ABSTRACT: The newfound world of virtual currencies is gaining popularity among individuals and government of various nations. A new industry has established around these virtual currencies, businessmen, exchanges and investors who are increasingly dealing in them. These currencies do not have any intrinsic value or any physical presence and are traded on a common platform which does not have any central control and regulatory system.

Today, bit coin is the most popular crypto currency, reason being it’s wide acceptance and usage. The more acceptability the currency has, the better it is When it comes to bit coin, a country like India cannot be overlooked .It is a country with a huge population where oligarchs are continuously looking for safe alternatives to invest their enormous wealth and citizens are looking for ways to save taxes.

The paper studies conceptual background of bit coin and it’s impact on economy of India.


The world of crypto currency is gaining popularity day by day. This popularity is a result of financial crisis in Europe. The wave of technology and increased users of internet have brought the focus to crypto currency. Investors who earlier used to invest in gold and commodities have been attracted by crypto currency as an alternative investment. Ever since bit coin’s launch in 2009 by an unknown group named Satoshi Nakamoto, it has increasingly gained traction.

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A number of countries namely Russia, China, Japan, United States of America, Denmark, Sweden, South Korea, Netherlands, United kingdom, France and Australia have understood the concept of virtual currency and have accepted bit coin as a currency making bit coin one of the most popular virtual currency. Abbreviated as BTC, it relies on certain algorithms to prevent hacking of the system. As and when a transaction is made in the bit coin economy is stored in a block which contains the information of the block previous to it and the previous block contains information of the block previous to it, thus forming a chain popularly known as a block chain. This process is similar to what we see in our daily whatsapp conversations which is end-to-end encrypted. Let us consider a message to be a block. When a message is sent it is stored as a block, when

the next message is sent it is saved as another block. There are a number of blocks in a conversation which makes a block chain. This rising craze of crypto currency just like the general citizens did not miss the eagle eyes of the Government of India which put a ban on crypto currency in 2018 considering a number of factors which have been discussed in detail later in the paper.


? To understand the concept of crypto currency and bit coin

? To understand how a crypto currency, to be specific, bit coin works

? To examine the impact of crypto currency on the economy of India

? To analyze the major influencers


To conduct the study, secondary data has been collected from different websites possessing information about crypto currency securities and their futures. To facilitate the study,workings of different researcher have been used.


A crypto currency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Crypto currencies are a type of digital currencies, alternative currencies and virtual currencies. Crypto currencies use decentralized control as opposed to centralized electronic money and central banking systems. The decentralized control of each crypto currency works through a block chain. The block chain is a public transaction database, functioning as a distributed ledger.


Crypto currency is designed in a manner to be benefitted from the internet and it’s workings. Just like one’s e-wallet, crypto currency exists just in the cloud and do not have a physical presence. Not having physical presence does not imply that it does not have any value. Instead, it suggests that it has a digital value. It has been widely accepted by various traders and a number of businesses due to the fact that the fee charged on a bit coin transaction is considerably lesser than that charged for a credit card transaction.

Giving an analogy to the start-up ecosystem, a considerable number of start-ups get initiated but only a few of them witness the road to success, seeing the massive success of bit coin as a crypto currency a number of other crypto currencies emerged such as Lit coin, Peer coin, etc. Some of which could make people to transact in them whereas others died a slow death because it is the users who make or break a crypto currency. Salient features of crypto currency are as follows:

• Allows conversion into any form of currency. Putting light on the fact that transacting in crypto currency does not necessarily mean that it will remain in the same form. Rather can be converted into other forms of currency unlike cash.

• Can be transferred at a lightning speed. Just like other just in time transactions crypto currency can be deposited in one’s account in click of a button.

• Transactions can be made anonymously. Unlike bank and other centralized transactions where the details of account holders are explicitly mentioned the users are not named in crypto currency transactions. Hence, enhancing security.

• Saves conversion fee. Crypto currency is a standardized unit of exchange unlike other modes of currency which varies from country to country. Since, value of crypto currency remains the same all around the world, no conversion fees has to be paid.

• Easy to store. Crypto currency can be stored offline in a ‘paper’ wallet or on a hard disk which not necessarily be connected to internet.

• Increased safety from theft. Although not fully secure, crypto currency is difficult to break in for hackers.


The validity of each crypto currency’s coins is provided by a blockchain. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data. By design, blockchains are inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.


In cryptocurrency networks, mining is a validation of transactions. For this effort, successful miners obtain new cryptocurrency as a reward. The reward decreases transaction fees by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized machines such as FPGAs and ASICs running complex hashing algorithms like SHA-256 and Scrypt. This arms race for cheaper-yet-efficient machines has been on since the day the first cryptocurrency, bitcoin, was introduced in 2009. However, with more people venturing into the world of virtual currency, generating hashes for this validation has become far more complex over the years, with miners having to invest large sums of money on employing multiple high performance ASICs. Thus the value of the currency obtained for finding a hash often does not justify the amount of money spent on setting up the machines, the cooling facilities to overcome the enormous amount of heat they produce, and the electricity required to run them.

As of July 2018, following are the largest cryptocurrency*

1. Bitcoin

2. Ethereum

3. Ripple

4. Bitcoin Cash

5. EOS.

* in terms of market capitalisation


Bit coin is a peer-to-peer decentralized electronic cash system. Bit coins are generated using a process called mining. That’s where block chain comes in: it is the unique part of Bit coin and what makes it so secure. Block chain is a ledger that authenticates and records Bit coin transactions; it stops people spending money twice.

Will it be correct to affirm that ‘bitcoin’ is another form of money?

Economists consider something as a currency when endowed with three attributes: means of exchange, unit of account and store of value. Thus, in an economic perspective, Bitcoin may be considered currency. An increasing number of merchants have accepted Bitcoin as a form of payment (means of exchange), and fixed prices in Bitcoins (unity of account). Also, more and more people are willing to save Bitcoin to protect themselves from the economic crisis and the harmful effects of inflation (store of value).

Real world impact of virtual money:

? Market Capitalisation

The net worth of all forms of virtual money which is in circulation is known as market capitalization. A crypto currency’s success is determined by the market it has been able to capture. New crypto currencies do not enter the market daily or even if they do, they are not able to gain enough market share in order to capitalize on it.

? Trading Volume

It refers to the volume of the virtual currency that has been transacted in a day, week or month, that is, a standardized period of time. The more the crypto currency traded, the better it is and better are the chances of it being successful.

? Acceptance in Market

We all understand the reason behind dollar being more valuable than the Indian rupee. It is the acceptability that defines the value of a currency. Similarly, virtual currency which is widely acceptable will hold greater value than the one which is lesser acceptable.

? Verification Channels

When a transaction is made in crypto currency, it needs to be verified. There exist two methods for verification. First one being the one in which a computer brain makes all the calculations and then verify the transactions. In second method the user with the highest share of that particular crypto currency verifies the transactions.

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