10 Bitcoin-Related Questions in India Answered: The Reality of Cryptocurrency

Every day we find some celebrity talking about cryptocurrency, From Twitter CEO Jack Dorsey to Tesla CEO Elon Musk. Despite the fact that cryptocurrency is not a new concept, a sizable portion of the population is unaware of it.

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Before you invest in cryptocurrency in India, these are a few things you should know.

We’ve compiled a list of questions and answers that you should be aware of before making your first cryptocurrency investment.

1. What is Cryptocurrency?

A cryptocurrency is a type of digital asset that can be used to pay for goods and services over the internet. Many businesses have created their own currencies, which can be exchanged for specific goods or services.

2. Is it safe to Invest in CryptoCurrency?

Cryptocurrency’s value, like that of real currency and stocks, is determined by a number of factors, including price determination theory (demand and supply) and other economic factors. Because the supply of cryptocurrencies is limited, demand is a big factor in determining how much they cost.

Because cryptocurrencies, like real currencies, do not generate cash flow, you must have someone else pay more for the currency than you did in order to profit. Investing in crypto is not like winning the lottery, which can yield a quick reward; to make a true profit, one must be patient and hold it for a longer length of time.

3. How many types of cryptocurrencies are there?

Bitcoin, DogeCoin, Ethereum, Binance Coin, Lite Coin, Cardano, Bitcoin Cash, and other cryptocurrencies are among the almost 5,186 recognized.

4. Is Cryptocurrency legal in India?

In India, cryptocurrencies are not prohibited, which means that anyone can purchase, sell, and exchange them. The Indian government has yet to create a regulatory framework for cryptocurrency, leaving it unregulated; however, they do occasionally provide guidelines on the subject.

For example, the Indian government released a statement in 2018 to prohibit the trading of cryptocurrency because certain people were abusing it at the time, but later withdrew the statement, claiming that the “Government will study the use of Blockchain technology proactively for guaranteeing in the Digital Economy.” Their remark does not imply that dealing in cryptocurrency is prohibited.

Even if the government chooses to outright outlaw it in the future (which is highly improbable), they will almost certainly provide provisions for those who wish to convert or sell their crypto holdings.

5. Is GST relevant to Crypto? Should I have to pay some tax?

According to the Income Tax Act of 1961, every income that is not specifically exempted is subject to taxation. The same is true for GST: under the Goods and Services Act of 2017, any business, organization, or company that provides any service is required to pay GST unless they are specifically exempted.

According to the Corporate Affairs Ministry, companies dealing with digital currencies must now record profit or loss on crypto transactions, the number of cryptos they have, and deposits or advances from any individual for the purpose of trading or investing in cryptocurrencies in their financial statements.

In light of these considerations, everyone who holds or sells GST will be required to pay income tax, and any firm or organization that provides Crypto Services will be required to pay GST.

6. In India, where can I buy cryptocurrency?

A wallet can be used to purchase bitcoin, and each individual who has a balance in the wallet has a private key (secret number) that corresponds to the wallet’s Bitcoin address. Bitcoin wallets allow users to send and receive Bitcoins while also granting them ownership of their Bitcoin amount.

These wallets are available in a variety of formats, with the four most common being desktop, mobile, web, and hardware (cold wallet):

Desktop Wallet (Hot Wallet): This type of wallet is installed on a desktop computer and gives the user total control over it. WazirX and Binance are good examples.

Mobile Wallet (Hot Wallet): A wallet that is installed on a phone and gives the user complete control over it. WazirX, Coinbase, and Binance are just a few examples.

Web Wallet (Hot Wallet): Web wallets allow users to access their funds from any browser or mobile device. Because your private keys are stored online, you must choose your web wallet carefully. WazirX and CoinDCX are two examples.

Hardware Wallet (Cold Wallet): This type of wallet stores cryptocurrencies on a physical device that is connected to a computer via a USB port. The typical cost of a wallet like this is Rs. 10,000. Trezor and Ledger Nano are two examples.

7. What exactly is BlockChain and how does it function?

A blockchain is a growing list of documents, known as blocks, that are cryptographically linked together. Each block contains the preceding block’s cryptographic hash (hidden code), a timestamp, and transaction records.

In simple, it is a method of storing data in such a way that it is difficult or impossible to alter, hack, or trick the system. A blockchain is essentially a digital log of transactions that is disseminated over the entire blockchain network of computer systems throughout the world, making it extremely difficult for someone to track each one in order to steal or erase them.

8. What is the difference between a public and a private blockchain?

A public blockchain is one that does not require authorization. Anyone can join the blockchain network and read, write, or participate in it. It is decentralized, with no single entity in charge of the network. Data on a public blockchain is safe because it is impossible to change or edit data after it has been confirmed. Bitcoin and Ethereum are two examples.

A permission-based blockchain, a private blockchain’s work is dependent on access rules that limit who can join the network. The network is controlled by one or more entities, which necessitates reliance on third parties to transact. Only the parties involved in a transaction will have knowledge of it in a private blockchain, and others will not be able to access it. The Linux Foundation’s Hyperledger Fabric is an example.

9. How can you know if a coin is safe to invest in?

One of the most important tasks to do before making any type of investment, whether it’s in the land, buildings, jewelry, stocks, bonds, or cryptocurrency, is to conduct a thorough study into the technology behind it, as well as who invented it and why.

• What is the coin’s current rank? Check out CoinMarketCap for more information.
• Keep a close eye on how it performs over time.
• See what other people have to say about it on the internet.

10. What Precautions do I need to take?

Before you invest in cryptocurrencies in India, keep the following points in mind:

• It is preferable to invest using a new email address.
• Make sure the wallet you’re using is secure.
• Don’t deposit all of your money into a single coin or wallet.
• Two-factor authentication should be enabled (preferably hardware security keys)
• Long-term storage and a large investment in Cold Wallets
• Hot wallets should only be used for a limited period of time and with a minimal investment.