Monday, June 28, 2021

Know Cryptocurrency A2Z | Trading | Taxation | Legality | Types | Exchanges

What is Cryptocurrency ?

Cryptocurrency ,

➤ Cryptocurrency is decentralized digital money, based on blockchain technology.A cryptocurrency is a medium of exchange that is digital, encrypted and decentralized

Meaning of Decentralization 

➤ Unlike the U.S. Dollar or the Euro, there is no central authority that manages and maintains the value of a cryptocurrency. Instead, these tasks are broadly distributed among a cryptocurrency’s users via the internet.

➤ Cryptocurrency is also becoming a new stock market. Cryptocurrency is a blockchain based digital currency whose value keeps on increasing or decreasing. Just as the price of gold keeps on increasing, similarly the price of cryptocurrency also keeps changing according to the demand and availability.

➤ Bitcoin was the first cryptocurrency, first outlined in principle by Satoshi Nakamoto in a 2008 paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System. Nakamoto described the project as “an electronic payment system based on cryptographic proof instead of trust.”

Meaning of Cryptographic

➤ That cryptographic proof comes in the form of transactions that are verified and recorded in a form of program called a blockchain.

What Is a Blockchain? How Cryptocurrency Works? 

➤ A blockchain is a shared digital register of recorded data. For cryptocurrencies, this is the transaction history for every unit of the cryptocurrency, which shows how ownership has changed over time. Blockchain works by recording transactions in ‘blocks’, with new blocks added at the front of the chain.  

➤ With a blockchain, everyone who uses a cryptocurrency has their own copy of this book to create a unified transaction record. Software logs each new transaction as it happens, and every copy of the blockchain is updated simultaneously with the new information, keeping all records identical and accurate.

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Types of cryptocurrency

Cryptocurrency ,

➤ There are estimated to be more than 4,500 different cryptocurrencies in circulation as of this writing, and the figure keeps increasing

1. Bitcoin (BTTC)

➤ Created in 2009, Bitcoin became a house name in the cryptocurrency market in the following years. Bitcoin avails blockchain technology to allow the user to make transparent peer-to-peer transactions.

2. Ethereum (ETH)

➤ Ethereum is the first altcoin that emerged out of bitcoin technology. Functioning in a decentralized software platform, the cryptocurrency enables smart contracts and decentralized applications (dapps) to shield against downtime, interference of third parties, control, and fraud threats.

2. Dogecoin

➤ Dogecoin is a digital currency that was originally started as a joke. Later, the online community turned it into a cryptocurrency. Featuring a Shibu Inu dog, Dogecoin has emerged as a major source of digital currency like bitcoin. Elon Musk, the CEO of Tesla, is one of the biggest supporters of Dogecoin.

3. Ripple

➤ Walking out of individual profit sessions, Ripple, one of the unique types of cryptocurrency, yields big benefits for large companies and corporations. Unlike many other cryptocurrencies, Ripple is not based on the famous blockchain technology.

4. Cardano

➤ Cardano is a digital currency born out of extreme research and analysis by engineers, mathematicians, and crypto experts. Charles Hoskinson, one of the founding members of Ethereum, redirected himself to create Cardano after having a disagreement with the group.

5. Tether

➤ The cryptocurrency market is well known for its volatility. Even though crypto investors are well aware of the price swings, most of them are ready to bet big money in the digital currency sphere despite its oscillation. However, as a sign of relief, Tether emerged as a reliable stable coin. 

6. Zcash

➤ One more successful cryptocurrency leveraged out of the bitcoin codebase is Zcash. Built on a decentralized blockchain, Zcash was built by scientists at MIT, John Hopkins, and other respected academics and institutions.

How to Buy or Sell ( Trading ) Cryptocurrency in India

Cryptocurrency ,

➤ Buying Bitcoin, Dogecoin or any other crypto in the country was a big task few years back. That has changed with the emergence of multiple homegrown crypto exchange platforms that allow investors to buy or sell cryptocurrencies within minutes.

➤ The investors can download the above-mentioned apps from Google Play Store or App Store. They just need to sign up using their credentials, complete the KYC process, transfer money to the wallet and make the purchase. The entire process should not take you more than five to ten minutes.

➤ There is no limit on how much and what you can buy. The investors can start with as low as they want to. The purchase is completed within minutes after transferring the amount to wallet.

➤ Most trading platforms have enabled IMPS and NEFT transactions but, charge a small fee for that. 

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Most popular Cryptocurrency Exchanges in India.

Cryptocurrency ,

➤ Several cryptocurrency exchanges have now come up in the country that enable buying, selling and trading in several cryptocurrencies. Cryptocurrency exchanges offer ease in trading by offering functionality through user-friendly applications or websites.

Some of the most popular cryptocurrency exchanges in India are listed below:

1. WazirX

➤ Founded in 2017, WazirX was later acquired by Binance Holdings, which is the world’s largest cryptocurrency exchange by trading volume. 

2. CoinDCX

➤ The Mumbai based cryptocurrency exchange, CoinDCX is one of the popular options with crypto investors in India.The exchange claims to have over one lakh active users and offers more than 200 cryptocurrencies

3. UnoCoin

➤ UnoCoin is among the first cryptocurrency exchanges in India. Launched in 2013, the exchange caters to over 1.2 million users. The exchange allows its users to buy or sell Bitcoin with INR. Traders are also provided with a special bitcoin address that auto sells Bitcoin.

4. Zebpay

➤ Zebpay offers lightning fast payments and enhanced security controls including include controls to disable all outgoing transactions with the 'Disable Outgoing Transactions' feature.

The exchange offers trade across six EUR-Crypto pairs and five Crypto-Crypto pairs across Bitcoin, Ether, Litecoin, Ripple, Bitcoin Cash and EOS.

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Is cryptocurrency legal in India?

Cryptocurrency ,

➤ As things stand now, Bitcoin and other cryptocurrencies are not illegal in India, anybody can buy, sell and trade cryptocurrencies ,but are currently unregulated. And that ‘unregulated’ part is what is bothering the government. But as the crypto space is all about ‘no central authority regulating it’, the government may still not be very sure about how to tame this wild animal. 

➤ In 2018, RBI came out strongly and kind of banned these in India. Then in 2020, the Supreme Court of India reversed RBI’s ban of 2018.

➤ Now the government is also planning to bring in the “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021,” which is expected to clear the government’s stance once and for all.

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Is cryptocurrency taxable currently?

Cryptocurrency ,

➤ Yes. Cryptocurrency transactions are taxable in India in cases where the person earning such gains is an Indian tax resident or where the crypto is said to be domiciled in India.

How Cryptocurrency taxed

➤ Cryptocurrency  as investments - depending on the holding duration of these assets, they would be subject to taxation under long-term capital gains (20 percent post indexation) or short-term capital gains (taxed as per individual slab rate).

➤ But if they are not considered as capital assets and are instead, taxed under income from other sources, then their tax rate will be equivalent to the taxation slab the person falls under. 

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Is govt working on digital currency?

➤ While the government has some reservations regarding cryptocurrencies, it is also working on its digital currency. The government does not want to be left behind in the new age tech revolution and aims to cash in on the benefits blockchain technology offers. 

➤ "The time has come to leverage its applications while at the same time strengthening the digital infrastructure," Reserve Bank of India (RBI) Governor Shaktikanta Das had said in February while announcing that RBI is working on its digital currency.

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