Did you know? If you had bought bitcoins worth 100$ in 2010, now you would have a whopping amount of 75M$ for the same amount of bitcoins. 😉
All of a sudden Bitcoins started to become trending! It is no surprise because the value of Bitcoins has increased to nearly 150% this year alone. And after Japan accepted bitcoins as a payment method, the demand for Bitcoins increased further.
In 2018, RBI had declared cryptocurrencies illegal in India and stopped the banks from partnering with companies that deal with cryptocurrencies. They cited it as a risky investment for the general public, while the internal reason was to stop people from investing in crypto to avoid paying taxes to the Govt. This virtually put a full stop on the white-labeled buying and selling of cryptocurrencies in India.
Obviously, Cryptocurrency Buy/Sell companies in India like WazirX, Binance etc. moved to the Supreme Court filing a petition against this RBI rule. After a period of 2 years, finally, on March 2020, the Supreme Court struck down the RBI regulation, saying it was unconstitutional. This allowed the companies to continue trading in India.
Are you still wondering what exactly is a Bitcoin and how to earn from it? In today’s article, I will discuss Bitcoins, the technology, and how to earn (or even lose) from trading Bitcoins in India. I will also discuss all necessary stuff about bitcoins you need to know before jumping into this, and also the risk factors involved, and how to play smart.
No, I won’t be blabbering the same boring stuff you see on other websites, I will try to explain it from a different approach, which, I believe, is easily understandable.
Just to give you an idea, as I am writing this post, my Bitcoin values are increasing (and decreasing too) 😉
I know many have queries regarding bitcoins and I never found any website which discusses these matters in a way that we can understand better. Hence, I tried to write it in my own style and tried to educate you all about it.
So, let’s get started with today’s trending topic Bitcoins or BTC in short.
What is a Bitcoin?
Bitcoin is a cryptocurrency.
Wait, what is cryptocurrency then? Let me start from the absolute base: Cryptography.
You must have played this game when you were a child. Something like this:
Say there are two lines:
I AM NIRMAL
J BN OJSNBM
See the first line ‘I AM NIRMAL’ it is a meaningful sentence. But the second line ‘J BN OJSNBM’ is not meaningful at all. If I give this second line to someone it will take him some time to find out the meaning.
What I did was just wrote the next letter. J in place of I, B in place of A and so on.
This process of replacing something with something else is called ‘Encryption’. I encrypted the first line with the second line.
Getting the first line back from the second line, by decoding the encryption, is called ‘Decryption’. To decrypt a data, we need a decryption key. In the above example, the decryption key will contain the instruction of switching to the previous letter. Using the key we can decrypt it.
But see, if I give you that example sentence if you are clever, you can decrypt it without a key too. It is easy.
Well, that above encryption was just a small example. Nowadays encryption has reached highest standards. The modern day techniques use highest encryption algorithm with the strongest security so that it cannot be decrypted without the key.
This modern day technique of encrypting and decrypting is known as cryptography. Concept cleared?
Okay, let me jump to Cryptocurrency now.
To put simply, cryptocurrency is a virtual currency which uses cryptography for encrypting itself.
The first thing to note is, it is virtual, not real.
You must be knowing about a virtual debit card. It is the same debit card but only exists virtually for digital payments. Similarly, a cryptocurrency is totally a virtual currency. It has no physical existence.
[Note: Do not confuse between virtual/physical and online/offline. A cryptocurrency can exist only in virtual mode, not physically, but it can exist both online and offline. I am coming to that later on. For now, keep in mind that it is virtual. Just like a virtual wallet like paytm, freecharge, bookmyshow etc]
Just like we exchange physical currency, a cryptocurrency can be exchanged between parties. Like you give or take money in place of something equivalent, you can give or take cryptocurrency too.
Bitcoin is a type of cryptocurrency. Bitcoin was created by an unknown person or a group of unknown persons who used the name, Satoshi Nakamoto, back in 2009.
Apart from Bitcoins, there are around 800 such cryptocurrencies. Each having their own conversion rates to our physical currency. Examples are Ethereum, Ripple Coin, PeerCoin, ZCash etc.
And the rates of conversion keep on fluctuating every second. It is similar to the INR – USD conversion rate, which keeps on changing based on different factors. Similarly, the Bitcoin to USD conversion rates keep on changing every second based on different factors. (Some of them I will discuss in this article so that you can understand it)
Probably you have heard people saying that it is risky to trade with Bitcoins. That is due to the fact that the value of Bitcoins and every other cryptocurrency keeps on changing rapidly. If you are lucky you may earn huge, or you may suffer great lose.
But if you can play smartly, then you can possibly earn some good amount of money. Like I said, in this year, the value of BTC increased by 150%! It’s all about doing research and investing with a good plan. 🙂
You can exchange one type of cryptocurrency for another type. There are websites available for that. (I will come to that later on). Currently, Bitcoins have the highest value among the other cryptocurrencies.
Bitcoin is the Cash for the Internet
For now, keep this in mind. Let’s proceed to the Bitcoin Wallet and how it works.
What is a Bitcoin Wallet and Bitcoin Address?
From a Bitcoin Wallet, you can create Bitcoin Addresses. The Address is basically a match of letter and numbers if you read it. It also has a corresponding QR Code.
So to send money to other bitcoin wallets, you either need his address or just scan his wallet QR Code. And you can send them bitcoins.
Same applies for getting Bitcoins, you need to give your Bitcoin Address or the QR Code to other party and he will be able to send you Bitcoins.
Bitcoin transactions are irreversible
One important thing to remember is that Bitcoin transactions are irreversible. So, once sent, you cannot reverse it. The only possible way to recover it is to ask the receiver to return it back. So, if you do a mistake in typing proper address it will be fatal for you.
But many people confuses between wallet and address. An Address is a Private Key itself that carries the information how much Bitcoin is stored in it. A wallet is a collection of private keys. During a transaction, you give or take the address of yourself / other parties. For each transaction, you can use a different address.
Unlike regular real wallets, Bitcoin wallets are directly stored in the hardware. Like I said the addresses are just some random match of letter or numbers, and a QR Code, so you can store it on your pen drive, computer, mobile, or even take out a paper print and store it offline.
A paper wallet is safer to store because it is non-electronic, so it has no chance of getting corrupted like a hard disk or pen drive. And it is stored detached from the internet, so nobody can actually get access to it by hacking. It is recommended that everyone of you should create a Paper Bitcoin Wallet and store your Bitcoins there.
Create a Paper Bitcoin Wallet
Coinbase wrote a detailed guide on How to create a Paper Bitcoin Wallet. Check it out. 🙂
Now, let me come to the part of the technology behind the bitcoins and how it works. Again, I won’t be going to technical details, I will just tell the part you need to know, without much confusion.
How does Bitcoin Work? What is Bitcoin Mining?
This part is the core of the entire Bitcoin system. Unless and until you understand the technology properly, your picture regarding the bitcoin system will be vague.
Sadly enough, most of the websites have given complex explanations, which are hard to understand properly. I would try my best to make you understand in an easy way.
Like our Currency is printed by Reserve Bank of India, Bitcoins needs to be generated from somewhere. The founder Satoshi Nakamoto found an interesting way to develop bitcoins, known as Mining.
Mining Bitcoins is making the computers solve Complex Mathematical Problems
To explain in simple words, Mining is ‘Making the computers solve Complex Mathematical Problems’. The ‘information’ generated by the computers during the process of mining is stored in Bitcoins.
But why should a computer solve the problem? And what problem should it solve? Let me explain that.
Suppose Person A sending 1 BTC to Person B. A will take B’s BTC Address and transfer the amount. As soon as the transfer request is made, a ‘block’ or record is created with an encryption that a transaction is pending.
A miner’s job is then to decrypt the ‘block’ (like I said, every Address is a private key) so that the bitcoin transfer to Person B is complete. The decrypted ‘block’ is attached to a ‘blockchain’. The Blockchain keeps the record of the ‘successful transaction’ after it is done.
So, from a blockchain, all details of the transaction can be known, including which address sent it, to whom it was sent, and how much amount was sent. But even if someone knows that he still won’t know who is behind that specific address. So, both the parties spending and accepting bitcoins remain private.
Well, in doing the job of transferring the money, the miner takes some fees. So, Person B won’t receive fully 1 BTC, he will receive a bit lesser. This is the reason every bitcoin transaction, some amount of fees is cut off.
Again, the amount of fees is totally dependent on the miner. That also keeps on fluctuating. But, it is a very minute amount (Under 0.00001%) which won’t affect much of the transaction amount.
Anyways, coming to the miner’s point of view again, so, the miners need to solve these complex encryption algorithm which is based on Mathematics. The more mining is done, the more bitcoins are made.
As soon as the bitcoins are created, the miners own it. Because they mined it. (Like gold mining)
Bitcoin Mining Reward Amount Falls by Half Every 4 Years
This is like a reward for the miners and this is the ONLY SOURCE of generating new bitcoins.
But what is the reward amount?
Well, that’s another interesting scenario. This reward amount falls by half every 4 years. (That’s the way this technology is created by Satoshi Nakamoto)
So, if you had earned 50 bitcoins for mining a block in 2009, you would only earn 25 bitcoins for the same work in 2013, and only 12.5 bitcoins in 2017.
Mathematicians have calculated and found that, if this continues, then there will not be more than 21 Million Bitcoins in circulation ever. So the total amount of Bitcoins that can be created and circulated is fixed.
And right now, in 2017, 16 million bitcoins have already been mined using this technique. Only 5 million is left to mine. And it will continue until the year 2140 only. By then all bitcoins will be mined.
No matter how much more mining is done, new bitcoins won’t be produced after that, due to the fact that the reward is reduced to half every 4 years and will be almost zero by that time.
If you are still reading, then, yes, you now know how this system works. That’s everything, inside out. That’s the thing people fail to understand. Now you know it.
Why the Bitcoin Value Fluctuates?
In the beginning, I said that the conversion rate of Bitcoins to USD or INR or other currencies keep on fluctuating.
The general tendency of the users is to buy Bitcoins and let the value of Bitcoins rise high and sell them finally at a higher rate.
The reason for the fluctuation lies in this buying and selling of Bitcoins itself.
When someone buys bitcoins, the value of bitcoin rises up: This is due to the fact that Bitcoin is being consumed by people. The total amount of Bitcoins is constant, so, the more people buys is, the lesser amount of bitcoins will remain in the market. This Bitcoin Scarcity is one of the reasons of its value hike.
Bitcoin Value Fluctuates due to buying and selling itself
When someone sells bitcoins, the value of bitcoin goes down: Likewise, this happens due to the fact bitcoins are rejected by users and they are more freely available. If all bitcoin holders decide to sell off bitcoin RIGHT NOW, then the value of Bitcoin will fall to zero: It’s obvious, something can only be traded if there are users for it.
Also, the more bitcoins are purchased, the value will become higher. Right now (25th May 2017) it is growing tremendously and the reason behind it is people purchasing it like hell. In my personal opinion, I don’t think people will stop buying right now. In fact, this increased rate is going to encourage more and more buyers, which will increase the rate even more. It works that way. But these are all my speculations. It may not happen!
So, I guess you now understand why the value of bitcoins keeps on fluctuating. It is due to the amount of transactions done using them.
Since bitcoins are widely accepted as payment modes for many places, the demand for bitcoins is high, which has resulted in this high price. And the ones accepting the payments as bitcoin are also getting benefitted. Because by the time they sell that bitcoin, they can earn even more than the actual amount of money they took as payment.
Suppose a coffee costs 5$, and a user pays the company bitcoins worth 5$. At the end of the month, when the company decides to cash it out, the value may go up to 10$! (Just an example) That’s the reason, different merchants have started to accept bitcoins and it is increasing every day.
See the scope and demand for the bitcoins? You can now easily tell the reason behind its rapid growth now.
Bitcoin value too high? That’s the time people start selling them. This may lead to downfall. Again, if the value is too low, people will buy it, grossing its value. 😉
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What to do with Bitcoins?
There are basically two things you can do with buying bitcoins. The first thing I already discussed earlier. That is, to buy and sell bitcoins depending on their value.
Either Sell off your BTC or Trade for Altcoins (Other Cryptocurrencies)
The second thing you can do, and which is more profitable, is to trade off bitcoins for other cryptocurrencies.
Every cryptocurrency has its own conversion rate and it fluctuates too. So, you can trade off bitcoin for some other cryptocurrency and wait till the value increases and again exchange it for some other cryptocurrency.
These type of trading are usually profitable because your money is never stored in some distinct currency. If you play well, you will end up making some quick profits.
A general rule is to never sell off your cryptocurrencies for real money as long as you don’t need money. That’s because if you sell it off, the next time you need to purchase them you need to pay even higher rates. Because our currency values remain same and never increases.
But if you keep your money on some cryptocurrency which is increasing every day, you will keep on making money everyday 🙂
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Important Things to Know about Bitcoins before Investing:
So far you have known almost everything you need to know to start Bitcoin Trading. But, I feel I should talk to you about some important stuff which I feel you should know before getting your hands dirty on Bitcoins.
‘Someone’s profit is someone’s loss in this market’ – Paras
These are very crucial. Please read them carefully before proceeding to buy bitcoins.
- Understand the RISK FACTOR carefully. The value of bitcoins may fall down anytime. It is totally unpredictable. I will be not responsible if you buy bitcoins and end up losing money.
- If you are new to Earning Money Online, or if you don’t have a good bank balance, you should stay away from investing money in Bitcoins. It’s a game of chance and has absolutely no surety what will happen in future. So, newcomers are NOT WELCOME to play in it.
- Only proceed if you have already earned a lot of money online or just have a huge bank balance.
- Never invest all bank balance in bitcoins. Only invest a small amount. Keep the majority in your bank. Let that small amount grow big. Even if something bad happens, your main bank balance is there to save you.
- Don’t hope for returns while investing in Bitcoins. Think of it as some money wasted already. It will help you play with Bitcoins better.
- This platform is only for risk-takers., Yes taking risk is worth, but, you should not take the risk if your financial condition isn’t good. You should not hope for living by investing in Bitcoins. Treat is as an extra income only.
- Bitcoin is out of Legal Jurisdiction in India. So, it is not illegal to trade with bitcoins. And you are not bound to any legal stuff. There is no Government Taxes and other fees.
- If you are investing in bitcoins, at least try to invest 7k-8k. This will give you better returns. Like I said, you need to completely trust your gut!
- On Every Bitcoin Transaction, there is a fee cut off due to mining, which I explained clearly above. So, don’t expect the same amount of bitcoin when you are buying, selling, or transferring bitcoins. It will be lesser by some amount.
- The buying and selling rates of Bitcoin are different. To be more precise, the selling rates are much lower than the buying rates. So, once you buy bitcoins, you need to wait for its value to increase before you decide to sell it. Else you may incur a loss.
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How to Buy and Sell Bitcoins in India?
In India, you can buy Bitcoins in two ways:
- Either from any bitcoin vendor
- Or, from Bitcoin Buy / Sell Trusted Websites
Bitcoin Venders are available throughout social networks. Just search Buy Sell Bitcoins on Facebook and you shall see a lot of Facebook Groups involved in buying and selling Bitcoins.
But there is a big risk in buying from them, they can cheat you. They may take your money, and never give you bitcoins. You can’t seek legal assistance as Bitcoins don’t fall under the jurisdiction of any law.
So, the second option is more preferable. You should buy bitcoins from a trusted place and sell there only.
I have written a detailed post on the Best Places to Buy/Sell Bitcoins and other Altcoins in India. This lists apps which became functional after The Supreme Court of India struck down the RBI Ban on cryptocurrencies in 2020. You can go through that post to know in details about it.
Below I am listing the apps I mentioned in that post:
Note that these are not a hardware wallet like I said above, this is a online wallet which is stored on their servers, so if you need to store Bitcoins for a longer period, its recommended that you always transfer your Bitcoins to a hardware wallet which you create like Copay or Blockchain.
Anyways, let’s look at the options.
These will be my suggestions if you just want to get started right away. But there are a lot of other wallets that you can also use from India.
Well, each of these apps require you to verify KYC before you can start using the app to deposit money from Indian banks, or redeem money to your bank account. So, the first thing you should definitely do after joining any of these apps, is to verify KYC, because it may take a few hours to a day or two.
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How to Trade Bitcoins In India?
Bitcoin trading is the process to exchange one cryptocurrency to buy another cryptocurrency.
We usually trade off bitcoins with altcoins (other currencies) because we can buy more of them with bitcoins, since the value of bitcoins is higher, and then we can get better profit when the value of the corresponding cryptocurrency rises higher.
Now comes the question why not buy other cryptocurrencies directly, like we buy bitcoins?
The reason is there are not many options to buy other currencies. Yes, there are a few websites that are dedicated to buying altcoins directly, you can try them out if you wish. But I personally prefer buying Bitcoins first, for a different reason. It is actually about strategy.
As Bitcoin value is more, the more bitcoins you have, the more Eth or Xrp you can buy. So you can buy BTC at first and keep your money in Btc for some days, see the growth of Btc, and only trade once the value of Btc starts falling down.
In that case, you can buy more Eth or Xrp as your Btc would have increased by that time. Isn’t it good? 🙂
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Where to Trade Off Bitcoins?
There are many sites where you can exchange your Bitcoins for your preferred Currency.
Almost all of the apps listed above now supports native trading of bitcoins into other currencies.
So, what’s the difference between them?
Well, its just that every platform will vary in their rate of trading, although it is very minimal. You can simply use any platform as you like.
And as the old rule says: Don’t keep all your eggs in one basket. So, its better to diversify your portfolio and use multiple platforms to keep your cyptocurrencies. Anyways let me list some platforms below:
The Popular Ones are:
Altcoin Wallets for Trading:
To trade Bitcoins against Altcoins (other cryptocurrencies), you first need a Wallet for that corresponding Altcoin. A Bitcoin Wallet cannot hold Ethereum and vice versa.
Never Send Bitcoins to Ether Wallet and vice versa. Applicable to all wallets.
It is absolutely essential not to mix up wallets. Keep them separate from each other. A bitcoin wallet runs in a completely different way than ethereum wallet. So, if you try to send altcoins to a bitcoin wallet, it will fail. But by chance if it DOES NOT FAIL, you will LOSE THAT AMOUNT. Like I said earlier, these transactions are not reversible. So always be cautious.
Below I am listing both Ethereum (ETH) and Ripple Coin (XRP) Wallets. During trading, put these wallet addresses.
Note that each of them are secure wallets. So take utmost care to keep their address and qr codes in a safe place. Take print out to be safest.
Ripple Coin Wallets:
Well, like I said there are more than 700 Cryptocurrencies. I can’t discuss them all here. Also, the listed ones aren’t the only options. There are others too. I just tried to assist the best I could. Do the internet research yourself. 🙂
Check Bitcoin Rates, Price History Graph, Charts:
To do a better business, it is extremely important that you keep a track of your cryptocurrency growth rates. The more you study them, the easier it will become for you to decide whether to stay or sell or trade it off.
Below I am listing some websites which provide detailed information on Cryptocurrency rates.
Bitcoin Reddit Threads:
Reddit is the first place where Bitcoin updates catch attention. If you are active there you may probably get to know a lot about the new cryptocurrencies and on what to invest on. Even if you are not active, just keep checking them at regular intervals, that’s sufficient. Below I am listing 3 links which you can follow:
Learn More about Bitcoins:
Did you think you already know everything about Bitcoins just by reading a blog post? Nope. There are much to learn. Below I am leaving links to important resources related to Bitcoins which will help you know more about bitcoins.
- Important things to consider about Bitcoins
- How to Secure your Bitcoin Wallet?
- Protecting your Privacy
- Legality of Bitcoin in Different Countries
- Choose your own Bitcoin Wallet
- How does Bitcoin Work, Official Explanation
- Dictionary of Terms Related to Bitcoins and their Meaning
- Bitcoins FAQ
If you are really interested in jumping into the world of bitcoins trading, then it’s very important to stay updated about the market. So far I had only talked about facts. But you need more than that to be able to understand about bitcoins.
You need to keep yourself updated with the latest news about bitcoins. Never miss news articles on bitcoins as they get published.
A good habit is to go to Google News website and set a notification for news related to Bitcoins. This will help 🙂
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Bitcoin Transaction & Fees: Everything You Need to Know:
Update on 23rd July 2017: I have finally published a separate article on Cryptocurrencies focussing on Bitcoin Transaction and the Fees Associated with it. Actually, after writing this article I got a lot of queries on Bitcoin Transaction and Fees. I tried to explain the entire concept and answer the most common queries there. Check out the article to know about Bitcoin Transaction and Fees. You will know more about Bitcoins.
In future, I have plans to write more articles on Cryptocurrencies.
Join CryptoHub Facebook Group:
To help you discuss Bitcoin and other Cryptocurrencies, Ups and Downs, Market Rates and Important Notifications, we have created a helpful community on Facebook called CryptoHub. We welcome you to Join there and Get any types of Help regarding Cryptocurrencies.
Once you have invested in bitcoins, there is no looking back. You can’t expect your price to become double in an hour. But give it time and patience, it will skyrocket.
Try to understand the market by studying the ups and downs carefully. If you see your cryptocurrency value falling down, trade it off quickly to other forms. That way you will save yourself and may even afford to buy the same cryptocurrency later with a lesser rate due to the price downfall.
For example, say Bitcoins value start falling, you can trade your bitcoins for Ethereum. Now keep it there and watch the Bitcoins Growth rate. Once it falls down to a good amount, it will again start rising up (due to the fact that people will start buying once the rates come down). That moment is a golden moment. Again trade off your Ethereum for Bitcoins and you can buy more Bitcoins at the same rate. That’s how you can make a profit.
Try not to sell bitcoins. Rather Trade them off. You will continue making profits
One last advice is that if you have already invested, try not to sell it off. Exploit it well. Trade it for other cryptocurrencies. Play with it. If you sell it off you won’t get to buy bitcoins at the old rates. Keep it in mind while dealing with bitcoins.
Thanks for reading this post with the utmost patience. I hope I was able to clear all your doubts regarding Bitcoins, Cryptocurrencies, and all your related queries.
If you have further questions, you are most welcome to comment below. I will be happy to help you out.
Keep your mind cool and start earning, right from today. 🙂
And I will request you to please share this post with all of your friends who are eager to know about bitcoins. They need to know fully about it before jumping into it. This post may be helpful for them. Use the social share buttons below.
That’s all for today. I will be back soon with another exciting update. Till then, keep counting Bitcoins 😉
This is a special section I couldn’t help writing. This section is dedicated to those who had helped me understand Bitcoins and told me about the resources available online. The tremendous amount of data I was able to gather here, it was all possible for some helpful guys who patiently responded to my queries and assisted me personally. They deserve a mention here.
I got help from a lot of guys, I am mentioning some of them here in the alphabetical order. 🙂
You Guys are Best 🙂
Aakash Mishra, Ajay Pandey, Arnab Mohapatra, Bharat Kumar Jaiswal, DhrubaJyoti Malakar, Jai Gupta, Jatin Singh, Mahmudul Hussain, Mathews Daniel, Mohammad Ali, Naga Vamshi, Paras, Piyush Pithadia, Pratap Satyamsetti, Pratik Mody, Rachit Mangi, Sahil Agarwal, Saurav Joshi, Shubham Bajaj, Shubham Kumar, Shuvamoy Roy, Sravan Kumar, Suraj Jagdale, Vivek Sancheti, and more.
Thank You, Guys. You are the reason I feel I could write this post at this level and I could invest in this and get profit out of it already. Kudos to you all.
Lastly, if I had forgotten to mention anyone, please pardon me. I didn’t mean to do so. Peace!