Bitcoin is a purely digital currency, that is not governed by any bank or Government (this is called decentralised currency).
Similar to how most of us today never actually touch our money (it’s all stored online in a bank and accessed electronically via our plastic cards) – Bitcoin is not a printed currency and in turn relies on the internet for you to send and receive.
Bitcoin is fast gaining momentum as the future of money; it rids the world of numerous economic problems that exist with the current finance system (such as continuous printing of money that devalues the money and creates excessive global debt).
Bitcoin acceptance is also growing rapidly, with many online merchants beginning to accept Bitcoin (along with bricks and mortar stores like Cafes). Bitcoin is known as a cryptocurrency that uses complex mathematics to secure it.
How does Bitcoin work?
Essentially you need a Bitcoin wallet to store your funds. This wallet has a public address, that you can share with others, to receive money. If you wish to spend the money in your wallet, you need to have a private key. This private key, when paired with your wallet – allows you to access your Bitcoin (e.g. pay people or transfer).
Like your existing Internet Banking, it’s very important that no one knows your private key. As Bitcoin is completely anonymous, if someone were to gain access to your key – they could take your money. As there is no bank behind Bitcoin, the funds can never be recovered so storing your private key securely is of upmost importance.
There are Bitcoin wallet providers that hold the private key for you, allowing you to send and receive money by simply logging into the wallet (whether it be via email, password or fingerprint if using an App).
Alternatively you can have money stored in your own Bitcoin wallet, whereby you hold the private key personally and are responsible for it’s safe keeping.
How do you buy Bitcoin in Australia?
You may notice that the price of 1 Bitcoin (BTC) is quite expensive. This means you may never own a full Bitcoin, but instead a portion of a Bitcoin (known as a Satoshi, named after the founder). This means for instance I only have 0.4 of a Bitcoin and am able to use it to buy things.
If you are wanting to buy Bitcoin:
- You can use Bitcoin exchanges, which accept AUD for Bitcoin in return
- Sites such as Cointree.com.au or Coinbase.com.au are a good place to start
- You can accept Bitcoin when you sell items; in turn receiving Bitcoin
- You can mine Bitcoin (which is rather complicated, and not really worth talking about now).
How is Bitcoin different to traditional currencies?
In many ways, they are much the same. Your Australian dollars are all traded electronically via payment networks already – Bitcoin is simply a more efficient and new way of doing this.
Conventional currencies like AUD or USD were in the past able to be traded in to a bank for it’s value in gold. Over the years, currencies such as USD no longer represent a portion of gold, thus the money is technically worthless and only valuable if someone else wants the money. This is why we work for a living; we do something with out own time that helps others make money, so that we can be given a portion of that money.
Unlike major governing banks who can print more money (which in turn devalues the currency) – Bitcoin has a limited supply.
Why does the Bitcoin price go up and down so much?
Like anything new and progressive, there is a lot of speculation around Bitcoin. This means that people are essentially taking a gamble on this currency becoming the #1 currency of the future. As such, people are buying, selling, trading, investing and more based on current world events. As such, when something scares these people – they will quickly sell which can cause the price of Bitcoin to fluctuate.
Who created Bitcoin?
Satoshi Nakamoto is the alleged founder of Bitcoin. As Bitcoin is open source and decentralised, there is a lot of confusion around the true identity of the original Bitcoin founder.
This however doesn’t make Bitcoin less secure; Bitcoin and the foundation it’s built on (Blockchain) is open source and reviewable by anyone. This means the entire world is able to review the code, see that it’s correct and doing what it’s supposed to.
What is the prediction that 1 Bitcoin will be worth in the future?
As there is only a finite amount of Bitcoins that will ever be available (21 million coins), the price of Bitcoin will need to go up in order to cover the supply and demand of this new digital currency. This is leading people to speculate that a Bitcoin will one day be very valuable.
Some experts believe in the next five years the price will go from $2500 AUD a coin to $5000+. These same experts are also speculating the eventually a single Bitcoin will need to be worth well over $250,000 USD per coin.
This is why many people are starting to buy Bitcoin in the hope that over the long run it will continue to increase in value.
Do you have any Bitcoin questions you want answered?
Drop a comment below and we will do our best to further explain this new and slightly exciting currency.