What is Bitcoin?
Bitcoin is known for being the first ever cryptocurrency in existence. It’s also the most popular and well supported out of all the digital currencies. In this section of the guide, you’ll learn more about Bitcoin, where it came from, what it’s used for and how to buy it.
What is Bitcoin?
Bitcoin is a digital currency that isn’t owned by any central agency such as a government or a bank.
Here are four core attributes that make it unique.
Bitcoin is a digital currency
Unlike physical money as we know it, bitcoin has no bills or coins – it’s purely digital. Unlike fiat money which doesn’t have a limit, there is a limit of 21 million bitcoins. The token ticker for bitcoin is BTC.
Bitcoin is decentralised
Bitcoin allows a complete transaction between two parties without a middleman (like a bank). There is no central agency that owns bitcoin, so there are no governments, banks or institutions that control it.
Bitcoin uses blockchain technology
Bitcoin is the first blockchain-based cryptocurrency. Essentially, this means that transactions are secured by cryptography – using algorithms and secret keys to encrypt and decrypt the data.
Transactions are recorded in a publicly available ledger called the blockchain, which logs every single bitcoin transaction ever made.
Bitcoin allows for anonymity
Even though every single bitcoin transaction can be found on the public ledger, the senders and receivers involved are pseudo-anonymous. Instead, they are identified with an electronic address known as their public key.
What is Bitcoin used for?
The key role of Bitcoin is to allow for more transparent and secure transactions by using blockchain technology. Some people think that bitcoin improves on the problems of traditional fiat money.
Even though many people see this as a risk, on a larger scale it prevents counterfeiting and fraud.
Controlling your own money
You have total control of your money and use money purely for payments without being involved in the money creation and credit system.
Fundamentally border-less currency that can be sent over the Internet for low fees. If you’ve ever sent money overseas, you know how difficult and expensive it can be.
Near instant money transfers
When you pay someone nowadays, it can take a few business days to reach their bank account. This doesn’t exist with bitcoin transactions.
It’s also worth noting that there are people who trade bitcoin purely to speculate on price too.
Where did Bitcoin come from?
Bitcoin was created and published by anonymous cryptographer going by the pseudonym of Satoshi Nakamoto in 2009. Satoshi’s idea was founded upon a paper he wrote called “Bitcoin – A Peer to Peer Electronic Cash System”, which was published to a cryptography discussion board.
In his paper, he proposed a peer-to-peer electronic cash system which would allow transfers of value to happen entirely online, without relying on a financial institution, clearing house or central bank. Satoshi later created the Bitcoin protocol and the reference software Bitcoin.
How to get bitcoin
We think the best way to learn more about digital currency is to firstly get a small amount yourself so you can see how it works. There are many ways to get bitcoin.
Buy bitcoin via an exchange
This is the most convenient and reliable way to buy and sell bitcoin.
Digital currency exchanges will require you to register and verify your identity before depositing money to trade. In CoinJar’s instance, our customers can deposit Australian Dollars using BPAY or Blueshyft. Once it arrives in the account, they can buy and sell as they wish.
Receive bitcoin from someone else
Someone might send you bitcoin. To do this, you’ll need to set up a digital currency wallet.
For a bitcoin transaction to be successful, it needs to be verified so it can be added to the public ledger – the blockchain. This is where mining comes in.
Mining is the process of adding and verifying transactions (blocks) to the Blockchain ledger by solving complex mathematical problems. When a miner is the first to solve these problems, they are rewarded with payment in bitcoin for their work. As Bitcoin is decentralised, anyone can mine for Bitcoins since there is no central regulator.
Where to store your bitcoin
We recommend getting a digital currency wallet that will hold your private keys securely. Your private key is a secret password that gives you access to your bitcoin.
There are many types of wallets available, but in general, you can either control the private keys yourself or leave them to a professional service to manage it for you.
Some wallets, like CoinJar, also have exchange services, which lets you buy and sell bitcoin. To learn about the best wallet for you, read the ‘Keeping your Coins safe’ section of this guide.