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What Are Bitcoins? Research Team | Posted On Tuesday, December 19,2017, 06:43 PM

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What Are Bitcoins?



What's this Bitcoin thing that everyone is talking about? You have so many questions. Where did Bitcoins come from? How do you measure the value of Bitcoins? Are they legal in India? It's time for some answers and let's start with the first question. What are Bitcoins? Bitcoins were the first and most famous cryptocurrency.

Not able to understand what I'm talking about, I'll explain. Cryptocurrencies are simple lines of computer code, created by electricity and high performance computers.

Bitcoins are a digital currency created by Bitcoin miners. Miners use special software to solve very complex mathematical problems. Miners are given Bitcoins in exchange. Miners keep the Bitcoin network safe and secure.

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What is Bitcoin?

Bitcoin is just a digital currency which runs on a technology called Block Chain Technology. There are no notes to print and coins to mint. No Government or Central Bank controls Bitcoins. Bitcoin owners are anonymous....You don't know who they are.... Buyers and sellers are connected through encryption keys.

Bitcoin is a shared public ledger. All confirmed transactions anywhere in the World are recorded in the block chain.

A little history on the Bitcoin

You must be keen to know where it all began. Who invented the Bitcoin? Bitcoin was created in 2009 by a person or a group called Satoshi Nakamoto. Satoshi Nakamoto created the Block Chain technology and then vanished. The creator of the Bitcoin is the 44th richest person on Earth.

Let's face it...Bitcoins have been launched 8 years ago and we still don't know who created them....It's a real puzzle.

Why people chase Bitcoins?

A year ago, the value of a single Bitcoin was around $600 to $800. Today, it's around $18000 - $19000. Quite a phenomenal rise. Before you think of chasing your dreams in Bitcoins, do read this. Neither RBI nor SEBI regulate Bitcoins.

If your Bitcoins are hacked or lost, there's no one you can approach to lodge a complaint. RBI has cautioned Bitcoin traders. The Finance Minister Arun Jaitley has clarified that Bitcoins are not a legal currency in India.

Bitcoins are used for money laundering and hackers like payments in Bitcoins. The anonymity of Bitcoin transactions makes them a favorite with criminals and money launderers. Bitcoins are used for a lot of illegal activities.

How do you measure the value of Bitcoins?

Bitcoins are valued based on how much you and other people will pay for it. A protocol for mining Bitcoins was established by Satoshi Nakamoto. It says only 21 million Bitcoins can ever be mined. As of now, 12 million Bitcoins have already been mined. The limited supply of Bitcoins gives it its value, even though Bitcoins have no real value.

If you understand stocks, you know that value is derived from the Company's potential or actual earnings. Bitcoins have no Company to back them, nor any regulator to control them. Bitcoins are backed by nothing.  

The value of Bitcoins is through price discovery. Its value depends on what the buyer is willing to pay for them. Don't commit the foolish act of selling your house and buying Bitcoins. It's all bubbles....

Are Bitcoins Legal In India?

The Income Tax Department is widening the probe into Bitcoins. Notices have been issued to 4-5 Lakh HNIs (High Net Worth Individuals) who were trading on Bitcoin exchanges. The Income Tax department is chasing Bitcoin Exchanges, checking for tax evasion. Surveys were conducted under Section 133A of the Income Tax Act.

The aim of these surveys was to establish the identity of investors, traders, counterparties, take a look at their transactions and bank accounts and also check for tax evasion. You must study, How Bitcoins are taxed in India?

Are Bitcoins legal in India? The creation, trading or usage of Bitcoins as a medium of payment, has not been authorized by the RBI. RBI has not given regulatory approval to any entities (read Bitcoin Exchanges) in India. No license has been given by the RBI to any exchange to deal in Bitcoins. So the question of whether Bitcoins are legal, has been answered.

RBI has said that if you buy, sell, trade or invest  in Bitcoins, you do so at your own risk. The Finance Minister Arun Jaitley has said "We Don't Recognize Bitcoin or other Cryptocurrency as Legal." Be Wise, Get Rich.

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