Of late, we have read and heard extensively about bitcoins in the news and how its price has increased by 750% in the past year. As of 12th December 2017, the value of 1 bitcoin is four times that of 100 grams of gold in India.
Created in 2009 by an untraceable man named Satoshi Nakamoto, it gained popularity for not being regulated by the governments of any country and the ability to buy and sell it globally. In recent times, it has grown popular as a means to get richer with 'Bitcoin trading.'
What is Bitcoin?
Without getting into the technicalities, let us understand that 'Bitcoin' (uppercase B) is the entire network and 'bitcoin' (lowercase) is a cryptocurrency. Cryptocurrency is a digital medium of monetary exchange based on cryptography. Cryptography helps in securing the transactions and control creation of additional such units, thus causing a decrease in production; making each coin more and more valuable in the future.
How does it work?
To buy or sell a bitcoin, you need to install a 'Bitcoin wallet' on your computer or your mobile phone. This wallet is similar to the digital wallets we use to transfer money. You can then generate a Bitcoin address which you will share with your seller or buyer at the time of sale or purchase.
Also Read: What Is a Bitcoin Wallet?
These addresses are like email addresses, except an address can only be used once. The idea behind using an address only once is that all bitcoin transactions are stored publicly (also known as 'block chain') and using different addresses assures that your identity is protected.
You can create your wallet from multiple 'Bitcoin exchanges' in India. The most popular ones being Unocoin, Zebpay, Coinsecure and so on. These platforms give you the option to buy bitcoins online using your Indian bank account.
Payments are made easy through apps that designed for Android as well as iOS. Select the platform based on your user preferences and security needs provided by the platforms. You can then buy bitcoins or a fraction of a bitcoin, based on your investment budget.
When you wish to sell your bitcoins, you can consider a popular platform known as localbitcoins.com that helps you discover sellers in your locality. The sellers have reviews, feedbacks and scores to help you decide.
Some points you need to know
Apple had banned Bitcoin wallets in February 2014 but later chose to uplift the ban. A Chinese regulator has stopped all unregulated cryptocurrency exchanges in September 2017. These instances indicate that Bitcoin is still considered an experimental currency and yes, there have been doubts about the insufficient regulation or security around Bitcoin. But, with wise trade decisions, one can make the most of this uncertain yet profitable medium of exchange.
A few things one should know before buying Bitcoins are:
- Bitcoin prices are highly volatile and should be considered as a high-risk asset. Do not invest your savings especially if you cannot afford to lose it.
- Unlike Japan, India does not recognize Bitcoin as a legal payment system, but your investment or trade in bitcoins is taxable. Also read: How Are Bitcoins Taxed In India?
- Platforms like Zebpay and Unicoin are regulated Indian companies but act as brokers and are said to have high brokerage rates. Coinsecure, on the other hand, is an exchange platform.
- The platform localbitcoin.com helps you to find Bitcoin sellers in your area without providing personal information. It is a popular private medium for selling and buying bitcoins around the world and allows you to pay or receive payment as per your preference (online or cash deposit). The escrow service assures secure in-person meetings.
- All Bitcoin payments are irreversible. Therefore, only do business with people and organizations you can trust.
- As mentioned earlier, all Bitcoin transactions are publicly stored. Do not use the same Bitcoin address more than once to protect your privacy.