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Private Cryptocurrencies are best treated as risky investment assets rather than actual currencies in the age of renewed inflation fears. Analyse.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

6. Private Cryptocurrencies are best treated as risky investment assets rather than actual currencies in the age of renewed inflation fears. Analyse. (250 words)

Reference:  Live Mint

Why the question:

The question is based on the theme of private Cryptocurrencies and issues related therein.

Key Demand of the question:

Explain the nuances of private Cryptocurrencies and discuss the risks associated.

Directive:

AnalyzeWhen asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary.

Structure of the answer:

Introduction:

Start with what Cryptocurrencies are.

Body:

Age of Cryptocurrencies dawned in 2008, the aftermath of global financial meltdown and loss of trust in fiat currencies. Satoshi Nakamoto gave a new peer-to-peer payments system that would bypass the traditional financial system.

Discuss in detail the drawbacks of using cryptocurrency as a currency; Inability to generate liquidity during payments crisis, Immense volatility in prices, Inflationary pressures etc.

Explain the potential Significance of Cryptocurrencies.

Conclusion:

Conclude with way forward.