By Deepsekhar Choudhury
“Cryptocurrencies basically have no value,” Warren Buffett said recently. “They don’t produce anything. You can’t do anything with it except sell it to somebody else,” he added. While the jury is still out on the utility of cryptocurrencies, the most popular of them all – bitcoin – has ratcheted up to a market capitalisation of $162 billion on the fear of missing out by new investors.
However, many investors still need hand-holding while dealing with this relatively new asset class. Bitcoin marketplace BitBuddy aims to help make bitcoin investment and transactions a transparent and simple affair for Indians. It was launched soon after the Supreme Court ruled in March against a Reserve Bank of India order that prevented the use of bank payment systems for cryptocurrency-related payments since 2018. Founder and CEO Ashish Agarwal says that the platform had been ready for launch two years ago but it had to be shelved following the central bank’s dictum.
The BitBuddy app allows users to buy and sell bitcoin. There’s a second product the startup is working on, called Explorer, that will function like a bitcoin search engine. Intermediaries such as exchanges charge a fee to facilitate cryptocurrency transactions. Ideally, the rates should always depend on the congestion in the network – meaning it would be cheaper to conduct a transaction when many others are not doing so and vice versa.
However, the lower limit of the fees have been standardised at a level much above what it should be, according to Agarwal. “Everyone has standaridised their withdrawal fees at 0.0005 bitcoin which is Rs 300,” he says. One use case of the Explorer would be that it will help you check out how much you should be charged at current congestion and what others are charging.
But why would users choose a marketplace over an exchange? Agarwal says imagine an e-commerce site such as Flipkart or Amazon without information on who’s selling what. That would allow them to mark up prices of products and earn higher commissions. “Whenever prices fluctuate a lot, exchanges know that sellers have already earned well. They can manipulate the prices, technically speaking. Though I won’t comment on if they actually do so,” Agarwal says. “Everything is transparent in a marketplace.”
However, he contends that players in the Indian cryptocurrency space have done a good job as income tax raids on some exchanges in December 2017 did not find any problems in their operations. “Despite the absence of government regulation, there’s a lot of self-discipline in the market,” he says, adding that BitBuddy has a rigorous know-your-customer process to ensure there’s no wrongdoing such as money laundering through the platform. The company is largely bootstrapped and has received some seed funding from a Jaipur-based industrialist.