What is Bitcoin? – New Zealand’s Easiest Guide
What is Bitcoin?
Bitcoin is free to store and use, almost instant to send, highly secure if stored correctly and is potentially the most revolutionary financial technology we are going to see in the 21st century. Bitcoin is currently the 8th largest currency in the world – and many Bitcoin enthusiasts and economists believe that it is only a matter of time until it becomes the largest.
You are likely reading this article because someone told you that Bitcoin and her fellow cryptocurrencies are going to significantly change the world.
That statement is undoubtedly true.
- Bitcoin was the first fully operational cryptocurrency ever created.
- Bitcoin and her fellow cryptocurrencies appear to be the next evolution of money.
- You don’t store Bitcoin in a bank, but rather in a ‘Bitcoin wallet‘ – which can only be accessed by the person owns the digital keys to it.
- The Bitcoin network is unhackable, or has proven to be over the past 11 years since it was created.
Bitcoin doesn’t have any real value, right?
That’s right – the only value Bitcoin has is what people are willing to pay for it. If this sounds a bit crazy, think about the money in your pocket. A $20 note itself is worth nothing, it’s just a piece of plastic. (And it’s not even backed by gold). That note only has value because shops, banks, and other people all agree that that note can be exchanged for $20 of goods and services.
It’s exactly the same with Bitcoin. Bitcoin has no value in itself, but it is valuable because a community of people agree that it holds worth, just like with that $20 note. To many people, Bitcoin is a better and more useful currency than the New Zealand dollar.
The price of Bitcoin on Google is determined by Google taking the average prices of Bitcoin from a range of large exchanges, and finding the median price point from these data points.
How is Bitcoin more useful than the NZD or USD?
Bitcoin has several key attributes that provide the Bitcoin network with strong advantages over the established banking and currency system.
- Unlike how the banks are closed on the weekends, Bitcoin can be used 24/7, 365 days a year.
- You can send your Bitcoin anywhere in the world in seconds, whereas it can take from 4 days – 2 weeks using traditional money transfer systems.
- Bitcoin can not be censored, and you can send your Bitcoin to anyone on earth without ever asking for permission.
- All transactions on the Bitcoin network can be private, meaning that you can anonymously store value in Bitcoin without anybody knowing that you own it.
- Anyone can easily create a Bitcoin wallet and use Bitcoin, and secure a financial future for themselves that is independent of the NZD, USD, AUD or other government currencies.
Why do people buy Bitcoin?
This is a great question that has multiple answers depending on your personal interests.
- Most people buy Bitcoin as an investment. Since there is a capped amount of Bitcoin that can and will ever exist, if you buy some now, the price will increase as BTC is valued higher while more people adopt and use this revolutionary technology.
- Because you may not happen to have a bank account and Bitcoin is your best alternative, like what it is to the 1.7 billion adults on earth who do not have access to a bank account.
- Because you are wanting to store value in an asset that is independent of any other assets, which is also highly secure and private.
- Because you want to send money overseas for a low price at almost instant speeds.
- Because you would rather use Bitcoin as your primary currency than a government-issued currency, to avoid losing the purchasing power of your savings to inflation.
- To buy things online that you couldn’t otherwise buy with government-issued currency.
For a full rundown of why people buy cryptocurrency like Bitcoin, see our guide here.
How is Bitcoin created?
The Bitcoin network has a limit on how many Bitcoins can ever be created. That limit is 21 million, and currently, around 80% of those have been created. This limit is public and well known, and it is built into the Bitcoin network itself and it cannot be altered.
The process to create Bitcoins is called “mining”. Miners process transactions on the Bitcoin network, otherwise known as the “blockchain“. A miner is a computer program that solves mathematical problems in exchange for a slice of the fee that it gets for solving each problem.
When I make a Bitcoin transaction to you, my Bitcoin wallet automatically asks a miner to record that transaction on the blockchain. As a reward for processing my transaction, the miner receives some brand new Bitcoin, which is how Bitcoins are created.
Only a small percentage of people who use Bitcoin mine it – and the rest acquire their Bitcoin through a service like Easy Crypto NZ.
If you want to buy Bitcoin safely and easily at the best prices in New Zealand, see our guide on how to buy Bitcoin in NZ in minutes.
Can I just buy part of a Bitcoin?
Absolutely. One Bitcoin can be split up into 100 million pieces, meaning the smallest unit of a bitcoin is 0.00000001.
You can buy any amount of Bitcoin you want. However, when you purchase Bitcoin you also need to pay a fee for your transaction to be recorded in the blockchain. At the moment, the fee is around $5 NZD, so a transaction of lower value than that wouldn’t be able to be processed. This is one of the downsides to Bitcoin as a currency, however other cryptos like IOTA have no fees at all!
Bitcoin is seen as the gold standard of cryptocurrency, and many Bitcoin owners alike believe that it has a good chance at becoming the global reserve asset down the track. There are currently many projects around the world working on speeding up Bitcoin and lowering the transaction fees, such as the well known Lightning Network project. ⚡
Why Should I Buy Bitcoin?
There are a lot of ways in which Bitcoin is unique from any traditional currency, which make the Bitcoin technology so interesting.
- Fully digital – Bitcoin has no physical appearance, it’s recorded electronically but doesn’t exist in any tangible form.
- Decentralised – Bitcoin is not owned by a bank or government, or by anyone! While individual people can buy and hold Bitcoins (or parts of a Bitcoin), the network that runs the currency is controlled by the community that uses it, and not by any individual or organisation.
- Private – Instead of using a bank account or credit card that has your name on it, if you want to buy something with bitcoin, you don’t need to disclose any personal details. It’s not completely anonymous though, as all transactions are recorded and can be traced. However, you don’t have to link your name to your transaction.
- Global – it’s just as easy to send Bitcoin to your neighbour as it is to send it across the world. And there’s no extra cost for going across borders. In fact, the Bitcoin network doesn’t have any comprehension of international borders at all!
- Trustworthy – you cannot make a fake bitcoin, put through a false transaction, or steal a bitcoin that is stored securely. The Bitcoin network has built-in checks that make it impossible to cheat. Of course, there are always vulnerabilities through things like social engineering (e.g. if someone persuades you to tell them your password) or if an exchange gets hacked, but the Bitcoin system itself is faultless.
- Bitcoin is still in its infancy, and it has a long way to go before it is adopted by the mainstream.
Is Bitcoin safe to use?
People often ask how the Bitcoin system is so secure, and the answer is very simple.
Bitcoin’s code is open-source, meaning that anyone can copy the entire code and try and figure out ways to exploit the Bitcoin system in their own controlled environment.
In the programming and hacking world, a ‘bug bounty’ is a reward offered to someone if they can crack a computer system or network and steal the money, assets or data inside. Bitcoin currently has a 238 billion-dollar bug bounty – so it’s safe to say that the system has been more than battle-tested by hackers over the past 11 years – and the Bitcoin network hasn’t been exploited once.
Is Bitcoin a safe investment?
As an investment though, this is an entirely different answer. There is no guarantee at all that Bitcoin will be a successful asset to hold on to for the long term, let alone the short. Bitcoin is notorious for having extreme price fluctuations, making Bitcoin one of the most high-risk assets in the world.
In saying that, Bitcoin was the top-performing asset in the world in 2019, increasing 105% in price from January 2019 to January 2020. Nothing is certain in the future of Bitcoin, and there is nothing to compare Bitcoins future to in history. The key to holding Bitcoin is to buy low and sell high, and the safest way to do ensure that you don’t miss out is to hold on to Bitcoin for the long term.
The average prices of Bitcoin over the past 5 years:
2015: $423 NZD
2016: $905 NZD
2017: $6558 NZD
2018: $11,008 NZD
2019: $10,961 NZD
Downsides of Bitcoin
While Bitcoin has some amazing features, it also has its limitations. Some of the key drawbacks of Bitcoin are:
- No helpdesk – while being decentralised (i.e. not controlled by any bank or organisation) is a great strength of Bitcoin, it can also have its downsides. If you forget your password there’s no call centre to help you reset it, and if someone steals your wallet, you can’t just ask the bank to put a hold on your account.
- Slow – the Bitcoin network can only process around 7 transactions a second, compared to Visa which can theoretically process more than 50,000 transactions per second! It is likely that this will drastically change in the future as development continues on the Bitcoin network.
- Energy-intensive – the power used by the Bitcoin network is estimated to be equivalent to Switzerland, and this is growing fast. If Bitcoin were a country, it would be the 64th biggest energy consumer in the world!
- Expensive to transact with – because Bitcoin uses so much energy, it is expensive to send transactions on the network. At the moment, a transaction costs around NZD$5 – which is pretty pricey!
- Volatile – the price of Bitcoin can fluctuate massively, which makes it difficult to use for buying goods and services. If you bought a $4 coffee a year ago with Bitcoin, that payment may now be worth $100! And of course, the price can go down as well as up, making Bitcoin a risky investment option.
Not all cryptocurrencies have these same limitations though. While Bitcoin was truly ground-breaking as the first-ever cryptocurrency, newer coins have since come along that seek to address some or all of these limitations. In saying this, Bitcoin has become the ‘gold standard’ of crypto, so it seems likely that Bitcoin may still be the largest cryptocurrency in the future – but who knows!
Bitcoin perhaps should be seen as more of a store of value, like gold, than an actual currency to use daily, for now. Bitcoin and Gold share many similarities, and Bitcoin is arguably a better gold than gold is! For this reason, many believe that Bitcoin has a good chance of becoming a global reserve asset or currency.
How do I buy Bitcoin in New Zealand?
Easy Crypto NZ is your cheapest, easiest and safest crypto broker to buy and sell Bitcoin through in New Zealand. ⚡
- Easy Crypto has the best broker Bitcoin prices in NZ
- We are the only crypto broker in NZ to have a 100% funds safety guarantee
- Our system was built to be used by people who are brand new to the cryptocurrency scene
To get started with Easy Crypto, head to our homepage to create a free account to get started.
No what? I have Bitcoin, What should I do?
You have a few options:
- Sit on it for the long term and ride your investments like a rollercoaster. The more Bitcoin people, businesses and governments buy, the higher the price will go. If the value of Bitcoin as an asset class ( $196 billion NZD ) were to exceed the value of the gold market cap, ($11.7 trillion NZD) each Bitcoin would be priced at roughly $650,000 New Zealand Dollars.
- Spend your Bitcoin on goods and services that accept cryptocurrencies in NZ and beyond. You can see our map for where you can spend your Bitcoin in NZ here.
- Start day trading, where you will buy in when the price is low and sell high on a regular basis. This is, however, extremely risky.
Start your Bitcoin experience by learning how to set up your own Bitcoin Wallet in NZ here.