Bitcoin – the daddy of all cryptos

Ah Bitcoin. Still considered by many of my friend-group as a fad – a weird nerd thing that isn’t worth anything, and to be taken as seriously as aliens (which I also think could be a thing one day – Project Hail Mary is awesome!)

We all know that story of the guy who bought 2 pizzas for 10,000 bitcoin. Those bitcoin today would be worth approx. $600M AUD. I love pizza as much as the next guy, but was it worth it?

Honestly, yes. Hear me out… it was the first instance of someone using this ‘magic internet money’ for something in the real world. And something relatable – ordering pizza. At the time $10,000 bitcoin was worth about $40USD – a bit expensive for pizza but there was the novelty factor too. We needed people like this guy to show that it could actually be used for a practical purpose.

But was it really worth it – no!! WTF. What sort of pizza could possibly be worth that much money!???? Hindsight is 20/20 and you can’t un-spend money (lord knows I’ve tried). It was worth it at the time, and that’s how you have to think of it (and if you can keep that mantra through all things crypto, it will help!)

You used to be able to buy a bitcoin for less than a cent. Now it costs tens of thousands of dollars. Have you missed the boat? No!

But what is bitcoin?

Bitcoin is a digital, or virtual, currency.

According to the bitcoin whitepaper written by none other than Mr Satoshi Nakamoto himself, Bitcoin is “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

Bitcoin exists only in a network of computers, and this virtual nature means that some people don’t think it truly holds any value. But as the price continues to rise, and bitcoin is an accepted currency at more and more locations, it keeps proving all the nay-sayers wrong.

Bitcoin removes the need for a third-party (i.e. banks) to provide the medium to buy or sell something – the bitcoin network is all that is needed. It proposes “an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.” The blockchain, allows anyone who is running bitcoin code to verify transactions – it can’t be faked.

Why is that important?

Covid notwithstanding, generally my life has been relatively stable. Even with that stability, in 2008 I saw the Global Financial Crisis, where banks in the US collapsed, and sent our worlds into a spin. It was scary. Poor decisions by ethically questionable humans looking to make the most money possible nearly broke the world economy (well… that’s my oversimplified understanding of it anyway).

Bitcoin is completely decentralised. No one entity owns all the bitcoin and then sells it on to people. No one entity sets the price of bitcoin (that’s not to say that there aren’t players who can influence the price of bitcoin).

Just saying that you have a bitcoin isn’t worth anything. If you want to try to buy something with bitcoin, it gets verified by the network before the goods are supplied. You can’t pretend to have what you don’t – the network won’t let it go through. Neat, huh?

We will look at how to buy bitcoin in Australia, but there’s also other options for you to get it.

I’m a bit lazy and have only gone the easiest possible way to purchase. If you’re interested in mining Bitcoin etc. we may get there eventually on cryptocracy, but so far it’s a bit beyond me.

Want more bitcoin detail?

Investopedia has a great guide: What is bitcoin?

Just want to start buying?

Find out how to buy bitcoin in Australia.