Crypto growth has been pretty organic, and yet, naysayers are still aplenty. Today, we present a candid interview with CoinSwitch Chief Business Office Sharan Nair, who offers us a nuanced perspective on the skepticism toward crypto.
Pranjal Kamra, the founder of Finology, raises some very pertinent, user-specific questions, and Sharan tackles every one of them head-on with admirable simplicity.
In case you’re pressed for time, here are some key takeaways from the interview:
- Crypto skeptics should give the technology some more time for it to establish its credibility.
- Portability, liquidity, utility, and the nature of supply all determine the fair value of a crypto.
- Crypto assets derive their utility from the underlying technology when it is used to solve a problem.
- The Government taxing crypto is a step toward regulation and validation.
Note: The text below isn’t an exact reproduction of the virtual interview; it has been condensed, clarified, and curated for better readability.
Q1. There is a lot of skepticism surrounding crypto, even in 2022. Is it fair, given the massive global adoption?
A1. Everybody starts with skepticism, including me when I started my journey back in 2014. Back then, I too had so many questions regarding crypto—the source of its value, environmental impact, and credibility.
But, over time, I realized that we have to take into stock the fact that although Bitcoin started as an experiment, it has already been adopted across the globe and across capacities. From being a tax-paying instrument to becoming the backbone of ETFs for legal tenders in El Salvador, Bitcoin’s global adoption is awe-inspiring. Bitcoin’s story is a sign of crypto’s promising future.
Despite its wild success, crypto is still compared to the fiats even now. However, things are expected to change a few years from now. We just need to give the technology some more time to thrive.
Q2. What gives crypto assets, or even stablecoins, their intrinsic value?
A2. Crypto is unlike equities (stocks), where the intrinsic value of a unit is determined by how the company behind it is performing. Whether a crypto can solve an existing problem of some kind is what determines its value.
So what gives crypto value is its ability to develop apps in the crypto ecosystem, write smart contracts that replace several manual processes, and in general make existence simpler and less centralized.
As for stablecoins (assets that are pegged to other assets), their intrinsic value is determined by the reserves of commodities, fiat, and even crypto backing them—via unchangeable smart contracts and algorithms.
Q3. How do you determine whether the value of a certain crypto asset is fair when every tech innovation they bring is different?
A3. The price of a particular crypto asset, say Bitcoin, depends on many things beyond just the technology or the innovation it brings. The fair value of a crypto asset hinges on how much it meets some criteria:
- Portability: Billions’ worth of crypto can fit into a small hardware ledger and be moved around, unlike immovable assets for instance. So portability definitely makes crypto more valuable.
- Liquidity: Assets like real estate (which are also stores of value) are not always easy to liquidate and get money from, because there are fewer buyers and sellers. On the other hand, popular cryptos trading at respectable levels have a well-connected buyer-seller ecosystem and are much easier to sell if you need some liquid cash.
- Utility/Business Scope: Crypto isn’t just an asset. The technology powering it can be extended to several real-world verticals to make transactions and interactions more secure. This massive business scope also adds to the value of the crypto asset.
- Supply: Every popular asset with limited supply tends to be valued higher than others (think gold, for instance). Cryptos having similar traits have an edge over standard assets, as, over time, it will be harder and harder to procure the relevant tokens.
Q4. Speaking of supply, does simply having a limited supply make Bitcoin valuable? Is limited supply enough to sustain the claim that Bitcoin is a store of value?
A4. Even though being limited in supply is one of the reasons for considering Bitcoin a store of value, there is much more to it. Many things—like my fingerprint for instance—come in limited quantities, but that doesn’t make it worth billions of dollars! There are other (and even more important than limited supply) factors that make Bitcoin an unparalleled store of value.
- Use cases, such as P2P transfers, ease of usage, and more (We have discussed this already so I won’t repeat myself.)
- The fact that it contributes to the creation of a borderless world by scaling beyond the restrictions set forth by conventional financial authorities
- Any ecosystem participant from any part of the world can connect with all the others and be treated fairly
Q5. Crypto supporters are often asked about the illegitimate usage of crypto. How justified is this, and is it at all possible to avoid unscrupulous actors and activities on the blockchain?
A5. Even when the internet came into existence, people started belittling it because the web opened doors to some kinds of illicit activities. I don’t blame skeptics. Like I said, I started as one myself. But technology isn’t doesn’t have a conscience. We, as humans, do.
And like any other budding technology, especially something as decentralized as crypto isn’t completely immune to unscrupulous actors. But you need to think of the overall impact being made before you discredit something. The good thing is that crypto, courtesy of its use cases, is right at the top as far as its pros-to-cons ratio is concerned.
Besides, crypto is surely and increasingly not a safe haven for illegitimate activity. As they say, “The blockchain never forgets.” This means that nothing illicit happening within the ecosystem is overlooked as everything is stored immutably within the blockchain. So if someone steals from a blockchain or a participant within the ecosystem, there are several breadcrumbs to follow and track the unscrupulous party. The moment a transfer is made to a bad actor, or someone tries to encash the stolen crypto, trails are left and the entire blockchain knows.
Remember the Bitfinex hack in 2016? The malicious actors were apprehended in 2022, which shows that nothing evades the sight of a blockchain. Simply put, crypto ecosystems are arguably extremely secure, as there is no way for a bad actor to exit the system without getting recognized and apprehended.
Finally, several on-chain analysis tools and resources help users protect themselves by keeping track of every movement within the blockchain.
Q6. How will crypto power the future of the web?
A6. Web 3.0 is the future of the web. In time, it will be an ecosystem where consumers will be in charge of the content. As of today, content is being stored in centralized servers from companies like YouTube, Google, Spotify, and more. Therefore, these firms are at the liberty to pull down anything they don’t like.
With Web 3.0, users will be in control of what they create and consume. Participants, however, will still need an incentive to store data on their computers and be a part of this autonomous and open ecosystem. Crypto assets will be that incentive.
Also, the new web will require a democratic and transparent governance system. And cryptos (or rather governance tokens) will play a role in the same. Crypto will be the new way of transacting and making decisions in a space as novel as Web 3.0.
Q7. Why is investing in crypto a good way to have a stake in the future of the web or newer verticals that come along? And how does it differ from the Web 3.0 game via equities?
A7. Holding cryptos in your investment portfolio doesn’t just give you access to tokens. Instead, you are an active participant in the ecosystem and are qualified to make suggestions to bring about changes in its functioning. However, when it comes to holding the stocks of a specific company, you aren’t considered an active shareholder so you don’t get a seat at the table. If you don’t like how a company you invest in operates, there is nothing you can do about it.
The future of the web or Web 3.0 is active participation. And that makes crypto a great tool. Every token contributes to the system in one way or the other. They give you the right to enter the relevant ecosystem, suggest changes, and even disagree.
Q8. Crypto investors are growing in number as we speak. Why do you think people are drawn to crypto? Is it just the profits?
A8. It’s true that most people come into the crypto space, hearing about the massive price appreciation. But after investing a small amount and observing the trends, they keep learning about its technological significance and the problems solved and that’s what makes them stay ultimately. So while it’s important that people come to hear about crypto, the key thing is to channel them to move in the right direction. Companies like ours conduct accelerator programs for this very reason.
Q9. People are sometimes overwhelmed by how much there is to learn about crypto. Which are some of the most exciting crypto concepts in recent times, according to you? And how does one keep up with the rapid developments?
A9. I think you are confused because you don’t go through our YouTube channel and blogs! (laughs) On a more serious note, the metaverse is one of the more exciting crypto concepts around. As most of us already exist in semi-virtual spaces like social media and remote working setups, metaverse seems to be an important thing to pursue over time.
And yes, crypto is a developing space. Understanding all the new things crypto comes with is tricky, but that’s okay. New concepts are bound to show up every now and then, so it is better to look at them from an application-specific perspective, in case you are not technically inclined. Yet, if you want to go deep into crypto developments, the CoinSwitch YouTube channel and blog are options.
Q10. I agree and am equally excited. How do you perceive the 30% tax imposition on crypto? Your views and how the crypto community looks at it?
A10. Even though the government hasn’t gone out on a limb and deemed crypto legal yet, there aren’t instances where something illegal gets taxed. Therefore, it seems crypto is here to stay, and taxation is a good start, especially considering the state crypto was in a few years back.
Coming to the numbers, yes, the 30% tax and 1% Tax Deducted at Source (TDS) wasn’t taken well by the traders because it would not be financially feasible for them to pay those kinds of taxes regularly. However, what gives me peace of mind is the fact that we have a government that listens, and even Finance Minister Nirmala Sitharaman has hinted at a more accommodative stance emerging over time. Besides, the taxation process seems ongoing, with regular stakeholder consultation being a part of the process now.
Q11. Where do you see crypto positioned in India five years from now?
A11. First of all, it’s great to see that we have come a long way—from people calling Bitcoin illegal and a Ponzi scheme, to even the government considering sharing Covid-19 vaccination certificates on blockchain and uploading land records. That’s already a huge win.
In the next five years, we can see developments surface at least 10 times faster, riding on regulatory support and the shoulders of some brilliant people that the technology has attracted. And yes, there will be skeptics, as most smart people tend to question things. But they will be welcomed into the community when they change their minds, and they will join us as we eventually fix problem areas.
Q12. Were you always interested in the FinTech space?
A12. I didn’t choose the thug life, the thug life chose me! Crypto is pretty much like that for me. (laughs) My foray into crypto was myopic at best. I accidentally got into the crypto-powered FinTech arena and just thought let’s see how it goes, but then I learned so much about the value of money, the importance of transparent governance, decentralization, democracy, and more. And once I started to get the hang of all these concepts, the FinTech space started making more sense to me.
Being in crypto has been one of my bigger achievements as it has opened my mind toward everything else—especially the broader FinTech space.
Q13. What are your thoughts on the diversity of blockchain use cases available now?
A13. Blockchain technology will bring about a paradigm shift in the way we go about our daily lives. With decentralized finance (DeFi) making loan procurement safer and almost instantaneous and Non-Fungible Tokens (NFTs) giving underrated artists a wider audience, we have certainly come a long way. But this is just the start; the possibilities are endless.
With even the government making use of private blockchains (centralized entities), the technology is deemed efficient by skeptics and enthusiasts alike.
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Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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