Bitcoins are a form of digital currency, specifically, crypto-currency, that uses cryptography to facilitate and control transactions. It has been in the news recently for a bunch of very interesting reasons. For starters, the value of a Bitcoins have skyrocketed. (And that is an understatement.) A man who had invested about $25 in Bitcoins in 2009 was more-than-mildly surprised to realise they are now worth about $ 886,000. To put it in simpler perspective, when I started writing this article a week ago, one Bitcoin was worth about Rs. 14,000. By the time I finished it, one Bitcoin was worth almost Rs. 30,000.
Understandably, this has caught the attention of those who might have earlier been oblivious to Bitcoins. While the rest of the world, especially the West, has been proactively using and promoting Bitcoins, in India, it is yet to become a familiar term, as far as the common consumer in concerned. The relatively more tech-savvy crowd, however, already seems to have dipped in to the Bitcoin pool. People in the IT industry, and within that, mostly tech startups, seem to be transacting in Bitcoins for digital products and services. Industry insiders as well as people who have regularly been transacting and/or investing in Bitcoins say at least a few crores worth of Bitcoins have already exchanged hands across India and a few crore more exists in quiet pockets that have been gathering them.
In the virtual world, a fraction of a Bitcoin can get you anything – guns, lasers, t-shirts, cosmetics, web hosting solutions, a lesson in spoken English, or just good ol’ candy and a Baklava! Heck, you can even send ‘monetary’ aid to the Philippines through Bitcoins!
In India, however, there’s almost no physical outlet or operation that accepts Bitcoins yet. “India is a tech-savvy country and the rapid spread of smartphones and internet access allows for information to spread faster than ever before. To add to this, several techies are investors or owners of restaurants and pubs across the country. This allows for tremendous opportunity in the entertainment businesses, believes Benson Samuel, an early adopter of Bitcoins. Apart from running a bunch of Bitcoin-related initiatives (games, information and integration services, etc), Samuel is also the creator of coinsecure.in, a secure, digital exchange for Bitcoins in India.
One buzzing industry in India where which seems to be super-excited about the usage and potential appreciation of Bitcoins is that of technology startups. Many startups now prefer dealing in Bitcoins while setting up a business, instead of cash. This is because the crypto-currency can be integrated into almost any software build that can be monetised. “You could either host your own Bitcoin server (be your own bank) or use a shared service available on the internet. We do see some traction on the Indian front, however the lack of a fluid exchange system impedes the growth a bit,” says Samuel.
It’s then a bit strange that a currency which is slowly becoming so popular in the country and is increasingly being used by more and more people has no standing as far as legality is concerned.
Till now, the Indian Government has only been watching and studying how virtual currencies work. By the looks of it, they are probably going to wait to see how the developed economies react to it before adopting crypto-currency as it straddles two very radical and dynamic topics– economy and technology.
As of now, there is no regulation that says owing or transacting in Bitcoins is illegal. There’s none to say otherwise, either. So, as of now the crypto-currency circulates unregulated in India. Countries such as China and most parts of Europe have taken a similar stance for the moment. Wait and watch. However, in case someone uses the system to evade taxes or violate any foreign exchange regulations, the courts could possibly strike it down as illegal.
Cases of misuse of Bitcoins, and abuse of the security and anonymity it endows the owner with, are not rare.
Till about two months ago or so, you could pay for cocaine, weed or any recreational drug with Bitcoins via a web site called Silk Road, which eventually got busted by the FBI. Following this fiasco, the value of Bitcoins dipped a bit. The anonymity that a Bitcoin transaction involves means it could be possibly used for a lot of illegal trade and the episode has endowed the system with a certain negative connotation.
“Because they are highly scalable, Bitcoins can be used for both criminal or welfare purposes. Despite the Silk Road fiasco, there are far greater benefits that cannot be ignored,” says Samuel.
He insists cash is far dirtier and harder to trace than Bitcoins. “We have all seen pictures of piles of money lying in drug dens in Mexico or news of illegal gold stashes.”
When the Bitcoin recently hit an all-time high, a tweet proclaimed: “To all Bitcoin non-believers – most drugs and weapons in this world are purchased not in Bitcoins, but with US dollars.”
KEEP IN MIND
When a currency has been on a hot streak and is perceived as being overvalued, it’s difficult to resist the temptation to buy some. The value of a Bitcoin is based on the exchange rate between two parties, most often driven by demand and supply, making it as vulnerable and unpredictable as stocks or gold prices in the short term. A lot of people choose to stay away from Bitcoins because they look at Bitcoins as fiat currency – currency which has no intrinsic value. Another worry is that, considering how valuable Bitcoins are, people might just buy and hoard it and not spend it on anything productive.
However, if you want to ride the Bitcoin wave, you can do so by purchasing some online. While a quick Google search reveals many exchanges, buysellbitco.in comes highly recommended by those who have already bought Bitcoins in India.
In case you’re hurrying out to buy a bunch of Bitcoins, wait up. There are some things you need to keep in mind while investing in Bitcoins or any kind of crypto-currency for that matter. Because they are virtual, you need to take extra care to keep them safe. At the rate at which Bitcoins are appreciating, they are highly coveted and can easily be manipulated if someone manages to install a virus or malware on your PC. It’s safer to keep it in a digital wallets service such as bitcoin.qt or blockchain.io. However, this isn’t foolproof either as was highlighted by the recent case of an Australian Bitcoin “bank” which claimed hackers broke into the site and stole more than one million dollars worth of the digital currency.
Also, Bitcoins are going to be circulated in restricted numbers. After it reaches a certain number, miners (people who mine Bitcoins) are only going to work to maintain the existing Bitcoin network and not produce any more.
And last but not the least, if you already have some Bitcoins, hold on to them for the time being. You do not want suffer the fate of this guy from the US who sold about 10,000 Bitcoins to buy two pizza a couple of years ago. If he hadn’t given in to a pepperoni craving, he would have been sitting on about 4 million dollars now. Well, easy come, easy go!