According to SourceForge, 70% of the 35,648 downloads in India since the November 2008 launch took place in 2013
Mumbai: US-based Buttercoin, a free Bitcoin exchange backed by investors such as Google Ventures, says it is in talks with Indian banks to launch an exchange in India to allow for the purchase and sale of Bitcoins—a virtual currency that has caught the world’s fancy.
“Most users of Bitcoins in India are people who are employed with the IT (information technology) sector. One of the beneficiaries of the proliferation of Bitcoins is remittances which NRIs (non-resident Indians) send back to their dependents in India," Sunny Ray, director of business development at Buttercoin, said.
He did not disclose any bank names.
Bitcoins are fast gaining favour in India. According to SourceForge, an online platform that connects consumers to open-source projects such as Bitcoin and facilitates downloads, there have been 35,648 downloads in India since the launch of Bitcoins on 9 November 2008. Experts estimate there are two-three users for every download.
Of these, close to 70%, or 24,723 downloads, took place in 2013. In October alone, there were 2,067 downloads of Bitcoin, moving India’s ranking one place up to 16.
No one owns the open-source peer-to-peer payment network called Bitcoin, but it is gaining in popularity and legitimacy. In fact, Bangalore will host India’s first two-day conference on 14 December to discuss the virtual currency industry and its future potential since Bitcoins are not yet regulated by India’s central bank. The Reserve Bank of India (RBI), though, is closely watching the developments, said Alpana Killawala, principal chief general manager, RBI.
Bitcoin is an open source peer-to-peer electronic cash system developed by Satoshi Nakamoto, the pseudonym for an unknown person or group of people who designed and created the original software. It is similar to a mobile app or computer programme that provides a personal Bitcoin wallet and allows a user to send and receive Bitcoins with them.
According to the Bitcoin website, a public ledger called the “block chain" contains every transaction ever processed, allowing a user’s computer to verify the validity of each transaction.
The authenticity of each transaction is protected by a digital signature corresponding to the sending address, allowing all users to have full control over sending Bitcoins from their own Bitcoin addresses. Hence, the digital money is also known as a “cryptocurrency", since it uses cryptography to facilitate and control transactions.
In addition, anyone can process transactions using the computing power of specialized hardware and earn a reward in Bitcoins for this service—a process known as “mining".
Bitcoins are also growing exponentially in value.
At the end of August 2013, according to the Bitcoin website, the value of all Bitcoins in circulation exceeded $1.5 billion, with millions of dollars worth of Bitcoins exchanged daily.
Benson Samuel, founder of an exchange rate setter Coinsecure, recalls selling Bitcoins in India at ₹ 450 last September. On Wednesday, the Coinsecure Price Setter pegged the average price (of top global exchanges including Mt Gox, Buysellbitco.in, Coinbase and Bitstamp) of buying Bitcoins at ₹ 57,360.06 and selling at ₹ 57,235.87.
“Many people are gradually getting aware and getting on board, and lot of businesses want an official to come on board before they start using Bitcoins… I work with Coinsecure which aims at setting exchange rate after taking feedback from the top three global exchanges and comparing it with few exchanges in India," said Samuel.
Mike Jain, a consultant to the Satoshi Foundation—an organization that works to bring awareness on Bitcoin—said: “Bitcoins are generated in two ways—miners solving mathematical problems and miners helping transactions go through. This way usage of Bitcoin cannot lead to inflation and rules out the possibility of hacking.
“Argentina, one of the countries badly affected by rising inflation, has been the largest user of Bitcoins."
He pointed out that Bitcoins were introduced as coins for online games, but added that the transactions involving Bitcoins are very safe since it “takes 21 confirmations from various miners before a transaction gets settled and each of the transactions details gets logged into a public ledger.".
Currently, he said: “It costs about $300 to send $100,000 across the border from India. Bitcoins can reduce this amount down to only four cents. Exchange value of Bitcoin is currently determined on basis of supply and demand. Bitcoin users never would want Bitcoins to be regulated."
Nilam Doctor, the only Indian lifetime member of the US-based Bitcoin Foundation, corroborated the advantages of Bitcoin.
“For instance, it can act as an alternative to gold for the purpose of investment. This can reduce the demand for gold, which in turn can bring down imports and improve the balance of payments situation. It is also going to have an impact on the banking revolution," he said.
Not all agree that these numbers are realistic and sustainable, besides voicing concerns that governments around the world may raise legal issues with any digital cash scheme—ranging from money laundering to tax evasion to a range of other regulatory concerns.
“It’s a new concept in India and there are many regulatory and legal complications. These are grey areas as of now and one can only recall how the peer-to-peer music network Napster was killed by regulations. So while it’s a good opportunity for the common man, it remains to be seen how the government reacts to the popularity of a parallel monetary system," said Na. Vijayashankar, a Bangalore-based cyber law and information assurance consultant, who is billed to speak at the Bitcoin conference.
Moses Harding, group chief executive officer (liability and treasury management) at the Srei Group, said: “It is not clear who is the custodian of Bitcoin’s value and how it is realized. Before we start using Bitcoins for transactions, it has to come within the regulatory framework to bring in more clarity on its transaction ability. Currently, there is a lot of complexity and ambiguity surrounding Bitcoins."
However, “when transactions begin to take place in the virtual world, money supply, or M3, gets reduced, which would put downward pressure on inflation", Harding added.
The Electronic Frontier Foundation (EFF), a privacy lobby body, maintains it’s too early to say whether Bitcoin will be a success.
Rainey Reitman in a 20 January 2011 article, posted on the EFF website, pointed out that while Bitcoin is relatively new, digital currencies have been around a long time.
For instance, Digicash, released in 1994, is considered a pioneer of electronic cash using cryptography to maintain anonymity. The Ripple currency project relies on interpersonal relationships to allow communities to create their own money systems.
Reitman concluded: “Any new currency system faces an uphill battle, both technically and legally. The worth of Bitcoins, if the system ever gets wide adoption, will be based on an ever-fluctuating market value."
“Merchants will need to accept Bitcoins as a placeholder for goods and services, just like any other form of currency. This has been a barrier to other digital cash options historically, so it’s difficult to know whether Bitcoin will be better prepared to face these challenges."
“But many believe that there’s a need for a decentralized currency system, and Bitcoin certainly is a step toward censorship-resistant digital currency."