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what-is-bitcoin

Bitcoin hit a new record above $47,042 on Friday, 12 February, after Elon Musk’s Tesla announced a $1.5 billion funding in the largest cryptocurrency. Tesla added that it would start accepting the digital token as a form of payment for its electric cars.

Bitcoin is a modern payment network based on revolutionary cryptocurrency technology, that has enabled a new way to send and receive payments over the internet. The value of bitcoin has been appreciated so much that one bitcoin can buy you a 2 BHK flat in a city.

Yes, you read that right! One bitcoin is currently worth Rs 34 lakh, according to Google.

In India alone, investors aged between 25 and 35 years are spending heavily on bitcoin, according to the CoinDCX exchange. Meanwhile, the country’s biggest crypto exchange, WazirX, noticed a 125 percent increase in their sign-ups in the previous six months.

So, if you’re questioning whether investing in bitcoin is for you, read our FAQs to understand more.

What is cryptocurrency?

To put it simply, cryptocurrencies are digital currencies, which use strong cryptography to safe & secure online transactions. There are a variety of types of cryptocurrencies, such as Bitcoin, Etherium, Stellar, Ripple, and many more.

What is Bitcoin?

Bitcoin is a form of cryptocurrency that is used to perform transactions online – it is simply like a credit card but not like any physical card, it is digital and can’t be felt. It is basically a bunch of 0s and 1s stored on several computer systems around the globe.

Can bitcoins be used only in India?

Bitcoins can be used anywhere across the world because it is digital and is termed to be ‘globally accepted’. Many top companies like Microsoft, Twitch, Starbucks, and others have already started receiving bitcoins as legal transactions.

How did the value of bitcoin increase so markedly?

Even though bitcoin is a digital currency, the production of it incurs actual cost. One has to ‘mine’ bitcoins and this method consumes electricity. Every miner has to solve a complex cryptographic problem and the first one to crack it is rewarded with a block of bitcoins.

So, mining is directly proportional to the expense. The competition of solving this complicated problem can make the method even costlier.

The limited availability of bitcoin has also expanded its demand. Over 18 million bitcoins have been mined already, which leaves much less than 3 million. Once miners unlock all the bitcoins, the international supply will be tapped out.

The limited supply has fueled the bitcoin hype, which has led to a sharp expansion in its price. It is expected that, as the supply shortens, demand will expand exponentially.

Not only the supply and demand chain But the market competition has also expanded the price of bitcoins as well. With the enlargement in demand, there’s extra competition with people switching over to other types of cryptocurrencies.

This has led more investors into the cryptocurrency game, giving Bitcoin an upper hand with an increase in its customer base.

How can you purchase Bitcoins in India?

Buying bitcoins in India is as easy as creating a Unified Payments Interface (UPI) account. You can select any of those platforms – WazirX, Coinsecure, Zebpay, and UnoCoin – which are widely trusted within the world of cryptocurrency.

What documents do you need to purchase Bitcoins?

As you register on the cryptocurrency platforms, you will be asked to submit your KYC (Know Your Customer) documents. For investing in bitcoin, you need the following:

• Aadhaar card

• PAN card

• Bank account in your name

• Email address

• Phone number

What is the minimal amount of bitcoins that you can buy?

One bitcoin these days might cost you up to Rs 26 lakh however you don’t need to purchase a complete bitcoin in the beginning. You can begin with as low as Rs 500 and purchase a tiny portion of a bitcoin. However, there is a maximum limit to the number of bitcoins that you purchase – as of 8 January 2020, you can purchase a maximum of 2,405,700 bitcoins.

How do you earn profits from bitcoins?

Patience is a virtue that is most essential to maximize your profits. You need to patiently watch for the prices to rise. For instance, you offered a bitcoin for Rs 24 lakh, so all you have to do is wait until the price will increase automatically. This is a great thing to do for beginners.

But if you’re searching to earn and get richer quicker, then you might want to consider trading, simply like stock trading. You can also lend bitcoins to another person and earn as much as 10-15 percent interest on it. If you’re an expert, you can suggest to people how to make money with bitcoins and get tipped as well.

How do you withdraw your profit?

The procedure is pretty simple. You can go to the nearest crypto exchange and withdraw your returns in the form of physical currency.

Can you transfer bitcoins to your bank account?

Unfortunately, bitcoin doesn’t provide any facility to directly transfer your returns to your bank account. The total factor of cryptocurrency is decentralization, which means that bitcoin isn’t governed by any regulating or central authority.

Decentralization makes it impossible to counterfeit, and the government does not keep any power to take it away from you.

However, you can always sell your bitcoins at bitcoin exchanges and can also directly spend bitcoins on a variety of e-commerce websites.

Is bitcoin legal and secure in India?

It is not illegal to sell, purchase or trade bitcoins in India. In fact, bitcoins were never regulated by any central government authority in India. However, in the future, it is predicted that the authorities might release some guidelines to manipulate and trace bitcoin transactions occurring in the country. Meanwhile, there are a variety of risks involved, but if you purchase bitcoin from an official source, your cash will always be in secure hands.

A report published by Wired talks about how the costs that are surging will blast again, like it happened in 2017, but this time the costs will sink real low. So, make investments only if you can bear losses.

What is the threat involved in investing in bitcoin?

The price of bitcoin continues fluctuating – while on most days the prices are skyrocketing, there are days when prices sink actual low. On 11 January, the Financial Conduct Authority warned people about the risks because the price trembled from $40,000 to $30,000 within 24 hours.

At a similar time, there are cases of fraud and hacking reported around bitcoin. Trading bitcoins comes with a lot of risks, such as fake or illegal cash exchanges. Since bitcoin is a program, there are possibilities that the system can be compromised and that your bitcoins can be stolen.

Can the government track bitcoin transactions?

All bitcoin transactions are actually fully transparent, claims bitcoin’s official website.

“All bitcoin transactions are public, traceable, and completely stored within the bitcoin network. Bitcoin addresses are the only information wont to define where bitcoins are allocated and where they’re sent. These addresses are created privately through every user’s wallets.

However, once addresses are used, they become tainted through the records of all transactions they are concerned with. Anyone can see the stability and every transaction of any address.

‘Since customers typically have to reveal their identity to acquire services or goods, Bitcoin addresses cannot remain fully anonymous’, read a statement on bitcoin’s official website.

However, if you use a new bitcoin address every time, it will be pretty challenging to trace the starting place of the transaction.

“You can use multiple wallets for different purposes. Doing so allows you to isolate each of your transactions in such a way that it’s impossible to associate them all together. People who send you money cannot see what different bitcoin addresses you own and what you do with them,” the declaration read.

The government will quickly bring a bill on cryptocurrencies as existing legal guidelines are inadequate to deal with issues regarding them, Minister of State For Finance Anurag Thakur informed Rajya Sabha on Tuesday.

By dmaico

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