Swyftx Cryptocurrency Exchange
- 105 cryptocurrencies
- Fast online ID verification & deposits
- Low fees and spreads
- Demo Mode for beginner traders
- Live chat support available 7 days/week
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.
Bitcoin refers to two things at the same time.
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 has two main jobs:
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.
Bitcoin was invented by someone, or a group of people, called Satoshi Nakamoto.
No one knows who Satoshi Nakamoto really is.
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.
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:
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
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.
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.
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.
finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of banks, insurers and product issuers. We value our editorial independence and follow editorial guidelines.
finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product or service.
Please note that the information published on our site should not be construed as personal advice and does not consider your personal needs and circumstances. While our site will provide you with factual information and general advice to help you make better decisions, it isn't a substitute for professional advice. You should consider whether the products or services featured on our site are appropriate for your needs. If you're unsure about anything, seek professional advice before you apply for any product or commit to any plan.
Products marked as 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money here.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan, we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.