All you need to know about Bitcoin



New Delhi, Dec 6: Investors everywhere (this is not a problem specific to India) are notorious for jumping on the newest, shiniest bandwagons without necessarily understanding what lies underneath the hood.



What is a problem specific to India is the dichotomy of its burgeoning investor community lining up with alacrity for their golden tickets, without any semblance of a safety net to catch them if they fall.



With Bitcoin (and other crypto-currencies), that fall has the potential to be their hardest yet. As prices surge to tantalising new heights, constantly breaking their own records, Bitcoin FoMO is very real -- and there is clear potential, as there are pitfalls of investing in what some have carelessly called Gold 2.0.



Rags to riches Bitcoin investment stories are, of course, plastered across the web and beyond, drawing investors by the boatload, and why not, when value rises 900 per cent in a year, albeit with fluctuations between 44 (up) and 25 (down) percent. What isn't easy to come by when Bitcoin fever takes hold, is the ominous flip side.



Vili Lehdonvirta (who may or may not be Satoshi Nakamoto) is among many others rightfully labelled experts who have for some time now been warning of the eyeball frenzy and an approaching proverbial "big short" moment.



Closer home, Pramod Emjay of CryptoMe Payment Technologies and formerly the Dogecoin Foundation, shares this concern.



In our discussion on crypto-currency exchanges in India, he tells me how "any exchange worth its salt knows that it's supplying the shovels in this gold rush. It is stupid to assume this will go on forever".



And while it may admittedly be the wave of the future, for the time being, a gold rush is what it is -- of which there will be both casualties and collateral damage. You may have forgotten Mt. Gox for example, but its clients have not.



Bitcoin, of course, is only the flag-bearer, and gets most of the attention, good and bad. In all there are over a thousand publicly traded coins, and the advent of Initial Coin Offerings opens up new fronts for slapdash investments. As the world once again leaps before looking, parallels to the sub-prime crisis and the dotcom bubble are not unwarranted. Fed enough quick-buck hysteria, history will repeat itself.



Commercially, prospective Indian investors need to dig deep and understand how Bitcoin infrastructure, buying, storing and pricing actually works. A lack of adequate local mining infrastructure for instance, means eye-watering premiums over global prices (30 per cent is the latest figure doing the rounds) currently apply for Indian purchases.



On the legal front, the Indian government has on several instances in the past, through the Reserve Bank, the Securities and Exchange Board of India and recently the Finance Minister himself, reminded the country that crypto-currencies do not have legal sanction. While some industry stakeholders have stretched this wait-and-watch to claims that a hard stance is all but impossible, such exuberance is exaggerated and has little evidence or precedent.



There are, however, enough and more examples of reactive legislation ranging from public liability to data privacy, and everything in between. In a worst-case scenario, public issue and private placement, exchange control and national security considerations create a minefield that can cause governments to take sudden and radical steps, saying only that "you were warned".



Where does this leave the Bitcoin investor legally? At best, what your purchase can be likened to a commodity -- furniture, only furniture doesn't (usually) cost you $13,000 apiece. Careless moves with wallets can cause your investments irreversibly going up in smoke, and data breaches associated with these wallets also have limited legal and practical recourse.



Pramod Emjay, even as an industry pro, has himself been the subject of crypto-currency fraud, and he rightly points out that when that happens, there's nobody to go crying to. In the absence of legal sanction and a regulator, investments are not just a commercial, but also a legal gamble. Should and would you invest in the stock market if SEBI didn't exist?



Having had a consistently ominous outlook (although I myself treasure all things blockchain), I have been the recipient of many an evil-eye from stakeholders in the local Bitcoin ecosystem. Genuine as their motives may be, there are clear conflicts of interest, which do not help spread objective awareness or resolve desperate uncertainty for potential investors. Uncertainty which local law still does not alleviate, and inherent commercial volatility exacerbates.



It is for this, above all other reasons, that I continue to hold up the red flag. With the law providing no protection, being forewarned now more than ever, is being forearmed. As one local platform ironically warns in its fine print, "never spend more money on Bitcoins than you can afford to lose" -- the three extra questions you must then ask yourself is not just how much you can afford to lose, but how, when and why you might lose it.

IANS

Don’t Miss

PM Modi commissions India's 1st indigenously-built Scorpene sub
Teachers suspended for spelling errors in Modi passage
Gujarat polling on Thursday for 93 seats; PM, Shah will cast their vote
Pak, China shivering..Navy to induct deadly Made in India submarine
Kejriwal's big GIFT.. FREE coaching for entrance exams
APPLIED for these jobs? Monthly income 35K, Age limit 40
On wedding anniversary Rohit helps India beat Lanka, level series
Do or die for Modi, Rahul..Last phase Gujarat polls tomorrow
Kejriwal Magic.. Private hospital BILLS will fall sharply
Your money is banks is safe..Cornered PM Modi assures nation
Chanakya on News24..The BEST will give Gujarat results tomorrow
Best pictures of Virat and Anushka before marriage
Virat, Anushka wedding..This is what happened after ceremony, don't miss
Bumper 50000 jobs for you..Modi magic
This smartphone is SELFIE KING..Price will shock you
On Instagram you can now follow hashtags
Twitter's big GIFT..You can tweet more now
Deepika, Priyanka FIGHT to romance SRK!
Deepika is losing weight.. what's wrong, find out!
Janhvi does naughty thing with Ishaan.. In PICS!
PMs in Row: Former PM Manmohan Singh takes on PM Modi
Video:Rohit's anniversary gift to wife..Ritika cries, Rohit kisses
Ro'HIT' smashes world record 3rd double ton..Know about his 200+ scores
Bumper JOB openings for 10th pass; Salary 57K
PM Live: Policy change in textile sector will create one crore jobs
This Bollywood actress sings with rapper Snoop Dogg!
'No 'mantras', 'Jaykaras', 'chanting' in holy Amarnath shrine,' says NGT
Video: Now UPCOCA in Uttar Pradesh to handle mafia and goons
Salman's deadly stunt will make you scream..Watch Video
Is Rahul Gandhi wearing Rudraksha beads like his grandmother?