'Issues and challenges in cryptocurrency with special reference to

blockchain'

Authors:

Anuradha B S Abhishek M Arjun

Assistant Professor, Student, MBA IV Sem
Maharani Lakshmi Ammanni College For Women CBSMS, Central College
email: anuradha.bs11@gmail.com abhishekmarjun@gmail.com
Mobile: 9880590948 8971201048

INTRODUCTION
India being a developing nation is looking to be a super economy in the near future.
According to the projections made by World Bank and International Monetary Fund the
growth of India is termed as the "fastest growing & emerging economy" with the GDP of
8.2% for the 1st quarter of the year 2018-2019, beating other countries like China, Japan
and
U.S.A .

India, a youth demographic nation is facing high rate of unemployment. The adoption of
new
technologies and concepts will help the country to solve this unemployment issue by
opening
up new horizons for the job seekers to get recruited and thus increasing nation's GDP and
standard of living.

The objective of being an economic super power will be possible only when these new
inventions are embraced in a friendly manner but with caution and foresight. The role of
technology and finance has played and will continue to play a huge role in directing the
nation's development.

Moreover the activities in our daily life have been largely affected by the technology, where
the basic work can be done by the touch of a button which increases the efficiency and is
more flexible and reliable.

In recent times new terminology which has come into existence known as "Fintech” has

gained prominence. Fintech is the combination of Finance and Technology which is coined
due to the emergence of Cryptocurrency transactions with the use of
Blockchain.
Further, the adoption of virtual banking and encouragement given by the central
government
to increase the digital payments and reduction in the money transactions post
demonetization
has laid a platform for deploying new technology for monitoring purpose.

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 'Issues and challenges in cryptocurrency with special reference to
blockchain'

The meaning for the basic understanding of cryptocurrency can be stated as virtual
currency
and blockchain is the technology used to control the transactions of
cryptocurrency.
The technological era in which we live in demand for constant update in the day to day
transactions from which the cryptocurrency and blockchain has emerged as a new trend
throughout the globe. Though the cryptocurrency and blockchain increases the reliability
and
authenticity of transactions taking place in the cryptocurrency market, it faces certain
challenges.

This research shows the issues and challenges in cryptocurrency with special reference to
blockchain, risk associated with the blockchain and the transparency and safety of the
technology. The study also looks to add to the knowledge base in the field of cryptocurrency
and blockchain, further giving more clarity to these new concepts for the public and the
other
stakeholders of the country. The blockchain technology is something which is new and the
level of safety and security associated with the technology is not familiar to everyone, the
research makes an attempt to familiarise the concepts of blockchain technology and
cryptocurrency.

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 'Issues and challenges in cryptocurrency with special reference to
blockchain'

OVERVIEW OF CRYPTOCURRENCY AND BLOCK CHAIN

Cryptocurrency over the globe

Cryptocurrency is slowly taking a shape to become an alternative for traditional method of

payment applied in international business where companies and people accept digital
currencies over standard currencies such as dollars, pounds, yen
etc.
Though the potential of the cryptocurrency is huge there is resistance in the adoption of
payments in the form of virtual currency by some countries such as China, Argentina,
Malaysia, Bangladesh, and India.

However, some developed countries have already adopted cryptocurrency as the secure
and
legalized mode of payment in their respective country's monetary system. The countries
who
support the use of cryptocurrency are United States of America, United Nations, Japan
(where many cryptocurrencies originated), Singapore along with many other
countries.
Cryptocurrency in India

Cryptocurrency marked its presence in India in 2013, when a vintage era pizza shop named
'Kolonial' located in Worli-Mumbai became the first restaurant to accept Bitcoins. Further
the
decision of the Indian Government to demonetize the currency notes of higher
denominations
marked the increase in the investment in cryptocurrency by the people who had large
amount
of money which was not accountable through the exchanges such as BTex India, UnoCoin
and Coin Secure. India, contributed to two percent of global cryptocurrency market
capitalization with the increase in the cryptocurrency exchanges. Reliance Industries have
planned to launch their own cryptocurrency named as JioCoin which has not yet got the
approval of the government and moreover the company is the first to complete a
commercial
transaction with the help of HSBC bank on 6th of November 2018. However, UnoCoin had
set up the first ATM for withdrawal of cryptocurrency in Bangalore which ended up being
behind the bars for not taking prior approvals from the government officials. Though the
cryptocurrency is completely banned in the country on December 2018, RBI and SEBI have
set up panels to study about the safety, ways in which the transactions can be monitored
and
also to know about the Initial Coin Offering.

Cryptocurrency comprises of two words namely crypto which is a short form for
cryptography, cryptography is a computer technology which is used to safeguard the

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information and identities and currency simply meaning the money which is the medium
used
for transactions.

Cryptocurrency is a virtual money created with technology controlling its creation and
monitoring the transactions where the identities of its users are hidden. These are digital
cash
which are designed in a way to be more reliable and cheaper than
money.
Cryptocurrency can be defined as, 'Any medium of exchange apart from real world money
that can be used in many financial transactions whether they are virtual or real
transaction." [
Jani Shailak ISSN:324770908]

In the cryptographic world there are 1564 cryptocurrencies which are traded in more than
9000 exchanges over the globe. The overall market capitalization of cryptocurrency is more
than three hundred billion U.S Dollars. Bitcoins have dominated the cryptocurrency market
with more than 45% share and market capitalization of 142.2 billion dollars, Ethereum
being
the second dominated currency in the market with the market capitalization of 52.97 billion
dollars followed by Ripple with the market capitalization of 25.92 billion dollars.

Blockchain Technology

Satoshi Nakamoto the brain behind the invention of Bitcoins also invented a technology to
monitor the cryptocurrency in 2008. The technology which he invented or rather created is
popularly known by the name of 'Blockchain'. Blockchain was invented with an objective to
prevent fraudulent activities and manipulation of the cryptocurrency. The technology was
created with the inspiration of the transaction taking place in the Yap Island where anyone
could record and store data.

Blockchain is an in-corruptive digital ledger of economic transactions that can be

programmed to record not just financial transactions but virtually everything of
value.
In simple words blockchain can be defined as a technology where the transaction taking
place
is distributed to each and every member with a goal of creating a decentralized
environment
where no third party is in control of the data and the transactions.

Blockchain termed as the 5th generation of the computing world reduces the involvement
of
the third party in the transaction reducing the information and data flow of the transaction
to
the third party.

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 'Issues and challenges in cryptocurrency with special reference to
blockchain'

Blockchain can also be stated as a Distributed database management system[DDBMS] that

maintains a growing list of data records that are confirmed by nodes participating in it. A
node is a device on a blockchain network, that is in essence the foundation of the
technology
which allows the functioning and the survival of the chain. A node can be any active
electronic device which is connected to the internet and has an IP address. The role of a
node
is to support the network by maintaining a copy of a blockchain. Nodes are responsible for
the reduction in the problem of double spending which affects the chain.

Each transaction occurring with the help of blockchain will have two keys attached to that
particular transaction, namely private key and public key where the private key acts as the
password and authenticity for the transaction and public key is responsible for the
distribution
of the information to other traders.

Mining is a peer to peer computer process used to secure and verify bitcoin transaction-
payments from one user to another on a decentralized network. There are a group of
people
who are responsible for the creation of the block who are called as miners. Miners are
people
who add transactions in the block and each block is connected with special hash function
named as dSHA256. The transaction which have both the keys i.e. private and public keys
only are added to the blocks. For every transaction added into the block chain the miners
get
reward.

The block reward started at 50 bitcoins in block #1 and was reduced to half for every
210000
blocks. At present the block reward is 12.5 bitcoins which will be reduced to 6.25 bitcoins
once the block reaches 630000 mark. The block number as on 15th December 2018 is
554021.

It is known that Blockchain is not only restricted to cryptocurrency but it can be

implemented
in multi-domain, which makes us to think about the types of Blockchain.

Types of Blockchain

1. Public Blockchain

Public blockchain is the technology used in Bitcoin, a large distributed network that runs
through a native token. It is open for the public to participate at any level and has open
source
code that the community maintains.

2. Permissioned Blockchain

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 'Issues and challenges in cryptocurrency with special reference to
blockchain'

It is the type of blockchain where the individuals require permission to participate in the
network, it is not as large when compared to the public blockchain. The roles which the
individuals which can play within the network.

3. Private Blockchain

Private Blockchain is smaller and does not use token/ open source code where the
membership is closely controlled. The addition to the chain is favoured by consortiums,
having trusted members and trade in confidential information. It is similar to the closed
group
in whatsapp/facebook where the person whom you know are added in the group and not
everyone and anyone.

Transaction Life Cycle in Blockchain

1. Transaction Initiation

Transaction Initiation is the stage where the transaction is initiated by one of the parties
with
the help of their digital wallets similar to the bank accounts.

2. Identity Encryption

Identity encryption is the most important and integral part of the cryptocurrency
transaction
which uses blockchain. This is the stage which is responsible for the members in the
network
to check the reliability and authenticity of the transaction where the private key which is
responsible for the security and safety of the transaction and public key which is
responsible
for the transparency are attached to the transactions.

3. Block Creation

This is the stage where the transaction is locked. The block is created using the encrypted
information and the presence of both private key and public key is
ensured.
4. Noding

The information of the transaction is broadcasted across the blockchain network using the
nodes attached in the electronic devices of each and every member in the network system.
The information which is broadcasted is only the transaction data but not the owner's
information.

5. Verification

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 'Issues and challenges in cryptocurrency with special reference to
blockchain'

Once the noding process is completed the blocks are time stamped and efficient verification
of data is ensured using a structure named as 'Merklle Tree'. This structure checks the
transaction details to prevent tampering. The structure creates a hash of every transaction
and
then a hash of the transaction hashes, until one top level hash value is
reached.
Requirements for a Successful Blockchain

1. Creation of live and distributed transactional database.

2. Create user identification labels for active partners

3. Verification of each transaction on an active ledger.

4. Transactions should stop in case of any non-verification.

Scope of Blockchain Technology

1. E-Commerce

2. Data Management

3. Asset Management

4. Supply Chain Management

5. Trade Finance

6. E-Governance and in many more domains

Limitation of Blockchain Technology

1. Evolving technology and Standards

2. Lack of Consortium

3. Regulations of Government

4. Adoption Hassles

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 'Issues and challenges in cryptocurrency with special reference to
blockchain'

RESEARCH DESIGN

3.1 Title of the Study

'A study on issues and challenges in cryptocurrency with special reference to

blockchain'
3.2 Statement of Problem

Cryptocurrency faces certain challenges when it comes to monitoring them by use

blockchain technology. Since, the blockchain technology is something new the risk
associated with the same and the level of safety and security of cryptocurrency
transactions
dealt using blockchain technology is something which is not much familiar.

3.3 Objectives

1. To understand the process involved in block chain transactions.

2. To estimate the level of risk associated with blockchain.

3. To evaluate the level of safety and security in transaction involving blockchain

technology.
3.4 Scope of Study

The study is limited to the hyperliterate of blockchain in India.

3.5 Research Methodology

A combination of exploratory research and descriptive research is incorporated for the

purpose of this study. For this research, survey method is used to collect the necessary
information with the use of questionnaire.

3.5.1 Sample Size

The size of the sample is 19 as the study is directed towards the hyperliterate of blockchain
technology.

3.5.2 Sources of data

The primary data was collected from the experts of blockchain and cryptocurrency through
survey method and the secondary data was collected from various published papers, books,
magazines and websites.

3.5.3 Sampling Method

The method of sampling used in this research study is Judgemental Sampling.

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 'Issues and challenges in cryptocurrency with special reference to
blockchain'

3.5.4 Statistical tools used for analysis

The data collected was analyzed on various parameters and tools such as advanced MS-
Excel and MS-Word as the main objective of the study involves in understanding the process
involved in blockchain transactions and to estimate, evaluate the risk, safety, security
associated with the use of blockchain technology.

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 'Issues and challenges in cryptocurrency with special reference to
blockchain'

DATA ANALYSIS & INTERPRETATION

Sl.
Parameter Majority Percentile
No.
1 Gender Male 84
2 Age Age group '21-40' 89
3 Educational Qualification
Cryptocurrency Transaction using Graduate & Post Graduate 100
Block Chain(CTB). Awareness
4 Understanding cryptocurrency 90
transactions using blockchain
5 Investment in Cryptocurrency Process awareness 78
using blockchain
6 Time factor of transaction uses Not willing 58
blockchain technology
Threat and hacking Risk
7 Reduction in time 79
associated to blockchain
Monitoring the transaction
8 Level of safety in blockchain Low 68
Manipulation is difficult
9 Not difficult 58
Blockchain is highly authentic
10 High 84
and reliable
11 Agree 79
Risk of leakage of data in
blockchain
12 Agree
Safety and security of transactions 74
using blockchain.
13 Manipulation of transactions can Very low 21
be done by miners
14 Possibility of chain split High 84
Anonymity present in blockchain
leads to illegal funding
15 Disagree 89
Blockchain can be used for multi-
16 purpose No 89

17 Neutral 74

18 Agree 95

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 'Issues and challenges in cryptocurrency with special reference to
blockchain'

SUGGESTIONS
FINDINGS, SUGGESTIONS AND CONCLUSION

 Indian Government should think of ways in implementation of blockchain in the

FINDINGS
governance.

About 70 percent of the respondents got to know about cryptocurrency and

Effective measures should be taken to create awareness about blockchain
technology
blockchain after 2016. This finding supports the claim made by Jani Shailak in his
among the citizens of the nation especially the youth as it has the potential to
generate
research work tittles 'Growth of crypto in India. It's challenges and potential
employment.
impacts
 on legislations', that cryptocurrency came into prominence in India only after
Blockchain Technology will help the companies in effective management of their
the
government's decision of Demonetization.
resources.
 Around 57 percent of respondents feel that cryptocurrency transactions
using
CONCLUSION
blockchain are safe and secure.

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the
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blockchain
technology.
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multi-
domain platform.

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