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How Can Retail Investors Invest In Start-ups? Currently, there are a ton of start-ups that are democratising and making things easy for retail investors to invest directly in unlisted companies. In this article, we will develop a holistic understanding around: a) Should retail investors invest in start-ups? b) What are the key things one should keep in mind while doing so? First, let us understand the pros and cons of investing in unlisted companies. These are companies which have not yet been listed on NSE or BSE (as opposed to companies like HUL and ITC), but you see great potential in them. Let us first look at the negatives. 1. Loss of capital Start-up investing is risky. To give you perspective, venture capitalists and angel investors invest in 100 companies, and probably only 5 succeed. But those 5 companies give so much return, that it offsets the loss by the other 95 companies. You, as a retail investor, might only invest in 1 or 2 start-ups, hence you need to be extremely picky. This definitely is a risky game and there can be a complete loss of capital as well. 2. Liquidation risk If you invest Rs. 5000 in a start-up, liquidation can become a major problem. This means that you put in your money, but you are unable to sell off your stocks that you’ve purchased in the company. This is because there is no free market per se where you can sell your stocks in these unlisted companies. The liquidity, in terms of passing on your stocks to someone else is not that easy. 3. Dividend risk When you invest in private companies, they might or might not give you dividends. So, your money might get stuck for a very long period of time. 4. Performance assessment risk If you put your money into listed companies like HUL or Tata Motors, they come out with a lot of commentary. The news and media cover a lot of relevant information on which you can act. For example, if you realise that the growth of a certain company is not that great, you can sell off your stocks in these listed companies. With unlisted companies, it is not that easy to get access to quality information. Hence, the transparency is not that high. After reading these 4 points you must have convinced yourself that there is no point investing in these unlisted companies, but we are yet to look at the pros. 1. Asymmetric risk If you invest Rs. 5000 in a start-up, it might go to 100x in a very short span of time. These kinds of returns are possible only in cryptos and start-ups. You take a huge risk but there is potential to make very high returns as well. If you’re looking to put a little bit of money into these asymmetric types of instruments, then start-up investing might make a lot of sense for you. 2. You get a slightly more level playing field Before PayTM’s stock got listed, private investors had a lot of useful information. After the stock got listed on the exchanges, these early investors took an exit. This is one of the reasons why the PayTM stock has fallen so much. This type of scenario usually does not play out in the early start-up game, because everyone is investing at that stage and the investors usually get the best exit when the company IPOs. Investors enter at the seed round. Then there is Series A, Series B, Series C. The valuation of the company keeps going up with these rounds. Majority of these investors exit or make the most money when the company IPOs. If you as a retail investor get an opportunity to invest in a pre-IPO stage company, then there is a more level playing field there. 3. Sunrise sector This is the biggest pro in terms of start-up investing. Start-ups are bringing in a massive cultural shift. There are TV shows around start-ups. Governments are supporting start-ups. People are learning more about entrepreneurship. A lot of cash is flowing into the start-up sector. Therefore, if you invest in something where the growth potential is clearly visible, the potential returns can also be manifold.   Now, what are the key points you should consider before investing in a start-up? 1. Is it an industry which interests you? If you don’t know anything about fin-tech or ed-tech, don’t go and start analysing those ideas. You will miss a lot of critical details. For example, if you are working in IT and you understand software-development, and you identify an investment opportunity in that space, it might be sensible for you to invest in that idea. This is because you understand that industry well. Don’t get excited by the idea itself. If you don’t have knowledge of that specific industry, don’t invest in the idea. 2. You need to understand clearly how the company is going to make money If the idea is not clear to you, please don’t invest in such start-ups. 3. What are the founders of the start-up like? Do they have prior experience of working with start-ups? Do they have the experience of raising funds? Have they worked with good companies? Do they have a strong network? Knowing this gives you a positive orientation to investing in those types of start-ups. You are not essentially betting on the idea, you’re betting on the founder and their network. 4. What is the winning USP of this start-up? Do you understand the idea? Do you understand the business model of the start-up? Do you think the start-up will survive? Is the founder and the founding team good? Now, how can retail investors invest in start-ups? Of course, you can’t put 1 Cr, 2 Cr or 10 Cr rupees. There are multiple platforms you can use. One such platform is Tyke. (Not a sponsor :D) It allows investors to directly invest in start-ups they find interesting. You can start with as

The World Is In A Debt Of 279,000,000,000,000 USD The world debt currently is 279,000,000,000,000 USD. The number of zeros here is baffling indeed. In today’s article we will understand 3 key things. These are- Who is giving the world this debt? What is going to happen in case this debt bubble bursts? How can we use debt to make more money? Let us take a look at the split of the layers of debt that exists in the world right now. The data below, is taken from IMF and can help us understand the bifurcation of debt very clearly.   Investor sentiments have turned positive for this stock, and it is already valued as the second-largest Non-Banking Finance Corporation in India. Could Jio Finance be the next big Multibagger Finance stock? Where does the competitive advantage of Jio Finance lie? Simply put, it can achieve results (reach you) by spending only 1/100th of what its rivals require.  Let’s delve deeper into Jio Finance by examining Reliance’s typical business-building approach.   Debt layer #1- Public Debt (Indicated in orange) This is the government debt and it has been constantly going up. During the global financial crisis and COVID 19, there was a sudden spike in this debt because the government borrowed a lot of money. Overall, you can easily understand the upward trending curve represented by the orange bar which indicates the debt that is there in the world. Debt layer #2- Private Debt (Comprises of corporate debt, household debt, indicated in blue) a) Household debt debt taken by people like you and me. b) Private debt debt taken by companies. When companies like ITC, HUL, Nestle come out with their bonds (not equity), essentially, they are taking debt. When we take a loan from the bank, we are borrowing money on which we have to pay ROI. Similarly, when these corporations issue bonds, they are taking loans from the:  public and  large institutional players. Now, coming back to talking about public debt- Are all government debts the same? The answer is absolutely not. 1) Owning debt in your own currency. When we consider countries like the US and China, the majority of the debt they take, is in their own currency. This means that these countries are printing money and giving themselves a loan. This type of debt is obviously less problematic. 2) External debt. This is taken in external currency. Currently, Turkey is going through a massive macro-economic recession. This is because the majority of its loan was taken in USD. When the global pandemic hit, countries like Turkey, which have a lot of external debt, their macro-economics collapsed. As a result, they started defaulting which led to their currency weakening even more. In over-simplified terms, this is a balance of payment crisis. So, long story short, if a country owes debt in its own currency, it is not a big deal. But if a country is borrowing money externally, it can lead to a crisis. Now, an obvious question might arise. Why can’t all the countries just print their own money and give themselves debt? If a country like India decides to print an insane amount of money, we would have something called sovereign risk. In simple terms, this means that our economy is not as strong as China or the US’ economy. Another question might arise, why can the US get away with printing an insane amount of money? This is because the US is the reserve currency of the world. Unless we can find an economy stronger than the US, we can’t abandon it and till then, the US too won’t be frugal in terms of how it prints money. As you can see from the data above, advanced economies have taken more debt compared to anyone else. But if you take a look at emerging markets, the increase in debt taken is lesser compared to advanced economies. This is because advanced economies like the US and China have taken more debt by printing their own money in 2020. India and other economies of its likes, do not have the clout to go and print an insane amount of money. So, the entire discussion boils down to- US and China are printing a lot of money, simply because they can and India cannot. Now, can this debt bubble go back to a smaller shape? Theoretically, yes. There are 3 ways to deal with this high debt problem. 1) Governments will need to increase taxes. Once the government increases taxes, they will make more money and then they can repay the debt. In the US and China, they will repay it to themselves. In countries like India, they will repay the IMF and other developed economies from whom they have taken the debt. Now, here is the funny part. These are the taxation rates for India-   We are already hitting 43-44% in terms of taxation. Will people be okay paying more than 50% taxes? 2) Increase in productivity With upcoming technologies like the block-chain and further advancements in health-care and a bunch of other sectors, if the productivity of people can go up, the world will be able to repay its debt. By increasing productivity, there will be an increase in salary. Imagine if you are currently making 1L rupees, but with the advancement in tech and increase in productivity, you are able to make 5L. This is what the world is banking on. 3) Leave it to the future generation Let us just print as much money as we want and leave it to the future generations to deal with it. So this is how the world is currently dealing or not dealing with global debt. Will this bubble burst? At the end of the day, it is all a belief system. As long as the world believes that China and the US won’t default, the debt bubble will continue to exist in the advanced economies at least. Weak countries right now, like

6 Financial Mistakes You Should NOT Make In Your 20’s and 30’s Certain financial mistakes you make in your 20’s and 30’s can cost you your financial well-being for your entire life.  Here are 6 mistakes that you should avoid- 1. NOT buying health or life insurance Not buying term insurance in your 20’s, but at a much later stage, will require you to pay higher premiums, throughout your life.  The first and foremost step you should take in financial planning should be to mitigate risk completely. Only then must you talk about savings and investments. You might save a lot. You might invest a lot. But one grave event like the pandemic, and it can wipe out all your savings and investments. Several families, during COVID’19, suffered a lot because they did not have a term or health insurance. It wiped out their financial well-being entirely. 2. Undertaking life-style inflation. Life-style inflation simply means that you have entered the rat race of buying a bigger car, bigger house, and so on. There is no end to buying a bigger this, bigger that and soon you find yourself to be in that materialistic race. You go to the office, receive a salary at the end of the month and then start thinking of the next thing you should buy. This is a completely wrong approach towards money-management. Now, you might ask, “What is the point of earning money if you can’t spend it?” You obviously should make purchases, but you should do it mindfully. If you want to buy an iPhone 13, sure go buy it. But do it only if you have enough savings for it. Don’t purchase it on EMI. Cash back offers, no cost EMI, these are all tactics to lure you into a lifestyle inflation. Be a mindful spender in conjunction with how much money you’re making. If you are making a big ticket purchase like a house or a car, do a thorough analysis. Understand why you are buying that house. Is it from an investment point of view? Or, is it from a living point of view? Analyzing your purchases will help you make more well-informed decisions. Long story short, avoid getting into lifestyle inflation for as long as you can. 3. Not creating an emergency fund. It is generally recommended to have 6-12 months of savings intact, so that incase of an emergency (being fired), you can take that time to look for another job and again get back on the bandwagon of making money. Again, this 6-12 months time period might not be absolutely correct. It depends on your current lifestyle, your lifestyle inflation and the extent to which you can cut down your lifestyle inflation. Let’s say your current expenses are around 60,000 rupees, but you know you can bring it down to 30,000 rupees. In this case, you probably don’t need to save 12 months of your salary. If you want to create an emergency fund in case you lose your job, saving 6 months of salary would do. On the flip side, if you have fixed necessary expenditures, like paying fees for your children, it might become mandatory to have a larger emergency fund. Also, do not confuse an emergency fund with a retirement fund. The former is to deal with emergencies like loss of a family member or loss of a job. Or maybe there is a health emergency. Retirement fund is the money you will require once you stop working. Hence, a little money should go into each. 4. Depending on only ONE source of income Your employer might say you are like family, but the first sign of distress, and it is the employee who takes the brunt and is fired. Hence, it is very important to create multiple sources of income. It could be writing an e-book. Creating a course. In today’s day and age, especially in today’s start-up culture, relying on a single source of income is not a good idea. A majority of start-ups only tend to care about valuations and can fire people very easily. In a COVID like situation, your startup is not going to support you. They have investors they are answerable to. You are responsible for your own self. In today’s climate, creating multiple sources of income has become easier than ever. Analyse your skills, understand what you can monetize and simply start executing. If you depend on only one source of income, you will always have that sword hanging over your head and will end up living a very stressful life. 6. Not following the 80-20 rule. It simply means that to generate 80% of results, you need to put in only 20% of efforts in the right direction. For example, if you have your UG semester exams in 4 days, and you have yet not begun studying, the best thing to do would be to only solve the last 10 years papers. Frantically going through all your notes and textbooks will do no good. This rule can be incorporated into every activity in your life. In summary, your financial well-being in your 20’s and 30’s depends on your habits. Your habits of- Mitigating risk by buying a term insurance early on Not engaging in a high inflation life-style Creating multiple sources of income Following the 80-20 rule So on and so forth. 🙂 If you are a serious investor and are looking for advanced techniques with a focus on better returns, join my Youtube Community where I give live and timely updates on the Stock Market

3 Secrets to Grow Fast In Your Career! (The BCG Way) Here is an interesting question- Why do you think people like Mark Cuban, Bill Gates and Warren Buffett, despite being billionaires, not only get up in the morning and go to work, but are also excited about it? One could say they are following their passion, or they simply like what they do. You are not wrong. In technical terms, it is called- the concept of flow. What is the concept of flow? As human beings, we love challenges. Whatever work we are doing right now, we are doing it as a challenge. Probably the next job we will go to, if we find it challenging and fulfilling, we will certainly enjoy it.  But here is the disclaimer- do not confuse a task for being challenging when you actually find it backbreaking. Your work should not be so hard that it causes you an intense amount of stress. When the challenge that you pose to yourself and the skills that you have are matched- a flow is maintained, and you enjoy your work. I have had a successful career as a management consultant working with BCG. I am also a YouTuber, an entrepreneur and I have invested in different businesses as well. In this article, I am going to discuss three specific lessons I have learnt in my career.  By the end of this article you will have learnt a lot about how you should approach your career. With the right mind-set, you will easily be able to make an insane amount of money. Top 5 percentile rule. Each of us is gifted in certain areas. You might be a brilliant data scientist, painter, singer or are a very analytical person. Estimate things in which you can potentially be in the top 5%. In my case, I always felt that I am a very analytical person. I love to analyse things and draw my interpretations. I always pick non-fiction books over fiction, because there is a lot more analysis that goes into them.  That is how my personality was, and hence I decided to zero down on management consulting.  Management consulting involves: Extensive reading. Business analysis Getting creative with business ideas. I was naturally slightly better at these and hence the work appealed to me.  But I always endeavoured to get into the top 5 percentile of things that I pursued. When I decided to become a management consultant, I put my heart and soul into the fact that I should go and work at one of the best management consulting firms.  When I gave the GMAT, I made sure that I worked really hard and got a really high GMAT score. When I wrote my business school applications, I was determined to get into the world’s top 5 MBA programs. Do a self-assessment of your skills to figure out what you can be good at. Activate that and work really hard towards that goal. Now, how should you do that self-assessment and what are the key-points that you should keep in mind? Here is a simple two by two framework that BCG consultants use-  On the X-axis you draw out your skill-sets and on the Y-axis you draw out the job requirements.  In this graph, I have taken my own example. I was good at a lot of skills which were relevant in the field of consulting as you can understand from the graph. But I was not good with Excel or speaking well, which were very important in consulting. This form of self-assessment allowed me to uncover the skills which were important in consulting. I then started working on it and cultivating my skills by a) learning Excel and b) exploring public speaking forums. Doing this two way analysis helps you: Figure out the skills you are bad at. Isolate those skills and start working towards cultivating them. At the same time be smart enough to identify certain sub-areas in a job that you are exceptionally good at, bifurcate them and use it to your advantage.  The 80-20 rule. To generate 80% of the results, you just need to put in 20% of directional efforts.  If: Your strategy is right You’re looking at the problem in the right way. Just by spending 20% of your efforts, you can generate 80% of the results.             A very simple example would be- solving the past 10 years examination papers for a test you have in three days, which you are completely unprepared for.             An example from my life would be when I was playing cricket at the state-level during my school days. I used to practice for 4-5 hours on the field. I then had to attend school. Everyday I got only 2 hours to study, so I had to utilise that time in a focused manner to get the maximum output. Funnily enough, I did not know back then that what I was doing was called the 80-20 rule. But I was managing my time really very well.             And this is a habit which has helped me generate even better results going forward in my life.             When I graduated from INSEAD and joined Dalberg, I was simultaneously running a business, which took effort. Now I also have a one year old son to manage.              Over the years I have realised that understanding how to optimise your time is a very critical aspect to managing your entire career.  The importance of interdisciplinary learning. Whatever you have learnt in one of your career paths, you bring it to your other career path. An example of mine would be- some of the skills that I picked from management consulting were immensely helpful when I developed a bunch of businesses.  Skills like: Structure a problem and then Break it apart in a systematic manner. I applied the same principles I learnt in consulting to build my businesses.  Similarly, when I started investing in the stock market, I began- Analysing companies Understanding their product liability How they are going to

You Should Start a Business. Here’s why. In 2007, Warren Buffet was asked how much taxes did his employees pay in a financial year. To which he replied, 33%. And how much taxes did Warren Buffet pay himself in a financial year? Approximately 18%. Someone working for Buffet was paying 2X the taxes compared to what Buffet paid. Why was this happening? Here is where we need to understand the difference between wealth and income. Thomas Piketty, a French economist, speaks a lot about why people should be taxed more on their wealth than their income. This is precisely what we are going to try and understand in this article. Here are 5 simple examples which will almost convince you to start a business. Difference between me buying something on Amazon vs you buying something. Let’s say we both want to buy an Apple MacBook Air. For you, a normal retail consumer, it would cost Rs. 87,900 inc. GST. Since I use an Amazon Business account, I will be paying Rs. 74,491.53 excl. GST. Basically, I will be getting a GST rebate on it. And no, this doesn’t work only for expensive products.  So, if you own a business which is GST registered, you will get a lot of tax rebate in terms of GST credit inputs. If you compute all the items that you’d be buying in a year on Amazon, and take approximately a 10% savings rate, it will come out to be a lot of money you can save in a year. Now, I am not a CA. I just want to just give you a super simple explanation on how owning a business can allow you to save taxes legally. Please do your due diligence to understand how this works in its entirety.  2. Buying a car Here is a small clip around buying a car. It came out in Economic Times last year. It gives you an essence of how much you’re actually spending when you buy a car worth 15L with your savings : If you would have owned a business, there are a bunch of savings you could foster. Owning a business would allow you to depreciate some of that income out in terms of expenses. That will save you a lot of money.  When you fill your petrol tank, undertake maintenance or repair charges, you can expense that out to your business.  Do check with your CA if your business would qualify for that. What you need to understand is that owning a business does allow you the option of doing so. If you are a salaried employee, this is something you cannot claim. Now one might ask- Is it not evil to save taxes through building businesses?  There are two counter arguments to it. If you are building a business, you are creating more jobs in the economy.  Any nation would want to foster a more entrepreneurial culture. But what if the government pushes a lot of taxes on businesses? A lot of countries like Estonia and Portugal are giving visas to entrepreneurs to come and work there. This could be a big brain drain problem. Thus, the government needs to ensure an effective mechanism for entrepreneurs to keep on engaging with the economy and start creating more jobs. So this is the first qualitative argument as to why businesses are not taxed as high as individuals. It comes down to the risk reward equation. When one decides to start a new business, they have to put in a lot of capital to go to a certain scale. Only then it starts becoming profitable. This is how the majority of businesses function. Entrepreneurs are taking a greater risk. Hence once they are successful, they are rewarded more. Now one might have a lot of counter arguments to this statement, but the idea here is that building a business might be a worthwhile exercise after all. 3. Difference in taxation structure on income and wealth. Many times you must have heard the news headlines saying that Jeff Bezos and Elon Musk are paying close to 0% tax. On the other hand, an average American pays close to 35-40% tax. Is this not unfair? Let us understand the semantics behind it by taking the example of Tesla and Elon Musk. Assume that in 2020, the value of Tesla was 800 billion USD. In 2021, the evaluation became even bigger. It became 1 trillion USD worth of business.  Now, the 200 billion USD was the additional wealth that was generated. This money is still logged into Tesla. It is not as if Elon Musk has taken this 200 billion USD. Hence the money is not taxed from that perspective. If you compare this with income, it is a slightly different concept. If your income is 1L rupees, you have to pay a certain amount of tax because the money is going into your pocket. Hence the tax structure on wealth is very different to when income generation is happening. Very recently, Elon Musk decided to sell a certain bit of stake in Tesla. Whatever sale he made, he will have to pay tax on that, a much higher rate of tax compared to wealth building. So when you read the news that says billionaires pay close to zero tax, that might not be the complete truth. Rich people- Build wealth Invest it in different businesses. Use that money to off-set it. 4)  Billionaires exploit certain loop-holes to make more money. Let’s take the example of Jared Kushner, the son in law of Donald Trump. He goes and buys an entire block of high end properties in New York.  How does he do it? He buys this on debt. Since he is extremely rich, the bank will not hesitate to give him money as loan. Let us assume this debt is 1 billion USD and he has to pay a yearly interest of 60 million USD. This interest can now be offset against business revenue. If he makes 100 million

A deep-dive into Ethereum Here is an interesting corporate story. This story is one of the biggest blunders in American corporate history. In 1980, a company called AT&T (one of the biggest companies in the world as of now) was experimenting with something called cellular telephony- an earlier version of the cell phone. It gave a project to one of the top three consulting firms to conduct a market study and ascertain what the size of the cell phone market would be by 2000. The firm came back with a report saying that the number would only be 900,000. In 2000, the number of cell phone users was 109 million.  The firm was off by 99%. Because of this mistake AT&T had to go and acquire a company called McCaw Cellular for 12.6 billion USD. But what does this story have to do with cryptocurrencies? It is important to understand that even big, reputable consulting organisations can miss important trends. In 1980, the cellular market was going through a revolution. In 2021, the #1 industry going through a tectonic shift is the finance market. Post 2008, the entire world of finance is being built up again. So much has happened in the last 10-12 years. The earlier part of the crypto market was Bitcoin, which was called Crypto 1.0. Bitcoin was envisaged as a replacement of fiat currency. Then came in Ethereum, which is Crypto 2.0. The embedded technology of smart contracts gives Ethereum immense intrinsic value.  Crypto 3.0 has also come up. These would be called Matic and Cardano. This article explains the intrinsic value of Ethereum, in absolutely layman’s terms, through simple examples.  First things first, it is important to know that the entire value add of cryptocurrencies like Ether and Bitcoin is that they are decentralised. Imagine tomorrow morning, the government just had the mood to print 100 billions USD. And you have just saved one lakh rupees.  The value of that 1L rupees comes down due to the insane amount of money being flushed into the economy. This is why people are bullish on cryptocurrencies. If the government also controls cryptos, it destroys the entire argument. They could regulate the supply of cryptos into the economy as they willed and be done with it. Now, to talk about Ethereum. Let us understand the key difference between Bitcoin and Etherum. If Bitcoin is money, Ethereum is programmable money. That’s it. What gives Ethereum intrinsic value? The answer is simple. Ethereum is based on smart contract technology. Smart contracts are a  series of codes that get executed on the blockchain network. Let us understand the utility of a smart contract through an example. All of us are aware of an escrow account. If not, that is fine, keep reading further. Imagine I’m sitting in India and you are in Singapore. We’re both big builders. I want to buy 100 flats from you.  A bank like J.P. Morgan or Morgan Stanley will come into picture and co-ordinate the contract between the two parties. This is what an escrow mechanism is. You and I do not share trust and hence we will involve a bank. In this mechanism, the bank ends up making a lot of commissions. The two parties have to go through a lot of paperwork. The process in its entirety is extremely tiring and ineffective. A smart contract solves that problem. It takes away the middlemen and makes transactions hassle free. Let us say, I want to buy a house from person X. I will travel to X’s city. We will then go to a registrar office to sign the documents. X might ask me to pay him 10L before we go to the office, and I will do that in good faith.  But, what if he runs away with my money? This is something that actually happens. Moreover, in real estate transactions, we don’t know when we will actually get the money. Commissions to the middlemen, brokerage, and all these things make buying a house a nightmare. Imagine, if you had a simple contract which checked for all the required conditions and automatically transferred money into one’s account.  The friction in transactions could be reduced immensely. You can unlock so many services through this technology. Smart contracts can be designed to solve many problems around legal finance, merger & acquisitions, food contracts, housing market etc. The data below shows the market capitalization of Ethereum from August 2013 to November 2021. Source of picture- Statista. Right now, there are 2700 decentralised applications that use Ethereum as a network. You name it, and smart contracts will have an applicability around it. To sum it up, is Ethereum a utility product? Yes. But it is to be noted that a lot of inefficiencies exist in the market. There is still an immense scope of improvement and Ethereum is working towards it. If you would like to understand a detailed comparative analysis of Bitcoin and Ethereum, you can watch this video. If you are a serious investor and are looking for advanced techniques with a focus on better returns, join my Youtube Community where I give live and timely updates on the Stock Market https://www.youtube.com/watch?v=Pbx31ib6gT4 To take action towards your goal of Financial Freedom, check out this blog post on HOW TO INVEST YOUR SALARY For Beginners HOW TO INVEST YOUR SALARY For Beginners

A 101 Guide to Understanding Bitcoin! Cryptocurrencies are completely changing the landscape of how finance is driven. One might indeed find it to be a complex subject. This article demystifies certain concepts and terms behind Bitcoin specifically. Before getting into the meat of the subject, let us quickly understand four key terms to form a solid foundation about Bitcoin. Currency It means a medium of exchange. You go to a market with 100 rupees and buy vegetables. An exchange is happening between the INR 100 rupees and the goods/services you are purchasing worth that much money. Decentralised In simple words- Some cryptocurrencies are controlled by no authority. INR is controlled by the Reserve Bank of India. USD is controlled by the U.S. Fed. There is no such central authority that controls Bitcoin. It is a decentralised currency. Digital You cannot hold or touch Bitcoin. Blockchain Blockchain is the underlying technology behind cryptocurrencies.  Just how the internet is essentially a network which connects many websites, Bitcoin too has its own network.  It will be explained in greater detail, further in the read.  For now, all you need to understand is that- Bitcoin is a decentralised cryptocurrency. It is digital and is based on blockchain technology.  Utility of Bitcoin There are two specific features of Bitcoin that makes it powerful. Medium of exchange  You have 100 rupees and you go to a shop to buy a packet of chips or biscuits. Fiat currency allows you to facilitate an exchange between goods and money worth that much goods.  It is a great medium of exchange because these are currencies which are easy to transact. This is also a key feature of Bitcoins. Right now there are about 20,000 businesses which accept Bitcoins. But, can Bitcoin replace fiat currency?  The answer is no. It is nowhere near INR and USD in terms of scale as a medium of exchange and hence poses no threat to cash like USD, INR and the likes of it. Store of value Let us take an example to understand what store of value means. Let’s say you deposit 100 rupees into your savings account at HDFC bank. The rate of interest you will get in your savings bank deposit is 2-3% The inflation rate in the economy right now is close to 6.5% By next year, this 100 rupees would become 96 rupees in terms of inflation in the economy.  Currencies like INR and USD have a poor store of value. What is giving power to Bitcoin is its store of value feature.  Rupees 100 invested in Bitcoin has year on year grown approximately by 150% Another important thing to note is that- Bitcoin has finite supply, similar to gold. There are only 21 million Bitcoins. Therefore, the inflation of supply of Bitcoins will never be high. Hence it is a great hedge against currency printing. Bitcoin is not trying to replace fiat currencies. It is simply trying to protect your money. Because unlike cash, as of now, it won’t lose its value by 4% in a year. How is Bitcoin different from Ethereum? In absolute layman’s terms, let us take a simple example. Imagine, we are living in 2050.  A lot of trade is happening, similar to how it happens in today’s market. Except, instead of using fiat currencies like USD, INR, Singapore Dollars, we are using cryptocurrencies.  Now, imagine I want to buy a certain type of potato from an African farmer. I tell the farmer, take 2 Bitcoins and send me X kilograms of potatoes. This is a transaction in Bitcoins. Now what would a transaction in Ethereum look like?  Let’s say, I want the farmer to send me the same quantity of X kilogram of potatoes.  But this time I want him to cut them in a certain fashion, to make my work easy.  When I place my order, this condition will be embedded in a smart contract technology. Once the contract gets executed, the farmer will receive the money automatically.  Thus, the smart contract technology of Ethereum gives it intrinsic value. I will shed light on the differences between Ethereum and Bitcoin in greater detail, in the next article, for now, remember this- Bitcoin is money. Ethereum is programmable money. A comparison of Bitcoin with Gold Unlike Bitcoin, which is a good medium of exchange and also has a great store of value, gold doesn’t check the box for either. Why so? You cannot transact in gold. You cannot shave off 10 grams of gold to buy a coffee at Starbucks. It is a bad medium of exchange. In terms of store of value, it has hardly given 10% return over half a century, which is not a great matrix for an asset that has lived so long. Source: Unsplash A comparison of Bitcoin with Cash The key difference between Bitcoin and cash is that Bitcoin is decentralised. We are extremely dependent on our Government.  Governments are run by humans. Humans are driven by greed. If a political party wants to win an election, their course of action would be to get the money somehow and later tackle the economic mess they created. In Zimbabwe, the entire country went bankrupt and they then had to move away from their traditional system to the dollar equivalent system. This is why people are believing in decentralised currencies. These are not controlled by humans and are instead controlled by open network rules.  Bitcoin works on a ledger system. If person X sells person Y a Bitcoin, the ledger is publicly available. It is very clear where the money is moving. It is like an accounting book. No one is controlling anything and everything is transparent. Another concerning yet interesting point to note is that- The amount of money being circulated in the economy right now is unprecedented. Every time there is a problem, the Government starts printing more money, to do away with the problem.  During Corona, the U.S. Fed ended up printing trillions of dollars into the economy. Now, how does this excessive money printing relate to Bitcoin prices? A research

CRYPTOCURRENCY – Basics “First, they will ignore you,Then they will laugh at you,Then they will fight you ..and then they will buy bitcoin” – Mahatma Gandhi Okay so the last bit was DEFINITELY not said by Mahatma Gandhi, but it very much applies to the new-age cryptos. Almost everyone around seems to be talking about bitcoins – how it is the future of money and how the dollar is just going to vanish in thin air. Though the USD will not vanish per se, it’s true that bitcoins or cryptocurrencies are causing a major shift in the financial landscape. What are cryptocurrencies? Cryptocurrency or crypto is digital money that acts as a medium of exchange, just like the USD or Indian Rupee. Most of these digital currencies are decentralized i.e. they are not controlled by any authority. This is unlike our regular paper money which is managed by the respective central governments or banks. A peculiar feature of cryptos is that these digital currencies operate on the BLOCKCHAIN TECHNOLOGY. This blockchain technology is essentially a network on which transactions are recorded in an encrypted fashion. This gives a security advantage as due to transparency, traceability becomes easier in case of malfeasance. This independent and transparent nature of cryptos is what attracts enthusiasts. Are cryptos better than paper money? Fiat currencies, such as the USD, Indian Rupee, Chinese Renminbi are the tangible currencies that we can touch, unlike the cryptos. In 2015, China caused a major shake in the global financial market when it decided to devalue the Renminbi. This was the inception point of the infamous US-China trade war. The effect was so intense that from 2016 onwards, US stocks fell massively, despite the US being in a massive bull run from 2009-2018. This small(but major) incident points to an interesting loophole in the current money system – it is backed by humans. And all humans are prone to error. But why does this affect you? An average citizen of India usually puts all his/her money in a bank account, as a safety measure as well as to get some returns. Now, if the Indian government decides to increase the inflation to 10%(from 5%) and decrease the FD rates, or increase the supply of money in circulation, the value of money will become half. This means you will be actually LOSING MONEY! Thus, fiat money is backed by humans who are mostly driven by greed. How do cryptos come into the picture? Cryptos operate on a decentralized network, with full transparency. Additionally, A number of cryptocurrencies are FINITE in supply – for example, there are only going to be 21 million Bitcoins in production. So from a technological point of view, cryptocurrencies might be better than the fiat currencies. So will cryptos replace Fiat currencies? The first paper money was introduced by the Chinese Tang Dynasty in the 7th century, but it wasn’t until the 11th century that it truly began to be used. To replace such a system, it would take any new innovation a considerable period of time. Every technology has an adoption cycleWhenever there is a new invention, it takes time for people to adjust and accept it. For example, when cell phones were introduced, only a handful of people had them. Now in 2021, almost every second person has a smartphone. Volatility of cryptosThe volatility of any asset class is high if the size of the market is small. What that simply means is that currently, the crypto market is at a very nascent stage. Thus, even a minor action (such as a tweet by Elon Musk) can either skyrocket or bring the value of the cryptos.But as the market size increases with time, there will be stability and the volatility will gradually decrease. So we can safely say that the cryptos are not going to replace fiat currencies in the near future, but they will surely co-exist as more people start trusting this promising new medium of exchange If you are a serious investor and are looking for advanced techniques with a focus on better returns, join my Youtube Community where I give live and timely updates on the Stock Market To take action towards your goal of Financial Freedom, check out this blog post on HOW TO INVEST YOUR SALARY For Beginners HOW TO INVEST YOUR SALARY For Beginners