The government talks about prohibiting private cryptocurrencies with a few exceptions. What can be defined as private cryptocurrency? What would be those exceptions? Will the more well-known cryptos like Bitcoin, Ethereum be given some allowance?
When we say private cryptocurrency, we can either say it is one of the two methods. One is to say that anything that is not given out from the government or Reserve Bank of India will be a private cryptocurrency which means Bitcoins, Ether and everything else will become private currency. But on the other hand, if the cryptocurrency is managed or governed by a specific set of developers or community, then it can be termed as private.
On one hand, there is so much of a push saying that blockchain is a good technology and it is supposed to be embraced by a country like India because it is very tech savvy and digital savvy and cannot work without some kind of token on top of it. So the entire idea of why blockchain is successful is because it is not controlled by one person. It is controlled by many people and not individually. No one is responsible for it but everyone is collectively responsible for it. So that is what blockchain as a technology is bringing to the table. It is forward looking in nature.
I think the government may be talking about a situation where a company or a set of companies or a set of banks want to launch some kind of blockchain and if there is a token for it, then that may be an exception. So, we can see this in multiple ways. We definitely do not know what this looks like but at least we know that Bitcoin, is at least not governed by one particular foundation, it is much more global in nature.
There are concerns over what the final bill will look like.
Some people call it gamble but if you see how the returns have been, it does not look like gamble at all. It looks more like a future forward technology. At one point of time, there was a dotcom move; between 2005 and 2010, when the information and technology gave tremendous returns. What is at the end cryptocurrency? Most people don’t get it. They just try to see that okay the price of it is today so much and what it will be in two years and how much money they will make. A lot of people do not even talk in percentages how much gain they get. They talk in terms of multipliers. I think all that is taking away the real authenticity of why cryptocurrency is even there.
All that the cryptocurrencies or Bitcoins are doing generally is doing transactions in a free and fast manner like how messaging is possible — free and fast. So when this new technology comes into the world, it has to come with some particular value so that the actual transaction will become valuable and that is exactly what has pushed the prices from what it used to be maybe a few years ago to what it is right now. So much effort is being put behind to make it so valuable and it is not like there is no underlying physical asset.
What is the underlying asset? What is the value or the service or what do you get for that one coin?
The underlying asset is a huge network that is spread across the world which is ready to accept the transactions happening and process it. It uses something called blockchain technology which is immutable in nature and it exists forever without any intervention of a third party. It is valuable and that is why it is an underlying asset. These people are using large amounts of electricity to make these kinds of transactions and that is how they are earning the freshly created Bitcoins and then eventually those assets will come into circulation. We cannot say the computer I have is an asset behind it. It is a part of the asset behind it if I connect it to the network and make that particular work happen and today we are talking about hundreds of thousands of computers which is doing this work and that is why it is becoming valuable. If it was completely centrally controlled, I do not think it would have had this kind of value. It works without any one in between but kind of everyone in between.