Bitcoin: what is it? How does it work? There have been many goofy videos made about the fact that bitcoin is hard to explain, and that no one really knows what (a) bitcoin is. Luckily for you, this isn’t strictly true: we here at Digital Currency Markets have a pretty good idea about bitcoin. In fact, we built a whole site around it. So we figured what this site could use is a nice little rundown of what we know that we think you need to know before you start your bitcoin journey. And here it is: here’s our list of the six most important things you need to know before investing in bitcoin.
The header sounds wordy, but trust us: cryptocurrency and blockchain are important terms that you’ll need to have a grasp on if you’re going to interface at all with this new technology in the form of currency or computer program.
First up: cryptocurrency is a portmanteau derived from cryptography—the science of code-making and breaking (its own name derived from Greek’s kruptos, meaning ‘hidden’)—and currency, i.e. money. So essentially, it’s coded money. Digital money embedded in computer code. That’s the simplest explanation.
The more complicated version involves an explanation of the blockchain and begins like this: cryptocurrency is a type of digital money that exists on a decentralised network known as a blockchain, which is not managed by a central authority, and is instead verified and kept secure by a number of parties distributed across the network. Basically: a blockchain is a universally-accessible bank ledger that everyone has a copy of, instead of just a given big business’s accounting team. This means that anyone on the network can download and view an anonymised record of all transactions or actions in the history of the cryptocurrency or network, and everyone on the network can play a role in verifying and managing transactions. This is what makes cryptocurrency so secure: no one can make a fraudulent transfer or alteration to another person’s account without the entire network’s consensus, nor can they intercept a given transfer or action undertaken on the network. This makes hacking difficult.
So whenever you read in an article that a new project or technology is based on the blockchain, this is what they’re talking about: this hyper-verifiable, secure ledger technology that can be used to accurately track everything from money to a given product’s supply chain.
If you’re interested in some other large-scale applications of the blockchain in finance, you can check out a previous article of ours: Five Finance Companies Who Have Embraced the Blockchain.
We talked a little about decentralisation in the previous point, but let us give you a quick example of why decentralisation is good: because the currency is not under the control of a central authority (e.g. a government or a bank) it cannot be controlled or manipulated by that authority. Whether you look to the United States or to China, you can see examples of a central financial authority intervening in order to manipulate a given currency in someone’s favour. Now, that doesn’t really sound like the sort of currency that ought to underlie a free market, does it? But the beauty of cryptocurrency is that it can’t be messed with. It has a fixed supply and everyone knows what that supply is, which makes the currency completely reliant on the whims and actions of the market—which leads in nicely to our next point.
So: most currencies are inflationary—that is, the supply is set to be increased over time by a central bank, and so the value of one unit of currency will therefore decrease over time. Therefore, if you put $1,000 under your mattress today, it will be worth less by the end of the year, because there will be more dollars in circulation by the time the year is out. And the total circulation of dollars will hypothetically increase forever. Bitcoin, on the other hand, is a deflationary currency. There are only 21 million bitcoins. 21,000,000. Or, 21 million million Satoshi, which is the current accepted term for the smallest fraction of bitcoin (one millionth, or 0.000001).
There will never be more bitcoin than this—and no central authority can change the rules (like when the US ditched the gold standard in the 1930s) to make more. This is literally it. Over 80% of the total supply is in circulation now, and by the end of the year 2140 all 21 million bitcoin will be in circulation. And then: no more bitcoins. Which means that since there will never be more of the currency, no one can artificially decrease its value over time—if the value does decrease, it’ll be market-determined, not central-bank-determined. This sounds to us like a win.
Well, that’s not strictly true. You’re not going to need to learn how to trade. But it’ll be useful to you. Investing in bitcoin is actually a great testing grounds for new traders, and the volatility of crypto markets is a good way to cut your teeth and learn about the mechanics of traditional markets.
If trading is what really interests you, then we’ve got a Trading Blog dedicated to just that. And you can sign up to the excellent Bitmex crypto exchange through our affiliate link.
Of course, the easiest way to buy your first cut of bitcoin is right here through Digital Currency Markets. You can purchase one of our Bitcoin Gift Cards here.
Owning bitcoin or any decentralised currency means you’re in charge of your money. There are no banks to look after your money—only you and your cryptocurrency wallet. How this works exactly is a future article in and of itself, but it’s important to remember: if you don’t have your bitcoin directly under your control, then you don’t have your bitcoin at all. This means you shouldn’t keep bitcoin on an exchange, or in any sort of online browser-based wallet. You should be using a USB key or paper-based wallet—yes, it’s an investment, but it’s worth it. You should trust absolutely no one else with this wallet. Again, it’s the wild west out there—which leads nicely into this article’s final point.
Likely, you already know this. But there’s a chance that you still think like a lot of people who invested during the bull run of 2017: “The worst has to be over—it can only be up from here!”
Well, that’s likely not true. We’re sorry not to be part of the incredibly bullish bitcoin hypetrain; we wish we could be. It seems more fun over there. But the DCM team is made up of a team of long-time professional investors who have seen many market cycles and trends come and go. So we know this isn’t over—until bitcoin and crypto more broadly hit mass-adoption, we’re going to see a lot of price volatility. As was written in one of our recent articles, the market is still assessing Bitcoin’s true value. That assessment is likely to continue some time—perhaps for more than a decade. Perhaps even longer.No one can say. Maybe not until down the line in 2140 will we see a stabilisation of the bitcoin price. But until then, friends, we recommend having strong hands, and that you HODL as long as you can. Crypto is a long game. And it’s a game we’re all excited to play.
Most people involved in the cryptocurrency space who aren’t motivated purely by monetary gain will likely find themselves at some point saying something like this: “One thing I really like about cryptocurrency is that it’s decentralised, and that the currency isn’t owned or controlled by a bank or state.”
With all that in mind, this article will teach you to understand the key differences, successes, and failings of both centralised and decentralised crypto exchanges.
Consumers and investors are nervous, especially because of the unprecedented way that politics, economic policies, and company decisions are being executed and, more importantly, communicated.
This turbulent time can be neatly exemplified by the following true story: Elon Musk was recently forced by the United States Federal Exchange Commission (FEC) to resign as chairman of Tesla as a result of what essentially amounted to a bad weed joke he made on the internet to entertain his girlfriend. Oh, and he was also forced to pay a $20 million USD fine. And on top of that Tesla stock dropped double-digit percentage points throughout the affair. Since then, Tesla has rebounded rapidly since announcing profitability for the first time in the company’s history.
This is, roughly, the sort of year the markets have had.
What is a Bitcoin Gift Card?
A Bitcoin Gift Card is the perfect way for the newcomer to get their first Bitcoin. It comes with a paper wallet and simple instructions to set up a software wallet so that you can transact with Bitcoin over the internet. Bitcoin Gift Cards are available in AU$25, $50, $100 and $500 denominations.
Who should buy a Bitcoin Gift Card?
Anyone new to Bitcoin will find no easier way to get their first Bitcoin.
They can be gifted by an existing cryptocurrency enthusiast, or bought by anyone wanting to get involved for the first time themselves.
How can I pay for my Bitcoin Gift Card?
You can pay with either cryptocurrency through our coinpayments.net payment gateway, or you can use Australian Dollars through our POLI Pay facility.
Can I use a Bitcoin Gift Card to top up an existing software wallet?
Yes. When you receive your additional Bitcoin Gift Card, you can simply import the "Secret" wallet identifier from your Bitcoin Gift Card into your existing software wallet. This will move your Bitcoin from your Bitcoin Gift Card into your existing software wallet.
What does my Bitcoin Gift Card include?
Your Bitcoin Deposit, wallet and key generation and network transfer.
How long does it take to receive my Bitcoin Gift Card?
Going through to checkout takes about 2 minutes. You won't find an easier process anywhere. Once you've placed your order, it can take between 10 and 60 minutes to receive your Bitcoin Gift Card depending on the speed of the Bitcoin network at time of purchase.
We have partnered with GiftPay, an aggregator of online deliverable eGift Cards in Australia.
Through our agreement with GiftPay, you are able to purchase a Flexi eGift Card from us, redeemable at a broad range of retailers in Australia.
Watch the Video to see how it works
What is a Flexi eGift Card?
A Flexi eGift Card is an electronic gift card that lets you choose where you'd like to shop! In the past if you were given a gift card for a particular shop but didn't want to buy anything from that shop, you were stuck. But now with a Flexi eGift Card, you get to choose at which shop you spend your gift.
What's more, you may be able to split your Flexi eGift Card and spend it at different shops! For example, if you have a $30 Flexi eGift Card, you could choose to split it up into a $20 Myer eGift Card and a $10 iTunes eGift Card.
Where can I spend it?
You can spend your eGift Card at a broad range of Australian retailers. For a full list of our retailers, click here. (page showing full list of retailer logos)
How do I redeem it?
Your Flexi eGift Card will be emailed to you. Click the link in the email to open your Flexi eGift Card.
Then convert your Flexi eGift Card into any combination of gift cards or vouchers up to the total available balance. How you redeem your chosen gift card depends on the card or voucher chosen.
What Bills can I pay?
You can pay any bill that has the BPAY logo and Biller Code including credit cards.
Are there any payment limits?
Yes. You can pay a maximum of $1000 per transaction based on regulatory limits. You can however break up a bill into multiple $1000 tranches and enter the same biller and customer reference code.
How does the transaction work?
When you enter the amount you wish to pay, the BPAY biller code and your bill’s customer reference number, you will click through to our checkout.
At checkout, you will be asked to leave your details, which enables us to satisfy our legal requirements under the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017. This sounds ominous, but takes about 2 minutes.
When you proceed to payment, you will be shown the digital currency amount payable and the wallet address to send your digital currency to.
Once you have sent your digital currency to our payment gateway wallet, you will receive an email notifying you that your payment has been received. We then convert your digital currency to AUD and pay your BPAY bill on your behalf.
Are there any fees?
Yes. At checkout you will notice our 3% fee added to your bill amount. This is to help us manage the currency risk of a volatile digital currency market when converting to AUD for us to pay your bill. We use a third party payment gateway to enable the digital currency transaction. Our considerations when choosing a gateway was security, pricing (spread) and speed. You’ll note when at checkout (before proceeding to payment) that the price you receive on your digital currency is very competitive. Other digital currency BPAY facilitators charge up to 6% per transaction on the currency alone, which in our view is akin to highway robbery.
[Free PDF Download] 5 Costly Mistakes When Transacting in Crypto Cheat Sheet
Enter your details to access your cheat sheet.