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Crypto currency: A digital currency in financial database

by shruti pandey

Crypto currency is a form of digital currency, where the exchange of currency takes place only through the internet. It is not under any central authority, such as a government or any financial institution, to control or to manage it.

 It is a decentralized system, where there is no intermediary for exchanging of funds between two entities.

  Figure image: Bitcoin

Operations on crypto currency

It does not exist in physical form. Crypto currencies are generally decentralized control, where centralized currencies are minted, or created, or issued by a single authority.

It works by block-chain technology, where it serves as a public financial transaction database. The first cryptocurrency is the Bitcoin, which has decentralized also out in the 2009 as open-source software.

Types of crypto currency

The various types of crypto currency are on the basis of these four categories, which are as follows

  1. Utility
  2. Payment
  3. Security
  4. Stablecoins

Altcoins and Stablecoins of cryptocurrency

Altcoin is also as alternative digital currency for using of Bitcoin. It means the cryptocurrencies other than Bitcoin is altcoin. Litecoin and Ethereum are the examples of altcoins.

To maintain the purchasing power as a stable one, there is another type of cyrpto currency, which is the stablecoins. Its value is fixing to another currency, or financial instrument. It is useful for controlling the volatility of cryptocurrencies and making suitable for common transaction.


It is easier to manage when compared to traditional banking system.

  • It can be bought as little as we want.
  • They offer rewards for just having them.
  • It can transfer to other without any difficulty.
  • It will protect us when there is an inflation.

Disadvantages of cryptocurrency

  • The financial transaction of normal people can be tracked, because it is an anonymous form of transaction.
  • There is a risk of piracy over sharing of files.
  • There is no refund, as it cannot be transferred back.
  • It may be a way for cyber hacking, drug deals, and deals of black-market arms.

Cryptocurrency in India

The most challenging aspects in investment in India is tax on cryptocurrency. In the starting stage, there is literally no income tax or GST. But with the union budget 2022, tax on digital or virtual assets also will include the cryptocurrency.

It has brought the trading, keeping it safely and related financial services of virtual or digital assets, fiat currencies, mostly the cryptocurrencies under the prevention of money laundering act (PMLA).

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