What is Bitcoin?
Bitcoin is a peer-to-peer system to send payments from one person to another over the internet. Bitcoin payments don’t go through traditional financial systems. Transactions are managed in a Bitcoin wallet, a program that lets registered users store,
send and receive payments.
The cyber currency uses individual bitcoins, which have a value and can be bought, sold and exchanged. The recently opened Bitcoin ATMs let you withdraw real currency converted from your bitcoin wallet or add to your balance by depositing money that is converted back into bitcoins. A Bitcoin wallet can be used on a computer, smartphone or tablet.
Bitcoin is a
bit of a frontier currency because it isn’t controlled by a central bank and
its use is unregulated. In Australia, the ATO is expected to soon release taxation guidelines for Bitcoin and other cyber currencies. The US IRS (tax office) announced that bitcoins should be treated like property
and federal taxes should apply.
Australia isn't to be outdone when it comes to cyber currencies. Dogecoin was created by a software developer late last year and has since gone from strength to strength. There are other cyber currencies such as Litecoin and Peercoin.
Where did Bitcoin come
The idea of
Bitcoin was developed by Satoshi Nakamoto in a 2008 paper outlining how to
create a peer-to-peer payment system. The following year, the first Bitcoin program
was created and bitcoins released.
the Bitcoin network as such, and anyone can download the Bitcoin “wallet”
program to join the network. There is a Bitcoin Foundation, whose mission is to
promote Bitcoin as a viable, safe currency. It wants to standardise Bitcoin so
it’s robust and ensure it’s safe from being hacked.
How do I get bitcoins?
As of May 2014, it costs about $443 to buy one bitcoin. So as
you can see, they don’t come cheap. You might not want to buy them until you
know exactly what you’re going to do with them. You’ll also need to pay a
commission to buy and sell bitcoins like you do when exchanging foreign
The creation of individual bitcoins is pre-defined by the
original Bitcoin code and cannot exceed 21 million. As of May 2014 there
were almost 13 million bitcoins in the system, according to blockchain.info, which tracks transactions in real time.
several ways to acquire bitcoins:
Bitcoin mining is where people use their
computers to take part in processing and can eventually earn bitcoins for
themselves. Bitcoin mining on
your computer will earn bitcoins using special software to solve equations. To
do this, you use mining software to which you devote some of your computer’s
processing capacity to work towards bitcoins.
can be carried out using a Bitcoin e-wallet to send and receive payments over
the internet through a computer, smartphone or tablet. It’s like sending
payments via PayPal or electronic bank transfer. To create a Bitcoin wallet,
you need to install a Bitcoin wallet program.
is possible from one of the many Bitcoin exchanges. A Bitcoin exchange
is an online marketplace for buying and selling bitcoins.
In Australia, you can
start on howtobuybitcoins.info. This
site links to local bitcoin exchanges such as Bit Trade Australia,
Btc Markets or Bitcoin Australia.
Paying with bitcoins
can be made at certain online merchants as well as some cafes, restaurants and
other shops. It hasn’t yet taken off in Australia, but the introduction of
Bitcoin ATMs may spur along Bitcoin payments.
Read on to find out about some of the risks that may exist with Bitcoin and other cyber currencies.