Crypto currency is term used for a digital asset which is used to as a medium of exchange (like traditional money) using cryptography to secure the transactions and to put a cap on the creation of additional units of currency. This form of currency is decentralized in its mechanism as opposed to the centralized money banking systems based currency. First ever crypto currency to be used as a medium of exchange was Bitcoin, which started in 2009. Ever since Bitcoin, numerous other crypto currencies have been created. By the year 2016, a total of 740 crypto currencies were available for trading in the market. But only a few have crossed the market capitalization of $10 million.
This new method of payment under the umbrella of Blockchain technology was created by a group of people who go by a pseudonym of Satoshi Nakamoto. However their identities have not been revealed yet. In order to understand Bitcoin and its operational details, it is imperative to understand blockchain. In October, 2008, Satoshi Nakamoto published a paper on an online journal titled “Bitcoin: Peer-to-peer Electronic Cash System”. Blockchain is a distributed database that maintains a continuously growing list of records, called blocks, secured from tampering and revision. Each block contains a timestamp and a link to a previous block. The nature of blockchain is its inability to stand without any support from previous block. The inability to change the transactions that are recorded on the chain makes the network of decentralized transaction via Bitcoin secure and trustworthy. Simply put it’s a system where Bitcoin is the money and block chain serves as the General journal for the purposes of accounting. This backing of block chain to the crypto currency has enabled the currency to be secure and solved the problem of double usage of a currency. Once a payment is carried out via Bitcoin, the transaction is posted on the digital ledger (blockchain) with a record from both parties along with a unique time stamp.
The currency has had its criticizers along with its supporters, as some people expect the introduction of crypto currencies will decrease the influence of central banks to regulate the monetary policies. But the value of Bitcoin has nearly doubled since January 1st. This has revealed an increasing amount of usage of the currency from individuals around the world. After being officially recognized in Japan and China, the value for currency has soared to new heights ramping up demand for other crypto currencies. Although, the rise in Bitcoin is being associated in the increasing demand from Chinese who constantly look for alternate investments, the rise in value of other crypts is also inching up. Ether, which runs on the underlying technology of Ethereum, has outperformed the Bitcoin by doubling in value during the year. The value of ether is up by 2,300 percent. While Bitcoin has been getting traction form individual investors and users, Ether runs under the Ethereum has had support from large companies. Companies entered into an Enterprise Ethereum Alliance (EEA) in order to develop a blockchain technology to connect large companies and vendors to use the blockchain technology for smart contract applications. The companies involved in the launch include industry giants like Intel, Microsoft, and JP Morgan.
At the same time, rally in crypto currencies has seen investors turn to digital currencies as well help the new form of currencies in increasing a broader customer base. Skeptics argue that the recent rally in ether and other crypts will not last for a long time as it is easier to duplicate these currencies with a novel mechanism for developing them, each new investor will have create a new form blockchain technology.
With nearly all major currencies giving legitimacy to the new monetary instruments, Pakistan continues to lag behind. Pakistan does not recognize crypto currencies, like Bitcoin. State Bank officials cite examples where cyrpotcurrencies are being used by people to launder their tax-evaded money out of Pakistan. The reports state that Pakistanis are increasing their usage of Bitcoin in order to siphon their money outside the country. Only recently, Federal Board of Revenue (FBR) has launched an offensive against individuals who are using Bitcoin. The current price of Bitcoin is hovering around Rs200,000. Upon receipt of credible information, the Directorate General of I&I-IR undertook a search to trace the trade. Major traders of Bitcoin were summoned by the agency for further investigation. As per a report published online, the trade volume of Bitcoin in Pakistan increased 400 per cent during December 2016 alone. According to the tax official, the inquiry showed major traders of Bitcoin are employed in a multinational telecommunication company in Islamabad. They also maintain bank accounts in a few other countries.
Whereas, development is being carried out in Pakistan to introduce the crypto currency to the Pakistani users as a form of exchange. Amin Shah Gillani, a Lahore School of Economics graduate has launched an app by the name of PayLoad that carries out transactions in Bitcoin. Although, nascent in Pakistan, Bitcoin offers a variety of opportunities for payment system as it is foolproof and cannot be hacked.