Mains Practice Questions

Approach

• Define virtual currency
• Mention the pros and cons of virtual currency
• Then discuss about blockchain technology and its benefits
• Enumerate its potential in various sectors such as education, health, insurance etc.

Introduction

Virtual currency is a type of digital currency that is only available in electronic form and not in physical form. It is stored and transacted in only through designated software, mobile or computer applications, or through dedicated digital wallets, and the transactions occur over the internet or over secure dedicated networks.

Body

There are certain benefits associated with virtual currency such as:

• Cost-effectiveness: Virtual currencies have single valuation globally, and their transaction fee is extremely low. They also eliminate third-party clearing houses, cutting down the costs and time delay.
• No barriers: Virtual currencies make international trade more accessible by removing barriers and restrictions to trade, ultimately making it easier to accept payments in different currencies.
• Convenient: Another benefit of virtual currency is the convenience of use. Transferring the funds between people and companies is easy and fairly safe.

Challenges posed by virtual currency-

• Price volatility of virtual currencies could lead to potential loss to the customers as the value of a virtual currency is largely the result of speculation.
• Apart from the price volatility, there are numerous unregulated cryptocurrency exchanges mushrooming in the nation, putting investors to great dangers.
• Use of virtual currencies can lead to money laundering, tax evasion, terror financing etc. due to the untraceable nature and difficulty in evaluating the taxability of the transaction.

Blockchain technology is certainly having bright prospects :

• Blockchain-powered smart contracts where every piece of information is recorded in a traceable and irreversible manner would enhance ease of doing business; augment the credibility, accuracy and efficiency of a contract, and reduce the risk of fraud substantially.
• Blockchain technology can help check counterfeiting and bring a major transformation in financial infrastructure, collateral identification and payments system.
• Blockchain technology can help in secure and reliable storage of sensitive clinical data.
• Blockchain technology can play a crucial role in the management of insurance claims by reducing the risk of claim frauds.
• The technology will ensure a time-stamped repository of pass-outs and job records of students to enable easier verification of candidates by the employees.

Understanding the potential benefits of blockchain technology, NITI Aayog is reportedly building a platform called ‘IndiaChain’ —a India-specific blockchain infrastructure.

Conclusion

As an emerging superpower, India needs true solutions to tackle major problems including middlemen intervention, data breaches, corruption, and tampering of financial ledgers. India also needs a revolutionary technology to reform its major sectors including agriculture, healthcare, financial services, and real estate. Blockchain seems to be the most viable solution in achieving this.