In the past 10 years we have seen in the financial market, there is on name on Hype called Blockchain, if you have been following Banking, Investing or cryptocurrencies, you may have heard the term “Block Chain”
Huge investments is been made in this industry and every news network, social media, even Billionaire like Elon musk are taking action in block chain,
So what is it ………?
Are people really making money out of it…?
Blockchain, as the simple meaning, suggests that it is the chain of information, but somehow everybody knows that it is related to Cryptocurrency but we lack to understand the true concept of blockchain.
as we know that “Blockchain and cryptocurrencies are the future , This means that network is going to be 1000x bigger and more powerful than the internet because it requires much more processing power. Also, the largest network always wins”
Cryptocurrency is not Blockchain? (What is BlockChain?)
A blockchain is essentially a digital ledger of transactions and the system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system, Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger and that decentralized database managed by multiple participants
This means if one block in one chain was changed, it would be immediately apparent it had been tampered with. If hackers wanted to corrupt a blockchain system, they would have to change every block in the chain, across all of the distributed versions of the chain, Blockchains such as Bitcoin and Ethereum are constantly and continually growing as blocks are being added to the chain, which significantly adds to the security of the ledger.
How BlockChain Works?
Blockchain is basically record keeping Technology behind the Cryptocurrency network and every transaction is being recording while passing various stages
Step 1: A Transaction is requested & authenticated
Step 2: Block representing that transaction is created
Step 3: Block is sent to every node in the network
Step 4: Nodes validates the transaction
Step 5: Nodes receive a reward for proof of work
Step 6: The Block is added to existing Blockchain
Step 7: The update is distributed across the network
Step 8: The Transaction is complete
How BlockChain Relates with Cryptocurrency?
In the past, there have been many attempts to create digital money, but they have always failed.
The prevailing issue is trust. If someone creates a new currency called the X Rupee, how can we trust that they won’t give themselves a Lakhs of X Rupee, or steal your X Rupee for themselves?
Then cryptocurrency like Bitcoin was designed to solve this problem by using a specific type of database called a blockchain. Alike normal databases have someone in charge who can alter the entries. Blockchain is different because nobody is in charge; it’s run by the people who use it. What’s more, bitcoins can’t be faked, hacked, or double-spent – so people that own this money can trust that it has some value. And left the rest to market that controls the prices of cryptocurrency with numerous numbers of buyers and sellers
Advantages of Blockchain Technology
There are many advantages to using blockchain technology compared to other traditional technologies.
Market Influence by Majority Holders (Risk of 51% attack)
In BlockChain, there’s always a risk the Major players will act together to influence the outcomes of the system. In the case of a cryptocurrency, this would mean a group of miners controlling more than 50% of the mining computing power can influence what transactions are validated and added (or omitted) from the chain.
The wisest rule of investment is when others are selling, Buy and when others are buying, sell. usually, we do the opposite. When everyone else is buying we assume it is a good trade, so we buy, and when people start selling panic situation arises and we sell too, capital structure of Crypto is based on first come first benefit, an early investor will surely able to draw large financial incentive than others,
for instance in Dogecoin over 60% of Coins were held by the TOP-50 wallets across the globe and the largest wallet hold approximately 30% of all Coins which gives them to power to exploit the market, the regulation of the price of a coin will clearly depend upon the action of few people for which stakes of millions of investors will be affected in its decentralized trade or even crash in the few seconds.
Barriers for development of Blockchain Environment!
The beauty of blockchain lies in the complexity of the network. The higher the number of parties associated with a transaction, the better it is for the applicability of the blockchain.
Companies have to deploy dedicated blockchain experts, even if their existing applications are small.
Secondly, one blockchain application cannot be easily duplicated across operations and use-cases. Each application requires a deeper understanding of the business needs and blockchain can be drastically different for applications such as insurance contracts and for land records.
According to various surveys and reports, more than 80% of the blockchain developers in India are moving Abroad in search of better opportunities. Developers cite the brain drain happening due to the lack of a “robust regulatory framework” in the country on blockchain technology.
The report suggests that blockchain developers are moving to Singapore, UAE, Estonia, and Switzerland which offer tax breaks and e-residency for startups. The significantly improved digital infrastructure in these countries is also better suited for applications under the blockchain.
Regulatory Framework for BlockChain in India
The Indian government is now considering the introduction of a new bill titled “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”(“New Bill”) , intends to ban private cryptocurrencies in India with certain exceptions to promote the underlying technology and trading of cryptocurrency and provide a framework for creating an official digital currency which will be issued by the RBI.
Though it has been affirmed by the Union Finance Minister Nirmala Sitharaman that there shall not be a complete ban on cryptocurrency – “we will allow a certain amount of window for people to experiment on the blockchain, bitcoins, and cryptocurrency.”,
As you may know, blockchain technology aims to transform the current financial system and exclude the mediators, and these facts can’t be unnoticed by governments.
Keeping in mind that our nation’s success in the past three decades has come from ITeS-based solutions, if India is aiming to reach a $5 trillion economy, we cannot ignore the $1.7 trillion market that exists for cryptocurrencies.
A forward-looking crypto policy can have a significant impact on improving our overall financial infrastructure, help safeguard national security, deter financial frauds, strengthen our monetary policy, attract international capital, create more job opportunities, and retain our tech talent to accelerate technological development, thereby driving the nation towards becoming a global powerhouse.