ABSTRACT

Nowadays, there is a vast and fast development in cryptocurrencies. Bitcoin is

one of them which is most popular and known as first decentralized currency.

The legal status of Bitcoin varies substantially from country to country and is still
undefined or changing in many of them. This paper mainly covers working with
Bitcoin in India. Bitcoin transactions are anonymous and most secure but on the
other hand they fail to protect consumers because of lack of regulations. Also the
use of cryptocurrencies is very less because of lack of its awareness and vendors.
This paper also coveres the legality and regulatory framework with respect to
Bitcoins in India.

As a virtual currency and peer-to-peer payment system, Bitcoin may signal future
challenges to state oversight and financial powers.

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 CHAPTER- 1

INTRODUCTION

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INTRODUCTION

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

medium of exchange using cryptography to secure the transactions and to control
the creation of additional units of the currency.1 Cryptocurrencies are classified
as a subset of digital currencies and are also classified as a subset of alternative
currencies and virtual currencies. Bitcoin, which is regarded as one of the most
populous cryptocurrency, was created in 2009 as the first decentralized
cryptocurrency2. Since then, numerous other cryptocurrencies have been
created.3 They are frequently called “altcoins” as a blend of bitcoin alternative.4
Bitcoin and its derivatives use decentralized control5 as opposed to centralized
electronic money/centralized banking systems.6 The decentralized control is
related to the use of bitcoin’s blockchain transaction database in the role of a
distributed ledger.

Decentralized cryptocurrency is produced by the entire cryptocurrency system

collectively, at a rate which is defined when the system is created and which is
publicly known. In centralized banking and economic systems such as the Federal
Reserve System, corporate boards or governments control the supply of currency
by printing units of fiat money or demanding additions to digital banking ledgers.
In the case of decentralized cryptocurrency, companies or governments cannot
produce new units, and have not so far provided backing of other firms, banks or
corporate entities which hold asset value measured in it. The underlying technical
system upon which decentralized cryptocurrencies are based was created by the
group or individual known as Satoshi Nakamoto.7 As of October 2017, over a
thousand cryptocurrency specifications exist; most are similar to and derived
from the first fully implemented centralized cryptocurrency, bitcoin. Within

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cryptocurrency systems the safety, integrity and balance of ledger are maintained
by a community of mutually distrustful parties referred to as miners: members of
the general public using their computers to help validate and timestamp
transactions adding them to the ledge in accordance with a particular
timestamping scheme. Miners have a financial incentive to maintain the security
of a cryptocurrency ledger. Most cryptocurrencies are designed to gradually
decrease production of currency, placing an ultimate cap on the total amount of
currency that will be in circulation mimicking previous metals (Andy, 2011).
Compared with ordinary currencies held by financial institutions or kept as cash
on hand, cryptocurrencies can be more difficult for seizure by law enforcement
(Andy, 2011). This difficulty is derived from leveraging cryptographic
technologies. A primary example of this new challenge of law enforcement
comes from the Silk Road case, where Ulbricht’s bitcoin stash “was held
separately and encrypted”8. Cryptocurrencies such as bitcoin are pseudonymous,
though additions such as Zerocoin have been suggested, which would allow for
true anonymity

DEFINING THE CRYPTOCURRENCY

A bitcoin is a virtual currency first introduced in the year 2008 by an anonymous

group called Satoshi Nakamoto. It’s an open source peer-to-peer cryptographical
system (direct connections without an intermediary) where transactions happen
through a public ledger called blockchain, handling users’ data anonymously.
Eight years since its introduction, bitcoin is today the most widely used and
accepted digital currency.

Bitcoins are the most sought after cryptocurrency in the market. However there
are several other currencies which have gained momentum ever since the concept
has been introduced. Below are some other of crypto currencies that exist:

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1. Ethereum – Ethereum is the second most famous name in the virtual currency
market. It somewhat similar to the concept of bitcoins however it possesses some
additional attributes. It is purely a block chain based platform. What makes it
special is the Ethereum Virtual Machine. The blockcain in ethereum is used not
to store the data of the transaction but to make sure smooth run of a decentralized
application.

2. Ripple – Ripple is more in the nature of a payment protocol created and

developed by a company named Ripple, which is based on the concept of Real
time Gross Settlement. It was initially released in the year 2012.

3. NEM – Similar to bitcoin, NEM is also a peer-to-peer blockchain platform

launched in the year 2015. It uses the unique Proof-of-Importance algorithm , a
way to validate transactions and achieve the distributed concensus.

4. Litecoin – Initially introduced in the year 2011, litecoin is mostly identical to

bitcoin. What makes it stand out is the use of Segregated Witness and the
Lightning Network. Some other cryptocurrencies are bbqcoins and dogecoins
which have not gained much significance due to their technical shortcomings and
inability to stand out.

In 2009, a white paper was published online under the name Satoshi Nakamoto
(probably a pseudonym), proposing a new solution for something that some
Internet enthusiasts had been looking forward to since the beginning of the
Internet: A form of digital cash that functions based on principles dear to
libertarian strands of the Internet community – non-state administered,
decentralized (“peer to peer”) and open source based. In this strand of thought,
cryptography and anonymous transaction systems are seen as important
instruments to defend privacy and freedom in the digital age. With trust in the

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monetary and financial system shattered by the crisis, Nakamoto’s proposal was
taken up in 2009 and implemented by a significant number of supporters.

History of cryptocurrency

In 1998, Wei Dai published a description of "b-money", an anonymous,

distributed electronic cash system.10 Shortly thereafter, Nick Szabo created "bit
gold".11 Like bitcoin and other cryptocurrencies that would follow it, Bit Gold
was an electronic currency system which required users to complete a proof of
work function with solutions being cryptographically put together and published.
A currency system based on a reusable proof of work was later created by Hal
Finney who followed the work of Dai and Szabo. The first decentralized
cryptocurrency, bitcoin, was created in 2009 by pseudonymous developer Satoshi
Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work
scheme.12 In April 2011, Namecoin was created as an attempt at forming a
decentralized Domain Name Servers (DNS), which would make internet
censorship very difficult. Soon after, in October 2011, Litecoin was released. It
was the first successful cryptocurrency to use script as its hash function instead
of SHA-256. Another notable cryptocurrency, Peercoin was the first to use a
proof-ofwork/proof-of-stake hybrid.13 IOTA (Distributed Ledger Technology)
was the first cryptocurrency not based on a blockchain, and instead uses the
Tangle.14 Many other cryptocurrencies have been created though few have been
successful, as they have brought little in the way of technical innovation.15 On 6
August 2014, the UK announced its Treasury had been commissioned to do a
study of cryptocurrencies, and what role, if any, they can play in the UK economy.
The study was also to report on whether regulation should be considered

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The evolution of cryptocurrency memes, and bitcoin

1. street art
17 Block Bills Matthias Dorfelt created a type of physical bitcoin that looks
similar to the fiat money. He used the hashes fro 64 random blocks and turns them
into an eccentric design that was created by his own software. He further created
his own symbols for the hexadecimal numbers that he used along the bottom of
every bill. Dorfelt acknowledged the work of Satoshi where he created the bill
with codes except the signature of the name of “Satoshi” on the bill where he used
the number of transfers stored in each block to tell the worth of each bill.

2. Art for Crypto

Vesa Kivinen, the founder of Artevo Contemporary started a new cryptocurrency
infused platform called ArtForCrypto.com. His work used various mediums such
as digital photography mixed with oil and canvas paintings. The paintings
consisted of visual depictions of the bull and bear, Satoshi Nakamoto, and one
called the split among many others.

3. Phneep Phneep
It is a crypto-artist and very good in pixel blending as he is known for
manipulating movie covers, logos, and other images from pop-culture with
bitcoin-related imagery. After joining bitcoin in 2012, he decided to focus on
bitcoin satire in 2014 as he wanted to contribute to the crypto-ecosystem,
although he had coding limitations

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4 . Crypto graffi
As an early bitcoin adopter, Cryptograffi was the first artist to utilize a public-
facing cryptocurrency wallet to receive donations for street art. His work has been
seen all over the crypto-circuit, shared by luminaries, and featured in online
publications.

TYPES OF CRYPTOCURRENCY
1) Litecoin (LTC)

Litecoin, launched in the year 2011, was among the initial cryptocurrencies
following bitcoin and was often referred to as ‘silver to Bitcoin’s gold.’ It was
created by Charlie Lee, a MIT graduate and former Google engineer. Litecoin is
based on an open source global payment network that is not controlled by any
central authority and uses "scrypt" as a proof of work, which can be decoded with
the help of CPUs of consumer grade. Although Litecoin is like Bitcoin in many
ways, it has a faster block generation rate and hence offers a faster transaction
confirmation. Other than developers, there are a growing number of merchants
who accept Litecoin.

2) Ethereum (ETH)

Launched in 2015, Ethereum is a decentralized software platform that

enables Smart Contracts and Distributed Applications (ĐApps) to be built and
run without any downtime, fraud, control or interference from a third party.
During 2014, Ethereum had launched a pre-sale for ether which had received an
overwhelming response. The applications on Ethereum are run on its platform-
specific cryptographic token, ether. Ether is like a vehicle for moving around on
the Ethereum platform, and is sought by mostly developers looking to develop

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and run applications inside Ethereum. According to Ethereum, it can be used to
“codify, decentralize, secure and trade just about anything.” Following the attack
on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum
Classic (ETC). Ethereum (ETH) has a market capitalization of $41.4 billion,
second after Bitcoin among all cryptocurrencies. (Related reading: The First-
Ever Ethereum IRA is a Game-Changer)

3) Zcash (ZEC)

Zcash, a decentralized and open-source cryptocurrency launched in the latter part

of 2016, looks promising. “If Bitcoin is like http for money, Zcash is https," is
how Zcash defines itself. Zcash offers privacy and selective transparency of
transactions. Thus, like https, Zcash claims to provide extra security or privacy
where all transactions are recorded and published on a blockchain, but details
such as the sender, recipient, and amount remain private. Zcash offers its users
the choice of ‘shielded’ transactions, which allow for content to be encrypted
using advanced cryptographic technique or zero-knowledge proof construction
called a zk-SNARK developed by its team. (Related reading, see: What Is
Zcash?)

4) Dash

Dash (originally known as Darkcoin) is a more secretive version of Bitcoin. Dash

offers more anonymity as it works on a decentralized mastercode network that
makes transactions almost untraceably. Launched in January 2014, Dash
experienced an increasing fan following in a short span of time. This
cryptocurrency was created and developed by Evan Duffield and can be mined
using a CPU or GPU. In March 2015, ‘Darkcoin’ was rebranded to Dash, which
stands for Digital Cash and operates under the ticker – DASH. The rebranding

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didn't change any of its technological features such as Darksend,
InstantX. (Related reading, see: Top Alternative Investments for Retirement)

5) Ripple (XRP)

Ripple is a real-time global settlement network that offers instant, certain and
low-cost international payments. Ripple “enables banks to settle cross-border
payments in real time, with end-to-end transparency, and at lower costs.”
Released in 2012, Ripple currency has a market capitalization of $1.26
billion. Ripple’s consensus ledger -- its method of conformation -- doesn’t need
mining, a feature that deviates from bitcoin and altcoins. Since Ripple’s structure
doesn't require mining, it reduces the usage of computing power, and minimizes
network latency. Ripple believes that ‘distributing value is a powerful way to
incentivize certain behaviors’ and thus currently plans to distribute XRP
primarily “through business development deals, incentives to liquidity providers
who offer tighter spreads for payments, and selling XRP to institutional buyers
interested in investing in XRP.”

6 Monero (XMR)

Monero is a secure, private and untraceable currency. This open source

cryptocurrency was launched in April 2014 and soon spiked great interest among
the cryptography community and enthusiasts. The development of this
cryptocurrency is completely donation-based and community-driven. Monero has
been launched with a strong focus on decentralization and scalability, and enables
complete privacy by using a special technique called ‘ring signatures.’ With this
technique, there appears a group of cryptographic signatures including at least
one real participant – but since they all appear valid, the real one cannot be
isolated.

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IMPORTANCE OF CRYPTO CURRENCY

1. Cryptocurrency is one of the safest and trusted kinds of digital currency that
people prefer nowadays. In a world where there is an abundance of conmen and
looters, we all need to trade in the safest possible ways. Cryptocurrencies give
us that assurance which makes them an important source of investment right
now and in the future as well.
2. Another reason why cryptocurrencies have become extremely in demand is
because of their policies. You don’t really need to deal with a third party when
it comes to cryptocurrency. This gives people a reassurance and a feeling of
safety. The fact that cryptocurrencies are digital currencies alleviates the need
for a third party. You can transact no matter where you are situated at.
3. Cryptocurrency is a low-cost means of transaction. You don’t need to shell
out money in order to exchange digital currencies. All you need in order to be
able to transact is your cell phone and a basic knowledge of cryptocurrencies.
4. Most of the digital currencies have to pay for transactions. In the case of
cryptocurrencies, you don’t really need to pay for the transactions. The reason is
that the people who mine the cryptocurrencies; called as miners get their
compensation from the network itself.
5. You can store your cryptocurrencies in a safe wallet. Cryptocurrencies give
you the option of storing your money in two kinds of wallets which can easily
be transferred to your account. And the wallets don’t have any charges in order
to be able to store your digital currencies.
6. For most people, privacy is the top-most priority. When dealing in
cryptocurrencies, you can expect your transactions to be highly confidential.
You can carry out your transactions and be anonymous.
7. The amount of money that you want to invest is totally up to
Cryptocurrencies give you the liberty of buying them in fractions as well. If you
feel like one bitcoin is too much, you can split it and buy half or one-third of it.
This reduces the cost for you and does not require you to spend out of bounds.
Using a crypto converter, you can find out the price of any cryptocurrency in
your country’s currency and invest accordingly.
8. Since the senders and recipients of cryptocurrencies don’t directly transfer
any money to the credit cards, you don’t have to share your credentials with
anyone. This helps you in avoiding identity theft. You decide what information
you want to share with the merchant if anything at all makes you doubtful.

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9. You get complete autonomy that you look for. When it comes to
cryptocurrencies, there is no third party involved to demand for any fee or
money. You are the only person who is managing your account.
FUTURE OF CRYPTO CURRENCY

1. Reduced Remittance

Many governments around the world are implementing isolationist

policies which restrict remittances made from other countries or vice
versa either by making the charges too high or by writing new regulations.
This fear of not being able to send money to family members and others is
driving more people towards digital Cryptocurrency, chief amongst them
being Bitcoin.
2. Control Over Capital

Many sovereign currencies and their usage outside of their home country
are being regulated and restricted to an extent, thereby driving the demand
for Bitcoin. For example, the Chinese government recently made it
tougher for people as well as businesses to spend the nation's currency
overseas, thereby trapping liquidity. As a result, options such as Bitcoin
have gained immense popularity in China.
3. Better Acceptance

Today, more consumers are using Bitcoins than ever before, and that is
because more legitimate businesses and companies have started accepting
them as a form of payment. Today, online shoppers and investors are
using bitcoins regularly, and 2016 saw 1.1 million bitcoin wallets being
added and used.

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4. Corruption Crackdown

Although unfortunate, digital Cryptocurrency such as Bitcoin are now

also seeing more usage because of the crackdown on corruption in many
countries. Both India and Venezuela banned their highest denomination
and still-circulating bank notes in order to make it tougher to pay bribes
and make accumulated black money useless. But that also boosted the
demand for Bitcoins in such countries, enabling them to send and receive
cash without having to answer to the authorities.

The Real-world Impact of Crypto Money

While Cryptocurrency and its usage is at an all-time high, so are the
misconceptions about it. Most people still seem to ask - Why use Bitcoin? Since
such currencies use different algorithms and are traded in unconventional ways,
it is important to lookout for some important characteristics before investing in
Bitcoin or others of its ilk. This includes -
 Daily Trading Volume and Overall Market Capitalization

Market capitalization of a cryptocurrency is the total worth of all its forms

which are currently in circulation. New forms of Cryptocurrency might not
be widely available, and therefore might not have high market
capitalization. Similar to this is the daily trading volume, and a
cryptocurrency which has higher trading volume than the others is
considered more successful.
 Verification Channels
Each cryptocurrency has its own verification method. One of the most
common methods for verification is called "Proof of Work". Herein, to
verify a transaction, a computer has to spend time and computing power to
solve difficult mathematical problems. On the other hand, "Proof of Stake"
method allows users with the largest share of the cryptocurrency to verify
the transactions, which requires far less computing power.
 Acceptance of Cryptocurrency
Unless a cryptocurrency is not accepted by major retailers or other
businesses that you deal with, it doesn't stand much use. That is why Bitcoin

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 still remains the most popular form of digital currency, since its reach is
widespread and is accepted by many businesses and retailers alike.

Challenges Ahead for Bitcoin

While Bitcoin's astronomical growth cannot be understated, Cryptocurrency in
general have several challenges to meet before finding universal acceptance.
These challenges include –

 Safety and Reliability

Purely based on its digital form, Bitcoin and other types of Cryptocurrencies
are nowadays the favorite mode of payment for both hackers and criminals
because of the air of anonymity it lends. This instantly makes the general
populace weary of using it. In 2014, Mt. Gox, the largest Bitcoin exchange
was hacked and robbed of almost $69 million, thereby bankrupting the
whole exchange. While the people who lost money have now been paid
back, it still leaves a lot of people wary of the same thing happening again.

 The Debate on Bitcoin Scalability

The cryptocurrency community is up in arms over how the blockchain will
be upgraded for future users. As the time and fees required for verifying a
transaction climbs to record highs, more businesses are having a tough time
accepting Bitcoins for payment. In early 2017, more than 50 companies
came together to speed up transactions, but till now the results have not yet
been felt. As a result, more users might start using normal modes of
currency to overcome such blockchain hassles.

 The Rise of the Rivals

Today, Bitcoin is not the only game in town, and while its value has
increased by almost 100% since the beginning of 2016, its share of the
digital currency pile is rapidly reducing owing to almost 700 different
competitors. Its market share has reduced to 50% from 85% a year before, a
sign of the times to come.

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 Unrecognized by Governments
Most of the general populace doesn't understand Bitcoins, and nor does
most of the world's governments. The cost of gaining a license to set up
cryptocurrency companies is sky-high, and there are no regulations in sight
which might make it easier for people looking to invest into them. The U.S.
Securities and Exchange Commission recently rejected a proposal by
Bitcoin to run a publicly traded fund based on the digital currency, which in
turn led to a big plummet in Bitcoin's shares.

Literature review
1. Sindri Leó Árnason(2015) This is a bachelor’s of science essay that
counts for 6 ECT credits in the School of Social Sciences, Faculty of
Business Administration, at the University of Iceland. I chose this topic
because I had become interested in Bitcoin and cryptocurrencies in 2013-
2014 when their media coverage boomed. I had already done some
research on this topic beforehand and as I am studying finance at the
University of Iceland I wanted to research what Bitcoin’s future impact on
the business world could possibly be. I would like to thank Guðrún Johnsen
who is a lecturer at the School of Social Sciences, who helped guide me
through writing this essay and my father, Árni Leósson, who helped read
over my essay, fixing spelling and grammar mistakes as well as helping
me develop essential arguments.

2. Steven Goldfeder (2016) The path to Bitcoin is littered with the corpses
of failed attempts. I’ve compiled a list of about a hundred cryptographic

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payment systems, both e-cash and credit card based technologies, that are
notable in some way. Some are academic proposals that have been well
cited while others are actual systems that were deployed and tested. Of all
the names on this list, there’s probably only one that you recognize —
PayPal. And PayPal survived only because it quickly pivoted away from
its original idea of cryptographic payments on hand-held devices! There’s
a lot to learn from this history. Where do the ideas in Bitcoin come from?
Why do some technologies survive while many others die? What does it
take for complex technical innovations to be successfully commercialized?
If nothing else, this story will give you an appreciation of how remarkable
it is that we finally have a real, working payment mechanism that’s native
to the Internet.

3. Jonathan Chiu(2017) A general equilibrium monetary model is

developed to study the optimal design of a cryptocurrency system based on
a blockchain. The model is then calibrated to Bitcoin transaction data to
perform a quantitative assessment of the scheme. We formalize the critical
elements of a cryptocurrency: the blockchain to keep a history of
transactions, the distributed updating of information and consensus
through competition for such updating. We show that, unlike cash, a
cryptocurrency system does not support an immediate, final settlement. In
addition, the current Bitcoin scheme generates a welfare loss of 1.4% of
consumption. Such loss can be lowered substantially to 0.08% by adopting
the optimal policy which reduces mining and relies on money growth
rather than transaction fees to finance mining rewards. The efficiency can
potentially be improved further by adopting an alternative consensus
protocols such as the proof-of-stake. A key economic feature of a
cryptocurrency system is that mining is a public good, while double
spending to defraud the cryptocurrency depends on individual incentives

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to reverse a particular transaction. As a result, a cryptocurrency works best
when the volume of transactions is large relative to the individual
transaction size.

4.Nicola Dimitri (2017) Since its 2008 appearance as a cornerstone of the

cryptocurrency bitcoin, the blockchain technology gained widespread
attention as a modality to securily validate and store information without a
trusted third party. Indeed trust is replaced by cryptographic security,
epitomised by hash functions, a unique fingerprint of any information file.
The paper is a quick overview of the main concepts and applications of the
blockchain, taken from an economic perspective.

5.Pasquale Giungato( 2017) Bitcoin is a digital currency based on a peer-

to-peer payment system managed by an open source software and
characterized by lower transaction costs, greater security and scalability
than fiat money and no need of a central bank. Despite criticisms about
illegal uses and social consequences, it is attracting the interest of the
scientific community. The purpose of this work is to define and evaluate
the current trends of the literature concerned with the sustainability of
bitcoin, considering the environmental impacts, social issues and economic
aspects. From the analysis it emerges that the transition of the whole
monetary system in the new cryptocurrency will result in an unacceptable
amount of energy consumed to mine new bitcoins and to maintain the
entire virtual monetary system, and probably bitcoin will remain a niche
currency. Blockchain, which is the base for a distributed and
democratically-sustained public ledger of the transactions, could foster
new and challenging opportunities. Sharing the framework of medical data,
energy generation and distribution in micro-grids at the citizen level,
block-stack and new state-driven cryptocurrencies, may benefit from the

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wide spread of blockchain-based transactions. Under the perspective of its
being a driver of social change, bitcoins and related blockchain
technologies may overcome the issues highlighted by numerous detractors.
6.Satoshi Nakamoto( 2017) A purely peer-to-peer version of electronic
cash would allow online payments to be sent directly from one party to
another without going through a financial institution. Digital signatures
provide part of the solution, but the main benefits are lost if a trusted third
party is still required to prevent double-spending. We propose a solution to
the double-spending problem using a peer-to-peer network. The network
timestamps transactions by hashing them into an ongoing chain of hash-
based proof-of-work, forming a record that cannot be changed without
redoing the proof-of-work. The longest chain not only serves as proof of
the sequence of events witnessed, but proof that it came from the largest
pool of CPU power. As long as a majority of CPU power is controlled by
nodes that are not cooperating to attack the network, they'll generate the
longest chain and outpace attackers. The network itself requires minimal
structure. Messages are broadcast on a best effort basis, and nodes can
leave and rejoin the network at will, accepting the longest proof-of-work
chain as proof of what happened while they were gone.

7. Kiran Ganesh(2017) Cryptocurrencies have soared in popularity since

2008, with more than 1,000 in existence today and an aggregate value
greater than the market capitalization of IBM. But we are highly doubtful
whether they will ever become mainstream currencies. The need for
companies and individuals to pay tax receipts in government-issued
currency, and the potentially unlimited crypto-money supply, pose
significant barriers to widespread adoption. We think the sharp rise in
cryptocurrency valuations in recent months is a speculative bubble. • But
while we are doubtful cryptocurrencies will ever become a mainstream

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means of exchange, the underlying technology, blockchain, is likely to
have a significant impact in industries ranging from finance to
manufacturing, healthcare, and utilities. We estimate that blockchain could
add as much as USD 300-400bn of annual economic value globally by
2027. • Investing in the blockchain wave is akin to investing in the internet
in the mid-nineties. Blockchain could lead to significant disruptive
technologies in the coming decade. But for the time being, technological
shortcomings still need to be resolved, it remains unclear which specific
applications will prove most useful/profitable, and actual revenue and
profitability associated with the industry is currently limited. Despite these
challenges, investors seeking long-term opportunities from blockchain
technology can start to position in two broad groups: technology enablers
– in software, semiconductors, and platforms; and early & successful
adopters – in finance, manufacturing, healthcare, utilities, and the sharing
economy.

8 Jonathan Chiu(2017)A general equilibrium monetary model is developed

to study the optimal design of a cryptocurrency system based on a
blockchain. The model is then calibrated to Bitcoin transaction data to
perform a quantitative assessment of the scheme. We formalize the critical
elements of a cryptocurrency: the blockchain to keep a history of
transactions, the distributed updating of information and consensus
through competition for such updating. We show that, unlike cash, a
cryptocurrency system does not support an immediate, final settlement. In
addition, the current Bitcoin scheme generates a welfare loss of 1.4% of
consumption. Such loss can be lowered substantially to 0.08% by adopting
the optimal policy which reduces mining and relies on money growth
rather than transaction fees to finance mining rewards. The efficiency can
potentially be improved further by adopting an alternative consensus

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protocols such as the proof-of-stake. A key economic feature of a
cryptocurrency system is that mining is a public good, while double
spending to defraud the cryptocurrency depends on individual incentives
to reverse a particular transaction. As a result, a cryptocurrency works best
when the volume of transactions is large relative to the individual
transaction size (e.g., as in a retail payment system).

9. LuYu( 2017)Cryptocurrencies have emerged as important financial

software systems. They rely on a secure distributed ledger data structure;
mining is an integral part of such systems. Mining adds records of past
transactions to the distributed ledger known as Blockchain, allowing users
to reach secure, robust consensus for each transaction. Mining also
introduces wealth in the form of new units of currency. Cryptocurrencies
lack a central authority to mediate transactions because they were designed
as peer-to-peer systems. They rely on miners to validate transactions.
Cryptocurrencies require strong, secure mining algorithms. In this paper
we survey and compare and contrast current mining techniques as used by
major Cryptocurrencies. We evaluate the strengths, weaknesses, and
possible threats to each mining strategy. Overall, a perspective on how
Cryptocurrencies mine, where they have comparable performance and
assurance, and where they have unique threats and strengths are outlined.
10.Fabian Schär(2018) In this article, we give a short introduction to
cryptocurrencies and blockchain technology. The focus of the introduction
is on Bitcoin, but many elements are shared by other blockchain
implementations and alternative cryptoassets. The article covers the
original idea and motivation, the mode of operation and possible
applications of cryptocurrencies, and blockchain technology. We conclude
that Bitcoin has a wide range of interesting applications and that
cryptoassets are well suited to become an important asset class.

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11.Brian Lucey(2018) We are delighted to invite you to submit your
research papers to be considered for presentation at the first
Cryptocurrency Conference of its kind that will take place on 24 May 2018
at Anglia Ruskin University, Cambridge, UK. This event will bring
together an international group of academics conducting research in
finance and related disciplines, as well as practitioners and policy makers
to discuss the issues associated with the rapid growth of cryptocurrency
markets. This conference provides a forum for presenting new research
findings, and discussing the future direction of cryptocurrency research.
We welcome both theoretical and empirical papers assessing the
opportunities and challenges of cryptocurrency markets. There will be a
prize for the best paper from a PhD student. The main theme of the
conference is ‘Investigating the Macro-financial aspects of
Cryptocurrencies’.
12.William Lunn(2018) In this indepth report, we analyse the market
implications of blockchain technology in light of the bitcoin boom since
our initial cross-sector and cross-border publication, Blockchain: The Trust
Disrupter, roughly a year ago. While we make no comment on the
valuation of particular cryptocurrencies, we believe the rise of bitcoin and
Initial Coin Offerings highlights how transformative the underpinning
blockchain technology will be across sectors, with financial services and
capital markets at the front of the queue.

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 CHAPTER – 2

RESEARCH METHODOLOGY

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RESEARCH DESIGN

Crypto- is short for “cryptography”, and cryptography is computer technology

used for security, hiding information, identities and more. Currency simply
means “money currently in use”. Cryptocurrencies are a digital cash designed to
be quicker, cheaper and more reliable than our regular government issued money.
Instead of trusting a government to create your money and banks to store, send
and receive it, users transact directly with each other and store their money
themselves. Because people can send money directly without a middleman,
transactions are usually very affordable and fast.
A research design is a frame work or blue print for conducting research procedure
is necessary for obtaining information to solve the problem. Research designed
to assist the decision maker in determining, evaluating and selecting the best
course of action to take in a given situation. Descriptive studies are usually the
best methods for collecting information that will demonstrate relationships and
describe the world as it exists. Descriptive studies are designed primarily to
describe what is going or what exist.
The research design that will be use is Descriptive Research.
 Involves gathering data that describe events and then organizes, tabulates,
depicts, and describes the data.
 Uses description as a tool to organize data into patterns that emerge during
analysis.
 Often uses visual aids such as graphs and charts to aid the reader.

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 OBJECTIVES OF THE STUDY
1. To study the view of government and general public perspective towards
cryptocurrency.
2. Can we replace the indian financial system through cryptocurrency.
3. To check how much cryptocurrency is affecting the indian financial system.

SOURCE OF DATA

PRIMARY DATA
The data which is collected directly from the respondent to the base of knowledge
and belief of such research are called primary data.
SECONDARY DATA
When data are collected and compelled from the published nature or any other's
primary data is called secondary data. We have not collected any information
from any sources. So, we have not used secondary data for our research.

Research Instruments
I have collected the data through QUESTIONNAIRE by personal meeting and
table–calling with people.

Sampling area:-The sampling area to collect the data is common people near
about Bathinda and Kotkapura.

Sample size:-100 respondents

Sample technique:-Convenient technique

Limitations of the Study

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 The responses given by respondents may not be true
 Area of study is limited
 Time of study is also limited

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 CHAPTER 3

SWOT ANALYSIS

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SWOT Analysis

When we use SWOT analysis, Its often for strategic planning. It prepares for
decisions and gives an overall look at the strengths, weaknesses, opportunities,
and threats of business. But SWOT analysis can also be used to increase and build
upon customer satisfaction.
To give a well-rounded overview of how to use SWOT analysis for a boost in
customer satisfaction, we’ll start with the Strengths and Weaknesses first.

SWOT analysis, for any who may be unfamiliar, is a planning method

typically used in business strategy to identify
the Strengths, Weaknesses, Opportunities and Threats that may face a business
or project.

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A number of us have likely had the opportunity to either observe or participate
in this exercise for the broader business in which we work. A quick overview
of the core concepts:

Strengths and weaknesses

Strengths and weaknesses internal to the organization. Strengths represent
positive attributes or characteristics, factors that provide an
advantage. Weaknesses are attributes or characteristics that place the business
at a disadvantage relative to others.

Opportunities and threats

Opportunities and threats are external to the organization. Opportunities
represent external trends and chances to improve performance - something
happening in the outside environment that presents positive potential. Threats
are elements or trends in the outside environment that could cause trouble for
the business, place it at risk.

Strengths

1. Bitcoin uses blockchain (a peer-to-peer)

Network between the sender and the receiver. Only these two
parties are involved. It’s unlike any other method of transferring currency
— which involves a third party, like a bank. A middleman is prohibited
from Bitcoin transactions.

2. Positive insane

For most Bitcoin users, this is an insane positive because it’s not
folly to economic turmoil. Bitcoin’s worth is agreed upon by the sender
and the receiver. Not an institution. Even if the economy crashes, Bitcoin
can survive.

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 3. private wallet address

Trading Bitcoin is fully anonymous. It’s 100 percent untraceable.

Unless you decide to make your wallet address — but the majority of
users don’t. Because the anonymity makes your financial data fully
hidden

4. PIN number

It assigned to each Bitcoin masks the identity of the seller. Once the
Bitcoin is sold, the PIN changes anew. At this point, only the buyer
knows the PIN. It’s irreversible, unless the current owner decides to
change the ownership back

Weaknesses

1. Slow transaction
Bitcoin transactions aren’t as fast as they were a few years ago.
This is one of the downsides of Blockchain: the more people use it, the
more Blockchain limits your transactions speeds

2. Forget about the Bitcoin wallet password problem

Since the transactions are encrypted, recovering a lost password isn’t

possible. You’d be surprised how often people forget their password and lose
access to their Bitcoins. In fact, one man bought a few Bitcoin years ago
when it was dirt cheap. Now it’d be worth millions… if only he could find
his password to his wallet.

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 3. Flactuating value

The value of Bitcoin has shifted relentlessly over the years. And
despite the rocky nature, the media pushes out stories claiming Bitcoin is
the future of money

Opportunities

1. Cashless transaction

As a society, we’re moving away from physical money in

favor of cashless currencies. In fact, big names like Amazon are
already accepting Bitcoin as payment for their goods. If companies
the size of Amazon are recognizing Bitcoins’ viability, it’s safe to
assume others will follow

2. Technology

The blocks may be able to keep data like criminal records, birth
certificates, and public records private. It may pave the way for
impenetrable encryption. That’s something the masses are leaning
towards for data protection.

Threats

1. Scalability issues:

Too many transactions (overload), although several solutions are present.

2. Dangerous buying

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 anonymous buying is dangerous. Knowing the transaction is untraceable
will attract the attention of criminals. Because let’s be honest: the more
people accept Bitcoin, the more it’ll likely be used for more nefarious
reasons.

3. Law enforcement
It’ll also be a problem for the government or law enforcement, after all.
If more criminals adopt Bitcoin into their illegal purchases, law
enforcement will face a challenge in finding and prosecuting these
criminals.

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 CHAPTER – 4

OUTCOME OF THE STUDY

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OUT OF THE STUDY

Cryptocurrency facts takes a simplified look at digital currencies like Bitcoin to

help explain what cryptocurrency is, how it works, and its implications.
Cryptocurrency is a digital currency that uses encryption (cryptography) to
generate money and to verify transactions. Transactions are added to a public
ledger – also called a Transaction Block Chain – and new coins are created
through a process known as mining.

 From the survey we comes to know that 85% of the citizen of india do not
supports cryptocurrency and 15% of citizen of india support
cryptocurrency.

 From the survey we comes to know that, 73% people increase their interest
in using cryptocurrency and 27% people decrease their interest in using
cryptocurrency.

 From the survey,we comes to know that main reason behind that the
government is not supporting the cryptocurrency,70% of the people
thought it is untrackable,20% of the people thought that it reduces the
power of ministry of finance & 10% of people thought that it increases the
illegal activities.

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 From the survey, we comes to know that 20% of the people thought that
govt approach is positive towards cryptocurrency& 80% of the people
thought that govt approach is negative towards cryptocurrency

 From the survey, we comes to know that 50% people interest has been
increased in using cryptocurrency by considering the less fees to operate &
50% people interest has been decreased in using cryptocurrency by
considering the less fees to operate.

 From the study we comes to know that,45 % people thought that their
interest is increasing in using cryptocurrency & 55% people thought that
their interest is decreased in using cryptocurrency.

 From the survey, we comes to know that 35% people thought that
cryptocurrency diminish the value that you perceive about the currency &
65% people thought that cryptocurrency not diminish the value that you
perceive about the currency.

 From the study we comes to know that,30% people is interested in using

cryptocurrency & 70% people is not interested in using cryptocurrency.

 From the study,we comes to know that 60% People has invested in
cryptocurrency and 40% People has not invested in cryptocurrency.

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 CHAPTER 5

LEARNING EXPERIENCE SUGGESTION CONCLUSION

BIBILIOGRAPHY

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 LEARNING EXPERIENCE

This project gave me great opportunity to learn about the all aspects of the

CRYPTO CURRENCY And helped me to know about current situation of the

CURRENCY

The learning experience gained by me during the in plant training

was very much practical oriented. Mostly all the concepts which I studied
in the class, are applicable practically

I gained many new management skills and also got a chance to learn new things
on my own experience.

The overall study of the organization

1. Improve skills
One of the most important things you can gain from
internship is new knowledge and network and it helps to improve
many new skills and knowledge

2. Professional communications
It is the best way to learn how to
navigate the working world through real-life hands on experience
one of the most valuable skill you will gain from an internship is the
ability to speak with people in a professionals

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 3. Making connections
The people who will be reference in the
future it will setup many new connections and build the strong
relationship

4. Independence
Internship will teach you to make your own
decision and do things on your own being able to work
independently with little guidence is very important in the
working world

I came to know what exactly needs wheather quality of work or quality of work
to be done or both. And also some extent I could understand the CURRENCY
work culture. Uniformity which is a essential element that management should
maintain it will also create an impression on the minds of another about their
taste, preference, values .I had a great time working on the project, as it given
insights into the working environment of an organization. The environment is
good. I have learn lot of thing there.

This project gave me a great learning experience and at the same time it gave me
enough scope to implement my educational ability. The information advice
presented in this project is based on secondary information.

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 CONCLUSION

The cryptocurrency market, which trades various digital-based coins, can look
exciting, scary, and mysterious all at once to the casual observer. Its pioneer,
Bitcoin, dramatically surged in value and steeply dropped (before picking
back up) in recent months. ICOs (initial coin offerings for new
cryptocurrencies), meanwhile, are emerging at a head-spinning rate.While
some financial advisers remain skeptical, it’s hard to ignore the massive
amount of money invested in the field. We talked to two leading futurists, who
study and predict technology trends, about where they see cryptocurrency
headed—and why you should pay attention.The problem that we can foresee is
the pace of change in regulations; change in regulation usually takes a route of
develop, propose and adopt which generally takes a period. Regulations or
regulatory changes typically evolve at a pace than innovation thereby killing it by
declaring it illegitimate. Also as its not been governed by a central authority
Bitcoin tends to fluctuate widely and to be used globally its volatility needs to
settle down.

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SUGGESTIONS

The price of Bitcoin and the price of Ethereum has exploded in 2017. The
question is whether there is sufficient upside potential to consider investing in
crypto currencies. Stated differently, is it (still) worth looking into crypto
currencies as an investment or is it too late?
The key consideration is that Bitcoin is not the only crypto currency to invest in.
On the other hand, Bitcoin has made crypto currencies popular and even more
secure. Yes, there were definitely security issues a couple of years ago, but it
seems those issues have been resolved. So Bitcoin has helped mature the crypto
currencies space.

Investing Haven believes that a combination of price analysis and fundamental

analysis is the most appropriate way to make a rational investment choice, and to
engage in forecasting the price of crypto currencies. With that in mind, we also
look into the altcoins space in this article in order to find investment
opportunities.

Investing Haven’s research team has collected 10 investment tips for investing
in crypto currencies which are useful to investors not very familiar in this space.

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 BIBLOGRAPHY

BOOKS

 BITCOIN CURRENCY
 THE AGE OF CRYPTO CURRENCY

NEWSPAPER

1. THE HINDU
2. ECONOMIC TIMES

INTERNET

1. WWW.BITCOINORG.COM
2. WWW.CRYPTOCURRENCY.COM

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