What is Cryptocurrency
Cryptocurrency is in news everywhere and you can’t just ignore it. But many people are still unaware of its usage and wonder whether they should include it in their portfolio. If you are also one of them and are less familiar with digital currencies, then read further to know why more and more people are talking about crypto these days.
What is cryptocurrency?
Cryptocurrency is a digital form of currency and is also known as virtual currency. It can be used to exchange goods and services. It is a digital payment system, not under the control of banks, not allowing them to verify transactions.
A cryptocurrency is an electronic form of currency, instead of physical money. The payments made through crypto are digital entries in an online database. Individuals can store this currency in their personal digital wallets. Usually, crypto exists in only electronic form and there are no physical coin or paper currencies used. However, there are various services that allow you to cash cryptocurrency in form of the physical currency.
You can exchange cryptocurrency for various deals with someone online with the help of your smartphone or computer. Mostly no intermediary third party institutions like banks, are involved in these transactions.
Many cryptocurrency brands are popular in the market, and new ones are added daily, owing to its high demand. The most popular of these is bitcoin.
How Does Cryptocurrency Works?
Cryptocurrency is a digital medium of exchange and is electronically encrypted to make them safe. ‘Crypto’ means various encryption algorithms and cryptographic techniques to safeguard these exchanges.
Cryptocurrency transactions are recorded on a digital decentralized ledger known as the blockchain. Each time crypto is either bought or sold, the transaction is added to the blockchain, which is a public database of all the transactions made. This ledger is available to all crypto holders with a cryptography technique making it safe and secure. There is a digital validation process for individuals to verify their identity when they are required to add any transaction in the blockchain, helping it prevent fraud.
What is Cryptocurrency Used For?
This currency can be used for a variety of purposes. You can use crypto to make purchases, although your purchasing power may be limited as this currency is not still widely accepted among all businesses.
Most people use cryptocurrency as an alternative investment. Similar to buying and trading in the share market, people buy crypto with the hope that the value will increase and they will be able to make profits out of it. Many people also invest in cryptocurrency as they believe that soon it is going to become a popular currency with higher value.
People also use cryptocurrency for quick payments for many web bases services, as they do have not to pay any transaction fees, like banks. It also offers anonymity and a secure exchange gateway, making it more popular day by day.
Can Cryptocurrency be Converted to Cash?
Yes, this currency can easily be converted to regular currency. You can trade it via exchange into physical currency or another type of cryptocurrency. However, you will have to pay charges to move in and out. It is worth noting here that when there is an urgent need for cash, you will have to accept whatever price the market offers at that particular time. It can be higher or even a lot less than what you have paid for. The volatility of this currency is very high and is known as a high-risk asset.
How Safe is Cryptocurrency?
Cryptocurrency is based on blockchain technology which is very secure and safe. The decentralized and public distributed ledger technology makes this currency even safer. All the transactions are recorded in ‘blocks’ and time-stamped to safeguard exchanges. A lengthy and complicated procedure makes it a secure transaction method, which is hard for hackers.
However, like any other digital activity, there is the risk of fraud while using cryptos. It is not completely secure in the same manner as other establish physical currencies are. It is also not backed by any government authority making it an even riskier investment.
How Can I Buy Cryptocurrency?
You can buy cryptocurrency with the help of an online exchange platform. Some of the cryptocurrencies can be purchased with U.S dollars, or others by paying with bitcoins or another cryptocurrency. You need an online app known as ‘Wallet’ to hold your cryptos. You will be required to create an account on the app and then you can exchange real money to buy cryptocurrency.
You can also get bitcoin through exchange and stockbrokers, or from other owners. You can also earn crypto through a process called mining. Here many companies offer crypto as a reward for solving complicated maths and other types of puzzles.
Is Cryptocurrency Legal in India?
Buying or investing in crypto is 100% legal in India. The RBI circular states cryptocurrency as not illegal, allowing anybody to buy, sell and trade it. However, this currency is neither been authorized by the Indian government and nor been regulated. There are no set of
rules, regulations, or guidelines for resolving disputes arising while dealing with crypto. So, you can understand that cryptocurrency transactions can hold certain risks.
While there is a large number of Indian populations who are affirming the use of cryptocurrency, but certain pieces of missing information are keeping people back to accept it with full zeal. Most people are confused with the unregulated program of crypto by the
Indian government and relate it as illegal.
Is Bitcoins Taxable in India?
Bitcoin is a totally new concept in India, and the government has not yet geared itself toward taxing crypto. But, the taxing bitcoin cannot be ruled out completely as the Indian Income Tax laws levy tax on any income received, irrespective of the form it is received. For example, mining can be considered as self-generated capital assets, affecting capital gains that are taxable in India. Similarly, if bitcoin has been purchased as an investment, the appreciation in value will be taxable.
Buy Cryptocurrency to Diversify Your Investments
A portfolio with diversified funds is a key to invest. You can add some bitcoin or other cryptocurrency to spread your investments. Keep your holding affordable for you to enjoy the volatility of the crypto market.