Bitcoin – Can investing in Bitcoin be dangerous to your wealth?


When bitcoin was created in 2009, who thought this cryptocurrency will now among the top Google searches worldwide. This digital currency acts as a peer-to-peer cash system. In order to earn bitcoins, a person has to act as a miner, which involves them using their computer’s energy to maintain the blockchain. Bitcoin would act as the reward for this computing power. Now people have started to trade it like a financial asset just like a stock. Let us discuss 10 bitcoin FAQs

Bitcoin FAQs #1 – What is bitcoin?

It is a decentralized digital currency which falls under cryptocurrency and was the first and most valuable among them. It uses rules of cryptography for generation and regulation of units of currency.

Bitcoin FAQs #2 – Is bitcoin a virtual currency?

Bitcoin does not have a physical form. You will not get any underlying asset ( like stock) after purchasing bitcoins. We can say that it is as virtual as a Debit Card or a Credit Card. Bitcoins balances are put in a large network which spread and distribute the information among the holders of each balance. Nobody can alter the network. The most convenient way to use this virtual currency through your mobile device. It is impossible for Bitcoin to simply vanish because they are stored on bitcoin blockchain.

Bitcoin has put a huge impact in the currency world. However, there is still a small number of businesses and people using it. The main reason could be that people don’t know what benefits it offers actually. Ony some businesses are planning to incorporate Bitcoin into their payment system.

Bitcoin FAQs #3 – What is bitcoin mining?

Miners are actually creating bitcoins. Lets us understand the meaning of mining. It is a competitive process where there are lots of puzzles and the winner will get some part of Bitcoins. Bitcoin miners process transactions and secure the Bitcoin network in exchange for new Bitcoins. They do it with through the optimization of hardware and software. They need computers and software to create bitcoins. The miners obviously benefit from bitcoin mining. Moreover, this will help increase the security of bitcoin network.

Since due to complexity in the open source code of Bitcoin network, only a fixed amount of coins are made. It is all done when calculations are completed, which makes mining very competitive. As more miners join the network, making profit becomes increasingly more difficult. There is an inverse relationship between the technology and bitcoins. Stronger the technology, the fewer chances of generating bitcoins in the market.

Bitcoin FAQs #4 – Who decides the price of Bitcoin?

Firstly, the biggest factor in finding the price of each Bitcoin is basically demand and supply. Since the supply of bitcoin is limited, the demand level must increase in order to keep the price stable. If demand decreases, then the price of Bitcoin will surely start to fall or even rapidly drop. A reasonable purchase of Bitcoins can change the price drastically. the volatility will stabilize only when more bitcoins are there and more users start to use this as currency. As of today, 1 Bitcoin is equal to INR 5.67 lakh.

Bitcoin FAQs #5 – How does bitcoin have value?

Bitcoin value basically depends on how many users are using this as currency, and how many bitcoins are in circulation. But there is a difference between bitcoin & other traditional fiat currencies. Bitcoins are a product of pure mathematics and raw algorithmic calculations.

They are only influenced by the trust that its users put into the currency and how it is being adopted worldwide. The merchants, business startups, and users find the value of Bitcoin by choosing to use Bitcoin over other currencies. In a nutshell, we can say that the more people who choose to use Bitcoin as a form of payment, the higher the value of each Bitcoin will be.

Bitcoin FAQs #6 – Can I trust my Bitcoins transactions?

Anyone can view the coding related to Bitcoin and how bitcoin operates anytime. Anyone can verify every transaction any time. This is exactly people think they can easily put trust into Bitcoins. If you feel that something is wrong with the Bitcoins coding you can easily look it up and check for potential flaws.

If at any given moment you notice your transaction is invalid, you can easily verify it on the blockchain if the transaction is valid. There is no third party reliance, and everything is under the control of Bitcoin network. The new and more secure code need constant revision to make it even more secure.

Bitcoin FAQs #7 – Can I secretly do bitcoins transactions just like Cash?

If we compare cash transactions with bitcoins transactions, cash transactions are still more secure. Bitcoins transactions are still anonymous, yet these transactions are on the blockchain and anyone can access it. The blockchain is basically ledger which keeps records of every bitcoins transaction without revealing the identity of the person.

As far as cash is concerned, there is no public record of cash transactions. In case of bitcoins, the identity of the user who buys/sell something with the help of Bitcoins can always stay anonymous. However, he cannot hide the transaction and there will always be a digital trail leading to the transaction and that specific public wallet address.

So this means that it is very hard to deal bitcoins for illegal transactions when selling or purchasing illegal goods. The fact remains that Bitcoin will never be more anonymous than cash, thus it is impossible to prevent any type of criminal investigation regarding Bitcoin purchases versus cash purchases. The original purpose of bitcoin is to prevent financial fraud. This may reduce the number of crimes committed through financial transactions. So one may not buy bitcoins because its transactions are not anonymous.

Bitcoin FAQ #8 – What if I lose my bitcoins?

You cannot lose your bitcoins which are safe in your software wallet. However, you can lose your wallet which has your Bitcoins. Even though you lose your wallet and of course the bitcoins as well, there is no way that anyone can find the private key you need to access each wallet.

So your virtual currency will be safe in your wallet but remember you shouldn’t lose your wallet. So one can say that holding bitcoins is very dangerous. You might either see the falling prices of bitcoin, but also you have to be aware that you shouldn’t lose your wallet.

Bitcoin FAQs #9 – Whether I should buy Bitcoins?

Unfortunately, the concept of Bitcoin is new and it is very difficult to estimate or predict what will happen with this currency in the future. But this currency is cleverly designed and is actually offering much more than other currencies. If a well known large company or corporation decide to use Bitcoins as a method of payment, this would have a huge effect on its value to other businesses and corporations, making it more desirable.

You can buy bitcoins on various cryptocurrency exchange platforms. But as of now, it is too expensive and 1 Bitcoin price in India is around INR 5.6 lakhs. Moreover, these companies and businesses that deal with Bitcoins offer no insurance because this currency is still new. This makes this currency so risky for long-term investment. In other words, Bitcoins are still maturing and this presents a high degree of risk. You shouldn’t put your trust into any open source environment software without any government or any regulatory authority support.

Bitcoin FAQs #10 – Do RBI/Govt regulate Bitcoins?

Internationally, cryptocurrencies are regulated as commodities by several central banks. There is no regulation for bitcoins transactions under RBI & Indian Govt. Indian Govt has already warned Indian users to stay away from bitcoins transaction. The finance minister has already said that it is a bubble and it will break anytime. And, in that case, the investors will lose all their hard earned money. SEBI is also giving its own cautions. Similarly, the tax Department is scrutinizing the actions by investors to check the tax implications.


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