A boring topic today: The next big thing for tomorrow’s world and the sensation that will run the financial system of the world for the next few hundreds of years. That’s called Cryptocurrencies.
Cryptos or Cryptocurrencies are the latest inclusion to the World of finance. Not so new to the World but surely to the Indians. In India, the newness of the product depends on the size of advertising expenditure of the product. In the last few months, a fleet of cryptocurrency platforms has shot up their ads in promoting the trading of cryptocurrencies. Whether Elon Musk will accept Cryptos as a legal tender or not is secondary but what’s more important is to see how will the countries see this change in the financial system.
While it is easy to use this instrument called ‘crypto’ for those who understand its dimensions. It’s not so easy for those who are new to this concept. Firstly, the cryptos are not like any other financial instrument. Not talking about the physical form, because that’s obvious with technological change. What’s more stunning is the introduction of blockchain technology. This is also where the catch is… unlike the other currencies or digital currencies, there’s a significant difference in how the cryptocurrencies are produced.
Cryptos which are also called Tokens or Coins are produced by Mining!
Yes, the process of producing cryptocurrencies is tedious but requires extreme levels of skill. Unlike the usual currency that is produced by printing, cryptos are added to the system by using a method called mining. No not the mining that we see in the coalmines or goldmines. This is mining that we see in computer science. Simply put, cryptocurrencies are nothing but software. A software that’s born out of data that is coded by masters in cryptography. Each cryptocurrency that we purchase is stored in the system as a code in a block. That block in layman language is called tokens or coins.
Every time a new bitcoin is purchased or is ready to be added to the system, a password is generated and that needs to be cracked. The people who take up this task of cracking the code are called the crypto miners who are experts in cryptography. But one thing is sure that a miner takes nothing less than 5 minutes to 10 minutes in cracking the code. Once the code is cracked, it gives birth to a new cryptocurrency coin. For doing all this difficult job, the cryptographers are paid a fee, but that’s not it. Cryptography is a difficult process and it’s not easy for a single person to crack every code. This is why there are thousands of cryptographers right now. Too many technicalities…
Why such a complex process in creating cryptos?
Very simple. The whole idea of cryptocurrencies which was introduced by Satoshi Nakamoto was to replace the intermediary in the financial system. This person doesn’t want a bank to deal with transactions rather wanted everyone to be the banker for themself. To make sure there’s no danger and corruption in transactions, cryptography was chosen as the tool to code and crack the code.
Thus, the future of the financial system is moving towards the elimination of intermediaries like Banks. In this context, multiple opinions have been coming up. India is one of the few countries which is strongly against non-regulated financial instruments. Just imagine no more SBI, ICICI and most importantly Reserve Bank of India? Hard to imagine right.
Surely, the process of shifting from hard currency, digital currency to cryptocurrency is going to be a long haul for India. But the impact and the readiness of the World due to the adaptation of Cryptocurrencies will push India to rethink. Having said that, there will not be a sudden end to the traditional financial system, especially in India. A reminder: ‘cryptos’ can be used as deposits, transfers, loans and investments. Everything can be done using cryptos and already El Salvador has accepted Bitcoin – the world’s largest blockchain network as its legal tender.
The future ahead seems to be challenging and with a bit of crazy innovation.
Moving away from the process of cryptos, the risk to the financial system, etc. The brighter side of the introduction of cryptos is what the market is looking forward to. Just one signal from Supreme Court on not to ban Cryptos has gained huge attention of Cryptoexchagnes in India.
Companies like Binance, WazirX, Coinbase, BuyUCoin have seen a huge rise in their trading platform. The number of registered customers have gone up multiple folds in this year itself. So it’s all for us to wait and watch in the next 10 years to see where the World of Cryptos will reach from here…