BITCOIN (₿) AND ITS USE IN INDIA
BITCOIN (₿) AND ITS USE IN INDIA
Bitcoin (₿) And Opinion of Reserve Bank of India That Ban of Cryptocurrencies in the Country Needs to Be Total and Partial Restrictions Will Not Work
Bitcoin (₿) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. The cryptocurrency was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. The currency began use in 2009 when its implementation was released as open-source software.
Why Bitcoin is so popular
Technologies like Bitcoin have rocked society with understanding the value of information and the ability to transfer it instantly across the globe. It allows people from all around the world to more easily participate in digital economies, trade values without concern for geographical location or prohibitively expensive bank processing fees. Bitcoin is also a great way to teach oppressed people in places like Venezuela about privacy and how inflation hurts thanks to mining a currency with a low supply.
Units and divisibility
The unit of account of the bitcoin system is the bitcoin. Currency codes for representing bitcoin are BTC[a] and XBT. Its Unicode character is ₿. One bitcoin is divisible to eight decimal places. Units for smaller amounts of bitcoin are the milli bitcoin (mBTC), equal to 1⁄1000 bitcoin, and the satoshi (sat), which is the smallest possible division, and named in homage to bitcoin’s creator, representing 1⁄100000000 (one hundred millionth) bitcoin.100,000 satoshis are one mBTC.
The bitcoin blockchain is a public ledger that records bitcoin transactions. It is implemented as a chain of blocks, each block containing a hash of the previous block up to the genesis block in the chain. A network of communicating nodes running bitcoin software maintains the blockchain. Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications.
Transactions are defined using a Forth-like scripting language. Transactions consist of one or more inputs and one or more outputs. When a user sends bitcoins, the user designates each address and the amount of bitcoin being sent to that address in an output. To prevent double spending, each input must refer to a previous unspent output in the blockchain. The use of multiple inputs corresponds to the use of multiple coins in a cash transaction.
Since transactions can have multiple outputs, users can send bitcoins to multiple recipients in one transaction. As in a cash transaction, the sum of inputs (coins used to pay) can exceed the intended sum of payments. In such a case, an additional output is used, returning the change back to the payer. Any input satoshis not accounted for in the transaction outputs become the transaction fee.
In the blockchain, bitcoins are registered to bitcoin addresses. Creating a bitcoin address requires nothing more than picking a random valid private key and computing the corresponding bitcoin address. This computation can be done in a split second. But the reverse, computing the private key of a given bitcoin address, is practically unfeasible. Users can tell others or make public a bitcoin address without compromising its corresponding private key. Moreover, the number of valid private keys is so vast that it is extremely unlikely someone will compute a key-pair that is already in use and has funds. The vast number of valid private keys makes it unfeasible that brute force could be used to compromise a private key. To be able to spend their bitcoins, the owner must know the corresponding private key and digitally sign the transaction. The network verifies the signature using the public key; the private key is never revealed.
How does bitcoin make money?
New bitcoins are generated by a competitive and decentralized process called “mining”. This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.
Bitcoin’s primary advantages are its network effect and proven security. The cryptocurrency is becoming more accessible, with more exchanges, merchants, software, and hardware supporting it. It has arguably the largest developer ecosystem of any coin, with more software and implementations than any other. And now you understand why it is so powerful.
Are Bitcoins legal?
As of June 2021, bitcoin was legal in the U.S., Japan, the U.K., and most other developed countries. In general, it is necessary to look at bitcoin laws in specific countries. In the U.S., the IRS has taken an increasing interest in bitcoin and has issued guidelines for taxpayers.
Is Bitcoin illegal in India?
At present, there is no legislature that covers cryptocurrencies in India. However, that does not make cryptocurrency illegal in the country. It simply indicates that there is no regulatory framework to safeguard cryptocurrency owners in the country.24-Nov-2021
The Supreme Court in its judgment on Internet and Mobile Association of India vs. RBI in March overturned the RBI’s 2018 circular. The SC noted that in the absence of any legislative ban on the buying or selling of cryptocurrencies, the RBI cannot impose disproportionate restrictions on trading in these currencies.02-Jun-2021.
The Reserve Bank of India (RBI) on May 31 asked banks not to cite its 2018 order as a reason to deny banking services to customers who dealt in cryptocurrencies. It stated that its 2018 order was set aside by the Supreme Court in March this year and that it would be inappropriate for banks to cite the order any longer.
However, the central bank asked banks to continue other due diligence procedures on cryptocurrency traders under rules linked to anti-money laundering and prevention of terrorism.
Mumbai: The Reserve Bank of India (RBI) has said in a presentation to its central board that a ban on cryptocurrencies needs to be total and partial restrictions will not work.
In the presentation, concerns were raised by RBI officials about:
Trackability of Transactions
Valuation of cryptocurrencies
Extreme price volatility
Legal issues & difficulty in identifying parties in crypto transaction chain
Among the board members Revathy Iyer (former deputy comptroller & auditor general) expressed the need to proceed with caution.
Another board member Sachin Chaturvedi (director general at The Research and Information System for Developing Countries) cautioned against policy makers taking extreme steps and risks being cut off globally. He highlighted instances in the past when the government had to backtrack.
In 2018, the RBI was forced to retract its ban on crypto after a Supreme Court order. However, the RBI does not seem to have change its mind since then.
Crypto currencies and Regulation of Official Digital currency bill, 2021 in the winter session of parliament
“A bill on cryptocurrency and regulation of official digital currency is under finalisation for consideration of the Cabinet,” Minister of State in the Finance Ministry, Pankaj Chaudhary, said in written reply.
The government has listed a bill for the Winter Session of Parliament to ban all cryptocurrencies and facilitate the introduction of a central bank digital currency (CBDC).
The bill is titled “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”.
According to Lok Sabha Bulletin, the purport of the cryptocurrency bill is “to create a facilitative framework for the creation of the official digital currency to be issued by the RBI. The bill also seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”