BITCOIN--AN UNDERSTANDING AND RISK

Bitcoin 

What is BITCOIN

BITCOIN was invented by unknown person or group of people under the name of Satoshi Nakamoto through a Open source software in 2009. It  is  a crypto currency and worldwide payment system in decentralized digital currency works without a central repository or single administrator. The system is peer to peer and transactions take place between the users directly without an intermediary.  BITCOIN's smallest unit is a Satoshi, named after the creator. One Satoshi is one hundred-millionth of a BITCOIN, making it worth around $0.0001 at current exchange rates. 

Types of wallets

Few years ago buying BITCOIN was far-fetched. However, now with a market cap of approximately $180 billion and rising, even Wall Street investment bank Goldman Sachs has acknowledged that it's getting harder for institutional investors to ignore the digital currency.

Now it is easy to buy the BITCOIN just like signing up a mobile app. To invest in BITCOIN, one must open a wallet which is basically equivalent to a bank account to receive, store and sent BITCOIN. There are three main types of wallets, software wallet, web wallet and hardware wallet.

Software wallet should be installed in your computer or mobile which gives good control over the security of the coins but slightly tricky to install and maintain.

Web wallet is hosted by third party, easier to use but depends on the provider to maintain high level security to protect the coins.

Hardware wallet is small physical devise that can be stored in your wallet, keychain or safe. Since it is not connected continuously through internet and protected by PIN making it more secured option. However, there may be a cost involved as other two options are mostly free.

How to invest

The most popular BITCOIN wallet now is COINBASE whereas others including BITCOIN Core, Electrum and Breadwallet.

Let us see about opening wallet account in Coinbase.

After sign in the wallet, one has to add the payment option, which can be either Paypal account, Bank Account and credit /debit card. Bank account option is simple and cost effective whereas the other two options will have low purchasing limits along with long verification process and high transaction fees.

Purchasing of BITCOIN will be through Established exchanges (need to choose the exchange at the time of signup and link to payment method), or through third party web pages (which act as exchange) or one to one transaction from the local individuals.  

Exchanges

While choosing the exchange one need to take into account the transaction fees, accessibility, liquidity conditions, reputation, transparency and country where the exchange is located. . Some of the most reputable and popular exchanges include U.S.-based Poloniex , Bittrex and Coinbase-owned  GDAX, as well as Asia-based Bithumb and Bitfinex.  There were cases that around 980,000 BITCOINs have been stolen from exchanges, either by hackers or insiders and few were also recovered. Until earlier this year, it was thought that Chinese exchanges accounted for around 90 percent of trading volume. But it has become clear that some exchanges inflated their volumes through so-called wash trades, repeatedly trading nominal amounts of BITCOIN back and forth between accounts. Since the Chinese authorities imposed transaction fees, the volumes started falling.

Now it is ready to start buying and selling BITCOIN. Purchases and sales can be handled in a variety of ways, ranging from fiat currencies, such as dollars and euro, to credit and debit cards, to wire transfers. The BITCOIN Purchased will reflect in your account.

HOW MANY ARE THERE? 

BITCOIN's supply is limited to 21 million - a number that is expected to be reached around the year 2140. So far, around 16.7 million BITCOINs have been released into the system, with 12.5 new ones released roughly every 10 minutes via a process called "mining", in which a global network of computers competes to solve complex algorithms in reward for the new BITCOINs. 

Price movement of BITCOIN 

BITCOIN has been around since late 2008 but it only started making the news in early 2013. The price has moved from USD 50 in 2009 to USD 11000 (peck achieved) in 2017 and corrected to USD 9000. BITCOIN has performed better than every central-bank-issued currency in every year since 2011 except for 2014, when its performed worse than any traditional currency. So far in 2017, it is up around 1000 percent. If you had bought $1,000 of BITCOIN at the start of 2013 and had never sold any of it, you would now be sitting on $80 million. Many people consider BITCOIN to be more of a speculative instrument than a currency, because of its volatility.

  

Disadvantage :

Given its pseudonymous nature and that BITCOIN address owners are not explicitly identified, such transactions are effectively anonymous. Hence, KYC cannot  be ensured and hence, may be used for Illegal activities and terrorism financing.   This has been a problem with regulators and officials, as they recognize it as a medium for illegal transactions.

BITCOIN has been recognised as currency in many countries and as of today it’s the most liquid & widely accepted crypto currency in the world. However, there is a long list of alternate crypto currencies that are eager to grab market share and challenge BITCOIN’s dominance.  What about the 21 million BITCOIN limit? It’s possible that once that ceiling becomes severely limiting, users will turn to other crypto currencies, effectively increasing the global supply.

BITCOIN trades continuously on exchanges around the world in a very quick and straightforward manner, and it is conveniently stored electronically in “wallets”. However, having online wallet providers introduces an extra risk factor that cannot be ignored. This potential security vulnerability that makes many people skeptical.

What does the future hold for BITCOIN?

So what’s next for BITCOIN? As outlined previously, it has many advantages and for this reason it will remain relevant as a currency.

We see the biggest risk to BITCOIN being its substitution and/or parallel use by other crypto currencies. BITCOIN die-hard fans claim that this is never going to be an issue since BITCOIN was the pioneer and as such enjoys first-mover privilege.  Is BITCOIN simply a 21^st century version of gold, only without the storage issues? Or is it just a short-lived popular fad that may soon evolve into something quite different? Only time will tell. The only certainty is that its price will remain very volatile in the future.

Regulatory stand:

Most of the regulators do not recognize the BITCOIN but the  growing adoption and acceptance, investments in BITCOIN start-ups and products being launched around the digital currency have ultimately raised investor acceptance and confidence in BITCOIN. However, it’s still very early stages for the cryptocurrency market progression. One should also note that BITCOIN cannot be purchased through credit card in India, though it is possible to do so in select countries around the world. “It is not possible to buy BITCOIN through credit card in India 

Conclusion:

Till now BITCOIN is not under any control or regulations and are traded between individual or through exchange. Like Currencies, there is no guarantee by any government regarding value as BITCOIN is commodity and volatility cannot ruled out. Hence the risk investing BITCOINs is very high.  It is advisable to take only calculated risk in investing in BITCOINs subject to regulatory permission.

This write-up is based on news and reports in various web pages along with my perception on the subject.

IS OUR CORPORATES REALLY INTERESTED IN SOCIETY WELFARE?

Corporate social responsibility (CSR)

What is CSR

Corporate social responsibility is the duty of the every corporate body to protect the interest of the society at large. Although the main motive of the business is to enhance the profit, the corporate should also take initiatives for the welfare of the society and perform its activities.

Why and how it is being implemented

CSR is being implemented by compulsion by law, every company allocate a part of their profit to be spend on the CSR activities. But in real terms the some corporate do not care about the society, they are only worried about to the turnover growth along with improved profits.

Is the CSR only allocating funds from the profit and remit to the Prime Minister funds or spending on some causes for the society? According to me the answer is big NO. Following of business ethics and to see that the product which we market do not harm the consumer or the environment and also educate the customers about products and its usages is CSR besides spending a portion of the profits to society.

DO our corporate do this? Really not. Silapathigaram, a tamil epic says about the character of businessmen as under:

Quote

A businessmen is one who will not take more than what he deserve and should not give less then what the buyer deserves

Unquote

Examples of misdeeds/quality issues of some companies/ product

Let us see some examples of how some corporate are indifferent to the consumers.

1.   There are always fine prints. The advertisement will highlight only the favourable points to the consumers but silent about the conditions. For ex. A telecom advertise that at X amount the user enjoys free calls and internet facilities for 70 days but the condition is the handset should be 4G compatible. Although the company knows through the systems about the user’s handset compatibility but it will be silent even if a non 4G Handset user select this option.

2.   The price will increase when the tax goes up but will never come down when the tax is reduced. Recently, when GST is introduced the tax for restaurants has been increased and consequently the price of the eatables was increased but when the GST is reduced, the end price to consumer is maintained as it is and the difference in tax has been added to the cost.

3.   The cosmetic products are advertised as Herbal where as the products contains  chemicals

4.   The waste from the units was allowed to mix with nature  instead of treated at the plant itself unless the government take it seriously.

5.   Some hospitals run by big Corporate, there are targets fixed for doctors and hence they resort to unwanted treatments to charge more.

6.   Recently, harmful chemicals were found in the soft drinks and ready to cook products but I really wonder what happens to the quality control.

7.   Stray cases of expired products were also taken back to the factory and the expiry dates were altered and marketed again.

8.   There were cases of selling expired products in some retail chain stored.

9.   In banking also the charges are revised by incorporating conditions at the time of agreement “that the bank reserves the right to revise the charges”. The same procedure is followed in case of credit cards also the terms are changed unilaterally.

10.                Some banks are selling products in the name of cross selling by misinforming the customers

11.                There were cases of selling gold jewellary of lower quality/ mixed with other metal came to surface.

12.                The standard quantity was not maintained. The quantity was reduced and while there is no change in price. ( suddenly the company reduce weight from standard 50g to 30 g but the price maintained)

Conclusion

The above observations may be stray cases and will not represent the whole, but what happened to quality check undertaken by the corporate. My idea is not to highlight the bad incidents but only brought out the such happening and indifferent attitudes in the name of marketing techniques and smartness to improve the bottom-line of the company.   The consumer is approaching the branded products only with a faith that it will be of quality but the faith is being shaken up slowly. I do remember in my younger days when I buy a pen I will ask a paper to check the pen whether it is writing and now I just buy it without testing. The pen is only an example and it is applicable to all products. 

Now, slowly people going back to the olden days of checking the detail such as expiry date, weights etc while buying the products.

If we do not wake up and implement the CSR in letter and spirit, the days is not too far, the consumerism will get stronger to put everything in place.