Ethereum, the world’s second-largest cryptocurrency, is a blockchain-based platform that has its native token Ether. Ethereum has soared in popularity in different countries, including India. Yet, as crypto assets are unregulated in India, the legal status of Ethereum remains unclear.
The government’s only move so far in the crypto space has been the introduction of a 30% tax on the profit generated from crypto transactions, besides the 1% TDS on virtual digital assets. There have been mixed reactions to the tax proposal with some viewing it as detrimental to crypto-assets such as Ethereum, while crypto-backers see it as favorable. However, despite the slapping of tax and other measures, Indian investors appear enthused about cryptos, going by the increase in transaction volumes.
History of Ethereum
Ethereum is the brainchild of Vitalik Buterin, who co-founded Bitcoin Magazine while working as a programmer in 2011. The main idea was to develop a platform that focuses on financial use and several applications such as smart contracts. Soon after, Buterin published a whitepaper in a general script language to breathe life into his imagination. He envisioned Ethereum to perform other functions besides being traded as a crypto asset. The project took off in 2015 when the founders Buterin and Jose Lubin launched Ethereum, then known as Frontier. It followed a funds drive through crowdsourcing campaigns to support the platform that started in 2014.
A terrible turn of events involving cybercrime almost destabilized Ethereum when a group of decentralized autonomous organization (DAO) networks stole $50 million worth of Ether. DAO’s raid took advantage of the platform that allowed third-party transactions in the decentralized project and caused a rift within the Ethereum community. A few of the Ethereum community opted to retain the infiltrated Ethereum blockchain (ETC), while others moved to the improved version of the cryptocurrency platform Ether (ETH).
Since then, Ethereum (ETH) has become a formidable contender for the top spot, and it’s currently second after Bitcoin in terms of market capitalization.
How does Ethereum work?
Ethereum uses blockchain technology to support all transactions. It is a combination of blocks containing transaction information on the platform to form a long chain. The information in a block is transferrable to every new blockchain created in a distributed network, including the latest data. Consensus in the blockchain is a security feature that blocks changes on any block created. An automated program checks the validity of all transactions through a consensus.
When miners create a new blockchain, the previous block’s data goes through encryption and is transmitted to the new block. Ethereum is soon moving to proof-of-stake as a new consensus protocol to permit and support mining as collateral.
For safekeeping, Ethereum users can access the cryptocurrency store in the blockchains through a wallet. It’s a vital component of trading Ether since it holds private keys used to unlock your wallet.
Cryptocurrency in India
India has been an active player in the global cryptocurrency market. The country leads the world in terms of the number of crypto users and comes second in terms of cryptocurrency adoption. India is home to a number of crypto exchanges such as CoinSwitch.
Recent research shows that cryptocurrency transactions in India are on the rise. One factor that contributed to this increase is the advancement of technology in the country. Thanks to this, India has developed blockchain application games where investors learn how to unlock some great crypto features to trade successfully. Huge transaction volumes on cryptocurrency platforms have also contributed to this growth. With Ethereum, one can make transactions across the border with minimal transaction fees.
Is trading and mining Ethereum legal in India?
Ethereum is not yet regulated by the government of India. Cryptos, including Ethereum, are not legal tender in the country.
Ethereum mining in India has also remained unregulated. Talks are going on between the Indian government and stakeholders on how to regulate cryptocurrency mining. But currently, there is no regulation that bars Ethereum mining. However, the government has made it clear that expenses associated with the mining of cryptos cannot be claimed as deductions under the Income Tax Act.