The cryptocurrency industry has seen unprecedented growth since its inception in 2008 with bitcoin. With the price of one bitcoin skyrocketing from $800 to over $16,000 within a period of two years, more and more people are getting interested in this whole new digital currency phenomenon.
However, there are some people who think that cryptocurrency is a scam while others feel it’s the future of money transfer. With so much conflicting information available about it online and offline, one can’t help but wonder: Is Cryptocurrency a Scam by 2021?
Before we begin to answer this question, let us start with the basics.
WHAT IS CRYPTOCURRENCY?
At its simplest form, cryptocurrency is a digital or virtual currency that is designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as control the creation of new units of any particular crypto. Cryptography was born out of the need for secure communication in the Second World War. It has evolved over time to be used in many different areas where secure transactions are needed.
HOW DOES CRYPTOCURRENCY WORK?
Cryptocurrency works by utilizing blockchain technology, which is a digitized, decentralized, public ledger of all crypto transactions. This means that, unlike conventional money, it is not controlled by any central authority. Each transaction made using crypto is secured using cryptography which makes it extremely difficult to forge or replicate.
HOW IS CRYPTO CREATED OR MINED?
Cryptocurrency does not physically exist as coins, notes, or even digital files. It exists as records of transactions on the blockchain. Each transaction made using cryptocurrency is verified by computers which solve extremely complex mathematical problems as part of the verification process. These computers are known as miners and as a reward for their services, they receive new crypto as well as some transaction fees to keep them motivated and maintain the security of the network.
IS IT REGULATED?
Many people believe that cryptocurrency is unregulated since it is decentralized. However, the truth is that governments around the world are either thinking of or have already put measures in place to regulate its use. For example, recently, South Korea announced new laws targeting anonymous trading of cryptocurrencies which means that any traders with verified accounts will be able to make their trades anonymously while those with unverified accounts will not be able to trade anonymously anymore.
IS CRYPTOCURRENCY SAFE?
In general, crypto is safe when it’s in the hands of a user who has been educated about best practices for securing his or her own virtual currency. However, there have been many instances where people have lost their cryptocurrency to hackers. This usually happens when the user is using weak passwords or failing to keep his or her computer’s software up to date, which are issues that can be easily resolved.
CRYPTOCURRENCY TO BE CLASSIFIED AS A FORKED ASSET IN 2021?
The Indian Income Tax Department will be modifying the existing tax framework to class cryptocurrencies as forked assets by 2021. This means that users of crypto will have to declare crypto profits and losses each year just like how it is done with other financial instruments such as stocks, bonds, debentures, etc.
IS IT A SCAM?
No, it’s not. However, cryptocurrency is a complex subject and thus, it’s very easy for scammers to take advantage of this lack of knowledge to cheat people out of their money. For example, a scammer may send a message on WhatsApp or Facebook claiming that he has made a terrible mistake by sending Bitcoin or Ether at the same time as someone else who has made a similar mistake.
He will claim that he doesn’t have enough money to purchase the other person’s cryptocurrency so the only way to resolve this is for you to send him your cryptocurrency so he can repay his debt to the other party. This is an obvious scam since blockchain technology does not allow transactions to be reversed or refunded once they are carried out. This means that if someone sends crypto to the wrong address, it is a permanent transaction and cannot be returned by anyone.