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Bitcoin Businesses in India Petition to Make Bitcoin Legal, Can India Become the Next China?

India is a country with a good amount of smartphone and technology penetration. Traditionally, India has been the back office for most of the multinational companies owing to its time zone advantage, cheap and skilled labor and  diligent technical skills. With  the recent outburst of cheap and affordable smartphones in India, there has been a good amount of smartphone penetration leading most of the upcoming Indian e-commerce startups to go completely app-based rather than investing much on the traditional website. India is potentially one of the countries where with a good amount of adoption, Bitcoin volumes can inflate exponentially. However, the Reserve Bank of India has had a neutral standpoint towards the digital currencies. RBI has stated that they are not regulating Bitcoin or other cryptocurrencies yet and would like to observe and understand the technology better before adoption. However, Bitcoin businesses in India have filed a petition to make Bitcoin legal. Let’s dive into the details of the petition and the impending effects.

Bitcoin booms in India

While Bitcoin transactions in India initially were considerably low, Bitcoin mining activity has been very high since 2012. GB Miners group have 9% hashing power of the Bitcoin network, paralleling their western counterparst, making them the largest Bitcoin mining group in the country. With the Indian Government’s demonetization move, the country was forced to go cashless and this saw a rise in Bitcoin transactions and Bitcoin prices. The demonetization ended at the start of 2017, but the effects are still persistent with lower cash withdrawals being observed at banks and ATMs. This has built the required momentum for Bitcoin adoption in India.

The petition

The petition comes at a time when Bitcoin is making regional headlines due to statements from policymakers and politicians who have raised concerns about the lack of regulation surrounding the bitcoin industry. As the government is sticking to the hands off approach, big players in the Indian bitcoin industry who welcome regulation have banded together to launch a self-regulatory body to ensure adherence to KYC and AML norms called The Digital Asset and Blockchain Foundation of India (DABFI). DABFI has launched a petition calling for the explicit legality of bitcoin and other cryptocurrencies in the country. Their main motive is to develop an amicable environment for the development of Bitcoin and other cryptocurrencies.

What can India do to Bitcoin?

India is the second most populated country in the world relying heavily on micropayments. This is especially true for the small scale and medium industries that play a vital role in the country’s economy. With sustained adoption, Indian Bitcoin adoption can be a game changer for the cryptocurrency. Unlike China where the Bitcoin is only now a speculative vehicle, India can do justice to the true stature of Bitcoin and nurture the currencies through large scale adoption and eventually using its massively brilliant technical force for Bitcoin engineering. The verdict for Bitcoin’s legality in India might be set sometime in April. How the Indian government’s judgment would impact Bitcoin is to be seen.


Why Investors Should Care About Bitcoin Mining Pools

What is a Bitcoin Mining Pool?

A Bitcoin mining pool is a group of Bitcoin miners working together to earn Bitcoin.  Bitcoin miners use computing power, which is measured in hash rate, to unlock blocks, for which they are rewarded in Bitcoin.  Each time a block is unlocked, the Bitcoin system allocates Bitcoin to a miner who participated in unlocking the block.  The hash rate of the participating miners determines which miner earns the Bitcoin through random distribution.  As the number of miners unlocking blocks increased, miners with low levels of computing power would have to wait extended periods of time, even up to years, to earn Bitcoin rewards.  In response to this problem, pools were created to group miners and distribute Bitcoin rewards on a more consistent basis.  In other words, pools reduce the “granularity” of the rewards that miners earn.


Source: Blockchain

What are the Largest Bitcoin Pools?

The three largest pools, measured by hash rate, are DiscusFish (also known as F2Pool), AntPool, and BW Pool.  These pools comprise approximately 22%, 17%, and 15% of the total hash rate, respectively.  DiscusFish is a Chinese mining pool, founded mid 2013.  AntPool is owned by Chinese IC design company Bitmain Technologies Limited.  BW Pool is also a China based firm.

Why does this Matter to Investors?

The successes and failures of pools could have serious implications for investors.  Collectively, these pools make up more than  50% of the total hash rate.  If they were to collude, they pose a security risk to the validity of the blockchain.  Furthermore, hash rate is important because it indirectly reflects the projected value of Bitcoin.  If confidence in the value of Bitcoin is high, people will be more inclined to mine.  More mining means a higher hash rate.  If these pools disband or suffer from internal error, it could send shockwaves through the Bitcoin community, reflected in its trading value.  Given the geographic proximity of these pools, failure of one pool could be shared by others.

In looking at recent history, the primary sources of failure for Bitcoin have occurred during consolidation of information.  Two, notable cases of consolidated information failure are the Mt. Gox and Bitfinex exchange incidents.  Although pools have not had a severe adverse effect on Bitcoin value yet, investors should monitor the security and growth of pools with wariness.