Cryptocurrency and Blockchain dynamics in Nepal
The technology most assuring to evolve in the next decade of business is not the social network, extensive data, the cloud, robotics, or even artificial intelligence. It’s the Blockchain, the technology after digital currencies like Bitcoin.
Blockchain technology is obscure, but the idea is simplistic. At its most basic, Blockchain is a broad, global assigned record or database running on millions of tools and welcoming to anyone.
It is not merely information but anything of worth – money, names, deeds, music, art, scientific results, intellectual resources, and even votes – that can be transferred and collected securely and confidentially.
A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is tough to counterfeit because of this protection feature and organic nature. Organic nature here indicates that any authority does not publish it and is resistant to government intervention and guidance.
Positive Applications in Nepal
1. Minimize transaction cost
The transaction cost of cryptocurrencies lies between 1% to 0%, which, in contrast to VISA, Master, Western Union, and other mediators, is very minimal. The transaction charge of remittance usually ranges from 10-25%, which can be taken down to 1% through cryptocurrency.
When we analyze the online businesses in Nepal, it is in its budding state; the prime reason for such low progress of online transactions is the absence of infrastructure to encourage online payments.
The cryptocurrency payment method will lessen the cost of investment in infrastructure and also decrease the transaction expense.
Another possible purpose of cryptocurrency in Nepal is the convenience it provides in trading with foreign companies. Managing foreign currency through a central executive raises costs and prolongs the process, which can be made non-existent using cryptocurrency.
2. Secure Network
Cryptocurrencies employ a new technology or mechanism acknowledged as the Blockchain; this technology shields duplication of digital currency. These Blockchains are collected and sustained by miners worldwide to guarantee the fastest and most reliable encryption system.
Nepalese ISP’s often fail at providing unhindered internet service to its consumers. Moreover, people are often reluctant to use online payment gateway due to various spyware and viruses that can eliminate information or even balances.
The Blockchain registers every cryptocurrency activity that occurs; in other words, to hack the Blockchain system, one must hack all existing trade, i.e., all transactions of the same currency.
Blockchain is a decentralized method; there isn’t a particular person or organization regulating the operation of cryptocurrencies. The most significant perk of this system is getting rid of Nepal’s corrupt and inefficient banking system.
When we investigate the stock market of Nepal, we can notice that the best institutes are financial organizations. With cryptocurrencies and their decentralized mechanism, we can avoid the heavy fees imposed by the financial institutions.
The standard transaction fee for any transaction with credit cards in Nepal of 3% which can reduce to 1% or below using cryptocurrencies. Decentralization and attachment to the global market connect Nepalese trades to the global financial system, promoting an open economy.
4. Wider and easy use
Nepal Rastra Bank (NRB) claimed that only 40 percent of the adult people in Nepal have a bank account. At the same time, The 2011 census National report recognized that 64.63% of households possess access to cellphones across Nepal.
The above data is enough evidence that cryptocurrencies can enhance financial aid to the people of Nepal. The only thing essential for using a cryptocurrency is a handheld gadget that can connect to the internet.
The opportunity for wide-scale reachability of financial services are abundant. Nepal signifying agriculture-backed earnings, will profoundly benefit from the application of bitcoins. Farmers can trade their agricultural commodities online and collect payments via cryptocurrencies.
Micro-payments are small payments usually done online, which generally do not fit with the current financial policy as the transaction charges are high.
Crypto trade can initiate numerous business possibilities for micropayments such as mobile phone recharge, electricity bills, purchasing games, credits online, etc. It also can provide more valuable research materials for students who can order research papers or books online using cryptocurrency.
Negative Applications in Nepal
The idea of cryptocurrency is trending but still new and unfamiliar to the larger population of the globe, especially developing nations. The approval of cryptocurrency will demand time and needs a fair amount of knowledge about information technology.
We need to explain how cryptocurrencies operate and establish trust for this practice, before being used extensively. One promoting idea could be from the help of NGOs looking to improve the financial co-operation reachability in remote or rural regions of Nepal.
So far, no mechanism has been integrated inside the blockchain policy that can assist authorities to tax the trades and regulate transactions.
Usage of cryptocurrencies are bound to increase in the future; the governments of developed countries will develop a mechanism to access tax using cryptocurrency. Since our country also has some hardships on revenue collection, this might be a critical issue of a Blockchain system.
3. Possibility of Illegal activities
Blockchain lacks the feature to control and inspect the transactions prepared on the peer-to-peer network.
This unmonitored network opens gateways for numerous illegal actions; the money and trade cannot be traced, providing illegal dealers and corporations an easy way of funding their institutions.
The benefits of cryptocurrency is reliant on the demand and supply mechanism. In a free market, extensive trading of the currency can result in corresponding levels of fluctuation. Consequently, traders are bound to incur unrecoverable amounts of loss at times.
This service might prove to be impractical for farmers and the poor with a limited knowledge of arbitrage and hedging.
Like any other expensive metal or stone, the blockchain economy has restricted supply and, therefore, has an inflation command mechanism. This notion should make cryptocurrency users aware that variation in the price is just because of speculation.
The high fluctuation can be rewarding or punishing for investors. Nepal’s economy or trades are not used to such intense volatility. To be prepared for downhills and uphills, one must ensure their budgets, plans, steps, and purchases.
5. Risk factor
Blockchain is a decentralized operation; no one can ensure its minimum estimate. If a large organization or a renowned personal chooses to “dump” cryptocurrencies and neglect the system, its valuation will diminish.
This whim-based value can seriously damage the economic position of the people who have entrusted their assets to cryptocurrency. We can overcome this harm by limiting the maximum capacity of each transaction.
As users of Nepal are generally under budget due to significant marginal gaps between dollars and Nepalese rupees, the devaluation can demotivate uprising investors.
Should the government make it legal?
The crypto talks in Nepal have increased immensely since the first lockdown due to the COVID crisis. Though Nepal Rastra Bank (NRB) has illegalized transactions and mining, youths want to invest in the Blockchain system.
Although it is high profits that attract many Nepalese youths, the benefits of cryptocurrencies to the country as a whole remains unexplored. In addition, long-term use and feasibility in the country are not explored as well. It has a severe risk factor of constantly dropping to zero, and it hardly contributes to revenue.
These reasons do not imply that technology is unwanted in Nepal. The crypto era can significantly aid the progressing country with good policies regarding risks, illegal purchases, investment limits, and sectors for possible payments.
Legalizing highly stable and popular currencies such as Bitcoin and Etherum can be the initial step to ensure the safety of countries’ investments.