cap, and rate of use around the world.

TYPES OF DIGITAL PAYMENT SYSTEMS

Centralized systems
Currency can be exchanged electronically using debit cards and credit cards using
electronic funds transfer at point of sale.

Mobile digital wallets

A number of electronic money systems use contactless payment transfer in order
to facilitate easy payment and give the payee more confidence in not letting go of
their electronic wallet during the transaction.

Adoption by Government of India

Unified Payments Interface (UPI) is an instant real-time payment system
developed by National Payments Corporation of India facilitating inter-bank
transactions. The interface is regulated by the Reserve Bank of India and works by
instantly transferring funds between two bank accounts on a mobile platform. UPI
is built over Immediate Payment Service for transferring funds. Being a digital
payment system it is available 24*7 and across public holidays. Unlike traditional
a mobile wallet, which takes a specified amount of money from user and stores it
in its own accounts, UPI withdraws and deposits funds directly from the bank
account whenever a transaction is requested. It uses Virtual Payment Address (a
unique ID provided by the bank), Account Number with IFS Code, Mobile Number
with MMID (Mobile Money Identifier), Aadhaar Number, or a one-time use Virtual
ID. An UPI-PIN (UPI Personal Identification number that one creates on the UPI
app of the bank) is required to confirm each payment.

Pros and Cons of Using Digital Currency

Digital currency, also known as cryptocurrency, is a global currency around the
world. It is an independent way to generate and transfer money without the use
of centralized banks. This means that all digital currencies are exempt from
government interference.

While cryptocurrencies sound like they make life easier to buy and sell goods, as
well as transfer funds, it is not without its drawbacks. One of the biggest issues
surrounding digital currency today is the potential for it to be hacked.
But there are many reasons why digital currency is beneficial, that is why we’ve
come up with some pros and cons for using this type of currency.

The Pros to Using Digital Currency

1. Faster Transactions
When it comes to making large purchases like buying a car or a home, there are
many steps you must go through before the transaction can be complete. These
steps can be getting approval from a bank or paying for a lawyer. But with digital
currency, you can make such transactions immediately without the need for a
middle-man.

2. Constant Payment Tracking

Traditionally, when you use a check to make a purchase or wire money to
someone, you can only see where that money is every three days, using banks
systems. This can be an issue as you are never truly sure where your money is at
any given time. However, with cryptocurrency that constant wondering is not a
concern, as you can track your money every second of the day.

3. Fraud Protection
If you ever purchased anything online, then chances are you used your credit card
to do so. It’s the only way most people pay for things online, but the problem
with doing so is you run the risk of your personal information being stolen.
Though by using digital currency, you don’t run that risk as you can send funds
directly to whomever you want without ever giving out any information.

4. Zero Fees
While the money you store in banks is technically yours, banks still need to make
a profit for holding onto it for you. That is why they charge fees like ATM fees,
transactions fees, and closing fees; there are so many fees sometimes, that it
hardly seems fair to have to pay to use your own money. The beauty of
cryptocurrency, is the fact that you own it and not the banks. So you never have
to pay a fee for using your own money when using digital currency.

5. Easy Accessibility
Perhaps the best thing about using digital currency is that it’s available to
everyone. It’s estimated that over 2 billion people across the globe have access to
the internet, either by phone or by computer. This means that every one of those
two billion people can start farming for bitcoin if they so wished. And unlike banks
or lending companies that require you to pass their evaluation to earn funds;
digital currency has no such restrictions. So if you can farm it, you can keep it.

The Cons to Using Digital Currency

1. High Risk/High Reward System
While cryptocurrency, like bitcoin, has the potential to earn someone a lot in a
short amount of time, it also has the unfortunate side effect of being extremely
high risk for those farming it. The reason farming digital currency is so high risk is
because the price of the coins can change on a dime. One moment you could be
sitting on a fortune, and the next you can barely pay for a tank of gas.

2. Security Issues
Even though digital currency can better protect you from having to use your
personal information online, your currency itself is still vulnerable to attacks.
There is evidence of this happening as larger corporations farming digital currency
have suffered greatly at the hands of hackers. One such company suffered an
attack so bad, that they lost nearly $500 million in the process. If larger
corporations aren’t safe, who is?

3. Accessible to Everyone
This is mentioned in our pros section too because universal access makes digital
currency a double-edged sword. On one hand, it’s nice that anyone with skill
could gain a fortune just from farming digital currency. But on the other hand, this
also means that those involved in criminal activities have access as well. Many
authorities are concerned that digital currency is being used to launder money
and fund various criminal endeavors.

4. Impossible to Know the Future

Because digital currency is not controlled by a central governing body, the fate of
it is left up in the air. Some countries want to embrace it and have already started
developing their own cryptocurrencies. While other countries want to outlaw it all
together. Since the cryptocurrency market is prone to so many changes, it’s
impossible to know what the future holds for this technology.

Whether we like it or not, it seems like digital currency may be the wave of the
future. Since digital currency is rising in popularity, it’s best to know what the pros
and cons of this new currency are. Otherwise, we may have a new form of
currency and not be aware of the benefits or dangers that come along with it.
CONCLUSION

Digital Currencies made an unbelievable impact on the world payment system. It

makes the payment of goods and services effortless and more convenient in
modern era where if a person did not have the enough money in the form of cash
then also person can buy the essential things.