Everyone's talking about Bitcoin - but what on earth is it!?
Disclaimer: Bitcoin is a risky investment, and anyone thinking of buying it should do a lot of research and be prepared to lose anything that they invest. This is not a guide to buying, it is intended just to explain why everyone is talking about Bitcoin.
This is the most basic guide to Bitcoin you will ever read, and will hopefully allow you to dominate the conversation this holiday season when all your friends and family are talking about cryptocurrencies. It is not meant to be an in-depth analysis of Bitcoin. If you're already an investor, this probably isn't for you.
What Is Bitcoin?
Bitcoin is a virtual currency or cryptocurrency that essentially only exists on the internet. Basically it's a currency created by a computer code. You buy and sell it online, and people either use it to buy things via online stores that accept it (such as Expedia) or hold onto it and hope that it will grow in value.
Keep scrolling for a simple video that explains Bitcoin:
What's The Point Of Bitcoin?
Originally Bitcoin was intended to be a global currency that the government had no control over, was completely anonymous and could be used in place of regular currency to buy things anywhere in the world. This is technically still the aim of Bitcoin, but in the past year it has skyrocketed in value and people are using it as an investment instead, similar to investing in the stock market or buying gold.
How Is Bitcoin Made?
The most simple explanation of this that you will ever read. Basically it is made via a process called mining. Bitcoin's transaction records sit on a public ledger or "blockchain". Mining is the process of adding new transactions to the blockchain, which is done by solving mathematical puzzles. People that want to mine Bitcoin will invest in special hardware that solves these puzzles. They are rewarded for their work with Bitcoin.
Why Is Everyone Suddenly Talking About Bitcoin?
Bitcoin's astronomical rise in value has attracted the attention of the mainstream media. Suddenly well known identities like the Winklevoss twins are talking about how they are Bitcoin billionaires, and people are trying to jump on board the Bitcoin train.
How Much Is One Bitcoin Worth?
This is an almost impossible question to answer as the value changes constantly. At the time of publication, the value was somewhere in the vicinity of 1 Bitcoin = $24,000 AUD. This goes up and down almost by the second.
Do You Get Physical Coins?
No. Bitcoin is only on the internet.
If It Only Exists On The Internet Why Do I Keep Seeing Photos Of Coins?
Oh, like the one I used at the top of this very article? They are basically just a novelty item. You don't need one of those, they have no value. Bitcoin is virtual.
So What Do I Actually Get If I Buy Bitcoin?
Basically you get a keychain, which is like the serial number to your coin. This will initially sit in whatever exchange website you purchased it from. Serious Bitcoin investors will transfer their purchased Bitcoin into a safe wallet.
Safe Wallet? Whaaat? Why Would I Need That?
Hackers like coins. Many people have had their coins stolen via unsecured exchange sites or other methods, so people store them in "wallets" which need passwords to access. Wallets can either take the form of an app, a device similar to a hard drive or literally a piece of paper with your keychain and passwords written down. If you decide to invest in Bitcoin, please research this seriously.
Have I Missed The Boat?
Probably the biggest question asked about Bitcoin. If you hoped to buy one Bitcoin for $1, yes you have missed the boat. However you can buy tiny fractions of one Bitcoin, which is going to be a lot cheaper and more accessible. Be prepared for the fact that this money could all disappear if Bitcoin crashes... or you could make a few dollars!
How Do I Buy Bitcoin?
The simplest way to purchase Bitcoin is through an exchange, and you can use Australian dollars to do this. Please do your research. There are many websites out there claiming to sell Bitcoin. You can very easily get scammed. Globally the biggest exchange is Coinbase, and in Australia sites like BTC Markets and Independent Reserve are amongst the most popular. They all charge some kind of fee to trade. Read the FAQs and Help sections of any site before you choose to use it, read independent reviews, ask your Bitcoin obsessed friends what website they use and how they do it. Check forums, watch videos about Bitcoin, read articles to learn more. And NEVER invest more than you are willing to lose.
Are There Other Types Of Coins Out There?
Yes there are other cryptocurrencies which operate in a similar way to Bitcoin. Big ones are Litecoin and Ethereum. They are currently worth a lot less than Bitcoin.
Earlier this month Hit Network's Amos, Cat & Angus spoke to a Bitcoin expert! Hear what Graham Cooke from finder.com.au had to say in the interview below and get a more detailed overview of Bitcoin.