“I think it’s a funny and anarchist concept, these bitcoins you talk about”
I begun the interview with a prejudiced tone because I am not a huge fan of financial systems that have no oversight.
“And yet it’s the only currency immune to financial fallouts”, Mohit replied with a stoic confidence in what he set out to do.
Mohit is the founder of Coinsecure – India’s first bitcoin exchange.
“Most of the other players in the market are either brokers or trader themselves. They don’t operate a proper exchange.”
Let’s take a trip to money-land to understand exactly how money works. Currency is nothing but a common barter. Historically, human civilizations traded in several different modes of barter trades and eventually realised the need for a common entity to barter against. That is how the modern day money was born. More or less. Actually no, the modern day money is very different from what I just told you. If you realise that, good, you’re smart enough and don’t need an explanation, if you don’t, this is a fair analogy nevertheless.
Later on, people who owned large amounts of this newly formed currency got insecure about keeping it in their homes. This is when the business model of banks was born. A place that would take your currency keep it, and give you an interest over it. In turn, banks would lend out money to people in need and charge them an interest more than they’re paying you and make some money from the difference in percentage.
Sounds like a fair deal, a good business, until the point where you get greedy and start lending more than you have deposits for. Which was the basic premise behind the 2007-08. Of course it was way more than this, but yeah, for now, this should do.
“The financial system, as it stands today, is very fragile”, Mohit tells me as we go down the path of what’s really wrong.
“Most banks provide no safeguard to their bankruptcy. And this is how things work all around the world. This is something that struck me quite early on. I was on a trip to Singapore where I met someone who introduced me to the concept of bitcoins. I picked it up and kept reading about it all the time. That’s when the revelation happened.”
The Coinsecure team suggests that a bitcoin economy is a much sturdier way of dealing money than how we do it right now. Of course there are a lot of different web articles that you can read about bitcoins from and we will link some of them at the end of this article.
Mohit founded Coinsecure along with Benson Samuel as the CTO in July 2014. Coinsecure is a round-the-clock bitcoin exchange where you can open an account, deposit money (in INR) and trade bitcoins for your money.
Transactions in the bitcoin economy are non-reversible and non-erasable. All this because of the block chain system that bitcoin transactions follow. Without getting into a lot of detail, it will suffice to understand that a block chain system ensures no one can ever delete a transaction recorded on a global system and no one can track it back to the original buyer/seller. At least that’s how it works with its current system of things.
This makes the whole idea of bitcoins sound a bit anarchist but then again as Einstein once said, “an idea which at first does not sound stupid, is hopeless”. The blockchain technology has been the main innovation of the bitcoin economy that has found uses in several other places like logistics and even traditional banking.
But doing something so radical in India wasn’t so easy. It was a huge leap, back in the day, because people hardly knew about the idea of a bitcoin and the trading across India was very haphazard, disorganised and of course, low in liquidity. Mohit aimed at normalising these trends. When he sums it all to me, I can see him solving his own problems and along the way making something that could benefit people as well.
“The spread prices for buying and selling bitcoins in India was really bad” Mohit tells me as I go puzzled about what spread means.
This is when he realises, not everyone is a market genius, so he goes on to explain. “Every free market has a list of people who wish to buy shares/currencies/commodities at a certain price, and there are sellers who wish to sell at another price. The difference between the lowest asking price and the highest buying price is what we call a spread and generally represent as a percentage of the buy price”
Now the idea is that the smaller the spread, the lesser is the conflict between people willing to buy and sell. So if the highest buying proposal is closer to the lowest selling proposal, your chances of grabbing a deal are much higher compared to when these prices are far apart.
A narrow spread means more trades happen more easily, which means the liquidity of a market increases, or in other words, the total transactions that happen everyday go up. This increased liquidity or volume of transaction then helps the market become steadier, more profitable and relatively more predictable. Which is usually a good thing. Unless of-course large chunks of a market are controlled by a single person or dependant on a singular system easily prone to failure. This is something that has happened several times in the past from the great depression of the 1930s, the Arab oil embargo, the asian financial crisis, subprime mortgage crisis all the way to the eventual global financial depression of 2007-08.
So yes, snap out of the depressing stories. Mohit’s engagement with bitcoins has sure been an interesting journey to follow but what’s next holds even more promise. They are soon planning to launch their own payment gateway so people can now pay for items online using bitcoins. This is revolutionary in two ways. First is the independence from a complicated interdependent system of debts and liabilities. Second is the ease of transactions with anyone across the world. This means you can not only buy anything from anywhere around the world with no additional charges but you no longer have to depend on financial institutions to safeguard your money.
This does come with an obvious concern of investment related earnings. The interests that banks provide on top of a Fixed Deposit and the other investment options available. This tells us that for the time being, it is best to consider bitcoins as a commodity instead of a true currency.
However, the one amazing thing that it has accomplished is that it has made us rethink the structure of our economy by forcing us back (at least in concept) to the times of barter trade and making us realize the real meaning of money, of an economy and what a free market really means.
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