Is Cryptocurrency

the new money?

ANALYTICAL REPORT

INTRODUCTION-
What is
Cryptocurrency?


A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of

exchange wherein individual coin ownership records are stored in a digital ledger or
computerized database using strong cryptography to secure transaction record entries, to control the creation
of additional digital coin records, and to verify the transfer of coin ownership. It typically does not exist in
physical form (like paper money) and is typically not issued by a central authority. Some cryptocurrencies
use decentralized control as opposed to centralized digital currency and central banking systems. When a
cryptocurrency is minted or created prior to issuance or held on a centralized exchange, it is generally
considered centralized. When implemented with decentralized control, each cryptocurrency works
through distributed ledger technology, typically a blockchain, that serves as a public financial transaction
database. It is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger
enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are
generally not issued by any central authority, rendering them theoretically immune to government
interference or manipulation.

The four main types of cryptocurrencies are:-

1. Bitcoin
One of the most commonly known currencies, Bitcoin is considered an original cryptocurrency. It was
created in 2009 as an open-source software. The author of the whitepaper that established this digital
currency was under the pseudonym Satoshi Nakamoto. Using blockchain technology, Bitcoin allows users
to make transparent peer-to-peer transactions. All users can view these transactions; however, they are
secured through the algorithm within the blockchain. While everyone can see the transaction, only the owner
of that Bitcoin can decrypt it with a “private key” that is given to each owner. Unlike a bank, there is no
central authority figure in the Bitcoin. Bitcoin users control the sending and receiving of money, which
allows for anonymous transactions to take place throughout the world.
Pros
• There will only ever be 21 million Bitcoins. Most of these Bitcoins already have been mined by
users. There are currently around 17 million Bitcoins, so there are around 4 million left to be mined.
This low limit for Bitcoin is good for the price — if a lot of people want Bitcoin but there aren’t
many Bitcoins available, the people that want Bitcoin will pay more for it. That would make the
price go up!
• Bitcoin is easier to liquidate than rival cryptocurrency types. This means it is easier to convert
Bitcoin into cash. That’s right — because Bitcoin is so popular, it is easier to exchange your Bitcoin
for fiat currency like USD and EUR. Also, Bitcoin is on almost every crypto exchange on the
internet. This means the trading volume is super high! In fact, it’s the highest of all cryptocurrencies.
• More stores accept Bitcoin than other cryptocurrency types. You are able to buy just about any
item using Bitcoin through the hundreds of online sellers that accept the cryptocurrency. This is
another way you can liquidate your Bitcoin — rather than convert it back into cash, you can just
spend it like you would with cash.
• Bitcoin is the biggest cryptocurrency. Bitcoin was the first crypto, and it is the biggest. It currently
dominates over 40% of the market, which is huge! Many people believe that Bitcoin will always be
the biggest (but you should remember that’s just an opinion and that no one actually knows what will
happen).

Cons
• Bitcoin fluctuates a lot. This means the price of Bitcoin changes a lot every day. In fact, the Mt.
Gox collapse actually caused Bitcoin’s price to fall 50% below what it was the day before. Some
investors like fluctuations, but the people who lose money because of fluctuations, definitely do not
like them.
• Bitcoin may be replaced by a better cryptocurrency. As we mentioned in the section on altcoins,
there are hundreds of variations on Bitcoin in existence today. Bitcoin is almost 10 years old now.
Any of these newer coins could eventually replace Bitcoin — they are newer and further advanced.
• People still use Bitcoin for a crime. The reputation of Bitcoin is improving since its early days on
 Silk Road, but it’s still not perfect. We only hear of a few people being prosecuted for using Bitcoin
illegally, but there are probably a lot more people that use it illegally and don’t get caught. These
include things like scams and avoiding taxes.

2. Ethereum
In contrast to Bitcoin, Ethereum is a platform that allows people to build dApps, tokens and smart contracts.
Its currency is called Ether (ETH). Created in 2015, Ethereum is a type of cryptocurrency that is an open
source platform based on blockchain technology. While tracking ownership of digital currency transactions,
Ethereum blockchain also focuses on running the programming code of any decentralized application,
allowing it to be used by application developers to pay for transaction fees and services on the Ethereum
network.

Pros
• Users of dApps built on Ethereum will always need Ether. They need Ether to pay for transaction
fees on the dApps because the dApps run on the Ethereum blockchain. So, just like the peanut butter
jelly sandwich, Ether will never go out of style!
• Many new projects are being built on Ethereum. Most of these projects will take years to
develop, however, a lot of them could be huge when they are completed.
• Speed. Ethereum can process transactions in a matter of seconds, whereas Bitcoin’s transactions take
upwards of 10 minutes.

Cons
• There are many more Ether coins than there are Bitcoins. Earlier, we talked about how part of
Bitcoin’s value comes from the fact that there is a limited supply. This is not the case with Ethereum
— there are almost 100,000,000 Ether coins at the moment and they will never stop being created.
However, the rate at which they are being produced will slow down greatly, so it isn’t much of a
problem in my opinion.

3. Ripple
Basically, Ripple is a blockchain that is designed to be used by banks to make their payments faster. It is
known as the banker’s coin, and there are many partnerships with global banks currently being worked on.
Ripple was released in 2012 that acts as both a cryptocurrency and a digital payment network for financial
transactions. It’s a global settlement network that is designed to create a fast, secure and low-cost method of
transferring money.Ripple allows for any type of currency to be exchanged, from USD and Bitcoin to gold
and EUR and connects to banks, unlike other currencies. Ripple also differs from other types of digital
currencies because its primary focus is not for person-to-person transactions, rather for moving sums of
money on a larger scale.

Pros
• Big, well-respected companies (like global banks) are trusting Ripple. Huge financial
organizations (such as banks and governments) have partnered with Ripple. Many more are yet to
partner but have plans to. So, as an alternative to fiat currency, Ripple may be the best option for you
within the world of finance. Because it is working with governments, the power it has to be
widespread could be the reason it succeeds.

Cons
• Unlike other cryptocurrencies, Ripple isn’t decentralized. Instead, it is centralized. The company
behind Ripple (called Ripple Labs) owns most of the Ripple tokens (XRP). So, if they wanted to,
they could sell all of their tokens and the price of XRP would go down a lot. This is extremely
unlikely because they wouldn’t want to sell all of their tokens. But, I have to make a point about it
because it is still possible.

4. Litecoin
Litecoin is a fork of Bitcoin! So, basically, the blockchain of Litecoin used to be a part of Bitcoin’s
blockchain, but it split when the Litecoin update was offered. So, it’s very similar but it has different
features to Bitcoin. It was created to improve upon what Bitcoin had created. Litecoin has been in the news a
lot lately because it will be the first cryptocurrency to use the Lightning Network. The Lightning Network
solves a lot of issues for cryptocurrencies, such as scalability — using the Lighting Network, Litecoin will
be able to process many more transactions per second.

Pros
• Litecoin is both faster and much cheaper than Bitcoin. Litecoin transactions take seconds, like
Ethereum transactions. Bitcoin transactions take upwards of 10 minutes.
• Also, Bitcoin transactions can be costly, which makes them pointless for sending small amounts. As
Litecoin transactions are much cheaper, Litecoin is a lot better for micropayments (small payments),
which is why it is called “Lite” coin.
•
Cons
• Litecoin is still only a slight improvement in Bitcoin. If Bitcoin can improve so that it can scale
and offer cheaper & faster transactions, there might not be much need for Litecoin.


Mining of
Cryptocurrency


Cryptocurrency mining, or cryptomining, is a process in which transactions for various forms
of cryptocurrency are verified and added to the blockchain digital ledger. Also known as cryptocoin mining,
altcoin mining, or Bitcoin mining (for the most popular form of cryptocurrency, Bitcoin), cryptocurrency
mining has increased both as a topic and activity as cryptocurrency usage itself has grown exponentially in
the last few years.Each time a cryptocurrency transaction is made, a cryptocurrency miner is responsible for
ensuring the authenticity of information and updating the blockchain with the transaction. The mining
process itself involves competing with other cryptominers to solve complicated mathematical problems with
cryptographic hash functions that are associated with a block containing the transaction data.
Cryptocurrency mining is painstaking, costly and only sporadically rewarding. Nonetheless, mining has a
magnetic appeal for many investors interested in cryptocurrency because of the fact that miners are
rewarded for their work with crypto tokens.
A miner is a node in the network that collects transactions and organizes them into blocks. Whenever
transactions are made, all network nodes receive them and verify their validity. Then, miner nodes gather
these transactions from the memory pool and begin assembling them into a block (candidate block). The
first step of mining a block is to individually hash each transaction taken from the memory pool, but before
starting the process, the miner node adds a transaction where they send themselves the mining reward (block
reward). This transaction is referred to as the coinbase transaction, which is a transaction where coins get
created ‘out of thin air’ and, in most cases, is the first transaction to be recorded in a new block.
After every transaction is hashed, the hashes are then organized into something called a Merkle Tree (or a
hash tree) - which is formed by organizing the various transaction hashes into pairs and then hashing them.
The outputs are then organized into pairs and hashed once again, and the process is repeated until “the top of
the tree” is reached. The top of the tree is also called a root hash (or Merkle root) and is basically a single
hash that represents all the previous hashes that were used to generate it.
The root hash - along with the hash of the previous block and a random number called nonce - is then placed
into the block's header. The block header is then hashed producing an output based on those elements (root
hash, previous block's hash, and nonce) plus a few other parameters. The resulting output is the block hash
and will serve as the identifier of the newly generated block (candidate block).
In order to be considered valid, the output (block hash) must be less than a certain target value that is
determined by the protocol. In other words, the block hash must start with a certain number of zeros.
The target value - also known as the hashing difficulty - is regularly adjusted by the protocol, ensuring that
the rate at which new blocks are created remains constant and proportional to the amount of hashing power
devoted to the network.
Therefore, every time new miners join the network and competition increases, the hashing difficulty will
raise, preventing the average block time from decreasing. In contrast, if miners decide to leave the network,
the hashing difficulty will go down, keeping the block time constant even though there is less computational
power dedicated to the network.
The process of mining requires miners to keep hashing the block header over and over again, by iterating
through the nonce until one in the network miner eventually produces a valid block hash. When a valid hash
is found, the founder node will broadcast the block to the network. All other nodes will check if the hash is
valid and, if so, add the block into their copy of the blockchain and move on to mining the next block.
However, it sometimes happens that two miners broadcast a valid block at the same time and the network
ends up with two competing blocks. Miners start to mine the next block based on the block they received
first. The competition between these blocks will continue until the next block is mined based on either one
of the competing blocks. The block that gets abandoned is called an orphan block or a stale block. The
miners of this block will switch back to mining the chain of the winner block.
 How can one
invest and trade in
cryptocurrency?
 INVESTING-
Download the app and complete the KYC. This will take around 2–3 days.
Invest money which you can afford to lose. Suppose your monthly salary is 40,000. I will suggest pay off all
your bills and invest around 10, 000–12,000 in Bitcoins, which is approximately 25%-30%. There is no
restriction on the minimum amount, you can start off with 100 INR also.
Now, once you buy the Bitcoins through the app, keep a tab on the prices. Check them once every two
hours. See the trend over a period of one-two weeks. Go through the history of Bitcoin prices as well.

After a month or so, whenever you see a substantial dip, invest a bit more. The good thing is you can pull out your
money anytime and if you keep a tab on the prices regularly, you will never really lose out any money.
TRADING-
As you must already know, Bitcoin became the first ever cryptocurrency when it was released in 2009. However, with
only one coin available, you couldn’t trade it with any other cryptocurrency. It wasn’t until a few years later when more
and more cryptocurrencies were created that people started trading them. The idea is really simple. You trade one
cryptocurrency for another, with the hope that the coin you buy increases in value.This concept is the same as the real-
world stock exchange.When people trade, they need to use a cryptocurrency exchange. This is so buyers and sellers can
be matched. For example, if you are holding Bitcoin and want to sell it for Ethereum, an exchange will help you find an
Ethereum seller to trade with.Exchanges will charge you a fee for doing this, which normally costs around 0.1% for each
trade. Cryptocurrency trading is now really popular, with billions of dollar’s worth of coins being bought and sold every
day.The “lucky” ones have made a serious amount of money doing this, and there are lots of people that are now trading
cryptocurrency as a full-time job.However, experienced traders use lots of different tools to help them pick the right
coins at the right time. This can include software that helps investors analyze previous pricing trends etc.Nevertheless,
everyone must start somewhere! As long as you are not trading more than you can afford to lose, there is no harm in
giving it a try.

Short-Term Trading

Short-term trading is where you buy a cryptocurrency but only plan to hold on to it for a short amount of
time. This can be anything from minutes, hours, days, weeks or even a few months!You might buy a certain
cryptocurrency because you think it will rise in price in the short term. In which case, you would then sell it
for a quick profit if you thought the price was going to drop again!

Advantages

The main advantage of short-term cryptocurrency trading is that it offers a really good opportunity to make
high percentage gains. Unlike fiat currency markets, where prices usually don’t move by more than 1% each
day, cryptocurrency prices can almost double overnight! Now that cryptocurrencies have become so
popular, there are now more than 1,500 different cryptocurrencies to trade. Which means one thing — more
opportunities to make huge profits. Not only that, though, but there are large trading volumes for lots of
coins.

Large trading volumes are important as it means you will always find a buyer or seller! It simply means that
a high amount of currency is flowing in and out of that cryptocurrency.

Disadvantages

As the cryptocurrency markets are so volatile, the prices can change very quickly. This means that if you
want to perform short-term crypto trading, you will need to spend a lot of time analyzing the markets.It’s
super important to keep in control of your emotions — one thing you will learn when short-term trading is
that you don’t always win. It can be very stressful when prices move differently to how you had hoped.So,
learning to accept losses is a big part of cryptocurrency trading. Nobody makes profits 100% of the
time!Short term cryptocurrency traders look for small gains in small price movements, so you will need to
have quite a good analysis ability. This means being able to read trading charts and graphs. Which, if you
are a beginner, can take a little while to learn.Another disadvantage of short-term trading is that, for you to
see good returns, you must make quite a large investment. Which is something that most of you beginners
might not feel comfortable with.

Long-term trading
Have you ever heard the word “HODL”? Well, if not, then we’ll assume you’re completely new to the
crypto space! No, it’s not a word you’ll find in the dictionary, but you’ll certainly find it in crypto forums
and community chat groups!“HODL” is a slang word meaning to hold a cryptocurrency long term rather
than selling it. Its actual meaning is “Hold On for Dear Life”. Usually, long-term crypto trading means to
hold a coin for one year or more.The idea is that, although there will always be volatility, the price should
increase in a large amount over the long term.A great example of this would be the lucky investors who
bought Bitcoin in 2011 when it was just $0.35. If they held on to it until late 2017, they could have sold their
coins for almost $20,000 each! That’s over 57,000X your initial investment!

Advantages

One of the main advantages of long-term cryptocurrency trading is that it’s easy and requires a little amount
of time. You don’t need to understand complex trading charts or graphs as you’re simply looking to hold
your coin for the long term.Unlike short-term trading, where you need to constantly spend time checking the
prices of cryptocurrencies, you can do it in your spare time. It’s simple, once you have bought your coin,
you don’t need to do anything other than wait!Another good advantage of long-term cryptocurrency trading
is that you don’t need lots of money to get started. You can buy small amounts whenever you have some
spare money, and let it grow over a long period of time.This also allows you to avoid the stresses of market
volatility, as you don’t need to worry about short-term movements in price.

Disadvantages

One disadvantage of long-term cryptocurrency trading is that you might miss a good opportunity to make
quick short-term gains.Sometimes coins rise in value really quickly, only to fall straight back down. Short
term traders will notice this and can make a quick profit.Another disadvantage is that because you aren’t
spending time analyzing the market (as much as a short-term trader), you could miss some bad news. If
there is bad news released that could affect the price of your cryptocurrency (such as regulations), the price
could fall and never rise again.So, just make sure you are keeping on top of cryptocurrency news to avoid
this from happening.

How to Start Trading

As you are looking to trade cryptocurrencies, the first thing we need to do is get you some coins! The easiest
way to do this is with Bitcoin, as almost every exchange accepts it.
If you decide to buy Ethereum instead, then you can still follow the guide below. However, wherever
Bitcoin is mentioned, swap it for Ethereum. The quickest way to buy Bitcoin is to use your debit or credit
card with Coinbase. Coinbase are an exchange broker and will sell you Bitcoin at a really good rate.
Although there is a 4% charge to use your card, it is worth it as you get your coins straight away.
• Open an account at Coinbase
Go to the Coinbase website by clicking this link. You will need to choose a username and a strong
password. You will also need to confirm your email address and mobile number.

Verify your account at Coinbase

Before you can buy Bitcoin at Coinbase, you will need to verify your identity. Follow our step-by-step guide
below.
1. Click on Buy/Sell at the top of the screen.

2. You now need to add a payment method. Click on Add Payment Method.

3. You will then be asked if you want to add a bank account or a debit/credit card. In this example, we will
add a debit/credit card as it is the quickest way to deposit.

4. As Coinbase takes security very seriously, you will now need to verify your identity. Click on Upload ID.
5. You can upload either a passport, driver’s license or a government-issued ID card. Click on the one that
 you wish to upload.

6. Next, you will be asked how you want to upload your ID. You can choose a webcam, mobile camera or a
file upload.

7. Once you have uploaded your ID, you will get the below confirmation.
8. If the picture quality if not clear enough, you will be requested to upload it again. Add your payment
method in Coinbase
You will now need to enter the billing address for your debit/credit card.

Now you will need to enter your debit/credit card details. Don’t worry — Coinbase never gets to
see your card details as the numbers are encrypted.

Congratulations, you have now verified your identity and added a payment method! Now, let’s go
and buy some Bitcoin.

Buying Bitcoin at Coinbase

• Click on Buy/Sell again at the top of the page. This time you will be able to see the four coins that you
can buy. Click on Bitcoin.
• Scroll down and enter the amount (in fiat) you want to spend on Bitcoin. In our example, we are buying
150 EUR worth. The amount of Bitcoin will update when you enter your amount.

Finally, click on Buy Bitcoin Instantly, confirm the payment card that you added previously, and
click on Confirm. That’s it, it’s as easy as that — you now own Bitcoin!
Now that you have some Bitcoin, we need to open an account at Binance. They are one of the most popular
crypto exchanges for cryptocurrency trading and have more than 100 different coins available!

Open an account at Binance

• Visit the Binance website by clicking this link.

• Click on Register and follow the prompts. Binance is as basic as Coinbase — you need to enter your
email address, mobile number and choose a username and password.

• Now that you have a Binance account, we need to deposit the Bitcoin that you just bought from Coinbase.

Deposit funds into Binance

• Go back to your Coinbase account and click on Accounts at the top of the page. Then click on Send.
• You will then be asked to enter the address that you want to send your coins to. As you want to send them
to your Binance wallet, we need to go back to Binance and get your Binance wallet address.
• Go back to Binance. Move your mouse over Funds and click on Deposits.

• Click on Select Deposit Coin, type in BTC and then click on Bitcoin.

• You will now see your Binance deposit address for Bitcoin. Copy it.

• Now, go back to your Coinbase account. Enter the amount of Bitcoin you want to send and then paste the
Binance wallet address. Finally, click on Send. Your Binance account should be funded within 15
minutes.

How to trade cryptocurrency at Binance

Now that your Binance account is funded with Bitcoin, we are going to show you how cryptocurrency
trading works. In our example, we are going to trade Bitcoin for NEO, but you can replace NEO with the
coin you wish to trade with!
• Move your mouse over Exchange and click on Basic.

• On the right of the page, click on BTC and enter NEO (or the coin you want to buy). Then click on
 NEO/BTC. If the coin you want to trade with isn’t NEO, and instead it was ABC, then you would
look for the pair ABC/BTC.

• You are now on the main trading screen for the coins you want to trade — this is where all the fun
happens!

• To make a trade, you need to scroll down and look for the Buy NEO
• Before choosing how many coins you want to trade, you need to decide if you want to do a Limit
Order or a Market OrderLimit Order: This is where you enter the price that you want to trade at.
However, there is no guarantee that you will get your price matched. Market Order: This is where
you take the current market price that is available at Binance. If this is your first time, Market Order

is your best option.

• Now you need to enter the amount of NEO (or your chosen coin) that you want to buy. In our example,
we are buying 10 NEO. As you will see, we will get the market price, as we chose the Market.
Finally, to complete your trade, click on Buy NEO. That’s it, you’ve just made your first ever
cryptocurrency trade!

Legality of
cryptocurrency
in various nations
and in India


Cryptocurrency Is Legal In The Following Countries
• Morocco • Turkey • Slovakia
• Nigeria • India (banned by • Switzerland
• Namibia banks) • United Kingdom
• South Africa • Pakistan • Australia
• Zimbabwe • China • New Zealand
• Canada (banned by • Japan • Ireland
banks) • Hong Kong • Netherlands
• Mexico • Taiwan • Belgium
• United States • South Korea • France
• Costa Rica • Indonesia • Luxembourg
• Nicaragua • Philippines • Greece
• Trinidad and Tobago • Cambodia • Italy
• Jamaica • Malaysia • Bulgaria
• Brazil • Thailand (banned by • Bosnia and
• Argentina banks) Herzegovina
• Colombia • Singapore • Malta
• Chile • Vietnam (not allowed • Spain
• Kyrgyzstan as a payment tool) • Portugal
• Cyprus • Croatia • Sweden
• Israel • Germany • Iceland
• UAE • Poland • Norway
• Jordan • Austria • Denmark
• Saudi Arabia • Czech Republic • Ukraine
• Iran • Romania
• Lebanon • Slovenia
The legalization of cryptocurrencies doesn’t necessarily mean that the government of the particular country
supports or promotes virtual currencies in any way.

Following Countries Have Declared Cryptocurrencies As Illegal

• Algeria • Ecuador • Nepal
• Bolivia • Bangladesh • Macedonia

Cryptocurrency Regulations In India

Cryptocurrencies: Not legal tender

Cryptocurrency exchanges: Effectively illegal – regulations being considered
Cryptocurrencies are not legal tender in India, and while exchanges are legal, the government has made
it very difficult for them to operate. Although there is currently a lack of clarity over the tax status of
cryptocurrencies, the chairman of the Central Board of Direct Taxation has said that anyone making
profits from Bitcoin will have to pay taxes on them. Other Income Tax Department sources have
suggested that cryptocurrency profits should be taxed as capital gains.
Exchanges
Cryptocurrency exchange regulations in India have grown increasingly harsh. While technically legal, in
April 2018 the Reserve Bank of India (RBI) banned banks and any regulated financial institutions from
“dealing with or settling virtual currencies”. The sweeping regulation prohibited trade of
cryptocurrencies on domestic exchanges – and gave existing exchanges until 6 July 2018 to wind down.
Future Regulation
India’s government seems to be looking at the possibility of less prohibitive cryptocurrency regulations.
In 2017, the Special Secretary of Economic Affairs formed a committee to suggest ways of dealing with
the potential AML/CFT and consumer protection issues related to cryptocurrencies. In 2018, reports
suggested that a government committee was drafting new legislation which introduced greater
cryptocurrency protections for “the common man”

Pros and Cons
of using
Cryptocurrency

Cryptocurrency initial coin offerings (ICOs) are gambles. They have the potential to create huge returns on
your investment, but also come with great volatility and risk. Though people have been talking about the
risks associated with ICOs for some time now, major financial institutions such as Goldman Sachs and
JPMorgan are beginning to look at investing in the sector.
Pro No. 1: Massive potential for returns.
One of the statistics that makes everyone consider investing in cryptocurrency is that $1,000 invested in
Bitcoin in 2013 would be worth over $400,000 today.Recent ICOs have created a number of huge returns in
a short amount of time. Stratis raised $600,000 during their ICO in June 2016, and has since seen a 63,000
percent rise in the price. Spectrecoin raised $15,000 in January 2017 during their ICO, and has since risen
over 13,000 percent.
Pro No. 2: Shorter time horizon.

Since cryptocurrencies are riskier investments, it is best to compare them to angle investing and venture
capital investing. Datum launched their ICO in late October 2017, having already raised $1.5 million in pre-
ICO funds.Since cryptocurrencies are network-based and Datum has already received a groundswell of
support, investors know it is likely that they can begin cashing out their investments relatively quickly.

Pro No. 3: Increased liquidity.

When you purchase equity in a startup, in order to realize a profit, you need to find someone to buy the
equity from you or wait for an acquisition or IPO to occur. However, none of these options allow you to
control when you cash out your investment.If a cryptocurrency ICO is able to build a solid enough network,
such as the 56,000-member Datum network, investors immediately have much more liquidity and can sell
their cryptocurrency for ether or dollars almost instantaneously.

Pro No. 4: Clear direction for execution.

Perhaps the biggest advantage of investing in cryptocurrency ICOs over startups is the fact that startups
often need to pivot multiple times and overcome initial speedbumps. When you see a set of founders asking
for initial capital, you should recognize that the company they eventually take public will look drastically
different.With a cryptocurrency ICO, when you invest you know exactly what the network does and will be
doing. As such, you are able to more accurately evaluate the product–market fit for the platform, and can use
that insight to determine your investment.

Con No. 1: Increased volatility.

Of course, when compared to investing in the stock market or even real estate, cryptocurrency ICOs are
much more volatile. Issues such as hacking incidents can cause investors to lose all of their investment
quickly. Granted, such drastic incidents are rare, but major drops in ICO value are not unheard of.

Con No. 2: Potential network stall.

The real value of any cryptocurrency relies on building a strong product that a significant network of users
will want to use. However, if these networks either fail to attract users or never get users to actually utilize
the platform, then the currency will likely see a drop-off in price. Many of the recent ICOs that failed to
perform after launching did so due to a lack of network engagement.

Con No. 3: Potential shortage of resources.

Just as startups can run out of resources and be unable to continue operations, if a cryptocurrency ICO does
not raise enough money or the startup spends more money than expected, the doors close and the network
really takes off. Many cryptocurrencies are doing pre-ICO raising in order to have firm commitments of
resources and demonstrated demand for the currency.
Con No. 4: Potential mismanagement.
Ultimately, every cryptocurrency is a startup and has a team of founders running it. In order for the
cryptocurrency to effectively navigate from ICO phase to mass-market levels, it needs a solid founding
team. Before choosing to invest in a cryptocurrency ICO, make sure to look into the team's background and
evaluate whether they have the skill sets and capabilities to execute the project.With new investment
possibilities cropping up every day, it is critical to keep up to date with what options you have for wealth
management. While portfolios need to be balanced, good portfolios tend to include some riskier assets, such
as venture capital.

Can cryptocurrency
replace the
legal tender?

A report by Futurism highlights some of the possible outcomes, should cryptocurrencies surpass fiat
currencies at some point in the future. One important consideration is that cryptocurrencies cannot be
manipulated quite as easily as fiat currency, largely due to their decentralized and unregulated status.
Beyond that, cryptocurrencies could better support the concept of a universal basic income than fiat
currencies would. As a matter of fact, some programs have already experimented with the use of
cryptocurrencies as means of distributing a universal basic income. Further, cryptocurrencies could help to
get rid of intermediaries in everyday transactions. This could cut costs for businesses and help out
consumers.

Possible Concerns if Cryptocurrencies Replace Cash -

Of course, there are also some huge challenges and concerns with this scenario. If cryptocurrencies outpace
cash in terms of usage, traditional currencies will lose value without any means of recourse. Should
cryptocurrencies take over entirely, new infrastructure would have to be developed in order to allow the
world to adapt. There would inevitably be difficulties with the transition, as cash could become incompatible
quite quickly, leaving some people with lost assets. Established financial institutions would likely have to
scramble to change their ways.

It is important to note that while the initial Bitcoin-mania saw quite a few businesses offer to accept the
cryptocurrency, that list has steadily dwindled brining back the skepticism about its use a medium of
exchange.

Beyond the impact of a cryptocurrency future on individual consumers and on financial institutions,
governments themselves would suffer. Governmental control over central currencies is key to regulation in
many ways, and cryptocurrencies would operate with much less government purview. Governments could
no longer, for example, determine how much of a currency to print in response to external and internal
pressures. Rather, the generation of new coins or tokens would be dependent upon independent mining
operations.

Regardless of how individual investors may feel about the prospect of a switch from standard cash to
cryptocurrencies, it is likely out of anyone’s hands. Of course, with ample speculation abounding that the
cryptocurrency industry is a bubble that is destined to pop, it’s also possible that predictions of a crypto
future could be overblown. What is difficult for investors is that, as with all things crypto-related, changes
happen incredibly quickly, and predicting them is always tough.

Bitcoin became a sensation in 2013, when the value of a single unit of the virtual currency rose from $13 to
more than $1,000 and people began to use it for daily commerce (see chart on page 18). Travelers toured the
world subsisting on bitcoins. A Bitcoin ATM appeared in a Vancouver coffee shop. And a U.S. Senate
committee held hearings at which regulators commented favorably on Bitcoin and other virtual currencies.
Bitcoin is not issued by a government or a business but by computer code that runs on a decentralized,
voluntary network. It has found users among computer enthusiasts and opponents of the banking system (see
“Marginally Useful”). However, economists remain skeptical of Bitcoin’s staying power because it lacks
many attributes of a useful currency. Money is supposed to serve three purposes: it functions as a medium of
exchange, a unit of account, and a store of value. Bitcoin arguably satisfies the first criterion, because a
growing number of merchants accept it as payment. But it performs poorly as a unit of account and a store
of value.

Bitcoin’s extreme fluctuations undermine any useful function for it in these roles. During 2013 its volatility
was three to four times higher than that of a typical stock, and its exchange rate with the dollar was about 10
times more volatile than those of the euro, yen, and other major currencies. Bitcoin’s dollar price exhibits no
correlation with the dollar’s exchange rates against other currencies. Nor does it correlate with the value of
gold. With a currency whose value is so untethered, it is nearly impossible to hedge against risk.
Bitcoin also lacks additional characteristics usually associated with currencies. It cannot be deposited in a
bank; instead it must be held in “digital wallets” that have proved vulnerable to thieves and hackers. There is
nothing comparable to the deposit insurance relied on by banking consumers. No lenders use bitcoins as the
unit of account for consumer credit, auto loans, or mortgages, and no credit or debit cards are denominated
in bitcoins.

Even if volatility subsides and the currency finds a place in the world payments system, it has another fatal
economic flaw. Only 21 million units can ever be issued, and a fixed money supply is incompatible with a
growing economy. In a bitcoin-dominated economy, workers would have to accept pay cuts every year, and
prices for goods would gradually fall. Such conditions might lead to public unrest reminiscent of the late
19th century’s free-silver and populist movements—an ironic consequence of a currency known for its
futuristic cachet.



Conclusion

Some economic analysts predict a big change in crypto is forthcoming as institutional money enters the
market.Moreover, there is the possibility that crypto will be floated on the Nasdaq, which would further add
credibility to blockchain and its uses as an alternative to conventional currencies.Some predict that all that
crypto needs is a verified exchange traded fund (ETF).An ETF would definitely make it easier for people to
invest in Bitcoin, but there still needs to be the demand to want to invest in crypto, which might not
automatically be generated with a fund.
The future outlook for bitcoin is the subject of much debate. While the financial media is proliferated by so-
called crypto-evangelists, Harvard University Professor of Economics and Public Policy Kenneth Rogoff
suggests that the “overwhelming sentiment” among crypto advocates is that the total “market capitalisation
of cryptocurrencies could explode over the next five years, rising to $5-10 [trillion].”8

The historic volatility of the asset class is “no reason to panic,” he says. Still, he tempered his optimism and
that of the “crypto evangelist” view of Bitcoin as digital gold, calling it “nutty,” stating its long-term value
is “more likely to be $100 than $100,000.”8

Rogoff argues that unlike physical gold, Bitcoin’s use is limited to transactions, which makes it more
vulnerable to a bubble-like collapse. Additionally, the cryptocurrency’s energy-intensive verification
process is “vastly less efficient” than systems that rely on “a trusted central authority like a central bank.”8

Some of the limitations that cryptocurrencies presently face – such as the fact that one’s digital fortune can
be erased by a computer crash, or that a virtual vault may be ransacked by a hacker – may be overcome in
time through technological advances. What will be harder to surmount is the basic paradox that bedevils
cryptocurrencies – the more popular they become, the more regulation and government scrutiny they are
likely to attract, which erodes the fundamental premise for their existence.

While the number of merchants who accept cryptocurrencies has steadily increased, they are still very much
in the minority. For cryptocurrencies to become more widely used, they have to first gain widespread
acceptance among consumers. However, their relative complexity compared to conventional currencies will
likely deter most people, except for the technologically adept.

A cryptocurrency that aspires to become part of the mainstream financial system may have to satisfy widely
divergent criteria. It would need to be mathematically complex (to avoid fraud and hacker attacks) but easy
for consumers to understand; decentralized but with adequate consumer safeguards and protection; and
preserve user anonymity without being a conduit for tax evasion, money laundering and other nefarious
activities. Since these are formidable criteria to satisfy, is it possible that the most popular cryptocurrency in
a few years’ time could have attributes that fall in between heavily-regulated fiat currencies and today’s
cryptocurrencies? While that possibility looks remote, there is little doubt that as the leading cryptocurrency
at present, Bitcoin’s success (or lack thereof) in dealing with the challenges it faces may determine the
fortunes of other cryptocurrencies in the years ahead.

The emergence of Bitcoin has sparked a debate about its future and that of other cryptocurrencies. Despite
Bitcoin’s recent issues, its success since its 2009 launch has inspired the creation of alternative
cryptocurrencies such as Etherium, Litecoin, and Ripple. A cryptocurrency that aspires to become part of the
mainstream financial system would have to satisfy very divergent criteria. While that possibility looks
remote, there is little doubt that Bitcoin’s success or failure in dealing with the challenges it faces may
determine the fortunes of other cryptocurrencies in the years ahead.

Bibliography and
Webliography




I would like to thank my teacher, Mrs.Samanta and my school for giving me this project. Through this
project I got to know a lot about cryptocurrency. This is the first time I heard about this topic. It was
interesting to research on this. I would also like to thank my mother for helping me do this project.

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