Frequently Asked Questions
Refers to a digital currency, secured with cryptography to enable trusted transactions. Blockchain is the underlying technology, functioning as a ‘ledger’ or record of transactions made.

Hundreds of currencies are in circulation, such as Bitcoin, Ether, Monero, etc. Each is designed by one or more brilliant individuals, usually meant to run as a decentralised system so that no single entity can control it. Cryptocurrency units are usually generated on the basis of an algorithm announced to everyone in advance, by ‘miners’ using powerful computers. Having expended a lot of time and electricity on ‘mining’, these miners can hold on to the units or sell to others.
Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping system in existence.
Ethereum is a platform powered by blockchain technology that is best known for its native cryptocurrency, called ether, or ETH, or simply ethereum. The distributed nature of blockchain technology is what makes the Ethereum platform secure, and that security enables ETH to accrue value.

The Ethereum platform supports ether in addition to a network of decentralized apps, otherwise known as dApps. Smart contracts, which originated on the Ethereum platform, are a central component of how the platform operates. Many decentralized finance (DeFi) and other applications use smart contracts in conjunction with blockchain technology.
Ripple is a technology that acts as both a cryptocurrency and a digital payment network for financial transactions. It was first released in 2012 and was co-founded by Chris Larsen and Jed McCaleb. Ripple’s main process is a payment settlement asset exchange and remittance system, similar to the SWIFT system for international money and security transfers, which is used by banks and financial middlemen dealing across currencies.
The token used for the cryptocurrency is premined and utilizes the ticker symbol XRP. Ripple is the name of the company and the network, and XRP is the cryptocurrency token. The purpose of XRP is to serve as an intermediate mechanism of exchange between two currencies or networks—as a sort of temporary settlement layer denomination.
Bitcoin cash is a cryptocurrency created in August 2017, from a fork of Bitcoin.1 Bitcoin Cash increased the size of blocks, allowing more transactions to be processed and improving scalability.

The cryptocurrency underwent another fork in November 2018 and split into Bitcoin Cash ABC and Bitcoin Cash SV (Satoshi Vision).2 Bitcoin Cash is referred to as Bitcoin Cash because it uses the original Bitcoin Cash client.
Litecoin (LTC) is a cryptocurrency that was founded in 2011, two years after Bitcoin, by a former Google engineer named Charlie Lee. Like Bitcoin, Litecoin is based on an open-source global payment network that is not controlled by any central authority. Litecoin differs from Bitcoin in aspects like faster block generation rate and use of Scrypt as a proof-of-work (PoW) scheme. It is considered to be among the first altcoins, derived from Bitcoin’s original open source code.

Initially, it was a strong competitor to Bitcoin. However, as the cryptocurrency market has become much more saturated and competitive in recent years with new offerings, Litecoin’s popularity has waned somewhat.
As indicated by ‘currency’, they were originally intended to be used in the same way as rupees and dollars are, as a medium of payment between people for products and services purchased. Consider store reward cards, an alternative physical payment method that is denominated in their own units, and not in national currency. Similarly, cryptocurrency with its own units was meant to enable easy digital transactions online, at lower costs than what conventional banks charged.
The first question one may have to address is which currency to buy. The biggest one, Bitcoin, would be a good starting point to begin investing right away. One could later branch into other coins and tokens as per observations/confidence. As with stocks, researching the cryptocurrency of choice is always helpful. The second question is adopting a safe trading method. To begin with, a simple ‘buy and hold’ may be preferable. Long term investors could carry over the ‘rupee cost averaging’ (RCA) low-risk strategy from the stock market. An example of RCA would be setting a budget of ₹1000 a month, and buying crypto for exactly that much regularly each month, regardless of price dips or peaks. After gaining confidence, many more strategies could be used. The third question would be choosing a crypto exchange. Picking a well-known exchange backed by big names internationally, one that is likely to still be growing 2-3 years later could allow peace of mind that one’s investment is safe. CoinDCX and WazirX are both good starting points for Indian investors. After gaining confidence, one could consider comparing exchanges on factors such as currency pairs offered, transaction costs, ease of transaction, security, leverage availability, futures, NFT purchases, earnings from DeFi lending, and so on.
Fundamentally, a seller sells their currency to gain cash and a buyer buys expecting to hold the currency until its value increases in dollar/rupee terms. In mid-August 2021, the total market value of all cryptocurrency exceeded $2 trillion, with Bitcoin alone making up 44% of that. As the graph above shows, a currency can start small and reach very high – but with a number of bumps along the way. People with a lot of faith in the future of cryptocurrencies subscribe to a ‘HODL’ mindset, meaning ‘hold on for dear life’ to the roller-coaster they expect to ride. They buy and do not intend to sell anytime soon, even claiming that the value of one Bitcoin could rise from $50,000 today to $288,000 in a few years. Others choose the day trading route – buy a currency, target a profit percentage as low as 2% and sell as soon as that target is reached – sometimes within hours.
There are three things to be aware of when one is ready to take profits on investment. Like all business, trading in crypto has additional expenses to keep in mind. First of all, exchange transaction fees that apply to all actions between infusing cash and exiting investments at a profit. Secondly, unexpected movements in price could mean holding onto crypto for longer than initially expected. Thirdly, taxes that fall due at the end of the year. Depending on income tax bracket, people may have differing minimum profit targets. Frequently forgotten until the end of the financial year, keeping this factor in mind could help one enjoy their gains in moderation.
Your gain or loss will be the difference between your adjusted basis in the virtual currency and the amount you received in exchange for the virtual currency, which you should report on your Federal income tax return in U.S. dollars. For more information on gain or loss from sales or exchanges, see Publication 544, Sales and Other Dispositions of Assets.
If you held the virtual currency for one year or less before selling or exchanging the virtual currency, then you will have a short-term capital gain or loss. If you held the virtual currency for more than one year before selling or exchanging it, then you will have a long-term capital gain or loss. The period during which you held the virtual currency (known as the “holding period”) begins on the day after you acquired the virtual currency and ends on the day you sell or exchange the virtual currency. For more information on short-term and long-term capital gains and losses, see Publication 544, Sales and Other Dispositions of Assets.
Some cryptocurrencies like Bitcoin and Ether are designed to have a limited supply. By comparison, real-world currencies like the US Dollar do not have a hard limit on supply. When demand increases, the value of a supply-limited item is expected to increase.
That difference in supply, a high demand for crypto and new ways to profit from rising crypto, have led to a self-perpetuating cycle that drives up the exchange value of major cryptocurrencies.
For beginners in the crypto market, experts advise investing only as much money as you’re willing to lose. The reason is, crypto trading marries the ‘irrational exuberance potential’ of a conventional stock market to the regulatory uncertainty of crypto. Also, hackers have shown that anything financially valuable on the internet is a juicy target. However, crypto exchanges that hold user wallets try to stay safe by employing armies of security experts and paying ‘bug bounties’ to external consultants who identify vulnerabilities.
Let’s look at a national currency like the rupee. It can be deposited in your name at a bank, or privately stuffed into a mattress at home far away from anyone’s eyes. Similarly, a cryptocurrency can be held on your behalf by a company, usually in your wallet at a crypto exchange online. You could also hold it in without being affiliated to anybody, in a private cryptocurrency wallet.
Initially with no government control, crypto became a useful tool to escape political censors and repressive regimes, which was an admirable goal. However, crypto eventually became known as a method of transacting for illegal substances on hidden parts of the internet. Governments discourage such behaviour and made use of crypto’s built-in ledger to pursue criminals. With the extent of tracking that is now possible in 2021, it is safe to say that it is difficult to use cryptocurrency for crime. Bitcoin for instance, sees over 300,000 transactions daily on average, with crypto exchange trades accounting for over half of them in the last two years.
Also you can watch our educational videos
Bitcoin Market
Ethereum Market
What are Cryptocurrencies?
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