Bitcoin is a digital asset that only exists online. It's often described as being like an electronic combination of cash and gold. Bitcoin is meant to be spendable like cash, but also able to hold a lot of value similar to gold. However, unlike cash or gold, Bitcoin is entirely digital.
In this guide:
Quick guide: How to buy BTC
- Register for an account with a cryptocurrency exchange like Independent Reserve.
- Complete the signup questionnaire.
- Verify your account.
- Go to the “accounts” tab.
- Click “deposit” next to your currency of choice.
- Select your preferred payment method and confirm.
- Go to the “trade” tab and select the cryptocurrency you want to buy.
- Enter how much you want to buy.
- Double check the details and confirm your purchase.
This is our quick guide to just one way to buy BTC. Compare some other options in the table below.
Bitcoin refers to two things at the same time.
- The Bitcoin digital asset (BTC): These are the actual digital coins. There will only ever be a total of 21 million Bitcoin in existence.
- The Bitcoin network: This is the blockchain that powers Bitcoin and is what gives the digital asset its value and practical applications.
The Bitcoin digital asset
The Bitcoin digital asset is very simple. Bitcoin is just a digital coin, often abbreviated to BTC. It's like any other coin except it's purely digital. These coins are gradually created over time, up to a maximum of 21 million.
Each of these coins can be collected, traded and spent like money. The amount of new coins created will slow down over time and it will eventually take decades to produce just a few coins at the end.
When someone talks about buying, selling or trading Bitcoin, they're talking about these coins.
Everything else that makes Bitcoin special is down to the Bitcoin network.
The Bitcoin network
The Bitcoin network has two main jobs:
- It carries Bitcoin transactions. When you spend Bitcoin, it's being carried to the recipient through the Bitcoin network.
- It keeps a record of all Bitcoin transactions ever made and records them in a digital ledger.
What makes the Bitcoin network special is that no one's in charge of it and no one can control it.
No one can stop it from carrying transactions or creating more Bitcoin and no one can stop it from meticulously recording all Bitcoin transactions in its digital ledger.
Who invented Bitcoin and where did the Bitcoin network come from?
Bitcoin was invented by someone, or a group of people, called Satoshi Nakamoto.
No one knows who Satoshi Nakamoto really is.
Why do people buy Bitcoin?
Bitcoin prices are influenced by supply and demand. A Bitcoin is only worth as much as someone is willing to pay for it.
There are three main reasons why people buy Bitcoin.
As the Bitcoin blockchain grew, an entire industry grew alongside it, including plenty of Bitcoin brokers and marketplaces.
You can find and compare some of them here. Or skip ahead to our curated list of top BTC exchanges.
Best Bitcoin exchanges:
The typical Australian cryptocurrency exchange has trading fees in roughly the 0.5% to 1% range, plus "hidden costs" in the form of widely varying exchange rates. In Australia, it's not unusual for cryptocurrency to be sold about 1% to 5%, or even more, above mid-market rates.
Fortunately, exchange rates is where Swyftx really shines. Comparing prices on Swyftx to several other brokers shows that Swyftx has considerably better rates.
And while its trading fees aren't outright the lowest, they're still quite competitive.
You can buy directly with AUD so there are no currency exchange fees, but there may be some costs depending on your deposit method and the amount of the deposit.
Using a non-free deposit method for a small deposit may add up a considerable percentage of the total, so it's worth bearing this in mind.
The slowest part of registering with a cryptocurrency exchange is typically verification times, where the exchange checks your identification. This will often take a full day if you're trying to sign up after hours, or several days if it's a weekend or the exchange has a verification backlog.
As such, the fastest possible purchases will typically be from exchanges that can offer instant verification 24/7. Coinjar is one of them. It's possible to breeze through your first purchase at Coinjar with quick sign-up (just verify your email), instant verification, instant deposits and instant purchases.
The catch is that you need to have Digital iD for instant verification. If you don't, it may take up to 24 hours to get verified.
If you aren't interested in using Digital iD, you may want to simply look for an easier or cheaper exchange instead.
Also, note that while you can buy cryptocurrency fast with Coinjar, after your first deposit there's a seven-day waiting period before you can withdraw the Bitcoin to an external wallet.
Cryptocurrency exchanges can sometimes be overwhelming, especially when it's a peer-to-peer exchange where buying means navigating the order books. Meanwhile, some cryptocurrency brokers will require users to have their own wallets, or burden users with too much detail or crowded interfaces.
CoinSpot does none of these things. It's a straightforward brokerage, with an optional peer-to-peer market on the side, and it provides its users with wallets for all supported cryptocurrencies. That it offers an exceptionally wide range of cryptocurrencies, all in one place, is an added bonus.
The registration steps are clear and the verification steps are clearly explained as part of the sign-up process.
Transaction histories are clearly displayed, fees are fixed and clearly shown, and you can denominate buy and sell prices in AUD or cryptocurrency as preferred.
CoinSpot has local customer service and it keeps extraneous features and information to a minimum, focusing on only the essentials. Plus, its palette is easy on the eyes.
- Read the full methodology for a more comprehensive explanation of how we compare exchanges.
How does Bitcoin work?
The Bitcoin network was the first ever example of a blockchain as we know it today. It's called blockchain because it can be pictured exactly like a series of blocks that have been chained together.
The Bitcoin transactions are contained in the blocks themselves and because they're chained together the blocks can be easily processed in an organised fashion. This makes it easier for the Bitcoin network to keep a complete record of all the transactions.
In the case of the Bitcoin blockchain, a new block is created every 10 minutes on average. Whenever one arrives, the Bitcoin network automatically looks at all the transactions it contains, sends those payments to the correct recipients and records all the details of those transactions in its ledger.
The most up-to-date version of the ledger itself is transmitted on the blockchain along with the transactions.
In the end, you can think of the Bitcoin network as a kind of payments robot. If you want to send money to someone anywhere in the world, you can use the Bitcoin network to send them Bitcoin instead of going to the bank.
Because the Bitcoin network is a robot:
- There's no chance of it stealing your money
- It doesn't have to make a profit and won't charge you higher fees than necessary
- It won't fudge the numbers or make mistakes
- It will never lie
This system is what gives Bitcoin its value. Because it's fully automated and keeps impeccable records it's also impossible to counterfeit Bitcoin and you can be 100% sure there will only ever be 21 million.Back to top
You can explore the Bitcoin blockchain and go through its records from your computer, using programs called block explorers.
This is what blocks look like when you use this block explorer. You can follow along with it to see how easy it is to go through the Bitcoin network's ledger.
You can click on the block number to see the transactions on it. Here's one of the transactions on one of those blocks:
These are the kinds of details the Bitcoin network automatically records in its ledger. In this way you can find every Bitcoin transaction that's ever happened.Back to top
How does Bitcoin mining work?
There are many different makes and models of Bitcoin mining machines,
but this is what most of them look like.
Everything up to this point is purely digital. It's all just lines of code and anyone who wants to see exactly how Bitcoin is programmed can do so easily.
But of course, the Bitcoin network still needs to come back to the real world at some point. It needs electricity to keep going and it needs to be tough enough to resist hackers.
This is where Bitcoin mining comes in.
Bitcoin mining is the act of searching for new blocks on the blockchain. This is done by solving a complex maths problem. Whoever finds the answer first gets to add the next block to the blockchain and is awarded some newly created Bitcoin at the same time. This is where new Bitcoin comes from.
Ingeniously, the Bitcoin network will automatically adapt to the amount of energy that goes into solving those maths problems, to make sure it always takes an average of 10 minutes to find each new block, no matter how much energy is put into it.
When there's more energy committed to solving those problems, it makes them more difficult. When there's less, it makes them easier.
Theoretically, any kind of computer can solve these maths problems and you could even do it with a pen and paper if you really wanted. But it's a race to win the new Bitcoin, so miners try to be as fast as possible. To this end they now use specialised Bitcoin mining machines designed to solve the problems as quickly as possible.
There are now entire mining farms filled with these kinds of machines, solving maths problems for the Bitcoin network. All together, the Bitcoin network is now consuming more energy than some countries.
A tiny portion of this energy is used to actually pack blocks and send transactions around the Bitcoin network, while the vast majority of it is simply there to make sure the maths problems behind each new block are extremely difficult.
This is important, because the more difficult those maths problems are, the tougher it is to interfere with the Bitcoin network.
Learn more about mining:
More on mining: What if the maths problems are too easy?
If the maths problems are too easy, it would be possible for someone to find blocks too quickly. This is dangerous because if the same person manages to consecutively find enough blocks, they can trick the Bitcoin network.
But because the maths problems are so tough, on account of so many people competing to find the next block, it's very difficult for one person to find too many blocks for themselves.
The reason this protects the network is that someone who wants to attack Bitcoin can only modify the block they've discovered. They can't tamper with other miners' blocks.
So even if they tamper with their own block, for example by removing someone else's transactions, their version of that block would be the odd one out. The Bitcoin network would realise there was something wrong with it and it wouldn't put it in the ledger.
But if someone has a lot of blocks, they can tamper with one, then string out a lot of other blocks behind it. In this way, they can disguise their fake block as the real one and trick the Bitcoin network into accepting it as the real one.
With so many miners using all that energy to ensure the maths problems are super difficult, you can ensure no one will ever be able to hoard enough blocks to trick the network.
That's how Bitcoin and its blockchain work. On one end it's just a lot of miners solving maths problems, but on the other end it's like an autonomous digital, fully-automated payments robot that automatically records all transactions and lets you safely send money anywhere in the world without needing to use a bank or other payment service.
Bitcoin is just the beginning. It didn't take long for people to recognise the potential of the blockchain technology behind the Bitcoin network and to start thinking of other things to do with it.
A blockchain can carry information of any kind and you can program blockchains to do much more than just carry information and record payments. When you hear people talking about "smart contracts," for example, they're usually talking about an automated contract that's been programmed into a blockchain.
How do I store my Bitcoin safely?
Bitcoin itself will always be on the blockchain and nowhere else.
So when you own Bitcoin, you're actually taking possession of what's called a "private key." These keys are used to unlock the section of the Bitcoin ledger where your coins are held, letting you move them around.
By itself, the private key looks like a complicated password, made up of a long string of numbers and letters.
These keys are stored in specially-designed digital wallets.
Best ways to store your Bitcoin
Frequently asked questions
Ask an Expert