What is Digital Currency ? Its Pros and cons

A Digital currency(Cryptocureency or crypto), is a virtual currency secured by cryptography.

Now what is Cryptography?

Cryptography is a technology to prtotect data over the internet.

Cryptography provides for secure communication in the presence of malicious third-parties known as adversaries. Encryption uses an algorithm and a key to transform an input (i.e., plaintext) into an encrypted output (i.e., ciphertext )

Cryptography  is designed to work as a medium of exchange, where individual ownership records are stored in a computerised database.

Latest Developments regarding  Cryptocurrency in India –

The Cryptocurrency and Regulation of Official Digital Currency Bill 2021. It is a bill that would regulate Cryptocurrency in India. On December 7, 2021, Finance minister Nirmala Sitharaman asserted that the the proposed Central Bank Digital Currency will not boost cryptocurrency in India.

As per computer experts, any system that falls under the category of cryptocurrency must meet the following requirements.

1. Absence of any centralised authority and is maintained through distributed networks
2. The system maintains records of cryptocurrency units and who owns them
3. The system decides whether new units can be created and in case it does, decided the origin and the ownership terms
4. Ownership of cryptocurrency units can be proved exclusively cryptographically.
5. The system allows transactions to be performed in which ownership of the cryptographic units is changed.

Advantages of Digital Currency

• Funds transfer between two parties will be easy without the need of third party like credit/debit cards or banks
• It is a cheaper alternative compared to other online transactions
• Payments are safe and secured and offer an unprecedented level of anonymity
• Modern cryptocurrency systems come with a user “wallet” or account address which is accessible only by a public key and pirate key. The private key is only know to the owner of the wallet
• Funds transfer are completed with minimal processing fees.

Disadvantages of Digital Currency

• The almost hidden nature of cryptocurrency transactions makes them easy to be the focus of illegal activities such as money laundering, tax-evasion and possibly even terror-financing
• Payments are not irreversible
• Cryptocurrencies are not accepted everywhere and have limited value elsewhere
• There is concern that cryptocurrencies like Bitcoin are not rooted in any material goods. Some research, however, has identified that the cost of producing a Bitcoin, which requires an increasingly large amount of energy, is directly related to its market price.