Cryptocurrency – Are we ready to demonetize the world?

Acknowledgement
Firstly, I would like to express my sincere gratitude to St. Xavier’s College, Kolkata for
providing me an opportunity to research into such a vast, emerging and relevant topic:
Cryptocurrency. I extend my gratitude to Rev. Fr. Peter Arockiam, Vice-Principal (B. Com
Evening), St. Xavier’s College, Kolkata for his constant motivation to all the students of the
college.
I take immense pleasure in thanking my respected supervisor, Dr. Jayita Bit for extending her
co-operation, guidance, valuable inputs and regular encouragement during my project.
I would like to thank the respondents who took their time out for the survey and gave their
valuable opinions. I am grateful to my parents, and my friends and all others who have
directly and indirectly helped me in my project.

Prarthana Saha

Introduction
Background of the study
Since the swift evolution of data and c technologies, many activities in our lifestyle are
merged online. They have become more flexible and simpler. An enormous growth with
respect to the number of online users has activated virtual world concepts and created a
replacement business phenomenon which is cryptocurrency.
Cryptocurrency is used to facilitate the financial activities like buying, selling and trading. It
represents a valuable intangible asset which can be used electronically in numerous
applications and networks like online social networks, online social games, virtual worlds etc.
The usage of virtual currency as medium of exchange has become widespread in numerous
domains in the recent years.
The following paper is to see the user’s expectations of the future of cryptocurrency. It will
further explore the users’ confidence and willingness in dealing with cryptocurrency during a
time wherein such virtual money isn't fully regulated by any authority.
There is little question that the age of data and communication technologies has created many
golden opportunities in several aspects. Finance and Business are among the fields that have
leveraged the most out of these technologies and online connections. An increasing number
of technology users has activated virtual world concepts and created a replacement business
phenomenon. Thus, new sorts of trading, transactions and currencies are arising. One of the
remarkable financial forms that are emerged within the past few years is Cryptocurrency.
Cryptocurrency (CC) are often defined as any medium of exchange, aside from world money,
which will be used in many financial transactions whether or not they are virtual or real
transactions.

Literature Review
Bitcoin is soaring and the global cryptocurrency market now has more than $1 trillion in
market capitalisation. Even though most of the value is held in “altcoins” of uncertain worth,
it is clear that the decentralized future of money is gaining force.
The roots of the crypto revolution can be traced back to the 1970s. This literature review
compiles a list of the ten most significant developments underpinning the increase of the
digital economy. The list not only covers the papers related the only digital assets but also the
concepts and technologies exploring applications far beyond fintech and decentralized
governance.
The first such paper, named “A Certified Digital Signature”, published in 1979, by Ralph
C. Merkle, who was named as one of the fathers of cryptography presented the certified
digital signatures which provided efficient and reliable encryption of data by transforming
blocks of information into strings of unique code. This method of transforming blocks of
information resulted in space-efficient encoding of blockchain data.
The next paper, named “Untraceable Electronic Mail, Return Addresses, and Digital
Pseudonyms”, published in 1981, by David Chaum whose contributions towards digital
privacy and introduction of digital cash has led to the creation of Cypherpunk movement.
This movement supported the all-pervasive use of cryptography as a future path to social
change.
The paper, “How to Timestamp a Digital Document”, was published in 1991 by Stuart
Haber and W. Scott Stornetta. The work in this paper practically gave birth to blockchain
technology. A solution to problem of data tampering was proposed, called “a digital safety
deposit box”. It could record the date and time a certain document was created and retained a
copy of it for safekeeping. The correctness of these records would be guaranteed by an
unalterable chain of time-stamp requests.
“Smart Contracts”, was published in 1994, by Nick Szabo. Smart contracts are defined as
“computerised transaction protocols that execute the terms of a contract.” The main goals
were to lower the transaction costs and provide to the need for trusted intermediaries.
“Bitcoin: A Peer-to-Peer Electronic Cash System”, was published in 2008, by Satoshi
Nakamoto. Bitcoin took the world by storm, stimulating an entire new body of scientific
research and business developments related to blockchains, digital assets and decentralised
economies.
“Ethereum: A Next Generation Smart Contract and Decentralised Application Platform”,
in 2013, was published by Vitalik Buterin. The 19-year-old Russian-Canadian programmer
proposed a blockchain with a built in, fully functioning Turing-complete programming
language that would enable anyone with coding experience to write smart contracts and
decentralized applications for various transactions. The transaction fees would be facilitated
with “ether”, Ethereum’s internal crypto-fuel.
 The paper “Zerocash: Decentralised Anonymous Payments from Bitcoin”, was published
in 2014 by Eli Ben Sasson, Alessandro Chiesa, Christina Garman, Matthew Green, Ian Miers,
Eran Tromer and Madars Virza. “It is an extension of Bitcoin with stronger security and
better privacy, allowing users to hide personal information that might be sensitive in nature.”
This privacy model inducted the application of the “zero-knowledge succinct non-interactive
argument of knowledge” cryptography, which allows a party to prove to another party that
they possess certain information, without actually revealing that information.
“A Note on Cryptocurrency Stabilisation: Seigniorage Shares”, was published in 2014 by
Robert Sams. Cryptocurrencies have high levels of volatility. Increased risk aversion and
demand for stability in crypto market led to the creation of “stablecoins”. They were designed
to remain stable in value against pegged external asset class.
“The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments”, was published
in 2016, by Joseph Poon and Thaddeus Dryja. This was designed as a potential solution to
Bitcoin’s struggle to establish itself as an alternative to the existing online payment
infrastructure. It adds another layer to the blockchain technology in Bitcoin, where two
parties can create payment channels for low-value Bitcoin transactions. This helps in moving
the transactions off the main ledger and reduces the associated transaction fees.
“Uniswap V2 Core”, was published in 2020, by Hayden Adams, Noah Zinsmeister and
Dan Robinson. It prices assets according to a deterministic algorithm known as automated
market maker (AMM), which removes the need to have a counterparty to make a trade and
allows anyone to create a market by simply interacting with a smart contract.

Objectives of the Study

The objective of the study is on decentralized digital currencies that use encryption
mechanisms, which is called cryptocurrencies. The liquidity of this sector is certainly a
challenge for research, along with an in-depth evaluation of the cryptocurrency industry as a
whole. This paper has intended to provide a brief, yet in-depth analysis of the cryptocurrency
industry. Our focus is also to understand the concept and working of cryptocurrency, the
advantages and drawbacks and to understand where it stands among the general public on
various factors such as risks and profits.

The Rationale of the Study

The digital currency is able to compete with other forms of payment, including PayPal,
credit/debit cards. It is possible that bitcoin and other digital currencies could have a
significant long-term impact on both the currency and a payment system, but this currency is
currently in its early stage of development. There are a lot of unresolved questions about its
usefulness, as well as the potential of the digital currency is a cutting-edge technology.” The
most trending word used by media, young generation investors, and IT Employees is Bitcoin.
Has the time has arrived for India to go cashless? - If yes! Is the usage of Bitcoin a positive
step to enable India attain this big dream?
Sources of Data and Research Methodology
1. Data Type – The research is based on primary data to have a closer perspective about
people’s understanding of the crypto world. The secondary data sources are derived
from online articles, existing research papers, journals issued by different institutes
and various other forms.

2. Sampling Procedure – A questionnaire (in Google Forms) is prepared to understand

people’s knowledge and opinions on cryptocurrency.

3. Sample size – The sample size in primary survey was taken to be 50.

4. Area of study – The area of study of the primary data was across various cities in
India.

5. Analysis Tools – Quantitative methods including various graphs and charts created
with the help of Ms-Excel.

Limitations of the Study

There are various limitations to the study:
i. As far as possible an honest attempt has been made to collect data from the
primary sources and reliable secondary sources. However, there is a possibility of
incorrect data being crept in.
ii. Knowledge about the subject matter is a critical factor limiting this study.
iii. The study is also limited to the data available in hand as on a particular date since
the topic is variable and people’s response may change depending on the
economic factors.
iv. Primary survey was conducted in the month of April, 2021. The same respondents
may have different perceptions and responses today.

Chapter Planning
For the purpose of simplicity and interpretations, the entire study has been divided into
various chapters as follows:
1. The first chapter of the study deals with the basic understanding of the topic, appraisal
of various literature review on the topic, scope of the study and the inherent
limitations to the study.
2. The second chapter of the study deals with a brief knowledge on the understanding of
cryptocurrency and the technology behind it.
3. The third chapter deals with the data analysis and interpretation of the study. Various
factors such as age, city, and multiple other such questions to interpret the
understanding of current cryptocurrency concepts and the trends in near future.
 4. The last chapter closes with a brief summary of the conclusions and recommendations
of the study.

Conceptual Framework
Cryptocurrency markets are still distributed, which means they are not issued or supported by
a central authority such as the government. Instead, they fall into the computer network.
However, cryptocurrencies can be bought and traded on exchanges and stored in ‘wallets.
Unlike traditional currencies, cryptocurrencies only exist as a shared digital ID, which is
stored in a blockchain.
Blockchain is nothing but a shared digital register of recorded data or a ledger of
cryptocurrencies. It keeps track of transactions across all trades, and shows how ownership
has changed over time. Blockchain works by recording transactions in ‘blocks’, with new
blocks being added to the front of the chain. Blockchain technology has different security
features that do not have standard computer files. It does this through network compatibility,
in which case the file is stored on multiple computers across the network - not in one place -
and is usually read by everyone within the network. This makes it obvious and very difficult
to change.
When a user wants to send cryptocurrency units to another user, they send them to that user's
digital wallet. Actions are not considered final until they have been verified and added to the
blockchain by a process called mining. This is also the way new cryptocurrency tokens are
often made. It has two functions:
1) Transaction Check: Mining computers select pending transactions in the pool and check to
ensure that the sender has sufficient funds to complete the transaction. This includes looking
at transaction details and transaction history stored in the blockchain.
2) New Block Creation: Mining computers incorporate legitimate transactions into a new
block and then attempt to generate a cryptographic link to the previous block by finding a
solution to a complex algorithm. When a computer successfully generates a link, it blocks a
block in its blockchain file version and distributes the update across the network.

Analysis and Findings

1. On the basis of Age – Among the 50 respondents to the questionnaire, we can see the
age range being between 20 years to 49 years. However, the topic of cryptocurrency is
seen to be most popular among young adults, ranging from 21 years to 24 years, with
top three being - 26% responses from people aged 21 years, 16% responses were from
people aged 22 years, and 18% responses from people aged 24 years.
About 6% of the people were aged 20 years and 31 years each, 8% were of the age 23
years and 26 years each, 4% were aged 25 years, with 2% responses from the rest of
the age.
2. On the basis of city - Among the 50 respondents to the questionnaire, we can see that
the data has been collected from various cities across India. It is difficult to assume
which city has more interest in cryptocurrency as the data is collected from peer
networking.

3. The third question was to determine the popularity of cryptocurrency among people.
Among the 50 respondents, 36% had a lot of knowledge about cryptocurrency, 40%
had some knowledge about cryptocurrency, 18% did not have much knowledge about
cryptocurrency and there were none who had not heard about cryptocurrency.
4. The fourth question helped us in understanding where our respondents had any
interest in purchasing cryptocurrency in the future. Among the 50 respondents, 30%
said they were planning to purchase cryptocurrency in the future, 30% said they were
not planning to purchase cryptocurrency in the future and 40% said they were unsure
about planning to purchase cryptocurrency in the future,

5. In the fifth question, we get to know the percentage of respondents who own
cryptocurrency. Among the 50 respondents, 14% of the people said they owned
 cryptocurrency while 86% of the people said they do not own cryptocurrency.

6. In the sixth question, we condition the respondents that if they were provided with the
knowledge to invest in cryptocurrency, how likely were they to do so. Among the 50
respondents, 24% were extremely likely to invest in cryptocurrency if provided with
the knowledge, 48% were somewhat likely to invest in cryptocurrency if provided
with the knowledge, 22% were not so likely to invest in cryptocurrency if provided
with the knowledge and 6% were not interested to invest in cryptocurrency if
provided with the knowledge.

7. The seventh question compared investing in stock market and investing in

cryptocurrency on the basis of risk involved. Among the 50 respondents, 2% had the
opinion that investing in stock market was riskier, 68% had the opinion that investing
in cryptocurrency was riskier, 22% had the opinion that investing in cryptocurrency
and investing in stock market were equally risky and 8% had no opinion in this
regard.
8. The eight question compares investing in stock market and investing in
cryptocurrency on the basis of profit. Among the 50 respondents, 50% were of the
opinion that investing in stock market was more profitable, 28% were of the opinion
that investing in cryptocurrency was more profitable, 14% were of the opinion that
investing in stock market and investing in cryptocurrency were both equally profitable
and 8% did not have any opinion in this regard.

9. The ninth question wanted to know about the opinion of people regarding the worth of
cryptocurrency in the future. Among the 50 respondents, 28% had the opinion that in
5 years the value of cryptocurrency will be significantly more than today, 38% had
the opinion that in 5 years the value of cryptocurrency will be somewhat more than
today, 20% had the opinion that in 5 years the value of cryptocurrency will be about
the same as that of today, 6% had the opinion that in 5 years the value of
cryptocurrency will be somewhat less than today and 8% had the opinion that in 5
years the value of cryptocurrency will be significantly less than today,
10. The tenth question tells us about the opinion of our respondents regarding
cryptocurrency as a medium of monetary exchange. Among the 50 respondents, 6%
of the people consider cryptocurrency to be related to criminal activity, 28% of the
people consider cryptocurrency to exist only in computer, 40% of the people had the
opinion that few merchants accept cryptocurrency as a medium of monetary exchange
and 26% had no opinion in this regard.

11. The eleventh question wanted to know about the common man’s trust behind the
technology of cryptocurrency. Among the 50 respondents, 38% trusted the technology
behind cryptocurrency, 28% did not trust the technology behind cryptocurrency and
34% had no opinion in this regard.
Conclusion
Cryptocurrency provides an effective, new and attractive mode of payment that can increase
the revenue of companies. It also provides an alternative method for payment, which can
bring a positive change in the e-commerce sector. However, there is still not much knowledge
and trust regarding cryptocurrency. Until it is regulated and controlled properly, numerous
challenges, concerns and issues will continue to exist, due to which users will need to take
extra precaution while handling such virtual currency. Therefore, the lack of legislation is one
of the main concerns in cryptocurrency system in India, and the silence of RBI may prove to
be damaging. Since an industry has grown around cryptocurrency, with traders and merchants
accepting digital cash as payments, it is important to get this industry regulated.

References:
1. http://ijrar.com/upload_issue/ijrar_issue_20543250.pdf
2. https://www.forbes.com/sites/ninabambysheva/2021/02/13/satoshi--company-the-10-
most-important-scientific-white-papers-in-development-of-cryptocurrencies/?
sh=c30298920571
3. https://www.moneycrashers.com/cryptocurrency-history-bitcoin-alternatives/

Questionnaire - https://forms.gle/NvLPxgPJVSVUgoZA7
This article explains what
cryptocurrency is and begins
to answer the new
questions that it raises. To
understand why
cryptocurrency has the
characteristics it
has, it is important to
understand the problem that is
being solved. For this reason,
we start with the problems that
have plagued digital cash in
the past and the
technical advance that makes
cryptocurrency possible. Once
this foundation is laid,
we discuss the unique
economic questions that the
solution raises
This article explains what
cryptocurrency is and begins
to answer the new
questions that it raises. To
understand why
cryptocurrency has the
characteristics it
has, it is important to
understand the problem that is
being solved. For this reason,
we start with the problems that
have plagued digital cash in
the past and the
technical advance that makes
cryptocurrency possible. Once
this foundation is laid,
we discuss the unique
economic questions that the
solution raises
This article explains what cryptocurrency is and begins to answer the new questions that it
raises. To understand why cryptocurrency has the characteristics it has, it is important to
understand the problem that is being solved. For this reason, we start with the problems that
have plagued digital cash in the past and the technical advance that makes cryptocurrency
possible. Once this foundation is laid, we discuss the unique economic questions that the

This article explains

solution raises.

what cryptocurrency is and

begins to answer the new
questions that it raises. To
understand why
cryptocurrency has the
characteristics it
has, it is important to
understand the problem that is
being solved. For this reason,
we start with the problems that
have plagued digital cash in
the past and the
technical advance that makes
cryptocurrency possible. Once
this foundation is laid,
we discuss the unique
economic questions that the
solutioni