India's first Bitcoin conference is around the corner. For those who don't already know, Bitcoin is an internet-based virtual currency that came into existence in 2009. It is an open-source protocol, its design is public, and nobody owns or controls it. Bitcoin also boasts of certain unique properties which are not found in other payment systems.
As per the latest estimates, there are over 11 million Bitcoin users worldwide, of which around 50,000 are in India.
Globally, there are some companies, including BTCChina in China, MtGox in Japan and Bitstamp in Europe that buy/sell Bitcoins. In India, too, there is a startup called Seven Digital Cash LLP based out of Gandhinagar (Gujarat)that buys and sells this digital currency through its platform Buysellbitco.in. In a chat with Techcircle.in, Buysellbitco.in founder Mahin Gupta, a software engineer who started the business in 2011, talks about Bitcoin, its uses and the trends in India. Here are the excerpts:
What are the benefits of possessing Bitcoins? Can we use them for transactions instead of a legal currency?
Bitcoin is a virtual/digital form of money. You do not need huge physical space to store it in comparison with gold or other valuable metals. Bitcoin was initially developed and designed to be a better form of currency and solve issues with traditional currencies. Since it works on the internet and across border, you can use it for fund transfer. You can also use it for wealth storage. Since it is in the early days, it is mostly used as speculative investment. People speculate about its prices and trade for it. Sometimes, people think that it is better investment option than gold.
Are you an official partner for selling and buying Bitcoins in India?
As far as Bitcoin is concerned, there is no central authority; hence there is no company, institute or board from which you need permission to start the business. Bitcoin is an open-source protocol. It is like email or internet. No one owns email protocol or internet protocol. To be a part of it, all you need is to install software that understands the protocol.
Other companies also have the same software which understands and obeys the same rules and that's how it works. To be part of Bitcoin network, all you need is install Bitcoin software on your computer and you are good to go. So, there is nothing like an official partner. We were the first to start the business of Bitcoin in India. We educated a lot of people about it over phone, email and chat. We allow users to buy and sell Bitcoin using our online portal. You can also start buying and selling Bitcoin in India or anywhere else in the world. All you need is Bitcoins to sell or Indian currency to buy it.
Where do you collect Bitcoins from?
We allow people to sell Bitcoins on our site which they have collected from Bitcoin mining (a process to generate Bitcoin) or trading (one can accept Bitcoin as payment for services they provide from other users). This is our major channel to get Bitcoin liquidity. We also buy them from our regular suppliers who provide us it in quantities when we need liquidity. We do not mine Bitcoins, as our business is not focused on it.
This is how Bitcoin mining happens: Any currency needs a way to enter an economy. For our traditional currency, central bank prints them and lands it to banks who lend the money to end customers. That is how traditional currency enters economy. Basically, central banks prints (mines) currency for us. Bitcoin solves this issue with a process called Bitcoin mining. You can install the software on your computer and start mining them. Its protocol decides how much Bitcoin they will get as a reward for mining depending on their hashing power (the speed at which their computer can solve Bitcoin mining puzzles).
Once you mine Bitcoins you can sell it to other users for money or services. That is how it enters into an economy. There is one famous incident when a Bitcoin user in early days bought pizza for 10,000 Bitcoins from other user.
Are there any other platforms which buy and sell Bitcoins?
A lot of sites are doing this. BTCChina in China, MtGox in Japan, and Bitstamp in Europe are major exchanges where people buy and sell Bitcoins just like normal exchanges. Coinbase.com in the US allows users to buy and sell Bitcoin through their platform.
How many Bitcoins do you sell/buy per day?
We used to generate around Rs 10-20 lakh turnover per month a few months ago, but the recent surge in Bitcoin prices got a lot of people involved with Bitcoins. Nowadays, we do around Rs 1 crore turnover per month.
How many have you bought/sold so far?
I will not be able to disclose it.
What is the trend in India? Are people aware of Bitcoin?
The response is very positive. Since it has been getting a lot of media attention, lots of people are buying and selling it.
Who decides on the pricing of Bitcoin? Why does the value fluctuate?
It is the demand and supply that decides pricing. Bitcoin is being traded over various exchanges across the world. So, depending on the supply/demand and adoption of Bitcoin, people buy or sell at various prices. Most of the time, the exchange which has a maximum volume will be used as reference point to determine its prices. It is like how gold prices are being determined. The fluctuations are based on speculation only. If there are positive news about Bitcoin and its adoption, more people will invest in it and that will drive prices up. If there is any bad news, people who already invested will sell it and lower their risk, while new buyer would like to stay away for a while.
(Edited by Joby Puthuparampil Johnson)