It is a rare occurrence when something that exists only in the virtual world, with no counterpart in physical form, catches hold of the imagination of the entire world, with the only exception possibly being Westeros, and all the parties competing for the Iron Throne!
What is Bitcoin?
This was true till an anonymous software developer came along, calling himself (or a team) Satoshi Nakamoto. In 2009, Nakamoto launched a virtual currency, called Bitcoin, which could only be held in electronic form but could be used in exactly the same way as the traditional currency in your wallet.
What this essentially means is that Bitcoin isn’t printed on paper like the US dollar or euro or even the Indian rupee. It is part of something called a blockchain and exists only in the virtual space in encrypted form, which is why it is called a cryptocurrency.
However, what differentiates this digital currency from the traditional currencies is that there is no central bank or country that governs it, which is why it is called a decentralized currency. This is also one of the key drivers of the popularity of Bitcoin. Being decentralized, its value/price is not affected by the economic volatility of a single nation or geo-political tensions in any one part of the world.
This makes Bitcoin much more stable than any other market-linked investment option across the globe.
Benefits of Owning Bitcoins
The cryptocurrency that started out at a value of US$0.06 in July 2010 touched a whopping US$5,000 on the Asian exchanges on September 1, 2017. In fact, Bitcoin has seen an amazing run in 2017, rallying more than 700% through the first eight months of the year. As of October 18, 2017, Bitcoin was valued at US$5301.01. Most experts believe that this upward trend is likely to continue in the foreseeable future, with CNBC going so far as to state that the digital currency could be worth $100,000 in the next 10 years!
But don’t just base your decision regarding whether or not you should trade Bitcoins on just this because this isn’t where the benefits of owning Bitcoin end.
This is possibly the biggest advantage of trading Bitcoins. This digital currency is actually safer than using credit or debit cards, as well as wire transfers, given the multiple layers of security built into the trading, purchase and storage of Bitcoins. With the virtual wallet that contains your stash of cryptocurrency constantly changing addresses to secure your privacy, it also increases safety because cyber criminals are unable to link transactions to your wallet or access your confidential and private financial information.
- Total Control:
For now, there are no regulations to govern the exchange of this digital currency. At the same time, since transactions cannot be traced to a single person, party or even government, access to information on whether or not you own Bitcoin and how many you might own is unavailable. What this means is that no government can tax you for any gains you make or seize your asset. You have complete control over what you want to do with the currency.
- Low Fees:
The transaction fees for cryptocurrency is very low. It is far less than the fee you would need to pay for the use of traditional payment methods, such as online banking, wire transfers and credit/debit payments. What’s even better is that this transfer fee is not linked to the amount of Bitcoins being transferred. So, you need to pay a fee for just one transaction, even if you are transacting lakhs of rupees worth of Bitcoins.
- Portfolio Diversification:
The only driver of Bitcoin price is the law of demand and supply, making the digital currency a great way to diversify your portfolio and hedge against economic volatility and geo-political tensions, which are only too common these days.
Lastly, and maybe most importantly, a big advantage is the anonymity Bitcoin affords, given that it cannot be traced back to the user.
What is a Bitcoin Wallet?
People today are all too familiar with digital wallets and a Bitcoin wallet is not very different. It is essentially software that allows you to store this digital currency electronically. You get a private key, which is a confidential number, similar to the PIN for your debit/ATM card. The Bitcoin wallet helps you send and receive the cryptocurrency, while letting you know the balance in your account. You can either have this wallet on the internet or install it on your computer or mobile phone. If you are planning to invest in or trade Bitcoins, you will need a wallet.
Types of Bitcoin Wallets
- Web Wallet:
This type of Bitcoin wallet allows you to receive, send and store the digital currency via a web browser. They are usually hosted by a service provider, who is responsible for managing it and ensuring security. This is possibly the most convenient form of wallet, especially if you are a beginner.
- Desktop Wallets:
You can also choose to install the wallet onto your desktop computer or laptop. It gives you complete control over the wallet, although the total responsibility of ensuring security falls on you. This option needs the private key to be stored on your hard drive. The problem is that if the file is somehow corrupted, you have no backup and your stash of digital currency could be lost forever. So, if you choose this option, make sure you have a very strong password and trustworthy backup.
- Mobile Wallets:
Similar to the desktop version, this one needs to be installed on your smartphone. The advantages is that you can access your wallet on the move, while it is easy to use and navigate, and can scan QR codes easily. These wallets don’t usually store the entire cope of the blockchain and therefore are a “light” version.
- Hardware Wallets:
This is a type of device that is created with the specific purpose of storing Bitcoins. The key benefit this offers is that you are relatively safer from malicious cyberattacks.
Apart from these, you can also opt for a paper wallet or a brain wallet. The former is a representation of bitcoins in physical form, such as metal or paper. Similar to printed currency, a paper wallet is liable to be more easily lost or damaged. A brain wallet, on the other hand, is created through a passphrase. However, if you lose this passphrase, your Bitcoins would be lost forever. So, if you really trust your memory, opt for this one.
How to Keep Your Bitcoins Safe
When you create a Bitcoin address, you will receive two keys, a public one and a private one. Similar to a bank account, the public key is used by others to send Bitcoins to your account, while the private key is a secret password that only you have knowledge of and can use to send the currency to other Bitcoin addresses. So, keeping the private key safe and confidential is a key only way to keep your wallet safe.
There are different ways in which to secure the private key. The most basic way is to encrypt the Bitcoin wallet through a password. However, this still open to hacking and malicious attacks, which is why some people prefer to keep the access completely offline, while others choose to hold the private key through an unconnected database, to protect themselves from online threats.
You could also choose to protect your digital currency through the use of multi-signature addresses. This allows multiple parties to gain access to a part of the address or hold one of several keys, all of which would be needed to access a single Bitcoin address. So, each time any one of the users wants to use the wallet, all signatories would need to approve the transaction.
Apart from this, there are some other things you can do to secure your investment:
- Ensure that you secure your wallet with a very strong password.
You could opt for software such as Roboform or 1password to generate and store passwords. This ensures that the same password is used only one time and then changed.
- Most web-based wallets offer you the option of 2-factor authentication, which ensures that when you log into your wallet, you need an addition step, after entering the password, to verify your identity as the registered user. This could be in the form of a text message sent to your registered mobile number, similar to the one-time passwords banks send for online transactions.
- Make sure you have backup that protects your wallets against human error or computer failure. With backup, if your computer crashes or your smartphone is stolen, you can recover your wallet.
- If you have a large number of Bitcoins stored, you can use cold storage to secure them. This means that your wallet is available in physical form, rather than being stored online or on your computer. Cold storage could be in the form of paper wallets or even flash drives.
Websites to Buy Bitcoins in India
Before you begin buying and selling Bitcoin, you would need to identify an online platform that facilitates cryptocurrency trading. Some of the most websites to buy Bitcoin in India are:
Unocoin customers can purchase Bitcoin with any Indian bank account via online banking or NEFT. The platform is backed by US investors.
- Status: Regulated company
- Ease of Use: Very easy
- Fee: Low (1% and is lowered to 0.7% for higher trading volumes)
- Safety: High
- Anonymity: Low (requires ID verification)
- Speed: Average
Founded in 2012, Zebpay is an Ahmedabad-based Bitcoin exchange. In December 2016, Zebpay became the first Indian exchange to surpass Bitcoin turnover of Rs.6 billion. It has mobile app for Android and iPhone.
- Status: Regulated company
- Ease of Use: Very easy
- Fee: Low, but lacks transparency, since the fee is included in prices
- Safety: Multi-signature security features
- Anonymity: Low (requires ID verification)
- Speed: Average
- Other features: Allows purchase of mobile airtime, DTH and gift vouchers for popular stores like Amazon, Cafe Coffee Day and Pizza Hut.
Founded in 2014, Coinsecure is an Indian platform, headquartered in New Delhi. Apart from online banking, the platform allows cash deposits.
- Status: Regulated exchange
- Ease of Use: Could be confusing for beginners, since platform focuses on traders
- Fee: Very low (0.3%)
- Safety: High
- Anonymity: Low (requires ID verification)
- Speed: Average
- Other features: Video guides to learn trading
Apart from the three most popular platforms, there are two that are worth a mention.
Koinex is a new entrant to the list of Indian Bitcoin exchanges. Fee is very low and could range from 0.15% to 0.25%, depending on the trading volume. However, they charge for KYC and password change! The approval process is quite fast and the interface is simple.
LocalBitcoins is a platform for buying, storing and selling Bitcoin. It supports a wide range of payment modes, including IMPS, PayPal, Western Union and even cash. Speed of the platform is super-fast and the fee is very low. However, the interface is not very intuitive and there is low liquidity, making it difficult to trade larger amounts.
Choosing the Right Bitcoin Platform
Choosing the right platform is among the first, most important decisions to make in buying and selling Bitcoin.
- Country of Registration: The laws that govern the exchange would depend upon where it is located. These regulations can vary from country to country. Choosing a platform based in your home country, in this case India, is recommended.
- Payment Modes: Check whether the platform allows your preferred mode of payment, like net banking, wire transfer, credit card, cash and so on.
- Fees: Compare fees being charged by different platforms. Apart from transaction fee, find out of any other charges.
- Order book volume: An order book is a list of buy and sell orders on offer on the platform. A higher volume indicates higher liquidity, meaning that more people are using the exchange to buy and sell Bitcoin. This means you’ll find a seller or buyer faster when you’re trying to buy or sell at a particular price-point.
- Transparency: Find out whether the exchange clearly mention its fee and charges and whether it publishes its audit information.
- Speed of Deposits: This includes how quickly your wallet gets debited with Bitcoin after you make a purchase as well as how fast your bank account gets debited when you sell the digital currency.
- Anonymity: If this is critical to you, the only option is to choose a person-to-person exchange and trade in cash. Other platforms will require you to complete KYC formalities.
- Security: Check whether the exchange uses secure logins and two-factor authentication.
Top Cryptocurrencies Other Than Bitcoin
Bitcoin is by far the most traded digital currency, with its market capitalization touching a record high of ~$94 billion on October 18, 2017. The trading symbol of this virtual currency is BTC. A breakaway from Bitcoin created a separate cryptocurrency called Bitcoin Cash, which has a market cap of ~$11 billion and trades under the symbol BCC.
Ether holds the second position in the list of the most highly traded cryptocurrencies. It was created by Ethereum, a platform launched in 2015 to build and run smart contracts without any interference from a third party. In 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC).
Launched in 2012, Ripple is a real-time worldwide gross settlement network. Ripple works on a peer-controlled consensus ledger and does not require any mining, unlike Bitcoin and other altcoins. Ripple trades under the symbol XRP and has a market cap just shy of $10 billion.
Litecoin was introduced in 2011 and is based on a decentralized and open-source worldwide payment network. Litecoin trades under the symbol LTC and has a market cap of almost $3 billion.
Dash, NEM, NEO, Monero and BitConnect are the others in the top cryptocurrency list. There are more than five thousand different cryptocurrencies trading across the globe.
Is Bitcoin Legal in India?
The Government of India has come a long way in its acceptance of Bitcoin and is actively considering ways in which this virtual currency can be regulated. The legalization process is highly complex and challenging. This is not only because Bitcoin is an unprecedented currency, but also because it requires a deeper understanding of the blockchain technology, the dynamics of this unique market and the implications on individuals and the economy. Thus, the Finance Ministry, IT experts and the RBI need to be included.
The Finance Ministry has set up a ‘virtual currency committee’ that is deliberating on a framework for Bitcoin and altcoins. Monitoring and regulating virtual currency transactions may fall under the purview of SEBI (Securities and Exchange Board of India).
Currently, Bitcoin and other cryptocurrencies are neither legal nor illegal. In case these digital currencies are legalized in India, their trading would may be governed by RBI’s 1934 Act and the FEMA Act, while all returns earned through trading would be taxed.
Which Companies Accept Bitcoin Payments
Bitcoin is being increasingly accepted as legal tender across the world, with Japan being one of the most recent countries to jump onto this bandwagon. However, businesses seemed to have much more foresight in terms of adopting payments in the form of cryptocurrency. As of August 2017, the countries where bitcoin was legal is illustrated in the image below:
Although the early adopters of Bitcoin were some of the largest names in the world, such as Microsoft, here’s a list of 100 companies that accept payment via this digital currency as of 2017, in alphabetic order:
- 1-800-FLOWERS: US-based online flower and gift retailer and distributor
- 4Chan: Offers premium services
- A Class Limousine: – Pick and drop off for Newark (NJ) Airport
- Alza: The largest Czech online retailer
- Amazon: Do you need an introduction to this one?
- Apple’s App Store
- Badoo: An online dating platform
- BigFishGames: Developer of games for PCs, Mac and smartphones
- Bing by Microsoft
- Bitcoin.Travel: A travel aggregator site
- Bitcoincoffee: Order coffee online
- Bloomberg: Leading online newspaper
- Braintree: A research firm
- CEX: A trade-in chain based in Glasgow, Scotland
- CheapAir: A travel booking site
- CoinMama: Platform to buy Bitcoins via credit card
- Crowdtilt: Crowd funding site
- Curryupnow: Provides list of restaurants that accept bitcoins in San Francisco Bay Area
- CVS: A pharmacy
- Dell: American computer company
- Dish Network: Direct-broadcast satellite service provider
- Dream Lover: Another dating site
- Etsy Vendors: Art and jewelry creator
- Euro Pacific: Precious metal dealer
- Expedia.com: Travel booking site
- ExpressVPN: High speed, ultra-secure VPN network
- EZTV: Torrents TV shows provider
- Famsa: Mexico’s largest retailer
- Fancy: Provider of a vast range of collectibles
- Fight for the Future: Leading organization fighting for Internet freedom
- Fiverr: Offering to get almost anything done for $5
- Foodler – North American restaurant delivery company
- Grass Hill Alpacas: A local farm in Haydenville, Massachusetts
- Green Man Gaming: Popular digital game reseller
- Grooveshark: US-based online music streaming service
- Helen’s Pizza: Based in Jersey City, New Jersey
- Home Depot: Office supplies store
- i-Pmart: A Malaysian online mobile phone and electronic parts retailer
- Intuit: US-based software company that develops financial and tax preparation software and related services for small businesses, accountants and individuals.
- Jeffersons Store: A street wear store in Bergenfield, NJ
- Kmart: Retail products store
- Lionsgate Films: Production studio, famous for The Hunger Games and The Day After Tomorrow
- LOT Polish Airlines
- Lumfile: Free cloud base file server
- Universidad de las Américas Puebla: A major university in Mexico
- Microsoft: Again, no introduction needed
- Mint: Useful financial software solution
- MIT Coop Store: Massachusetts Institute of Technology student bookstore
- MovieTickets: Online movie ticket purchase site
- Mspinc: Respiratory medical equipment supplies retailer
- Museum of the Coastal Bend: Based in Victoria, Texas
- Namecheap: Domain name registrar
- Naughty America: Adult entertainment site
- NCR Silver – Point of sales systems provider
- Newegg: Online electronics retailer
- OkCupid: Yet another online dating site
- Old Fitzroy: A pub in Sydney, Australia
- One Shot Hotels: Spanish hotel chain
- Overstock: A company that sells big ticket items at lower prices due to overstocking
- PayPal / Ebay: Credit card / payment processor / Auction
- Pembury Tavern: A pub in London, England
- PizzaForCoins: Domino’s Pizza signed up
- PureVPN: VPN provider
- PSP Mollie: Dutch Payment Service
- Rakutan: Japanese e-commerce giant
- RE/MAX London: UK-based global real estate network franchisee
- Reddit: Offers premium features for Bitcoins
- Sacramento Kings: Professional Basketball team for Sacramental, California (NBA)
- San Jose Earthquakes: San Jose, California, Professional Soccer Team (MLS)
- Save the Children: Global charity organization
- Sears: Retailer of clothing, household products and electronics
- Seoclerks.com: SEO services provider
- SFU bookstore: Simon Fraser University, Vancouver, Canada
- Shopify.com: Online store
- ShopJoy: Australian online retailer for novelty and unique gifts
- SimplePay: Nigeria’s most popular web and mobile-based wallet service
- Square: Payment processor that helps small businesses accept credit cards using iPhone, Android or iPad
- State Republican Party: First State Republican Party that accepts Bitcoin donations
- Steam: Desktop gaming platform
- Straub Auto Repairs: Based in Hastings-on-Hudson, NY
- Stripe: San Francisco-based payments company
- Subway: “Eat fresh”
- Suntimes.com: Chicago-based online newspaper
- T-Mobile Poland: T-Mobile’s Poland-based mobile phone top-up company
- Target: American retailing company
- TechCrunch.com: IT blogging site
- Tesla Motors: US-based car company
- The Libertarian Party: American political party
- The Pink Cow: A diner in Tokyo, Japan
- The Pirate Bay: BitTorrent directories
- Tigerdirect: Major online retailer of electronics
- Victoria’s Secret: Lingerie outlet
- Virgin Galactic: Parent company of Virgin Mobile and Virgin Airline
- WebJet: Online travel agency
- Whole Foods: Organic food store
- Wikipedia: Can one describe an online encyclopedia?
- WordPress: An online company that allows user to create free blogs and websites
- Yacht-Base: Croatian yacht charter company
- Zappos: Online retailer
- Zynga: Mobile gaming developer
So, there you have it. Everything you need to know about Bitcoins in India. Let me know your thoughts and comments below.