What is cryptocurrency?
Cryptocurrency is a digital asset secured by cryptography and recorded on a decentralised ledger called a blockchain. No single bank or government controls it. Bitcoin, launched in 2009 by the pseudonymous Satoshi Nakamoto, was the first.
How blockchain works
- A transaction is broadcast to a network of computers (nodes).
- Transactions are grouped into a block.
- The network validates the block — via Proof of Work (mining, e.g. Bitcoin) or Proof of Stake (staking, e.g. Ethereum).
- The block is linked to the previous one, forming a permanent, tamper-resistant chain.
Major cryptocurrencies
| Asset | What it is |
|---|---|
| Bitcoin (BTC) | "Digital gold" — fixed maximum supply of 21 million coins; supply growth halves roughly every 4 years (halving). |
| Ethereum (ETH) | Programmable blockchain for smart contracts, DeFi and NFTs; moved to Proof of Stake in 2022. |
| Stablecoins (USDT, USDC) | Tokens designed to track the US dollar; used for trading and transfers. |
| Altcoins | Solana, XRP, BNB, Cardano and thousands more — far higher risk. |
Wallets & exchanges
- Hot wallets — apps/browser wallets connected to the internet; convenient but more exposed.
- Cold wallets — hardware devices kept offline; best for long-term storage.
- Seed phrase — 12/24 words that control your funds. Never share it, never store it online.
- Exchanges — in India, crypto exchanges and service providers must register with the Financial Intelligence Unit (FIU-IND) under anti-money-laundering rules.
Crypto trading basics
- Markets run 24×7×365 — no closing bell.
- Volatility is extreme: 10–20% daily moves happen in altcoins.
- Technical analysis — chart patterns, price action, support/resistance — is widely used.
- Use stop-losses and small position sizes; avoid high leverage.
Crypto tax in India
| Rule | Details |
|---|---|
| Tax on gains | Flat 30% (+ surcharge & cess) on profits from Virtual Digital Assets, regardless of holding period. |
| Loss set-off | Losses cannot be set off against other income or carried forward. |
| Deductions | Only cost of acquisition allowed — no other expenses. |
| TDS | 1% TDS on transfers above specified thresholds (Section 194S). |
Crypto is not legal tender in India and regulation is still evolving.
Risks & scams to avoid
- "Guaranteed daily returns" schemes and MLM crypto plans.
- Fake exchanges, phishing sites and fake support agents.
- Pump-and-dump groups on Telegram.
- Rug pulls in new tokens.
⚠️ Invest only what you can afford to lose completely.
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Educational content only — not investment advice. Rules and tax rates mentioned are as understood at the time of writing and may change; verify with official sources (SEBI, RBI, Income Tax Dept.) or a qualified adviser.