A token is what we call a cryptocurrency. Do you know what a token is? It is something that allows us to receive something in return. Let’s explain it in a simple way.
Imagine you walk into a fast-food restaurant and order a sandwich. After you pay, they give you a bill. With that bill, you go to another counter and collect your sandwich. That bill—or that small piece of paper in your hand—is the token.
Cryptocurrency works in a similar manner. Instead of writing everything down on a piece of paper, the information exists as a computer code. If you transfer that piece of code to someone else, they gain the right to its value (its price).
In short, cryptocurrency is a digital token whose value is recorded and exchanged through code rather than paper.
If we hold a physical token, we have full ownership of it. We can keep it in our hand, pocket, or even a bank locker. But when it comes to a piece of computer code stored inside a computer, how can we claim that it belongs only to us? How do we prove ownership?
This is made possible through blockchain technology. A blockchain is essentially a digital notebook in which every transaction is recorded. Whenever a cryptocurrency token is given by someone or received by someone, it is noted in this digital ledger.
Because of this, it becomes very clear who the current owner of the token is at any given moment. Whenever a person buys or sells cryptocurrency, that transaction is immediately recorded in the digital notebook. This transparent record is what proves ownership and ensures that the token belongs to the rightful holder.
What happens if someone tries to edit or alter the information in this digital notebook? Who actually keeps this digital notebook, and how can I trust the person maintaining it?
It is not possible to illegally change or manipulate the digital notebook. This is because copies of the same digital notebook are held by thousands of people at the same time. All these copies are updated simultaneously.
In other words, there are thousands of identical digital ledger copies stored across computers all over the world. Anyone can verify the entries at any time. Because of this decentralised structure, tampering with the information becomes extremely difficult.
This is why blockchain is considered trustworthy—no single person controls it, and any attempt to alter data would immediately be rejected by the countless matching copies.
How does the same digital notebook end up on computers all over the world?
Blockchain technology makes this possible. The transactions recorded in the digital notebook are grouped into units called “blocks”, which is why the system is known as a blockchain. Each block is linked to the one before it through details such as time and date. In this way, they form a chain.
This design itself prevents tampering. If anyone tries to make an unauthorised change, the system immediately detects it because the altered block will no longer match the others in the chain.
This innovative technology was introduced in 2008 by an unknown cryptographer who identified himself as Satoshi Nakamoto.
How can I be sure that the token I purchased with my money truly belongs only to me?
All these tokens are protected using cryptography (the science of secure communication). When you pay money to buy a token, two things happen:
A record is created in the digital notebook (the blockchain). This means the ownership of the token is officially transferred to you.
A cryptographic private key (a very long and complex password) is generated in the name of the new owner. This private key is the only proof of who the new owner is.
In short, your private key is the one and only identification that proves the token belongs to you.
What is the need for all this? Why should I buy a digital token that has no visible use in everyday life and store it in a digital notebook?
The idea behind cryptocurrencies is that they act as a store of value beyond traditional banking and financial services. This concept emerged because people began losing trust in conventional banking systems.
Traditional currencies—such as the rupee or the dollar—lose value over time. What you can buy with one rupee or one dollar today may not be available for the same price next year. That is why we often buy gold. Since the availability of gold on Earth is limited, we know its value will not erode easily.
The value of currencies like the dollar or the rupee drops because central banks can print as much of them as they wish. Cryptocurrencies such as Bitcoin are more like gold. Their supply is limited. Because of this scarcity, their value tends to increase over time.
For example, the price of Bitcoin—one of the major cryptocurrencies—was just one dollar in 2010. Today, it is worth $87,328.
Is the main purpose of buying cryptocurrency just investment? Does it have any other use?
Beyond investment, cryptocurrencies have several practical uses. Here are some of them:
• Payments:
Many retail outlets and online platforms now accept cryptocurrency as direct payment. Sending money internationally in the form of crypto is often cheaper and faster than using traditional banking systems. For international transfers and digital payments, cryptocurrencies are increasingly being used.
• Smart contracts:
Platforms like Ethereum allow developers to write self-executing code when certain conditions are met. These programmes—known as smart contracts—power decentralised applications such as lending platforms, games, and digital art marketplaces.
• NFTs (Non-Fungible Tokens):
Another application of blockchain is the ability to create crypto tokens that prove ownership of unique digital items—such as artworks, music, or valuable collectibles.
Cryptocurrencies, therefore, are not limited to investment alone; they form the backbone of several emerging digital ecosystems.
How can I invest in cryptocurrency?
Cryptocurrencies are not officially recognised or regulated in India. At the same time, they are not illegal either. They are subject to income tax.
The safest way to buy or sell cryptocurrencies in India is by opening an account with a well-known crypto exchange after completing the KYC process. Popular exchanges include CoinDCX, CoinSwitch, and ZebPay.
Once you buy cryptocurrency from any Indian exchange, it is extremely important to withdraw your tokens to your own custody. This means the ownership of your cryptocurrency must be transferred fully to you.
To ensure complete control, you must hold the long and complex password known as the private key. The best way to generate and store this private key is by using a USB-based hardware wallet. Popular hardware wallets include Ledger and Trezor.
By keeping your private key in your possession, you ensure full ownership and security of your cryptocurrency.
Should you invest in cryptocurrency?
Allocating a small portion of your assets to cryptocurrency can be beneficial. However, it should never be excessive. All cryptocurrencies are highly volatile. Their prices can rise dramatically—and fall just as sharply. There is also the possibility that your entire crypto investment could be wiped out.
For this reason, it is advisable not to invest more than 3–5 per cent of your total assets in cryptocurrency.
Moreover, unlike shares or bank deposits, there is no official regulator in India overseeing cryptocurrencies. This lack of regulation adds another layer of risk that every investor should keep in mind.
(Disclaimer: This article is intended solely to introduce readers to the opportunities and landscape of cryptocurrency in India. The author, a financial adviser, is not making any recommendations to buy, sell, or hold cryptocurrencies.)