The contents of this blog should not be viewed as financial advice. Please use your discretion while investing your money.
Like the throbbing heartbeat of a pumped athlete right before a 100-metre dash, raring to sprint past the competition and break all records, the crypto trendline is set to take the world by a storm (or should we say, by a Bolt?). And with this fast-paced vertical fluctuation, a flux of excitement among new-age investors has already cast an influence over our pop culture, the major government institutions, and even our social media memes!
The question that naturally comes to those of us sitting on the horizon is - “Are crypto coins in here for the long run?” The simple answer is - we don’t know! However, this blog post attempts to help you understand the basic ideas behind crypto technology and analyse the current conversation around crypto to help you arrive at your own answers to this question.
Technology Behind Crypto
In the simplest terms, Cryptography is the encryption of information to enable secured peer-to-peer communication without the intervention of any unwanted 3rd party. Dan Brown fans might well be aware of this never-ending human pursuit to create complex coded ciphers to protect the holiest of the secrets. Modern cryptography techniques attempt at securing even the most rudimentary seeming information with an unprecedented level of security.
The two key terms that you need to understand before moving on to cryptos are ledgers and blockchain.
Ledger: A piece of paper (/software) that records all monetary transactional history between two parties. It allows for the provision of monitoring and tracking of credits, debts, and any potential future transactions.
Blockchain: A shared database for storing information wherein all new data gets stored in virtual blocks. As soon as a block fills to its maximum capacity, it closes and links to the previous blocks, thereby creating a chain of blocks worth information, i.e., a blockchain.
Crypto coins are one of many potential applications of blockchain technology. All transactions are recorded in blocks on a publically accessible ledger with corresponding timestamps to create a secured record of all transactional data.
Unlike the traditional fiat currency, crypto coins can be exchanged between two parties without the need for an intermediary body such as a bank or any other government institution. A major advantage this brings is its significantly lower susceptibility to societal influences and inflation. This also means that a particular type of cryptocurrency might ultimately emerge as one single global token of exchange, thereby eliminating the need for multiple currencies across the world (of course, the economics behind this idea are not so simple, and it could be decades before something like this can actually happen).
Another potential opportunity for investment in blockchain technology includes NFTs, or Non Fungible Tokens, which help you create a unique identity for a virtual commodity. This virtual commodity could be a simple logo or a complex digital art. It could even be the skin of a gun that you purchase in your computer game! Whatever the virtual commodity is, NFTs can ensure that they are not replicable. Of course, you can still take a screenshot of that virtual commodity and preserve it, but that will not be equivalent to stealing. That would be the same as clicking the picture of Van Gogh’s Starry Nights. You still don’t own the painting; you simply possess a copy of the original. The copy has no value. Additionally, specific NFT coins can be incorporated into the mix, thereby allowing you to own these virtual commodities as potential assets that you can exchange for cryptocurrency or fiat currency at any point.
New Crypto Bill in India?
Through our above discussion on the usefulness of the crypto space, it is easy to realise that a blanket ban on such an advanced technology is almost impossible for any democratic country as it will hamper the growth and development of the nation. However, there have been talks of a potential ban on cryptocurrencies with the crypto bill around the corner. So, what changes can we see in the crypto space in India within the next few months? While the scope is wide, here are three major outcomes of this bill that seem likely at this point:
- Regulation on crypto-related advertisements: Irrespective of the developments, crypto is still an emerging space and therefore, the crypto market is highly volatile. In order to safeguard the financial interests of the citizens who may get influenced by these attractive crypto investment ads, the government may regulate the advertisements by making the issuing of an advisory statement mandatory for all crypto-related ads and imposing certain visual restrictions (For e.g., you can see the warning statement in commercials for cigarettes and disclaimers in mutual funds advertisements. Direct advertisement for liquors is also prohibited in India).
- Banning of all private crypto coins: The government may ban all private cryptocoins. However, the word “private” does not necessarily include all coins that are not owned and controlled by the government. Private cryptocurrencies are a separate class wherein the ledger is masked, i.e., the transaction history on the ledger is not publically visible to everyone. This can lead to a lack of transparency and further financial complications that cannot be traced easily. Major crypto coins such as Bitcoin, Etherium, etc., are NOT private cryptocurrencies as they work on an open ledger system and therefore are highly unlikely to get banned in India.
- RBI’s crypto: The Reserve Bank of India may launch its own cryptocurrency. However, the entire appeal of cryptos is the fact that they are unregulated by any organization. Therefore, there are significant chances that the efficacy and the adoption rate of that crypto remain perpetually low.
Should Students Invest?
Young learners are at an age where their minds are easily impressionable. Any new idea can capture their imagination and get their adrenaline pumping. However, it is extremely important to develop a critical thinking ability wherein you can consciously dissociate with a particular trend, look at the situation clearly from a distance, evaluate the potential consequences that may come with it, and then make an informed decision. This holds for the crypto space as well.
Having said that, if you as a student have some spare money from your side jobs or pocket money that you have saved over several months, the crypto market presents a HUGE opportunity for you. Take time out to study the investment opportunities in this space, and once you attain a sufficient level of confidence and clarity, you can start with small monthly investments in the form of crypto SIPs (Systematic Investment Plans). One big advantage that you have as a student is that you are on the right side of the time, and therefore, you can maximize your compounding benefits.
As a beginner in this field, Bitcoin and Ethereum are probably the best crypto coins to invest in as they offer the greatest potential for future growth while being relatively stable.
You may steer clear of new crypto coins that may have higher volatility (unless you have put in dedicated research and are absolutely convinced that a particular coin can skyrocket your investment portfolio). Additionally, if you have put in the effort of doing the necessary research, learn to stick with your decisions. The fluctuations in any rewarding investment opportunity are almost inevitable. However, your investment decisions at this age need to be for the longer horizon. If things do not go disastrously wrong in a particular direction, do not keep changing your investing patterns and stay in it for the long run. With an in-depth understanding of the space, regular reading, and due patience, the crypto world may present an incredible opportunity to secure your financial future well in advance.
Conclusion
Blockchain technology holds the potential to revolutionise the way in which we interact with the world around us - both physically and virtually. Irrespective of whether you choose to invest financially or not, it is essential for you to get acclimatised to the developments in the digital world so as to stay up-to-date with the technology of the future. In that capacity, reading beyond your academics and constantly educating yourself while also focusing on skill-building is a necessity. Who knows, maybe you will become the one to figure out the best coin to mine and become the next billionaire?
SSSi Online Tutoring Service provides you with an exceptional opportunity to learn the key skills that will help you create a mark for yourself in this technologically evolving world. You can choose to study your class 11 Computer Science and class 12 Computer Science with us to gain an in-depth understanding of the subject matter, or you can choose to pursue additional skill-building courses such as Data Science and Cybersecurity that can open a sea of lucrative opportunities for you in the professional world.
Book your FREE live one-on-one tutoring session for a subject of your choice with SSSi and become a master of the digital space.
