With Bitcoin hitting $11,773 (Rs8,50,300) this Sunday, the debate on whether cryptocurrency is the new age hero or just a mythical unicorn, has risen again.
But before that, what exactly is cryptocurrency?
Decentralized digital cash system. Yes that’s it. Satoshi Nakamoto, the unknown founder of Bitcoins, was the first person to have brought this system to existence in 2008.
In digital cash, one needs a payment network with accounts, balances, and transactions. The major problem every payment network has to solve is to prevent the double spending. Hence they need a central server, who keeps record about the balances. But in a decentralized system, this server isn’t needed. Every peer in the network needs to have a list with all transactions to check if future transactions are valid or an attempt to double spend. This creates an absence of records. So, there is no trail of your spendings. The blockchain technology used in bitcoins makes sure that the parties involved remain anonymous. The system offers randomly generated name and key.
Cryptocurrencies: bitcoins and more
Right now, while Bitcoins are the biggest of the lot, there are others shining as well. For example, Ethereum, which hit $500 for the first time this November and is up more than 5,000% this year, and Litecoin, which hit $100 for the first time and is up more than 2,000% this year.
Investing in bitcoins in India
In India, Union Finance Minister Arun Jaitley admitted that bitcoins are not legal tenders as yet. The Reserve Bank Of India had even issued a warning, telling people to not invest in bitcoins as it’s risky, being prone to theft and also is an asset without an underlying value. But does this mean you can’t buy bitcoins in India? No. You can buy them via bitcoin wallets. There are various wallet firms in India. Unocoin is one based in Bangalore. Zebpay is another based in Mumbai and Ahmedabad. Coinsecure is based in New Delhi. You have to buy bitcoins in rupees (INR) by transferring money through NEFT/RTGS. And when you sell bitcoins, the money is transferred to the bank, in Indian currency.
However, bitcoins and other cryptocurrencies are being increasingly used for money laundering, buying guns and drugs and in ither illegal actovities. As a result, UK is planning tighter regulation of Bitcoins and the US Senate is moving towards the criminalisation of non-disclosure of cryptocurrency ownership. It does look like the bubble of bitcoins is just gonna burst. But one never knows. It’s already surpassed the GDP of major countries in terms of market capitalization.
The whole matter has also brought in political implications, with the Venezuela President, Maduro, now claiming that they will back cryptocurrency ‘Petro’ with the help of their oil, gas, gold and diamond reserves, as a mean to fight the US ‘blockade’. On the other hand, Goldman Sachs head calls bitcoins a “vehicle of fraud” and Nobel laureate Joseph Stiglitz outright said that bitcoin “ought to be outlawed.” This clearly indicates the various opinions held about cryptocurrency by various people.
It’s now for you to decide which side you are on.