In this article we will look into the key differences between Future and Forward contracts. If you would like to keep yourself informed on the same then please read on…
Forward
Contract
The
forward contract is an agreement between a buyer and seller to trade an asset
at a future date. The price of the asset is set when the contract is drawn up.
Forward contracts have one settlement date—they all settle at the end of the
contract. These contracts are private agreements between two parties, so they
do not trade on an exchange. Because of the nature of the contract, they are
not as rigid in their terms and conditions.
Many hedgers
use forward contracts to cut down on the volatility of an asset’s price. Since
the terms of the agreement are set when the contract is executed, a forward
contract is not subject to price fluctuations. So, if two parties agree to the
sale of 1000 ears of corn at $1 each for a total of $1,000, the terms cannot
change even if the price of corn goes down to 50 cents per ear. It also ensures
that delivery of the asset, or, if specified, cash settlement, will usually
take place.
Because
of the nature of these contracts, forwards are not readily available to retail
investors. The market for forward contracts is often hard to predict. That’s
because the agreements and their details are generally kept between the buyer
and seller, and are not made public. Because they are private agreements, there
is a high counterparty risk. This means there may be a chance that one
party will default.
Futures
Contracts
Like
forward contracts, futures contracts involve the agreement to buy and sell an
asset at a specific price at a future date. The futures contract, however, has
some differences from the forward contract. First, futures contracts—also known
as futures—are marked-to-market daily, which means that daily changes
are settled day by day until the end of the contract. Furthermore, a settlement
for futures contracts can occur over a range of dates.
Because
they are traded on an exchange, they have clearing houses that
guarantee the transactions. This drastically lowers the probability of default
to almost never. Contracts are available on stock exchange indexes,
commodities, and currencies. The most popular assets for futures contracts
include crops like wheat and corn, and oil and gas. The market for futures
contracts is highly liquid, giving investors the ability to enter and exit
whenever they choose to do so.
These
contracts are frequently used by speculators, who bet on the direction in
which an asset’s price will move, they are usually closed out prior
to maturity and delivery usually never happens. In this case, a cash
settlement usually takes place.
It is important to understand what a blockchain system is: a blockchain is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block a timestamp, and transaction data (generally represented as a Merkle tree). By design, a blockchain is resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.
A
blockchain is, in the simplest of terms, a time-stamped series of immutable
record of data that is managed by cluster of computers not owned by any single
entity. Each of these blocks of data (i.e. block) are secured and bound to each
other using cryptographic principles (i.e. chain). Now that we’ve got a basic
understanding of what a Blockchain System is we can dive right into
understanding hybrid blockchains.
Hybrid Blockchain
Hybrid
Blockchains could lie
somewhere in-between private and public blockchains, depending on their
architecture. Hence, to get a good understanding of hybrid blockchains, one
must first understand the differences between private and public blockchains.
As the name suggests, public blockchains are accessible to and managed by the
public. Anyone can participate in the upkeep and governance of the blockchain.
The most popular blockchain in the world, Bitcoin, is a public blockchain.
Participators are typically rewarded in the form of block rewards for their
contributions to the network to incentivise good behaviour on the part of
network peers. Since millions of users manage a public blockchain across the
world in real time, attaining consensus for a public blockchain is
time-consuming and expensive.
For example, the consensus
mechanism that Bitcoin uses, Proof of Work, relies profoundly on wasteful
computations for millions of devices to ensure security. By comparison, a
private blockchain allows limited access to entities outside a trusted few who
were involved in the creation of the private blockchain. Typically, private
blockchains have administrators who can control permissions of adding or
modifying data on a private blockchain. The most popular private blockchains
include the Hyperledger
fabric which is being developed as a competitor to Ethereum by IBM and
quorum, which is being developed by J.P. Morgan. Private blockchains are much
faster than public blockchains because the network is managed by a handful for
trusted nodes whose motives are clearly for the benefit of the network. Such
trusted nodes typically belong to financial institutions or universities to
maintain fairness and remain unbiased.
Now, it is clear that each type of blockchain has its strengths and
weaknesses. Public blockchains while being transparent and resistant to
tampering are slow and expensive whereas, private blockchains are somewhat
centralised but can deliver much higher throughput and speeds. As a logical
step, hybrid blockchains combine the benefits of both of the blockchains while
trying to limit the disadvantages. Therefore, with hybrid blockchains, we can
employ a public blockchain to make the ledger accessible to every single person
in the world, with a private blockchain running in the background that can
control access to the modifications in the ledger.
Hybrid Blockchains in the Real World
One of the leading hybrid
blockchain platforms, XinFin,
has developed a unique network for Ramco Systems for the management of supply
chain logistics. XinFin completed its ICO earlier this year and had since
developed its public-private blockchain on Ethereum (public blockchain) and
Quorum (private blockchain). There are numerous benefits to using a hybrid
blockchain like the speed of private blockchains combined with the security of
public blockchains. The private blockchain is used to generate a hash of
transactions which is later verified using the public blockchain.
Another real-world application of hybrid blockchains includes Ripple network and the XRP token. Ripple has
regularly been criticised for its centralised nodes which can arbitrate
transactions in the case of a dispute. But by adding a public blockchain to
verify the operations of its private blockchain can make the network much more
secure for its users.
The
main aim of Blockchain
is to create an immutable public ledger to ensure integrity of transactions. In
the past few years of its existence multiple different types of blockchain have
evolved from the original blockchain. The concepts of public and private
blockchains have come into being, these two are often confused together as they
both have very similar features. This article ensures to bring out the
difference between the two.
Public vs. Private blockchain
Public and private
blockchains are equally decentralized, peer-to-peer
networks where each member maintains a copy of a shared ledger that
stores digitally signed transactions. This ledger can only be affixed to,
but not edited. Participants in a blockchain
retain this ledger in sync through a consensus protocol. This produces a
assurance on the immutability of the ledger which cannot be tainted
even if there are some malicious members on the blockchain.
The difference between public
and private blockchain is related to the type of members allowed within the
network that preserve the ledger and execute the consensus protocol.
Public
blockchains
Public blockchains are open networks that allow anyone
to participate in the network, hence the name ‘public’. Such a network depends
upon the number of participants for its success, and hence encourages more and
more public participation through an incentivization mechanism. The best
example of a public blockchain is Bitcoin
where participants in the network (miners) are rewarded with BTC tokens.
In a blockchain, each block contains a record of
numerous transactions on the network. Creating new blocks gives out a reward,
also known as the “miner’s fee”. In a public blockchain, where there can be a
lot of participants on the network, it becomes necessary to maintain scarcity
of the reward tokens, and regulate who gets the right to create the next block.
To achieve this, each participant in the network must solve a complex
cryptographic problem (also known as “proof of work”). Whoever solves the
problem earn the right to create the next block (and gets the reward). The
disadvantage to this is, these problems are very resource intensive and take a
substantial amount of computational power to solve.
Another disadvantage is the public nature of the
blockchain itself. There is little to no privacy for transactions, nor any
regulation or criteria for participants to join. Public blockchains might be
suitable for projects in the public domain (such as Blockchain), but not ideal
for enterprise-level use cases.
Private
blockchains
Enterprises can set up private blockchains to protect
the privacy and security of their data. Participation in a private blockchain
requires an invitation, which itself is also validated by the network starter
or a set of rules that can put into place. Such a network is known as a permissioned
network, and puts a restriction on who is allowed to join. Private
blockchains can also restrict participant activity such that certain
transactions can only be carried out by certain participants and not others,
despite the fact that they’re on the network. This creates an added layer of
privacy.
Participation rules can either be set up by existing
participants, a regulatory authority or a consortium. All participants in a
network play a role in maintaining the blockchain in a decentralized manner.
An example of a private blockchain is Linux Foundation’s
Hyperledger Fabric,
designed to cater to enterprise requirements. Only entities participating in a
particular transaction have knowledge about it — other entities will have no
access to it. Because such a blockchain is lighter, it provides transactional
throughput that is orders of magnitude higher than in public blockchains.
The blockchain era has already begun. Taking into account the fast progress in the development of new and more efficient healthcare record systems, wearable devices, and medical examination systems implementing artificial intelligence, cryptography will become an important part of the way hospitals work. There are, however, a few improvements still needed in order for seamless blockchain adoption across the entire medical industry. According to Hyperledger’s survey, 42.9% of healthcare organizations suppose that the interoperability of electronic health records will help for faster blockchain implementation; with 28.6% of respondents ready to use this technology in care settings today. So, what are the benefits of blockchain technology in healthcare?
Data
Provenance and Integrity
With
an ongoing increase in patient numbers, healthcare providers have to manage
more and more health data on a regular basis. As the data volume increases each
year, it becomes harder for hospitals and clinics to process and store
information.
Data
managed by medical organizations includes:
·
Patient health information (PHI);
·
Electronic health records;
·
Data collected from IoT devices (Internet of Things) or monitoring systems;
and,
·
Medical insurance claims.
Secure
information sharing methods, which allow both healthcare providers and their
covered entities to verify the correctness of data, are crucial for ensuring
proper medical services. This is where blockchain comes in useful, as one of
its main advantages is data integrity. When information is recorded and
encrypted, it becomes impossible to change or remove.
One
of the blockchain approaches that allows for the secure recording and sharing
of information is anchoring data to the public blockchain. This method involves
generating a proof of data integrity. Using this proof, any user can verify the
data timestamp without the need to rely on third-parties. This method allows
users to:
·
Verify PHI integrity;
·
Perform unchangeable medical audits;
·
Prove the integrity of clinical research results;
·
Reduce audit expenses and ensure regulatory compliance; and,
·
Ensure data safety.
HIPAA
requires the usage of safe methods of communication between those who deal with
PHI stored in electronic form. That is why data encryption plays a crucial role
in ensuring data privacy and safety. Our team has a deep expertise in
developing digital solutions for the healthcare industry. One of our projects
is a HIPAA compliant online communication platform called MDChat that allows
patients to securely communicate with medical employees and be sure they are
protected from any hacker attacks.
More
Secure Standards
Blockchain
provides a more secure way to protect data than ordinary encryption. The new
technology allows for the implementation of new standards in managing insurance
claims, PHI, and medical records. It excludes intermediation in data sharing,
when using blockchain. Such consortiums as Hyperledger help
increase awareness of the advantages of cryptography and further explain how to
use blockchain in healthcare.
According
to the survey mentioned above, the main reason why medical organizations
hesitate to use blockchain is the lack of knowledge around this technology. A
quarter of respondents are still at the stage of education and exploration,
which is why responsible state organizations should make the corresponding
information more widespread among caregivers. Healthcare providers suppose that
this technology must pass several milestones before any adoption is possible,
including:
·
Technical proof of concept (PoC) (65.4%);
·
Security proof (38.5%);
·
Privacy proof (34.6%); and,
·
Regulatory approval (23.1%).
We
can spend a lot of time wondering why caregivers hesitate to implement blockchain
in their organization, though the answer is far simpler than it may seem: they
simply do not know enough about this technology and its advantages.
Data
Transparency
Besides
disintermediation, data integrity and provenance, healthcare providers see
transparency (55.2%) as one of the top advantages of using blockchain in their
industry. To better understand this aspect, let’s consider how it works in the
financial sector.
This
technology provides a decentralized register of ownership by recording every
transaction made through the system. It stores all details starting from the
formation of a data block, and ending with any digits related to a specific
transaction. Every device that is a part of the system stores a copy of this
block. Before making a transaction, the system confirms whether a blockchain
version coincides with another in the network. Therefore, each blockchain user
can identify the owner of a particular data block at any time. Furthermore, the
blockchain is not only a secure way to send money, but a fully protected data
sharing method that widens its potential use in healthcare.
Blockchain
in Healthcare: Usage
Caregivers
feel quite optimistic about fast blockchain implementation, with 37.9%
predicting that it will take only five years to adopt it across medical
organizations. For now, these organizations and professionals need examples of
blockchain, and how it can be helpful in their field. Here, we will cover
examples of blockchain use in the healthcare industry, describing existing
issues in the sector and considering possible solutions through the use of this
technology.
Blockchain
in healthcare examples include the following usage issues:
Problem:
Drug Traceability
One
of the most serious problems in pharmacology is drug counterfeit. According to
the Health Research Funding Organization (HRFO), approximately 10%-30% of drugs
in developing countries are fake. US businesses lose up to $200 billion
annually because of drug counterfeiting; however, the main reason is not in
counterfeiting itself, but, rather, that these drugs provide different effects
than their traditional medicinal counterparts. They may not help patients at
all, or may even be harmful and dangerous to a person’s health.
Blockchain-Based
Solution
As
all transactions in blockchain are times tamped and immutable, it is easy to
detect fraudulent drug dealers. There are two blockchain types: private and
public. Trustworthy healthcare blockchain companies have to register their
products in the private system to ensure authenticity and the high quality of
their medicines. Private blockchains are moderated by central entities, and the
fact that a specific producer or distributor has access to the so-called drug
blockchain is proof of drug authenticity. This is where blockchain transparency
comes in useful. Once a drug is produced and moves from the manufacturer to
retailer, the operational data is recorded on the blockchain. It makes it
extremely easy to verify the whole path of the drug, and determine all chain
links at any time.
Problem:
Data Security in Clinical Trials
Clinical
trials are used to determine the effectiveness of particular medicines which
cure specific diseases. These tests can either prove or disprove an offered
hypothesis. During clinical trials, researchers obtain and record a great deal
of information concerning statistics, test results, quality reports, etc. Each
scientist is responsible for specific research, making it difficult to control
everyone. Those data can then be easily modified or hidden in order to change
the whole outcome of the research performed. Criminals are interested in
recording the results that are beneficial for them, even if the data does not
coincide with the reality.
Blockchain-Based
Solution
This
technology allows users to prove the authenticity of any document registered in
the system. It provides proof-of-existence by adding data in the form of the
transaction and validating the information by all system nodes. As mentioned
above, blockchain records immutable data. This characteristic will allow for
the storage of results from clinical trials in a secure way, making it
impossible to modify data. Two doctors from Cambridge University conducted a
2016 study to see how blockchain can provide proof-of existence for clinical
trials. They found that comparing a unique data code, which is set by the
system, with the original makes it possible to verify whether the data of
clinical trials has been modified, thanks to the inner SHA256 calculator which
generates a unique hash every time a modification is made to the data.
Problem:
Patient Data Management
Patient
data privacy is strictly regulated by the Health
Insurance Portability and Accountability Act (HIPAA), and requires PHI
to be totally secure. There is, however, another problem related to PHI:
sometimes, patients need to share their medical records with third parties
(e.g. with pharmacies when they need to buy specific medicines). So, how can
blockchain help protect data while providing partial access at the same time?
Blockchain-Based
Solution
The
Blockchain
creates a hash for each PHI block, together with a patient ID. Using an API,
covered entities can receive the necessary information without revealing a
patient’s identity. In the same way, a patient can decide whom to provide with
access and whether this access will be either full or partial. Furthermore, a
patient can set specific third parties that would have to give their permission
for sharing the PHI, if the patient is not sure in what he or she is doing.
Blockchain
has a tremendous potential of use in different industries, including
healthcare. This technology has already become widespread in the financial
sector, but medical organizations still hesitate to implement it into their IT
systems. This does not mean, however, that there are no healthcare companies
currently using blockchain. Below, you will find a short list of startups that
have made this technology the base of their operational structure.
Blockchain
healthcare startups:
·
Guardtime (a blockchain-based
system for securing patient healthcare records);
·
Gem Health (an
initiative that promotes blockchain-based collaboration in healthcare);
·
Cyph (a platform for building secure
digital identities and ensuring protected communication between healthcare
providers);
·
MedRec (a blockchain-based
system for securing medical records management); and,
·
Blockchain Health (a
blockchain-based system for medical research management).
Blockchain
is an effective technology that can help prevent data breaches in the
healthcare industry. It is a secure and reliable method of recording, storing,
and sharing sensitive data. Caregivers will definitely benefit from
implementing this technology, while remaining HIPAA compliant with this method
of trustworthy digital protection.
Charitable giving is on the rise, mostly due to resilient economic conditions in North America and Europe over current years. According to Giving USA, 2017 was the first year that contributions from the US crossed the $400 billion mark, a rise of five percent over the preceding year.
While
contributing to charity may deliver us with a warm glow, few people stop to
consider exactly where their donations end up. Charity fraud is a global issue,
creating a risk that donated funds end up being siphoned off through scams or
corruption.
What can Blockchain do for Charity?
Blockchain technology is creating waves in many sectors such
as supply chain due to its functionality in providing a secure, unalterable
record of value transfers. This makes blockchain the ideal technology to bring
transparency to the distribution of charitable donations.
Using an open public ledger, a charity or NGO could
collect donations in a digital currency. Each unit collected is traceable from
the moment it’s contributed to the point that it’s spent on goods or services. Cryptocurrency
transfers are peer-to-peer, meaning that charities could also decrease fees
incurred by intermediaries like banks or foreign currency exchange services. 2017
and 2018 saw a proliferation of tech start-ups generating blockchain-based
digital tokens to crowdfund their new business venture. While the regulators
have now started to clamp down, in 2019 blockchain innovators are now turning
to regulated token generation events, known as security token offerings (STO.)
Charities and NGOs could similarly use such a mechanism to crowdsource
donations for their endeavours.
Furthermore, blockchain-based smart contracts
could even automate the distribution of funds for particular projects. For
example, if a charity collects funds to build a school, the funding could be
released by smart contracts in stages once specific milestones of the
construction project are completed. Some projects are already working on
these kinds of solutions for charities. Alice is one example.
The tech firm is collaborating with the Charities Aid Foundation and Imperial
College London to develop a blockchain-based
platform aimed at transparency in charitable fundraising.
How the Blockchain Community is Giving
Back
The Bitcoin boom of late 2017 and early 2018 saw
massive growth in the market size for cryptocurrencies and blockchain. Now,
some blockchain firms are demonstrating their commitment to social
responsibility by setting up charitable initiatives. In many cases, these are
also leveraging the benefits of blockchain in managing charity funding.
#VoiceYourLove
For example, Tronis a decentralized application protocol, launched in 2018. The
project is managed by the Tron Foundation, a non-profit based in Singapore with
tech wunderkind Justin Sun at the helm.
Tron recently
announced its
collaboration with the ALS Association on an awareness campaign timed to
coincide with Valentine’s Day, called #VoiceYourLove. The ALS Association had
enormous success back in 2014 with the Ice Bucket Challenge, which went viral
on social media. The new campaign invites people to create videos where they
talk about their loved ones. Contributions to the #VoiceYourLove campaign
will be tracked through to distribution using blockchain, with the results
published at the end of the campaign. Sun himself has personally donated
$250,000 and is “urging others in the blockchain industry to voice their love
by donating to help find a cure.”
We strongly advise you to make your contributions
to charities that accept bitcoin
and other cryptocurrencies that
work towards causes that resonate on a personal level.
To understand blockchain governance, we need to first get a fair idea of what the word governance means, read on to know more.
Humans tend to interest each other and build tribes,
villages, town, cities, or empires. With that comes societal norms among those
who are living with or near each other. These rules have different ways of pending
into existence. It doesn’t matter if the governance is the real world or the
digital world, there are shared underlying principles within both.
These principles are: Rules, Rulers, Participants.
Governance can be commenced by a government, market,
network, or social system (family, tribe, development team, etc.).
For a governance procedure to
work successfully, the above three principles will need to play nicely with
each other. For example, the rules should be aligned with the overall
participants’ goals, and the rulers should enforce positive and negative
actions within this governance structure. Now that we have a basic and simple
understanding of governance, let’s see how this is taking place in both the typical
world and the blockchain world.
Blockchain Governance
All organizations and
software advancement projects need a way to agree on and to finalise each
decision along the roadmap. Most organizations are centralized and have a
leadership team. Several strategies for governing the decentralized blockchain
have been developed.
Effective blockchain
governance includes:
Incentives
Methods of coordination
Before diving into the niceties
of how governance works on blockchains, it’s significant to have a clear meaning
of what blockchain governance is. Every blockchain is a growing system which
needs to change to meet the needs of its users. If a blockchain isn’t relevant
and useful, then it won’t survive, it needs to be able to evolve and adapt. To
evolve, the blockchain needs to make changes and needs a way to make final
decisions on what these changes should be. Organizations usually have a
leadership team or a CEO who is the final authority for their organization.
However, blockchain is designed to be decentralized in its nature, and not be
under the regulations set by any person or group. This means that blockchain
needs another way to make decisions regarding the blockchain’s roadmap.
So, blockchain
governance in order to be effective, it needs to include both incentives and
methods for members to coordinate. Without incentives, members won’t
participate in governance and the blockchain will become less aligned with user
needs over time. Without a method for members to coordinate, it will be
impossible for a blockchain network to come to an agreement on future changes.
With prices rocketing back from the lows. In fact, many cryptocurrencies have doubled from their recent low prices over the last several weeks. Here are a few reasons why you should get your hands on cryptos, and make them one of your investment options:
The Market Is Still In Its Infancy
Cryptocurrency is less than a decade old. Bitcoin was launched in 2009, and other major crypto names are far younger. By way of comparison, the New York Stock Exchange began in 1792 and commodities have traded for many centuries.
Volatility is the hallmark of a new market. As exchanges and investors adjust to the new products, massive price swings are inevitable. This is why, despite my bullish bias, I say to only risk what you can afford to lose when investing in the novel cryptocurrency markets.
As the market matures, volatility will decline to create smoother equity curves for investors in both directions. Make no mistake, the inevitable decline in volatility will take much of the enormous profit potential out of the nascent market. This is why now remains an ideal time to buy despite the high risk for extreme return-seeking investors.
Regulations Are Not A Bad Thing
There is a broad fear among cryptocurrency adherents that regulations will ruin the market. Many of the early adopters and creators of cryptocurrency have a strong anti-authoritarian, anarchist bias. In other words, these folks hate the government, regulations, and anything that interferes with the free market.
The early adopter’s utopian worldview — the dream to live in a world where everyone interacts fairly and peacefully — remains nothing but fantasy in the real world. As unfortunate as it may be, regulations are a must for a smooth and fair operating exchange.
The anarcho-capitalist movement that spawned cryptocurrency, and the underground commerce sites like Silk Road, is quickly becoming less of a factor in the growth of cryptocurrencies. A strong argument can be made that regulations are a must for the continued success of the crypto market. The fear-based selloffs triggered by regulation announcements and rumours make ideal buying prospects for savvy investors. An example of this was the steep sell-off that occurred when South Korea announced a slate of regulatory measures. The move was way overblown, and crypto quickly recovered from the selling. This happens again and again, creating an exploitable pattern.
Real World Applications
Crypto has moved away from the anarchist’s preferred means of exchange into the mainstream. However, it is not entirely mainstream enough to squash the upside potential. This means now is the time to buy before it’s too late!
Everyone knows bitcoin is being accepted at more and more locations around the globe. Since it was the first mover in the space, it is the leading cryptocurrency and has gained relatively widespread acceptance in the real world of commerce.
Other crypto projects like Ripple serve to transfer fiat currencies around the world. Crushing legacy systems like SWIFT regarding time and cost, Ripple and XcelToken Plus are the leading players in the conversion of money transfer systems into the digital age. Rumours abound that even Starbuckshas plans to accept Ripple and Litecoin as payment within the next five years. Should Starbucks come on board, expect a massive move by retailers in this direction. Ripple is just the tip of the iceberg coming to real-world applications of the blockchain and cryptocurrency.
Platforms like XcelTrip allow those holding cryptocurrencies, to travel anywhere with cryptocurrencies.
Bigger ICOs
Initial Coin Offering (ICO) has become a favorite way to raise capital over the past year. Often built on the Ethereum network, ICOs use vast numbers of tokens which, in turn, increase the demand for Ether, the cryptocurrency of the Ethereum network.
These types of offerings have reached the billion-dollar stage with Telegram, a messaging app, and the old school company Kodak both recently announcing plans to launch ICOs. We will only see ICOs grow more extensive and more legitimate over time, increasing demand for Ether and other backbone blockchain network cryptos.
The Banks And Institutions Are Coming
Primarily a retail investor phenomenon, cryptocurrency has attracted the interest of major institutions, banks and hedge funds. Multiple cryptocurrency hedge funds are springing up around the world, increasing the demand for the cryptocurrency. At the same time, considerable institutional money is starting to flow into the space. Attracted by the high return potential, institutions are in the early stages of accepting the asset class.
The amount of institutional money available for the new market is staggering. Should institutions, banks, and hedge funds embrace digital currency, the upside is truly unlimited.
Keep all these points in mind and invest in a token that has
real world transaction usage and that also provides long term profits.
Cryptocurrency is “a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.” Cryptocurrencies in India are uncharted territory and seem to be one that is understood very little that people are vary of investing in them. Here is a list of myths revolving around cryptocurrencies that are busted:
Myth 1
Cryptocurrency Is Not Taxed
Yes, there is no central expert
involved and there are no banks involved. But this does not rule out that the
digital currency avoids being taxed. It is just any other transaction and you
are taxed whenever you sell it or whenever someone pays you in cryptocurrency.
In India, when you trade in
cryptocurrencies and make a profit, and if that profit exceeds 10 lakh rupees,
you have to pay 30% on the profit. This is for short-term gains where there is
no minimum time period for holding the investment. For a long-term gain, where your asset needs to hold for
at least two years, you will be taxed 20 percent on the profit.
Myth 2
Cryptocurrency Doesn’t Have Any Real Money Value to
Them
This is perhaps the biggest myth
about cryptocurrencies since there is no material asset that is backing them.
However, the people who trade in cryptocurrencies believe in the inherent value
of it, which has been supporting the system since 2008.
As long as there are people who
believe in and understand the value of cryptocurrencies, they are here to stay.
Myth 3
They Are Illegal Forms of Digital Money
Although the currency has been banned
in countries like Bolivia, Russia, Algeria, Ecuador and Trinidad; EU nations,
G7 nations, and the USA have made cryptocurrency a legal tender.
India’s previous Finance Minister,
Mr. Arun Jaitley pointed out in the Budget 2018-19 that the Blockchain
technology will be explored to promote digital and safe transactions. The
transactions in cryptocurrency are not banned in India and are thriving.
Myth 4
Cryptocurrencies Are Used for Criminal and Illicit
Purposes
While one event of the Silk Road Raid
in 2013 exposed the use of millions of dollars in Bitcoin for human and drug trafficking,
cryptocurrency is yet to be regulated. Yes, some criminal cases record the use
of cryptocurrency to get money, however, India has obligatory KYC (Know Your Customer) procedures in place for trading
in cryptocurrencies to reduce the chance of any unlawful use of the digital
money.
Myth 5
Cryptocurrencies Are Easy to Hack
Using a platform to trade in
cryptocurrencies is just like any other platform for trading. Upping the
security on wallets where trading in cryptocurrency is facilitated is the only
way to secure your wallet and enable safe transactions.
Myth 6
There Is Only One Huge Blockchain In Place
There absolutely is not. There are
many blockchains. Blockchain is just a technology that caters to different
problems- they may be public or private versions of blockchain, the source may
be open or closed, etc. While one type of blockchain might back Bitcoin, others
might support other cryptocurrencies like Ethereum, Ripple, XcelToken Plus etc.
Myth 7
Blockchain Is A Cloud-like Database
What is important to remember is that
blockchain is just like a ledger- it only keeps a record of the transactions.
In its entirety, this is the ledger that is backing cryptocurrencies and
ensures that transactions are safe, not repetitive and are transparent. Blockchain
cannot store any ‘files’. It only comprises a code for the transaction that
took place.
Myth 8
Cryptocurrencies Are Not Accepted as a Form of
Payment
Cryptocurrencies came in 2008. Slowly
and steadily, their virtue has been realized by people who are investing in
it. Big companies like Microsoft, Fiverr, Dell and Expedia have started to
accept Bitcoin. However, while buying cryptocurrencies is not illegal,
cryptocurrencies are not recognized as legal tender in India. Meaning, it is
not allowed as a payment option in India.
Myth 9
Cryptocurrencies and Its Transactions Are
Untraceable & Anonymous
The blockchain, a public ledger
maintains a record of everything. There exists anonymity, but in extreme cases,
identifying users and their details is not a difficult task.
Just like any other platform, there
is user anonymity, but it’s not absolute.
Myth 10
Blockchains Have No Business Use
The fact that ex-Finance Minister,
Mr. Arun Jaitley quoted the need to explore blockchain to promote digital
transactions says a lot about its sanctity.
In fact, they might be the next
big thing in the investment sector. Japan has already legitimized them and has
set a self-regulatory body as well.
Blockchains are the perfect database-
they store information, keep it secure, permanently store records and
transactions are traceable and cannot be easily hacked.
Conclusion
To sum up, since cryptocurrencies is still an unmapped
avenue in the Indian market, a little more information around the topic can go
a long way in helping investors take a call whether they would want to venture
into the virtual currency space.
If you are someone gearing up to purchase
a Bitcoin or other cryptocurrencies, I suggest you weigh the
pros and cons of investing very carefully and be very clear about their use and
tax treatment in India before you make a decision.
Much has been made about blockchain’s utility across different industries. Critics oppose the technology is mere hype, that the alterations it makes is marginal and not worth spending money on. Supporters, on the other hand, willingly acknowledge that blockchain is not the answer being trumpeted in some corners, but also identify that there are use cases where it essentially makes sense. This is why noteworthy resources are being devoted to the study of the blockchain system/technology by some of the world’s major establishments.
Insurance is
one such industry, but in fact, blockchain is exactly
what’s required to inoculate some revolution into an industry that has not transformed
much in decades. From global insurers down to start-ups, we are seeing a wave
of new goods and services, everything from flight delay insurance to enhanced
risk modelling. What we need to understand what it is about blockchain that
makes sense for the industry, if you want to know more, then read on.
Information sharing
Imagine a situation where
insurance firms can share customer KYC data instead of having to inspect every
individual that requests to buy insurance. It could mean savings of thousands
of dollars per customer. Blockchain makes this possible by allowing multiple
insurance firms to contribute data to the same decentralized ledger. And
because the data is immutable, the insurance companies can trust that it is
authentic. One such information are claims records. If insurance companies
contribute information to the same blockchain, duplicate claims can easily be
detected.
Transparency
Historically, consumer data
has been stored behind the walls of insurance companies. Consumers have little
in the way of visibility of this data, and instead are given only what the
insurance company decides via a portal. And if the information is shared with
third parties, the consumer is not notified about it. The open and decentralized
nature of blockchain means that consumers will always be able to see the data
the insurance company has and what is being done with that data.
Trust
It is not unusual for
consumers to mistrust insurance companies. Confusing policy terms, high
premiums, and long claims processes all contribute to this. The blockchain,
specifically smart contracts, bring trust back into the equation by simplifying
the insurance contract and, with the help of AI, automating claims. No human
intervention required.
Tokens
One reason the privilege pay-out
process is slow is the need for fiat currency cheques or bank transfers.
Consumers occasionally wait for weeks for the pay-out to show up in their
account. Using digital tokens
accounted for on the blockchain answers this problem. Pay-outs can be made promptly
and then be re-used to purchase added coverage.
Smart contracts
Smart contracts are programmable contracts devoted
to the blockchain. They are independent and, therefore, do not need human intrusion.
For the insurance industry, smart contracts enable micro-insurance guidelines
to be issued and claim pay-outs to be pre-programmed.
Lower costs
What all of this adds up to
is lower premiums for consumers. Personalized insurance coverage has never been
so affordable. Hearti is committed to
providing the most innovative and hassle-free insurance products to its
customers. Blockchain is one of the technologies that will help us get there.
Fraud deterrence
Fraud is a major problem in
the insurance manufacturing, costing an estimated 80 billion USD each year(1).
Blockchain, smart contracts, and AI
can help reduce this figure by demanding info verified by AI from multiple
sources before paying out a claim. And the immutability and decentralization of
blockchain allows
insurance firms to share fraud data.
We have already discussed about the history of currencies and the benefits of cryptocurrencies and blockchain, if you haven’t read them already, it is suggested that you do read them before you go ahead with this blog as it is required for you to understand everything written below.
The Future
Some of the limits that cryptocurrencies currently
face – such as the fact that one’s digital wealth can be removed by a computer
crash, or that a virtual vault may be looted by a hacker – may be overawed in
time through technological developments. What will be harder to overcome is the
basic paradox that bedevils cryptocurrencies – the more prevalent they become,
the more parameter and government scrutiny they are possibly could attract,
which corrodes the essential evidence for their presence.
While the number of merchants who take
cryptocurrencies has gradually amplified, they are still very much in the
minority. For cryptocurrencies to become more widely used, they have to first
gain extensive receipt among consumers. However, their comparative complexity likened
to conventional currencies will likely deter most people, excluding the
technologically adept.
A cryptocurrency
that seeks to become part of the conventional financial structure may have to content
widely conflicting criteria. It would need to be mathematically intricate (to
avoid fraud and hacker attacks) but easy for customers to comprehend;
decentralized but with passable consumer safeguards and protection; and reserve
user anonymity without being a conduit for tax elusion, money
laundering and other reprehensible activities. Since these are arduous criteria
to satisfy, is it likely 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 likelihood looks remote,
there is little hesitation that as the leading cryptocurrency at present, Bitcoin’s success (or lack thereof) in
dealing with the challenges it faces may determine the wealth of other
cryptocurrencies in the years ahead.
Should You Invest in Cryptocurrencies?
If you are considering investing in
cryptocurrencies, it may be best to treat your “investment” in the same way you
would treat any other highly hypothetical venture. In other words, identify
that you run the risk of trailing most of your investment, if not all of it. As
detailed earlier, a cryptocurrency has no intrinsic value apart from what
a buyer is willing to pay for it at a point in time. This makes it very liable
to huge price swings, which in turn upsurges the risk of loss for an investor. Bitcoin, for example, plunged from $260
to about $130 within a six-hour period on April 11, 2013. If you cannot digest that
kind of instability, look to another place for investments that is better matched
to you. While belief continues to be deeply separated about the qualities of
Bitcoin as an investment – factions point to its limited supply and mounting
usage as price motorists, while detractors see it as just another notional
bubble – this is one debate that a traditional investor would do well to evade.
A cryptocurrency
that seeks to become part of the mainstream financial system would have to
satisfy very wide variety of criteria. While that option looks remote, there is
little uncertainty that Bitcoin’s success or failure in dealing with the
challenges it faces may regulate the fortunes of other cryptocurrencies in the
years moving forward.
Future Of Cryptocurrency 