Bitcoin is a peer-to-peer digital currency launched in 2009 by ‘’Satoshi Nakamoto’’. Satoshi worked on the project alone for 2 years before releasing the code to the public. He disappeared shortly after creating the cryptocurrency, but before leaving he posted the now infamous quote:
‘’It might make sense just to get some in case it catches on’’
With a 300% increase in its value in just one year, Bitcoins could well be the kind of investment you may be looking for.
Bitcoin is a “cryptocurrency” and a new and unique financial vehicle, unlike anything the world has ever seen. It’s called a cryptocurrency because it uses cryptography to control the creation and transfer of money. Despite the name, there is no physical coin to speak of, Bitcoin is a completely electronic form of money.
The first digital currency was Bitcoinin 2009, with its own symbol and rate. Later, more and more types of cryptocurrencies were added by different agents ( Ethereum , Litecoin, Ripple , Dash) proving this flourishing market is here to stay. Late in 2016 their market share grew, alongside increased volatility and natural public interest. Little did we know, that it was only the beginning of an outburst of growth to these digital currencies, with a spike in 2017. During the first months of this impressive year, Bitcoin has more than doubled in value, Ethereum grew by 1,400% and many other currencies showed similar trends. March 2017 broke another glass ceiling for digital currencies, in which for the first time ever a cryptocurrency surpassed Gold in value.
Bitcoin solves the so called ‘’double spending problem’’ present with digital goods. For example, if I have an mp3 file or an ebook on my computer, I can freely copy that file a thousand times and send it to a thousand different people. For a digital currency, the possibility for unlimited copying would mean a quick hyperinflationary death. Bitcoin solves this by maintaining a peer to peer network and recording each transaction in a public ledger called the block chain.
Example : Say I send 1 bitcoin from my bitcoin address to my friend John. The bitcoin network records that transaction in the block chain and I no longer have possession of that bitcoin. The coin ‘’moved’’ from my bitcoin wallet to John’s wallet.
Bitcoin is a peer-to-peer virtual currency.
- This means that in order for a transaction to occur, no middle men or central authority is needed. You can send any amount of bitcoins to anyone living anywhere in the world, completely eliminating the need for traditional third parties like banks or money transmitters. The cryptocurrency also allows the bypassing of capital and AML restrictions.
- In order to send or receive bitcoins, all you need to have is a bitcoin address and internet access. You only need to be online long enough for the transaction to process. Similarly to traditional bank accounts, you can receive bitcoins to your bitcoin address even if you’re offline. When you want to ‘’collect’’ your coins however, you’ll have to find an internet connection.
- You can get a bitcoin address either by downloading the bitcoin client or by getting an online wallet. The two most popular btc clients are Bitcoin-qt and Multibit. The main difference between these two clients is in the size of the block chain that needs to be downloaded. If you decide to go with Bitcoin-qt, have at least 10 GB free space on your hard drive for the block chain. Multibit is a lightweight version of the bitcoin client.
- After you install one of the two clients above, you can find your bitcoins in a file called dat. If you use windows this file will be located in the application data section. If your computer gets stolen or lost and you haven’t made a copy of the wallet.dat file you will lose your bitcoins. It is always recommend to backup this file.
- The bitcoins can also be stored in online wallets/ hardware wallets. There are specialized websites that offer bitcoin wallet services. However due to these sites being a frequent target for hackers, keeping bitcoins in online wallets is not recommended when you can easily store them offline on your computer. Wallets can be useful for storing small sums of bitcoins so that you can make quick online purchases.
- Btc exchanges are a somewhat safer place for your bitcoins compared to online wallets because they keep most coins in what is known as ”cold storage”. Usually over 90% of the bitcoins deposited on an exchange are kept offline. A small 5 to 10% reserve is kept onsite for immediate redemption purposes.
But how can you actually get a hold of a bitcoin?
The easiest way to acquire bitcoins is to buy them at an online exchange.
- Get your BITCOIN WALLET
Without a wallet, you can’t receive, store, or spend bitcoins.
You can think of a wallet as your personal interface to the Bitcoin network, similar to how your online bank account is an interface to the regular monetary system.
Bitcoin wallets contain private keys; secret codes that allow you to spend your bitcoins.
In reality, it’s not bitcoins that need to be stored and secured, but the private keys that give you access to them.
In short: A Bitcoin wallet is simply an app, website, or device that manages Bitcoin private keys for you.
- A hardware wallet is a physical electronic device, built for the sole purpose of securing bitcoins.
The core innovation is that the hardware wallet must be connected to your computer, phone, or tablet before bitcoins may be spent.
The three most popular and best Bitcoin hardware wallets are:
Ledger Nano S – Rs.17,000
KeepKey – NA
Hardware wallets are a good choice if you’re serious about security and convenient, reliable Bitcoin storage.
Bitcoin hardware wallets keep private keys separate from vulnerable, internet-connected devices.
Your all-important private keys are maintained in a secure offline environment on the hardware wallet, fully protected even should the device be plugged into a malware-infected computer.
As bitcoins are digital, cyber-criminals could, potentially, target your computer’s “software wallet” and steal them by accessing your private key.
Generating and storing private keys offline using a hardware wallet ensures that hackers have no way to reach your bitcoins.
Hackers would have to steal the hardware wallet itself, but even then, it can be protected with a PIN code.
- Buy through Online portals:
Same trader, same day:
We’ll leave the choice of where to buy your first bitcoin up to you, it all depends on your needs and requirements. Some exchanges are better for trading, others have superior banking relations with bankwire deposit and withdrawal options.
Aside from the exchanges, you can also buy bitcoins on ebay and similar auction sites. Keep in mind that due to the possibility for chargeback’s and fraud, bitcoin and other cryptocurrencies trade at a premium on ebay. Face to face meetups are another option to acquire bitcoins.
Is Bitcoin trading legal in India?
The CIS is India’s leading Internet organization. CIS helped Internet remain neutral in India in the 2015 net neutrality fight. They have published a research post on their website which also states that bitcoin is not illegal under any existing laws.
Despite RBI’s reluctance to recognize the cyptocurrency, the interest in Bitcoins in India has not waned. After Prime Minister Narendra Modi’s demonetisation move, Ahmedabad-based bitcoin trading start-up Zebpay witnessed a 25 per cent surge in revenue.
The central bank hasn’t unequivocally banned Bitcoins in the country.
The fear here is- It will be a shortcut to convert or transfer black money, and moreover, it would be a bigger and larger threat to existing currency in India.
The ED also suspects that Bitcoins could be the root cause behind terror funding, money laundering and hawala transactions in India.
Therefore, it will be interesting to see how the Bitcoin community in India really takes on regulators and agencies on this issue.
Dilzer Consultants Pvt Ltd
14 August 2017