Colonel Shiv Choudhary (Retd)
Advancement in technology brings new ideas and innovations. Of late, there has been a revolution in such products to say a few like Facebook, Google, mobile phones, Whatsup, digital technology etc. One such recent product, which is threatening the financial circuits out of craze or smart growth, has been Bitcoin. Bitcoin was actually invented in 2009 by Dorian Prentice Santos Nakamoto, an American-Japanese living in California, using computer algorithms. It has created a buzzword around the world in 2017. Many people remain glued to it very silently due to its value surging up by as much as 27 times in last one year. All top regulators and bankers around the world continue to maintain it as zero value assets for any investment. Whatever, it has beaten all the available investments and wealth multipliers to the mystery of investment experts.
Bitcoin is globally known as cryptocurrency. Bitcoins are virtual coins designed to be ‘self-contained’ for their value, with no need for banking role. Once one owns Bitcoins, one possesses value and can trade for purchases of goods and services online or tuck them away for growth, just as if they were nuggets of gold in his pocket. The complete blockchain is permanent and unalterable, thereby making cryptocurrency transaction hack-proof and irreversible.
Bitcoins are generated through a process called mining out of the Bitcoins mines mostly located in Japan, China, US and Singapore. Bitcoins can be mined at home too with the help of supercomputers having very powerful servers, energy and habitual environment for machines to handle the algorithms. Bitcoins are also available in physical form through odd 1400 Bitcoin ATMs located in 50 countries. Bitcoin can be invested into smaller unit called Santos, which is one-hundred-millionth of a Bitcoin.Winklevoss brothers, known for notoriety and suing Mark Zuckerberg, who they claim stole their idea for Facebook years ago, just became the first Bitcoin billionaires thanks to the crypto currency shooting through an all-time high valuation of US $11,400 for each Bitcoin.
Cryptocurrency transactions are settled immediately with no transaction fees. Each transaction is done on one to one network consisting of computers nodes. There are few other cryptocurrency forms and trend setters too such as Litecoin(LTC), Ethereum (ETH), Zcash (ZEC), Dash, Ripple (XRP), Monero (XMR). The Bitcoin rules the market since its market capitalization has surpassed $200 billion with its aggregate market cap having grown by 810% in 2017 as a currency in its own right. It is a source open to tweaking and modifications of software, subject to approval by lead developer. In other words, it is an anonymous payment system without demanding any trust from other party.
Bitcoin is traded on applications like Zebpay, Unocoin and coinsecure based virtual exchanges across the world. These are often quoted in dollar but traded in respective national local currencies. Presently, it is neither regulated, nor governed by anybody anywhere and its prices are calculated based on the demand and supply like indian property with no controller. There is no common or central depository for Bitcoin unlike what we have in the stock market. However, its open acceptability due to very high volatility and price fluctuation, will take time with its roughly estimatedcurrent value of around $283 billion. “That dubs its ‘market cap’, greater than that of Visa, and bigger than the combined market cap of Blackrock and Citigroup,”.
Around 21 million Bitcoins are said to be available. Interestingly, about 12.5 new Bitcoins get into the system every 10 minutes through mining process. Less than 16 Bitcoins had been lost until date due to forgotten passwords, accidental losses, hoarding, forgetfulness or death of holders. If you want to purchase a single Bitcoin say on the day of this article hitting the stand,it’ll cost you about Rs 6,43,325. This number is only going up.The number of people with Coinbase accounts grew from 5.5 to 13.3 million between Jan to Nov 2013. In Nov 2017, Coinbase was sometimes adding 100,000 new customers a day.
It is important to understand where is Bitcoinheading before plunging into it. It is moving faster, tramplingupward and everywhere. Leading exchanges such as CME Group, CBOE and NASDAQ will be offering future contracts over Bitcoin prompted by its underlying assets value. Surprisingly, Bitcoin is a legal currency in over 60 major nations including the USA, China, Japan, UK, Mexico, Canada, Hong Kong, South Korea, Singapore, Germany and Switzerland. Many Indian are after it too, to fulfil quick millionaire dream despite it being not legalized by RBI. This remains an illegal tender in Pakistan, Bangladesh and Nepal too.
China was touted as the largest Bitcoin trading nation accounting about 90% of trading volume, which has now plummeted. Presently Japan has emerged as a major force in yet unsafe Bitcoins trading accounting for an estimated 30-50%. Many term Bitcoin as a bubble with no intrinsic value. Wall Street maestro Warren Buffett said “You can’t value Bitcoin because it’s not a value-producing asset.”Jamie Dimon, CEO, JPMorgan Chase statement in New York in Sept 2017 says, “Bitcoin is a fraud and will blow up,” and “The currency isn’t going to work.”
Obviously, this virtual magic band has its own advantages and pitfalls too. One is lured since its accounts cannot be frozen, has no prerequisites or arbitrary limits to stored value,has no formal regulators, unaffected by inflation, low risk of collapse, uncatchable, untraceable due to security and easy for online transactions. On the darker side, Bitcoins are yet to be tested against a global financial cry, run risk of its hosting servers being destroyed, easy to replicate from any server, susceptible to heist, highly fluctual on the extremes, easy to be misused, impractical recoverability, difficulty to postulate and too new to be a financial medium to the world
Delhi Police has recently busted a gang and more people are under their radar. Incidentally, the origin complainant cheatedto the tune of Rs 13.90 lakh, has bought the newly launched crypto currency at a rate of Rs 3.50 per coin and was promised a huge profit. The modus operandi was and is, to lure potential victims through business promos seminars, websites and social media covering Nepal, Mumbai, Gujarat, Chandigarh, Raipur and Nagpur.People should not just jump into the fast buck making band and wagon.It is not falling under the tax law in some countries and is being misused for tax evasion.
It may look like a novelty for any govt today but will need an institution to control it. Nations make currencies, but its nationals wish to know what,where and why of such medium.The bigger the Bitcoin gets, the more likely governments are going to close it down… China just did.” Cryptocurrency can become the global fei, or end up like the tulip crisis or a pack of cards by a lone smart move.It is perfect to be a small dreamer, but don’t be imperfectly crazy to become rich only virtually.
(Feedback shivchoudhary2@gmail.com).
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