Investing in Bitcoin

The Bitcoin (BTC) craze is unlikely to die down anytime soon. If you are new to Bitcoin — and cryptocurrencies in general — it can be difficult to figure out how exactly to go about investing.

To help you get started, we've put together some helpful guides and comparisons with everything you need to know, from what a Bitcoin is, how it works, and options for buying Bitcoin in Australia.

What is Bitcoin?

Bitcoin is a form of digital currency. It was created by an unknown individual using the name of Satoshi Nakamoto who introduced the concept of Bitcoin to the world with a whitepaper which outlined how the protocol would operate. The original paper has now been translated into dozens of languages and is still recommended reading for anyone interested in acquiring a deeper understanding of how it works. You can find it on Bitcoin.org.

Unlike physical fiat currencies like the Australian dollar, Bitcoin is not controlled by any government or central bank. There is no single entity that governs the currency, a defining feature which appealed to idealistic early adopters, many of whom were of a libertarian worldview.

You might be wondering how it can possibly work without a central governing body to issue money and manage transactions. Therein lies the real power of Bitcoin — a technological masterstroke some think will usher in a third industrial revolution.

It uses peer-to-peer technology called the blockchain. How it works is really quite simple.

When a transaction is being made the details are broadcast to the network, in the form of a transaction block. Everyone who is connected to the network is able to see when transactions are being made. Anyone can make a transaction block, all of which are added to a chain and once the transaction has been verified (by other nodes in the network) it becomes part of the official ledger. This ledger cannot be changed — in fact it would be near impossible for it to ever be changed without the agreement of all nodes. Therefore, the blockchain is an immutable and authentic way of storing data in a decentralised manner. We have a distributed network that nobody owns or controls, but everyone has access to the same ledger.

Bitcoin as an investment

What started out as something of a novelty is now being taken seriously in Australia and around the world. In fact, Bitcoin is now considered a store of value, much like gold. And here's why: the most important thing to know about Bitcoin is that there are a finite number of coins that can be mined. There will only ever be 21 million, so it is becoming an increasingly valuable commodity. Since scarcity creates value — and value creates demand — it’s no wonder why so many people are looking to add Bitcoin to their portfolio.