Bitcoin is a type of digital currency (called cryptocurrency) founded by Satoshi Nakamoto in the aftermath of the financial crunch in 2009.

The main distinction between Bitcoin and regular money is that Bitcoin is decentralized, i.e., there is no central authority that issues Bitcoins, or regulates them. This is the main advantage of Bitcoin as it puts people in charge of their own money and democratizes the process of exchange of money digitally.

Bitcoin, unlike fiat money, is held only electronically and is never printed. The bitcoins are created by the people themselves through a process called Bitcoin mining using computing powers in a distributed ledger network. The technology that Bitcoin is based on is called Blockchain. In other words, Bitcoin derives its value from mathematics, not from governments.

Blockchain

Blockchain is the technology on which Bitcoin is based. It is not a cryptocurrency in itself like Bitcoin, but instead only a technology on which Bitcoin is based.

It can be used for the transfer of any asset where an exchange of money and ownership is required. Under Blockchain technology, any individual can write an information into the records. There is no central authority that has control over this information. The information is appended or updated by the community rather than any individual authority.

It is a lot more basic than Bitcoin, and many major companies have been flirting with Blockchain technology, such as Microsoft, IBM, and ICICI bank.

What are cryptocurrencies?

Bitcoin is just one type of cryptocurrency, and there are others that work on the same model. There are about 1100 cryptocurrencies overall. They are often called ‘altcoins’. Among the most famous altcoins are Ethereum, LiteCoin, Dogecoin, Ripple, and Dash.

Which is the best cryptocurrency?

There is no consensus on which cryptocurrency is the best, however, Bitcoin is the oldest and the most popular with the largest market share. Ethereum is also rising, and in July 2017, almost matched Bitcoin’s market share at 30% against Bitcoin’s 40%. Other altcoins such as Litecoin and Dogecoin are also gaining momentum, and Bitcoin’s domination over the cryptocurrency market is being challenged vehemently.

I can also pay online via NEFT transfers and mobile wallets like Paytm, then what is special about Cryptocurrencies?

It is true that even Indian Rupees, and US Dollars, and all other nations’ currencies are also available as digital currencies, but Cryptocurrencies have many advantages over such digital currencies:

  • There is no central authority controlling your money.

  • International transactions can be done easily.

  • Bitcoin is transferred directly to another person within a few seconds.

  • Transaction fees are minuscule in comparison to other currencies.

  • No one can “freeze” your account.

  • A Cryptocurrency wallet can be set up in a few minutes online, no questions asked. It is hassle-free.

  • The transactions are anonymous.

 

How do I buy/sell Bitcoins and other cryptocurrencies?

To be able to buy/sell Bitcoin, the first thing you need is a Bitcoin Wallet, which acts as a Bank account for your Bitcoins. This wallet can be created on the hard drive of your computer, on an online web-service, or with a “vault-service” that will save your Bitcoins offline under high security. If you are new to Bitcoins, the easiest way to create a Wallet is through ‘Bitcoin Exchanges’, which are web-services that allow you to both create a Wallet and also trade Bitcoins with others.

Most Coin Exchanges in India will require you to connect your account with your PAN Card to avoid any legal problems. You will also have to buy Bitcoins with NEFT transfers or debit cards. Once you have set up an account, trading Bitcoins is as simple as sending emails. The most famous Coin Exchanges in India are Unocoin, Zebpay, CoinSecure, BitIndia, Bitxoxo, and Pocketbits.

On a more international scale, Bitstamp, Bitwage, and Kraken are some of the most popular choices that offer services to create a Wallet and buy/trade Bitcoins. Xapo, founded by Paypal board-member Wences Casares, is another interesting venture that also provides a cold storage vault and a bitcoin debit-card in addition to the regular wallet and buy/sell facilities.

CoinBase, a cryptocurrency exchange, based out of the United States, is one of the most popular cryptocurrency exchanges in the world. They offer services to exchange not only Bitcoin but also Litecoin and Ethereum among other digital currencies, to fiat money. Coinbase is yet to start operations in India, but still currently functions in 32 countries.

 

 

 

Isn’t Bitcoin too volatile? Is it a safe investment?

Yes, it is true that Bitcoin is highly volatile. The price of Bitcoin can fluctuate quickly and vastly. If you are considering investing your life’s savings in Bitcoin, drop the plan. It is not a safe investment like a fixed deposit. As a rookie, it is best to invest small amounts initially and get an understanding of how cryptocurrencies work. Even seasoned investors consider it wise to only make a small portion of the investment in a diversified portfolio in Bitcoin.

 

Is Bitcoin illegal in India? Is Bitcoin black money?

No, Bitcoin is not illegal in India. In fact, there are no laws in India regulating Cryptocurrencies at all. Reserve Bank of India has in multiple statements announced that it has no plans to regulate Bitcoins or other cryptocurrencies. The Indian government too has not taken any initiative to draft any law regulating Bitcoin. As of now, owning or trading Bitcoin is not considered illegal in India.
Even though RBI, in early 2017, issued a statement warning the citizens that they will be using Bitcoins or other cryptocurrencies at their own risks, but they didn’t make any statement about Bitcoins being illegal.

Owning or trading Bitcoin does not, by itself, constitute black money or money laundering. As long as you comply with the relevant laws relating to taxes and international trade, owning or trading Bitcoin is the same as with Indian Rupees. 

For details on the government response, you can see my detailed article on CoinTelegraph here.

 

 

 

Is Bitcoin legal internationally?

Bitcoin is legal and recognized in most major countries. This includes the United States, Canada, Japan, Australia, China, Germany, France, England, etc. In fact, the only countries where Bitcoin is illegal are Afghanistan, Bangladesh, Bolivia, Ecuador, and Macedonia. Bitcoin is either legal in other countries or there are no laws for its regulation. Most countries aim at regulating Bitcoin, and not banning it altogether.

 

Where do I follow up on news regarding Bitcoin and other cryptocurrencies?

CoinDesk, Bitcoin NewsCoinTelegraph, and Bitcoin Magazine are some of the most popular news journals that report exclusively on Cryptocurrencies and Blockchain. The Bitcoin space on Reddit is also quite active, so you can keep an eye there. With rising popularity of cryptocurrencies, even mainstream media has been frequent in its reporting.

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Disclaimer: This blog piece is aimed at providing basic information about cryptocurrencies. It is not a substitute for legal or economic/investment advice. You can read more about the author here.

NEER VARSHNEY

JOURNALIST
WRITER
ANALYST

I started professional writing in December 2014, after I had to drop out of law school at the age of 19. My first job was to write a tour guide for a Temple for $10 in exchange of 2500 words— I have since then written over 500 articles in a wide variety of genres. I got interested in Bitcoin in late 2015 and started following the cryptocurrency world, learning about Blockchain and other Cryptocurrencies, apart from Bitcoin.

In January 2016, I started writing for CoinTelegraph—one of the most reputed Journals in the cryptocurrency-sphere, and have since then been vigorously involved in the crypto community. I currently also head Communications and Outreach for Velix.ID, a blockchain startup working in the ID-verification sphere. I care about social causes and unconditional equality for all human beings. I mainly dedicate my time and resources towards advocating for increased education & healthcare for children from underprivileged backgrounds; although I care equally about the rights of women, gender and sexual minorities, Dalits, racial minorities, and people with disabilities. When I am not writing, I enjoy reading, learning languages, cooking, baking, playing chess, meditating, traveling and volunteering.

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