What Is Cryptocurrency and Bitcoin? No Bank, No Government, No Guarantee

5.1 — "What do you actually think about crypto?"

Riya's first reaction was to be careful, because she could hear what the question was underneath.

"Do you want me to explain what it is, or do you want me to tell you whether to buy it?"

"Both. Start with the first one. I've read things and I don't think I understand it."

5.2 — What it is

A **cryptocurrency** exists only as entries on a shared digital ledger called a **blockchain**, maintained simultaneously by a network of computers worldwide rather than by any bank, company or government. **Bitcoin**, the first and best known, was designed specifically so that transactions could be verified by the network itself, with no central authority required to confirm who owns what.

"So there's no RBI behind it," Nikhil said.

"Nothing behind it. No central bank, no deposit insurance, no company with assets, no regulator you can complain to. That's the design goal, not an oversight — but it means everything you've learned about who stands behind an investment doesn't apply."

5.3 — Why it moves the way it does

"Why is it so volatile, though? I've seen it move thirty per cent in a fortnight."

Riya found this one easy, because six years of the course had given her exactly the right comparison.

"Think about what anchors a price," she said. "Aman's bakery has earnings — I can divide the price by them and get a P/E and argue about whether it's sensible. A bond has a coupon and a maturity date. Even gold has thousands of years of jewellery and industrial demand under it. What's the equivalent anchor here?"

Nikhil thought about it. "…what people think it'll be worth later."

"That's the whole thing. Which isn't automatically fatal — but it means the price is held up by sentiment alone, and sentiment can move a very long way in either direction without anything underneath it changing."

5.4 — The tax treatment, which he hadn't checked

Under current Indian rules, gains on **Virtual Digital Assets** are taxed at a **flat 30%**, regardless of how long the asset was held. There is no long-term concession, no equivalent of the ₹1.25 lakh exemption, and no lower rate for patience. A **1% TDS** applies on transfers. And **losses cannot be set off** — not against gains on other crypto assets, and not against other income.

"Say that last part again," Nikhil said.

"If you hold two coins, one doubles and one goes to zero, you pay 30% on the gain from the first and get no relief at all for the second. In equities those would offset. Here they don't."

"That's brutal."

"It's the most punitive treatment of any asset in this course, and it's the part people find out afterwards."

5.5 — It is not digital gold

"People call it digital gold," Nikhil said. "You just did a whole thing about gold."

"I did, and that's why I'd push back on the comparison." Riya was on firm ground here. "The argument for gold is that it's behaved differently from shares during crises — 2008, 2020, it held up when equities fell. Crypto has, at several points, fallen *with* equities during exactly those kinds of panics, and fallen harder. An asset that crashes when everything else crashes isn't a safe haven. It's a risk asset with better marketing."

5.6 — The part where being right didn't help

Nikhil listened to all of it. He didn't argue with any of the facts, because there wasn't anything to argue with.

"All of that's fair," he said. "Here's my situation. I'm forty. I have about eleven years of savings, minus the eighteen months I lost in City Bakehouse and the margin thing. I'm doing everything correctly now — fund, automatic, no leverage, no trading. And doing everything correctly gets me to something decent at sixty-eight."

"That's not a reason to buy something that could go to zero."

"It isn't. But you're telling me the safe route is better, and for you it *was* better, because you started at twenty-five with a decade I don't have." He wasn't angry. That was what made it hard. "You're not comparing crypto to my situation. You're comparing crypto to yours."

Riya opened her mouth and found she had nothing to put in it.

She knew — with total conviction, in a way she could not convert into a sentence — that the slow route was still right for him and that ten lost years did not make a lottery ticket sensible. She simply could not demonstrate it. She had the belief and not the arithmetic.

5.7 — What she told Raj, and what he said

"He's going to buy it," she said afterwards. "I gave him every fact and he took them all on board and he's going to do it anyway."

"Because the facts were never the problem," Raj said. "You answered a question about crypto. He was asking a question about time. You can be completely right about the asset and completely beside the point."

"Then what was I supposed to say?"

"I don't know that there was a right thing, at that moment, from you." He thought about it. "There's an argument that would have worked, but you'd have to actually run the numbers to make it, and I don't think you have. Most people haven't. It's not the argument people assume it is."

He didn't elaborate, and Riya — busy, and reassured that Nikhil was at least funding it from a small share of his savings — didn't press him.

She would come back to that conversation. It took her a considerable time to get round to it, and by then a good deal had happened.

5.8 — The real world translation