Ethereum explained in simple terms

Good.

You came here to read the article on Ethereum certainly means you have developed a fair understanding of blockchain and Bitcoin. Well, If you still need a refresher then you can read it here:  What is Bitcoin? – Explained in simple terms

Why Ethereum?

I promise.  I won’t use the word “Decentralized apps” so soon. Neither will I use the “smart contract” without creating an adequate background.

Let’s start with an example.

Imagine we are all living in the 90s. The internet is a new phenomenon and everyone is going gung ho about it. You get a crazy idea. You think of developing a microblogging platform where people could tell what they feel in just 140 characters. You also give this platform an innovative name – “Twitter.” Soon, the idea catches up, millions of people join your platform including celebrities from all over the world. You build and maintain servers to handle such a large number of user profiles, their tweets, their friends, followers, and the entire data. You take advantage of such high traffic and monetize the platform by providing advertisements.

However, your business sometimes does face problems.  You occasionally get requests from the government to block certain notorious users (censorship). Although you want to keep the freedom of speech alive, you have to oblige to government’s requests and bring down certain content. You have also been hacked a number of times before when you had to shut down your services (downtime).

That’s okay. You learn to sail through occasional problems but one fine day, you receive a shock of your life.  You wake up to see a billion of users go missing from your platform. Later you learn that China has banned your websites to its citizens (third party interference). Your business is in turmoil now but you can’t help it. You really wish that you could run the business without any downtime, censorship or third-party interference until you stumble upon a new word called the blockchain.

Wow. You get an idea to build twitter on the blockchain so nobody could meddle with it. But as you know, blockchain consists of only ledgers where new transactions are being added. It is only doing the job of storing the data and preventing it from any tampering.  It does not provide any environment where you could just run your twitter source code and create a new website for users. You wait for a few more years until you come across something called “Ethereum”.

Ethereum turns out to be your problem solver. With Ethereum, now you could build Twitter on the blockchain. But, you are late to the party. People have already started building Twitter on Etheruem and it is called Tweether.

What is Ethereum?

You can think of Ethereum as Microsoft windows of the blockchain. It’s similar to an operating system where you develop applications on top of it. Your Twitter application on blockchain will not be on not on a single or a selected few computer but will be distributed across all participating computers in the Ethereum network. That means the copy of your application will be everywhere on the network. It could be on your computer, on your neighbor’s computer, and on my computer. No one can tamper with your application since it is on the blockchain. Such applications which do not remain on a single or a selected few computers (servers) but are distributed across a network are called decentralized applications or dApps.

Cool.

Now, with this background, I feel safe to provide you definition of Etheruen as given on the Ethereum’s official website.

Ethereum is a  decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.

Let’s try to understand what smart contracts mean?

What is a smart contract?

You know that the bitcoin blockchain consists of append only ledgers. When people transact bitcoins, their transactions are getting added in these ledgers. The function of this blockchain is to make sure that nobody tampers with these ledgers and since 2009, we have seen that the blockchain has remained tamper-proof. However, you cannot make a twitter like application on blockchain with just append-only-ledgers. You need to make the blockchain programmable so you could write and execute the logic.

Ethereum blockchain allows you to write programs on the blockchain and these programs are called smart contracts.Let’s understand this with an example.

You want to create an application where if someone says hello to you, you will pay $5 to him/her. I know, you can easily create such application. You will create a website and provide fields to take “hello” and bank details of the user. When user presses submit button, his/her account is credited with $5. This is a smart contract, that means this contract will be executed automatically without any manual intervention. However, when you run this smart-contract on a website, it is executed on a centralized application. By now, you know the drawbacks of such applications. Someone may hack it and instead of $5, he/she can debit $500 from your bank. But, with Ethereum you can build such programs on the blockchain, which remain working till eternity with no downtime, no censorship, and no third party interference.

This was a simple example to explain what a smart contract is. Here are a few interesting examples that are being developed on the Ethereum.

Alice.Si

Alice.Si is on a mission to restore humanity’s trust in charities by holding funds in smart contracts so that donors only pay if the charity makes an impact. It helps keep charities honest and lets donors rest easy knowing that their money is actually going to a good cause.

Gnosis

The Gnosis platform looks to create a decentralized prediction market where users vote on anything from the weather to election results.

 

Now, let’s try to answer next logical question.

 What is Ether?

Ether is to Ethereum what Bitcoin is to Blockchain.

Like Bitcoin, Ether is given to miners who provide their resources to validate Ethereum blocks. However, unlike Bitcoin, Ether doesn’t operate as a digital currency but seeks to provide “fuel/gas” for the decentralized apps on the network.

Let’s go back to the example of a decentralized Twitter. Your decentralized Twitter is on the blockchain. To post a new tweet, you need to execute some code on the blockchain. When a sufficient number of tweets are generated, a block will be generated which needs to be verified before it is accepted by the public network. For this validation, some miners will deploy their computers and the miner who verifies the block first will get Ether as a reward. While no one owns Ethereum and anyone can use Ethereum the way they want but the system needs miners who will help verify the Ethereum blockchain.

Higher will be the computational needs on the blockchain, higher number validations need to be carried out and hence, more number of blocks generated and more Ether will be given out to the miners.

To summarize, Ether works as a transaction fee for running your decentralized apps the Ethereum blockchain.  These transaction fees are calculated based on how much computing power is taken by your application. In Ethereum world, this transaction fee is called “Gas”. Each action costs an amount of gas that’s based on the computational power required and how long it takes to run. A transaction costs 500 gas, for example, which is paid in Ether.

While bitcoin has a hard cap of 21 million bitcoins, Ether does not have a similar limit.

Who owns how much Ether?

  • 60m was purchased during 2104 crowdfunding campaign
  • 12 is owned by Ethereum Foundation
  • 5 ethers are being mined every 5 seconds who validate transactions

Where to buy Ether(eum)?

  • Buy directly on an exchange

You can purchase Ethereum directly on a digital exchange such as Coinbase. Coinbase also provides you the wallet to store Ethereum.

  • Convert bitcoins to Ethereum

Many websites such as Changelly provide services to convert bitcoins into Ethereum and other cryptocurrencies.

 

How to Store Bitcoins ? – Everything you need to know about Bitcoin Wallets

Bitcoin storage and wallets

You can’t store bitcoins. Period.

The number of bitcoins or Satoshis you own is just an entry against your address (public key) in the Bitcoin blockchain. In order to spend those bitcoins, you need to have a private key which needs to be stored somewhere. If you lose the private key, then it means you have lost your bitcoins.

So in practice, storing bitcoins is all about storing and managing your private key.

Know everything you need to know about public and private keys here: Private key and Publick key in Bitcoin blockchain

There are three goals to keep in mind while storing and managing your private key.

  • Availability:  Your private key should be easily available to you whenever required.
  • Security: Nobody else should get access to your keys. If they get the access, they can easily spend your coins or transfer those coins to themselves.
  • Convenience: Key management should be easy to do.

However, it is difficult to achieve all three goals simultaneously. There is a trade off and you have o sacrifice one goal to achieve other two.

What is Bitcoin Wallet?

Bitcoin Wallet is a software that keeps a record of all your coins, manages your keys, and provides a nice user interface so you can spend bitcoins with a click of a button. If you want to spend 2 bitcoins at a local shop then the wallet software would give you some easy way to do that. Not just one key but Bitcoin wallets help you store the whole bunch different keys for you. You can easily create new private keys and utilize them to make anonymous transactions. Wallet interface that tells you how many bitcoins are there in your wallet at the aggregate level.

Technically, Bitcoin wallets can be classified into two categories.

Hot wallets are those wallets that are connected to the network. Your computer or mobile connected to the internet is a hot wallet. Hot wallets are convenient but less secure.

Cold wallets are wallets not connected to the internet. They are safer but not as convenient as hot wallets.

Now, let’s see how different Bitcoin wallets achieve these goals.

Desktop Wallets

Desktop wallets store your private key in your computer hard-drive. Desktop wallets are more secure than mobile because they can’t get easily stolen. Desktop wallets fall into hot storage category since they are connected to the Internet. Hence, they are less secure than other offline wallets.  However, if you have small amounts of Bitcoin or other cryptocurrencies then they will serve your purpose.

Commonly used desktop wallets are

Bitcoin Core, Multibit, Electrum, Darkwallet, Hive and Armory

Hardware wallets

Trezor Bitcoin Wallet CoinDesk

If you are a long-term investor then you should either use a paper wallet or a Hardware wallet. Hardware wallets are specially made electronic devices that are secure and you can conveniently use them for day to day transactions.

Advantages of hardware wallets over the desktop and mobile wallets:

  • Private keys are stored deep in a secured area of a microcontroller, and  these keys cannot be transferred out of the device in plaintext
  • Can’t be hacked or infected by computer viruses
  • Are convenient to use
  • No reports of hacking ever since their inception

Examples:  Trezor , Ledger S nano,  Keepkey

Mobile Wallets

The mobile wallet similar to desktop wallet except that the fact that it is portable. You can use your smartphone can pay for products with bitcoin, or send/receive funds. You can use the camera to scan the QR address, which automatically converts it to recipients address, saving your effort of typing in a long string of letters and characters. If your phone is NFC enabled, then you can use mobile wallets as tap and pay. However, since your phone can be lost or stolen, and your keys along with it, you could lose your bitcoins. Hence, you should either keep bitcoins worth very small amount or keep secure backups of wallet data.

Paper Wallets

A paper wallet is the cheapest alternative to store your bitcoins. Many websites such as bitaddress offer services to generate a bitcoin keys for you and create QR codes: one is the public key and  the other is the private key, which you can use to spend bitcoins stored at that address.

Final words

What wallet you will use it all depends on how paranoid are you with your money. If you want to keep your keys safe, then hardware wallets are the best devices to store your keys. They will cost you less than $100 and are a good investment you plan a long-term investment in bitcoins. However, you can use mobile/desktop wallets if you want to use bitcoins for everyday purpose.

What is Blockchain, Cryptocurrency and Bitcoin? – Explained in simple terms

I agree.

Bitcoin articles on the internet are not simple to understand. A layman will never understand what Bitcoin is if you start your articles with words like “distributed ledger” or ”decentralized database”. The very concept of Bitcoin is based on the concept of taking power from a few selected people and giving it to the general public. Hence, you have to make the general public understand what Bitcoin is if you want them to accept the “biggest thing since the Internet”.

Let us try to answer the following two questions first.

  1. What is the problem with current Money?
  2. What is Blockchain and how does it solve this problem?

Why do we need Money?

Well, it all started barter system. Around 11000 years ago, when there were no currency notes available, people were exchanging household items such as food, cattle, or tools as money. Alice from town A would have to exchange her cow to buy a sword from Bob in town B. The problem with such system were

  • It was inconvenient to move your things across places.
  • The money wasn’t divisible. You can’t cut your sword in half to buy half Kg rice.
  • Some of these things were perishable.

Hence, a new system was needed where you could avoid the barter system.

Around 5000 years ago, a workaround emerged. People started using precious items such as gold, silver to avoid the exchange of household goods. Now, you may ask, what made people use precious items?  Here is the answer:

1) Durability.  Gold is durable. It won’t perish like fruits or meat. Neither it will rust like iron.

2) Transferability. Gold is easy to send, receive and transfer.

3) Divisibility.  Gold can be divided into smaller parts and still be used as currency.

4) Scarcity.  The currency has to be scarce in nature. If it is abundant then it will lose its value and gold is scarce.

 

However, precious items would get easily stolen in those days. That was the time when Banks came into the picture. People would deposit all their gold with Banks and would get a receipt for the gold deposited in a paper format. The paper would have Bank’s name and signature of authorized personnel. Now, instead of carrying gold, people started carrying and exchanging paper bills. This is how the paper currency was born.  Paper bills continued to be part of transactions until early years of 20th century. Each bank would have its own currency note and at one time in the US, there were 5000 different notes in circulation. People could submit such notes in the bank and get a gold of its equivalent amount. Such system where notes were backed by the gold value is called the ‘gold-standard’. You would have heard this word before.

Around 1920, the US decided to shun the gold-standard and started issuing a new type of currency called fiat-currency. The word fiat means “no intrinsic value”. The fiat currency has no intrinsic value. It has value because some central authority tells us and we accept it. The central authority decides how much of the currency is to be printed and to be kept under circulation. It can even decide to put a ban on certain denominations.

We have chosen the central bank to act as a trusted middleman who we can’t avoid when we want to make transactions. Also,

  • The bank charges a small transaction fee when you send/receive money
  • The bank knows your bank balance and all your transactional history
  • The bank servers may get hacked or crashed.

Now, the question arises, can we bypass banks? Can we have all our transactions anonymous? Can we avoid the transaction fees?

Yes. Blockchain solves all the above problems.


What is Blockchain?

This is how your bank transaction looks like. When Alice transfers $5 to Bob, the bank debits $5 from Alice’s account and credits $5 to Bob’s account. The bank provides this transaction a reference number and it stores this transaction in the database. Millions of such transactions are getting recorded on the bank’s servers worldwide.

Blockchain is a little different.

You can think of blockchain as a database which is not centrally located (on the bank’s servers) but distributed across the entire network (including your and my computer). It means every person on the network records transaction instead of bank recording it. Now, you will ask two very obvious questions.

  • What if I modify the data present in my computer?
  • What if I create a fake transaction and add some money to my account?

Well, you can’t do that. That’s the beauty of the Blockchain.Using advanced cryptography techniques, blockchain makes sure that nobody tampers with the data on the network. Even if someone tampers it, everyone on the network gets to know that and they reject this transaction.

 

Let’s take an example. We all are familiar with names of the days of the week. Monday follows Sunday, Sunday follows Saturday and so on. This system has been working for thousands of years. If someone tries to tamper with it by adding two Mondays in the week, we won’t accept that. We will consider it as invalid sequence and reject it. No matter how powerful that person is, he has to change the mind of more than half of the population so as convince the remaining population. This is a really difficult job and hence the system is in place for thousands of years.

Blockchain network works in a similar fashion. When Alice transfers $5 to Bob, every user the network checks whether Alice has $5 in her account. The network also checks that Alice has not used the similar transaction reference number before. If the transaction is approved by a majority of the users, then it is accepted and stored in the database. Now, you will have a few more questions in your mind?

  • If it’s a database, then why is it called blockchain?
  • If everyone sees my transaction, how can blockchain be anonymous?

We know that transactions are verified by users in the network before they are inserted in the database. However, it is not possible to scavenge through the entire database every time to verify transactions. Hence, the database is broken into a number of blocks and these blocks are arranged one after another, forming a chain of blocks called the blockchain. If you tamper with any one of the blocks, the entire sequence collapses and everyone comes to know of your misdeeds. Newly generated transactions are arranged in a block which is then verified and if everyone says “all okay” to the block then it is attached to the blockchain.

Let’s try to answer your second question. Is blockchain anonymous?

Every person who is transacting on blockchain has a public address. This address is a 256-bit public key which looks like ‘1yx5koy35dahwet9769….”. So,

  • Alice will have a key something like “1gsdfw564gfjf658….”
  • Bob will have a key “1089709sdasgda…..”
  • To the network, the transaction will appear as “Debit $5 from address: 1gsdfw564gfjf658 and Credit to address: 1089709sdasgda”

Although people can see the transactions happening against this public key, they don’t know the true identity of the person. Hence, your data is completely private and transactions are anonymous (or pseudonymous)

Read here more on: What is private key and public key in blockchain ?


What is Cryptocurrency?

Now, you might ask what will happen if users in the blockchain-network stop verifying the blocks.

This won’t really happen. Users will never stop their computers verifying the blocks because they get a reward. Rather, these users are competing with each other to get blockchain data verified.  The user who verifies the block first gets a reward and this reward is nothing but a digital currency or cryptocurrency. This cryptocurrency will not be like a media or text file on your computer, rather it will be an entry against your name (public address) on the blockchain. It means that as soon as you verify a block, your account on the blockchain will be credited with a certain amount of cryptocurrency.

This cryptocurrency is like gold. It has all the properties of gold that are mentioned at the beginning of the article. It is just that you cannot see it, but cryptocurrency has an obvious advantage over gold. It can be sent electronically anywhere in the world in just a few seconds. Just like you mine gold out from the earth, you mine cryptocurrency(or call it digital gold) by validating blocks. Just like mining gold requires heavy equipment, mining cryptocurrency requires heavy computing power.

Finally, mankind has managed to invent a digital equivalent of gold which can solve our problems with the money. Cryptocurrency is a better form of a currency that world did not see before 2009 until a guy called Satoshi Nakamoto invented it and called it Bitcoin.

Now, let’s summarize what we have learned since the beginning of this article. This will quickly help us understand the remaining article

  • You needed gold (precious items) to avoid barter system
  • You needed paper currency to avoid exchanging gold
  • However, paper currency required middleman who charged transaction fees, kept watch on our transactions and was prone to tampering.
  • Blockchain allowed you to avoid middleman but it required an effort of verifying the blocks
  • Cryptocurrency was a reward to those verified the blocks and help us maintain the blockchain

What is Bitcoin? How are they mined ?

Bitcoin is like digital gold. Bitcoin is mined when a user verifies a block in the bitcoin-blockchain. As we read earlier, the blockchain in nothing but a database divided into a large number of blocks. Now, the database could be of anything. It could be a record of names, phone numbers,  email addresses etc.Bitcoin blockchain is a database of transactions. It is a ledger divided into a large number of blocks. When transactions happen, these transactions get added into a ledger block. The user who verifies the block gets to make a special transaction. He/She gets to add a few bitcoins on his/her account in that ledger. This is similar to mining gold and keeping it in your bank. The block is then get added to the blockchain. At the time of writing this post, the reward for verifying a block is 12.5 bitcoins………….that will be around $50,000 if we convert it to fiat currency. 12.5 bitcoins are being mined every 10 minutes on the Bitcoin blockchain. Around 14 million bitcoins have been mined so far.  This represents 2/3rd of the total 21 million bitcoin limit.

Satoshi Nakamoto designed Bitcoin protocol in such a way that there will be a limited supply of bitcoins, similar to gold being available in limited quantity on earth. However, you cannot divide gold below a certain threshold. Handling gold in less than milligram levels will be an impossible job but Bitcoin is just a number in your account, you can divide it to any decimal amount and transfer. Just like 1$ equals to 100 cents,1 bitcoin is equal to 100,000,000 Satoshis.

  • Bitcoins are digital, therefore you can instantly transfer them to anybody across the world.
  • Bitcoins are stored locally on your electronic device
  • Bitcoin transactions are technically irreversible. There is no mechanism to revert a transaction

 


What makes Bitcoin valuable?

Value of a thing comes from its demand (and supply). If you have some new product X, what price does it have? You can set a price and see if anyone buys it. If anyone finds it useful, they will be ready to pay for it. Any useful thing with a finite supply and acceptability has a value.

The reason a currency or commodity has value is that people are willing to buy it. In earlier days, Bitcoin had no value. Some people saw its potential and invested in it. For example, one of the first transactions was two pizzas that famously sold for 10000 Bitcoins. Nonetheless, trades like this helped the currency get traction. Since one person was willing to sell pizzas for Bitcoins, others thought the currency has a value.  Trade and value grew step by step over time and now, at this time Bitcoin market cap is in billion dollars.

We have been taking traditional currency such as the US Dollar for granted and overlooking its drawbacks for many years. Bitcoin became valuable because it solved problems with traditional currency….. just like paper currency did hundreds of year ago.

Here are some points that make Bitcoins far better than the traditional currency.

1. Bitcoins are decentralized

No government controls bitcoins. That means, they can’t inflate or deflate its value. Neither they can ban it. Your savings will never get diluted.

2. Bitcoins are free to transfer

Bitcoin is not a company or a business. It does not charge its customer to use the service. It is an open source technology. As such, Bitcoin is completely free to transfer and hold.

3. Privacy Protection

Everyone knows where Bitcoin transactions come from and where they are sent. However, no one knows who holds a particular bitcoin address. If you want to stay anonymous, you can stay anonymous.

4. Bitcoins are easy to use

You don’t need to open a bank account to transact bitcoins. A simple Bitcoin wallet can be downloaded for free. Within minutes you can start transactions with bitcoins.

5. Bitcoins can be transferred easily

While traditional wire transfers can take a long time to process (sometimes even days), Bitcoin transactions can take just about 10 minutes to complete. You can send bitcoin anywhere and it will arrive minutes later. As soon as the Bitcoin network processes the payment, it is transferred.

6. Bitcoins are durable

Unlike paper bills, Bitcoin can not be destroyed or damaged. Unlike gold, it can’t be adulterated. Once a bitcoin is created, it stays as it is, forever.

7. Bitcoins are portable

Because Bitcoin is electronic, it is easy to store and carry. Gold is actually quite heavy and takes up a lot of physical space.


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Once again, I agree.

The article was very long and you did not understand many of the concepts. That’s okay. If you have any doubts lingering in your mind, feel free to ask them in the comments below. I will make sure they get answered within 24hrs.

Thank you.

What is Private Key and Public Key in Blockchain ?

A Private key and Public key are two important concepts in Bitcoin. You should have a good understanding of these two concepts if you plan to invest in Bitcoin for a long term.

Bitcoin Blockchain is an open database which is secured using private and public key cryptography. All your information is accessible to everyone but no one can tamper it unless they have legit keys. Private key management is everything in Bitcoin management and you must know its intricacies.

Private key and Public key in Bitcoin

Every person on Bitcoin network has two keys

The private key should be kept secret at all times. If you lose this key, someone may use it to secretly steal your money.

The public key which is known to everyone on Bitcoin network. Pubilc key has two uses.  1) It serves as your address on Bitcoin network  2) It is used to verify your digital signature.

Private and Public keys are linked together by an algorithm called Elliptical curve digital signature algorithm. It is not possible to derive your private key from the public key.

A private key is used to create your digital signature on the transaction. If Alice wants to send 5 bitcoins to Bob, she would digitally sign this transaction with her private key.  She will address this transaction to Bob’s public key which acts as Bob’s address on the Bitcoin network. This transaction is then sent to Bitcoin network for verification. Bitcoin network will then use Alice’s public key to verify her signature. If Alice’s signature is valid, then the network will accept this transaction for further processing and transfer 5 bitcoins from Alice to Bob.

If you are using Bitcoin wallets such as Coinbase or Zebpay then your private keys are being managed by them.  What you see on the wallet UI is your public key which can be used to receive Bitcoins from someone else. If you delete your account from the wallet, then you may lose your private key.

Things you should know about private keys

  •  Your account security depends on choosing a good private key

Private keys are meant to be kept secret.  A private key is the only verification needed to spend funds from a Bitcoin address.

  •  Private keys are Portable

You can move your keys from one wallet to another.

  • A Private Key is Just a Number

A Bitcoin private key is simply an integer between one and about 1077. Nobody can guess your private key from such a vast set. This vast keyspace plays a fundamental role in securing the Bitcoin network.

How to safely store private keys?

 Hardware wallet or Paper Wallet is a safe way to store your private keys.

 Online Wallets (also called Hot wallets) like Coinbase or Exchange wallets like Cex.ioPoloniex is never completely secure. You are not in control of your private key when you use above wallets for transactions. You will lose your private key if

  • Your own PC gets hacked or cellphone gets stolen
  • Wallet company gets hacked or goes bankrupt
  • Wallet company turns rogue and runs away with your coins
  • Software mistake in wallet leads to loss of coins

Cold storage (not fully connected online wallets) is the safest but a little inconvenient way of storing wallets.

Hardware wallets

If you want to store your completely secure then go for Hardware Wallets. They are hack proof.  I have been using  Ledger S Nano ( I since last couple of years and the experience has been wonderful. I suggest you invest a small amount if you plan long term investment in cryptocurrencies.  Trezor is another good hardware wallet.

PAPER WALLET

Paper wallets are nothing but a fancy way of storing your private keys on a paper.

If you want to know more about Bitcoin storage then read: How to store bitcoins?- everything you wanted to know about Bitcoin storage

Best Wallets to buy Bitcoin in India – Zebpay vs Coinsecure vs Unocoin Review

best wallets to buy bitcoin india zebpay vs coinsecure vs unocoin

Which is the best wallet for trading Bitcoins in India ?

You can’t disagree that Bitcoin fever is going on. The world is going crazy over Bitcoins, and you certainly don’t want to be left behind. If you are wondering how to buy some bitcoins in India now then you are in a much better position than we were in a couple of years back.  With the rise of homegrown Bitcoin wallet startups like Zebpay , Coinsecure and Unocoin  and entry of International biggies such as Bitbay, you can comfortably buy and sell Bitcoins in India.

In this post, we will review all Bitcoin wallets present in India currently. We will see their pros and cons and discuss individual features.

Prerequisites for trading in Bitcoin wallets in India

As of now, you cannot buy Bitcoins through cash or credit/debit cards. You have to do NEFT / RTGS online transfers or use Payment Gateways such as PayU money to load money in your Bitcoin wallet.
 
Also, Indian companies ask you to furnish KYC  documents before you start trading. Following documents are required to get started with Bitcoin wallets in India.
  1. Pan Card copy
  2. Address proof copy
  3. Bank details
  4. Phone number

Zebpay Review

PROS 

  • Amongst other Indian digital exchanges, Zebpay offers best user experience. The signup is quick, buttons don’t lag and you can finish the entire buying or selling process in two or three steps.
  • Zebpay provides email and SMS communication of all your transactions. 
  • In Zebpay, you need to first put money into your wallet through an online bank transfer. The minimum transfer amount is 1000Rs.
  • It gives you the value of your BTC investment in INR.
  • There are plethora of options on  Zebpay for making top-ups / recharges -Yes, you can use bitcoins for mobile recharges.

CONS

  • Zebpay is available only on Android and iOS devices. It is not available on desktop yet.
  • Buy and sell price difference: The difference between the buying and selling rates is usually quite wide on Zebpay. While most Indian companies at the moment offer wide spreads, this will reduce as the amount they trade increases.
  • You need to transfer money through online banking. If you use NEFT/RTGS/IMPS then it takes more than 1 working day to load the money. If you use payment gateway, then you have to shell out an additional 2.3% of convenience fee. 
  • You can’t place any auto buy / sell orders based on cut off prices. (I think this used to exist but I no longer see it on the app).
  • Security seems a little slacker than Unocoin. The app opens without any Pin unless you explicitly go in settings and enable it. They should also enable 2 factor authentication.

Unocoin Review

PROS

  • You can open account with just 200 Rs.
  • KYC verification is very fast. It happens within 1 working day.
  • The difference between buying and selling rates are usually less than Zebpay.  However, these rates fluctuate a lot with international currency exchanges. 
  • Unocoin provides web as well as app version for trading.  They have many more features than Zebpay such as you can create a systematic investment plan (SIP) to buy Bitcoins.
  • You can load mooney into the wallet using PayU money wallet which you can topup using  credit card, debit cards  or net banking. This is a BIG bonus.
  • Security is very strong. Every transaction is processed through a two step authorization process.
  • Money Transfer from your bank account to your UnoCoin wallet is much faster than ZebPay.

CONS

  1. They don’t lock transactions even for a minute. I was trying to make a payment for a small amount of BTC, and by the time I tried to make the purchase, the rate had changed. So I had to make the purchase from scratch.
  2. Transferring payments is painful. If you don’t want to use your PayU wallet, you have to do a fund transfer from your account to the Unocoin wallet before you want to transact. You can hold this money in Unocoin’s account for 90 days. This doesn’t feel right to me. I don’t want to hold money in someone else’s account, but I want to be able to transact immediately. However, on the positive side, payment transfers to your Unocoin wallet are much faster than Zebpay. 
  3. PayU money wallet limits apply. Meaning you can’t transact more than Rs 20,000 worth from your wallet.

Coinsecure Review

PROS

  • The price difference between buying and selling is lowest at Coinsecure, making it very good for trading bitcoins. 
  • Conisecure provides a real time trading platform with open ledgers- you can actually see all transactions happening over their exchange. Its good to see that they are following the philosophy of openness which Bitcoin is built for.
  • There is a 0.3% exchange trade fee on all transactions on Coinsecure, which is quite reasonable.

CONS

  •  Options to load money in Coinsecure wallet are very limited.  They do not have a payment gateway integrated. You have to use NEFT to transfer funds from your Bank , which usually takes 1 working day.
  • The UI is difficult to understand for beginners. Coinsecure team really have to work on it if they want to give User experience as smooth as given by Zebpay. 
  • Although there are features of two-factor authentication for mobile, but I don’t see user session management for the website. You are always logged into their portal , which I feel is a big security gap.

Summary: Each individual has its own preferences. I suggest you load minimum amount in each of the wallets and play for a while till you get hang of the features. Then you can transfer your Bitcoins from different wallets to the wallet of your choice and continue to trade from it.  

 

How to smartly buy and sell Bitcoins in India ?

When I purchased my first Bitcoins in India last year, I never thought the value will go from $480 to $4300 in just one year- giving an astronomical return of 800%.  Not just Bitcoin but other crypto currencies have given eye-popping returns in the last couple of years.  A pursuit of these crypto-currencies has led to a modern day digital gold rush and you can’t just sit behind when the entire world is going Bananas over Bitcoins, Ethereum, Ripple and what not. Naysayers will talk about the bubble and all but I am pretty sure that this price momentum is to stay long. Wallstreet experts are already predicting that Bitcoin will hit $25000 by 2020 and may reach $100,000 in next 10 years.

My point is – If you haven’t bought any, now is the time to buy in.

Before we talk about buying and selling Bitcoin, I want you to know what Bitcoin is, where to buy it and how to sell it.


What is Bitcoin?

Read the complete article here if you thoroughly want to understand Bitcoin: What is Bitcoin? – Explained in simple terms

Bitcoin is a crypto-currency (Krypto in Greek means hidden, secret).  It is like a dollar or a euro or a rupee but it does not exist physically. You can’t touch it, feel it but can spend it to buy stuff for you. When you visit an online banking page, you see a balance written against your account number. The balance just numbers on a computer screen but you can use them to buy stuff online or convert into cash at nearby ATMs. Bitcoin is no different. It is a balance written against your account number but not in a particular bank but on a blockchain. The blockchain technology is proven to be very safe. Unlike banks, it has no server downtime issues and it can’t be hacked. You have no reasons to worry when you buy and store Bitcoins.


Is it legal to buy Bitcoins in India?

Bitcoins are not illegal in India.

As of now, there is no clear mandate on the legal status of Bitcoins in India.  It neither legal nor illegal. All major governments are on the way of legalizing Bitcoins and a recent report by Inc42 suggest that Indian government will soon follow their path very soon.  However, Indians don’t seem to be in a mood waiting for government’s decision. Already (as of May 2017) India accounts for 10% of global cryptocurrency trade.

If Bitcoins become legal in India, then:

  • You will have to pay taxes on returns on Bitcoin investment
  • The government would issue guidelines regarding investment and purchase of Bitcoins.
  • If any foreign payment is made through Bitcoins, it would fall under the purview of FEMA Act.

I believe that with Bitcoins getting legal status in increasing number of countries, it will be legalized in India as well. See the legal status of Bitcoins by country here.


How to buy and sell Bitcoins in India? 

Stocks are purchased and sold at stock exchanges.

Commodities are traded on commodity exchanges.

Bitcoins are purchased and sold at digital-currency exchanges. There are multiple digital-currency exchanges are opened in India.

But, It’s very important to do a little homework on the exchange before you start investing. Here are a few things you should check before you buy your first Bitcoin.

  • Reputation – Lack of legal framework provides opportunities for scamsters to create fake exchanges and dupe investors money.  Hence, you must search through reviews from individual users and well-known industry websites. App store and Play store reviews and ratings act as good indicator of the reputation of an exchange.
  • Trading Fees – Go through the terms and conditions and understand the fee structure.  Well, not just trading fees but also read about the money deposit and withdrawal fees.
  • Payment Methods – What payment methods are available on the exchange? Credit & debit card? NEFT or RTGS? Payment Gateways? If an exchange has limited payment options then it may not be convenient for you to use it.
  • Verification Requirements –  Like stock trading platformsBitcoin trading platforms try to stay compliant with general regulatory guidelines. All Indian exchanges currently require some sort of ID verification in order to make deposits & withdrawals.
  • Exchange Rate – The value of a rupee against a Bitcoin will differ in different exchanges. Unlike stock markets, you will be surprised to know the difference in the exchange rate across various digital currency exchanges. Make sure you are buying at lower prices and selling at higher prices.

Digital currency exchanges in India

A lot of currency exchanges have sprung up in India.  However, not all exchanges are created equal.  Each exchange has its own advantages and disadvantages.  Digital exchanges in India require you to oblige to KYC norms.  All exchanges ask you to submit PAN or Aadhar copy before they give access to trade.  Here are a few of the popular exchanges currently operating in India. These exchanges have been registered as start-ups and have also raised funding from investors.

Read a detailed review of Indian Bitcoin wallets:  Best wallets to buy bitcoins in India

Buy and Sell Bitcoins on Zebpay

Backed by investors and used by thousands of customers, Zebpay is my favorite platform for buying and selling Bitcoins in India. The signup process is very fast.  You are required to submit a photo of your PAN card, which is verified in very short time.  As of now ( Aug 2017), users can only purchase bitcoins -Ether and other currencies are not available on their  Android & iPhone platform.

Pros:  Easy User interface, Quick KYC verification

Cons:  Does not accept debit/credit card as a payment mode,  higher deposit charges with netbanking

Download Zebpay on Google Play  and Apple Store

Registration and account Verification

buy sell bitcoins in India zebpay

Adding money to Zebpay wallet

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Buying Bitcoins on Zebpay India

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Selling Bitcoins on Zebpay India

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Buy and Sell Bitcoins on Unocoin

Unocoin is a Bangalore based startup which claims to have over 1,30,000 customers. The company raised 1.5 million USD in pre-series A funding from top investors like Blume Ventures and ah! Ventures. It is also featured among the top 20 out of 350 companies in The FinTech 20: India list.

Pros: Features such as SIP subscription are available.

Cons:  KYC verification takes time.

Step by step process to create an account on Unocoin.


Buy Bitcoins at Coinsecure India

Founded in July 2014  Coinsecure offers Bitcoin wallet, exchange, trading and merchant services along with other Blockchain based services. The company is based out of Delhi and Bangalore. Coinsecure offers an algorithmic trading Bitcoin exchange, a Blockchain explorer, free APIs for all their products.

Pros: Host of other services apart from buying and selling Bitcoins, Quick signup process

Cons: Frequent server downtime issue, Play store reviews haven’t been good.


You purchased bitcoins. What next?

All the above digital exchanges also provide mobile or desktop wallets to store your bitcoins.

Read here: How to safely store bitcoins? – Everything you need to know about Bitcoin wallets 

Once purchased, you can:

  • Sell bitcoins at the same digital exchange
  • Transfer and sell bitcoins to other digital exchanges
  • Transfer bitcoins to other wallets using your public and private key

Read here: Private key and public key in Bitcoin Blockchain?

    • Use these bitcoins to buy other cryptocurrencies

You can use popular websites like Changelly or ShapeShift to convert Bitcoin into any altcoins. You can also use Poloneix exchange where you can add Bitcoin convert it into any digital of fiat currencies.

  • Spend Bitcoins at popular e-commerce websites

To summarize :

  1. Bitcoin can turn out to be a smart investment. You should consider adding Bitcoin and other cryptocurrencies to your investment portfolio.
  2. It is safe to buy and sell Bitcoins in India.
  3. Start small, get the hang of the cryptocurrency market before you bet big on something.
  4. Cryptocurrency world is evolving very fast. Keep reading this blog to stay updated with the latest information.