CHENNAI: Bitcoins. When an elusive computer programmer pseudo-named Satoshi Nakamoto first released the concept in 2008, they were hailed as the next big thing in financial evolution. Regulatory concerns, the complexity of the system and the overall potential for misuse, however, forced it to the background.
But the last few weeks have seen developments that suggest Bitcoins were never off the grid. But first, what are bitcoins? (See Box) The ‘cryptocurrency’ is merely a complex block of computer code. Transactions happen through exchanges where users have to register with KYC (Know Your Customer) details and PAN card numbers. Bitcoins are plain virtual currency, currently unregulated by any central bank and only kept secure by thousands of programmers who themselves work for Bitcoins.
Bitcoins hit the limelight in early May this year when Australian programmer Craig Wright claimed he was the mysterious ‘Satoshi Nakamoto’. While his claim is being questioned, bitcoins are on the up. There are an estimated 1 lakh Bitcoin users in India. Bitcoin start-ups are also thriving - with UnoCoin, Zebpay, BTCXIndia and CoinSecure joining the fray.
UnoCoin, in April, got approval from the RBI to launch India’s first mobile bitcoin Point of Sale(PoS) app for merchants in India. Through the app, Bitcoin owners can pay with the virtual currency at merchant locations. “Over the past year, our web traffic has increased by more than 500%,” stated Unocoin. The platform added 6,000 users in March alone.
Meanwhile ZebPay, another platform, announced that it had recorded `100 crore in transactions within 10 months of launch, crossed 30,000 users and plans to add 100,000 users by the end of 2016. “While HNIs are buying bitcoin as investment, freelancers are more into using it as remittance and trading,” Sandeep Goenka, cofounder of Zebpay had noted.
However, while bitcoin usage is growing, the base is incredibly small. Even though platforms like ZebPay advertise uses besides exchanging Bitcoin to and from official currency, like recharging mobile balances and purchasing vouchers from companies like Amazon and Flipkart, whether bitcoin usage will grow past highly niche user segments remains in question. Like UnoCoin states, “This is presently unmarked territory in India.”
WHAT IS BITCOIN?
It is a type of digital currency that uses encryption for minting virtual ‘coins’ (blocks of code) and for carrying out transactions. The model works on unique codes generated by complex equations to avoid duplication. Bitcoins, while convertible on special bitcoin exchanges into currency, do not have any regulating authority, making them perfect anonymous transaction tools.