Cryptocurrencies

Digital or virtual currency supported by cryptography technologies are known as cryptocurrencies.

Without the aid of outside intermediaries, they make it possible to make safe online payments. The
term "crypto" refers to the numerous cryptographic methods, such as hashing, public-private key
pairings, and elliptical curve encryption, that protect these entries.

It is possible to mine cryptocurrencies or buy them via exchanges. Not all online stores let customers
use bitcoins to make transactions. In reality, hardly any retail transactions are conducted using
cryptocurrencies, even well-known ones like Bitcoin. However, the exponential growth in value of
cryptocurrencies has increased their acceptance as trade commodities. They are utilised for cross-
border transactions to a limited extent.

Cryptocurrency emerged in India for the first time around 2009 in the form of Bitcoin. The first
commercial transaction occurred in 2010, followed by the first cryptocurrency exchange in 2013. It
has garnered a significant following and interest in India over the past few years.

Blockchain:

Blockchain technology is essential to the allure and usefulness of Bitcoin and other cryptocurrencies.
Blockchain, as its name suggests, is essentially a network of interconnected blocks or an electronic
ledger. A group of transactions are contained in each block, and each member of the network has
independently validated each transaction.

It is nearly impossible to fabricate transaction histories since every new block that is generated must
first be checked by each node before it can be confirmed. The complete network of a single node, or
computer, holding a copy of the ledger, must concur on the contents of the online ledger.

According to experts, blockchain technology can benefit many different businesses, including supply
chains, as well as procedures like online voting and crowdfunding. Financial organisations are
experimenting with the use of blockchain technology to reduce transaction costs by speeding payment
processing, including JPMorgan Chase & Co. (JPM).

Mining:

Bitcoin and numerous other cryptocurrencies employ the mining process to create new currency and
validate fresh transactions. Blockchains, the digital ledgers that record bitcoin transactions, are
verified and secured by massive, decentralised networks of computers located all over the world. The
network's computers receive fresh coins in exchange for using their processing power. It's a positive
feedback loop: the miners protect and secure the blockchain, the blockchain distributes the coins, and
the coins provide the miners motivation to protect and secure the blockchain.

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Types of Cryptocurrencies:

The most well-known and valued cryptocurrency is bitcoin. It was created by Satoshi Nakamoto, who
went uncredited, and distributed a white paper introducing it to the public in 2008. Thousands of
cryptocurrencies are available on the market right now.

Each cryptocurrency asserts that it has a unique purpose and specification. Ether, for instance, is
promoted as gas for the underlying smart contract platform. Banks use Ripple's XRP to enable
transactions between different geographical areas.

The most traded and covered cryptocurrency is still bitcoin, which was made accessible to the general
public in 2009. Over 19 million bitcoins were in use as of May 2022, valued at a total of over $576
billion. Never will there be more than 21 million bitcoins.

Numerous "altcoins"—alternative cryptocurrencies—have been introduced in the aftermath of the

success of Bitcoin. While some of these are new currencies that were created from scratch, others are
copies or forks of Bitcoin. Solana, Litecoin, Ethereum, Cardano, and EOS are among of them. By
November 2021, Bitcoin accounted for around 41% of the entire value of all cryptocurrencies in
existence, which was over $2.1 trillion.

Top 10 Cryptocurrencies in India:

The following are the top 10 cryptocurrencies by market capitalization, or the sum of the value of all
coins currently in circulation.

Cryptocurrencies Market Cap

Bitcoin (BTC) Over $846 billion
Ethereum (ETH) Over $361 billion
Tether (USDT) Over $79 billion
Binance Coin (BNB) Over $68 billion
XRP (XRP) Over $37 billion
Terra (LUNA) Over $34 billion
Cardano (ADA) Over $33 billion
Solana (SOL) Over $33 billion
Polkadot (DOT) Over $22 billion
Litecoin (LTC) Over $9 billion

Data Science in Cryptocurrencies:

Cryptocurrency analytics is a simple way to use big data and data science in the crypto industry. Big
data infrastructure can handle the enormous amount of cryptocurrency transaction data produced.

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Data science techniques can forecast future results and produce insightful investment information. By
using transaction data for analysis, one can determine how much a certain cryptocurrency's price will
fluctuate (for example, by making Bitcoin future forecasts). This information enables investors to
increase profitability and minimise losses. Additionally, social-based data can be used to train
cryptocurrency forecasting models. When user involvement and activity data are paired with
transactional data, the price of the market at the time, and computational power, improved predictions
of market volatility over time can be made.

Legal Nature of Cryptocurrency in India:

The central government is preparing a Bill to regulate cryptocurrency and other digital assets in India.
Finance minister Nirmala Sitharaman in Union Budget 2022 announced that the central government
will levy a steep tax at 30 per cent on virtual assets including cryptocurrencies and Nonfungible
tokens or NFTs. For this crypto tax, Budget 2022 proposed to introduce a new section 115BBH to
levy income tax on cryptocurrencies and other virtual assets.

Taxing cryptocurrencies does not give them legal status in the country, finance minister Nirmala
Sitharaman clarified in the Parliament. It’s the country’s sovereign right to tax cryptocurrency
transactions. However, any official stance on regulation will only come once the ongoing
consultations are completed, finance minister said.

“The proposed section 115BBH seeks to provide that where the total income of an assessee includes
any income from transfer of any virtual digital asset, the income tax payable shall be the aggregate of
the amount of income-tax calculated on income of transfer of any virtual digital asset at the rate of 30
per cent and the amount of income-tax with which the assessee would have been chargeable had the
total income of the assessee been reduced by the aggregate of the income from transfer of virtual
digital asset,” Budget 2022 Memorandum said.

The newly proposed cryptocurrency tax will be applicable from Assessment Year 2023-24. That
means all your income from crypto transactions in FY 2022-23 will be taxed at the rate of 30 per cent.
Investors have to pay tax according to the existing taxation rules for FY 2021-22.

Way forward:

Many concerns remain unanswered, including whether cryptocurrency is legal, if cryptocurrency may
still be outlawed, and how digital assets like non-fungible tokens (NFT) fit into India’s legislative
system. While it might take some time to put regulations in place, the recent announcements regarding
taxes and the CBDC are the first tangible steps toward recognizing that cryptocurrency might possibly
be here to stay.

Perhaps, a framework, similar to the one US recently put out, could be a good place to start with.

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