To help give you more of an understanding, below is a breakdown of what Bitcoin is and a step-by-step guide to buying and using it in Australia.
What is Bitcoin?
Bitcoin is a decentralised digital cryptocurrency – the first of its kind in the world. Bitcoin was invented by Satoshi Nakamoto back in 2009. While Bitcoin acts as a medium of exchange, store of value and unit of account, but is not issued under the authority of any government body. You can learn more about the tax treatment of cryptocurrency in Australia from the ATO.
Every Bitcoin transaction is made on a peer-to-peer network online and there is no server or central authority that needs to check first with a bank before clearing a transaction. The decentralised verification process creates the potential for banks to transfer funds to each other faster and at a lower cost than traditional methods. Currently, international money transfers can come with relatively high fees and higher exchange rates to cover the cost of the banks involved.
Blockchain, the technology behind Bitcoin and other cryptocurrencies, is basically a ledger of who owns which bitcoins. Every transaction made with bitcoins is sent to the decentralised network and ‘mined’ into the Blockchain. And if you own bitcoins, you can own the ‘digital keys’ to unlock and spend those funds, unlike traditional currencies.
There are an increasing number of places accepting Bitcoin as payment in Australia and all over the world, but considering the youth of this currency and the uncertainty about how it operates and the risk factors involved, it’s considered to be highly volatile.
Source: ABC (Vimeo)
How to get Bitcoin in Australia
Many people are probably put off by the high price of a single Bitcoin when considering whether they should invest their money in this emerging digital currency. But did you know bitcoins are divisible by up to 8 decimal points, meaning you have the option to buy only a fraction of a bitcoin? There are a few ways you can buy Bitcoin in Australia – here are some of the main ones.
1. Buy bitcoins from a bitcoin exchange
Bitcoin exchanges are available all over the world and allow you to trade digital currencies, like Bitcoin, for other assets such as conventional money or another digital currency. If you do decide to trade on a bitcoin exchange, it’s a good idea to be aware of charges from the exchange merchant for the cost of their services. Some of the main bitcoin exchanges in Australia include:
The Federal Government’s financial intelligence agency, Australian Transaction Reports and Analysis Centre (AUSTRAC), has been given powers to police digital currency exchanges like the ones mentioned above. The Australian Securities and Investments Commission (ASIC) has been a strong advocate for regulating the industry for some time, due to the risk of “serious and organised crime groups” exploiting the system. It is unclear at this stage what this change could mean for exchange accessibility and merchant fees.
→ Related article: Keep saving or start investing?
2. Receive bitcoins for goods and services
Any business or individual can choose to accept bitcoins as payment if you have a Bitcoin digital wallet to store the currency. A Bitcoin wallet can be downloaded from the Apple or Google Play stores, and you will need to decide how you would like to accept the payment. Some ways of accepting payments include:
- QR codes which can be scanned using a smart phone and generated in a Bitcoin digital wallet app.
- Payment processing systems online that can automatically convert digital currency like Bitcoin into a traditional currency like Australian dollars.
- Custom Point of Sale (POS) terminals instore that integrate with your existing sales register.
3. Mine your own Bitcoins
Mining is basically a technical term for finding new, unreleased bitcoins. It’s the process of verifying bitcoin transactions across many different networks, with all transactions gathered into boxes with virtual padlocks – it’s the ‘miners’ job to find the key to open the padlocks by running certain software. When they find the key, they can earn new, never-before-discovered bitcoins as a reward.
While popular, as Bitcoin continues to expand the option of mining is now probably limited to bigger centralised miners with a big budget. This is because you would need the power of a big computer network that can be built upon just to earn the rewards. In the early days, though, it was pretty popular.
Source: BitcoinMiningCom (YouTube)
Where to store your bitcoins
If you’re thinking of getting into the Bitcoin game, it’s probably a good idea to find a secure way of storing your bitcoins. It’s generally recommended you shouldn’t be storing them in an exchange, but rather in a digital Bitcoin wallet as discussed above.
There are a few options available on the app stores for these wallets as well as software on laptops or computers, so do a bit of comparison shopping to find which one best suits your needs. You can get wallets apps that protect small amounts with a private key stored on your phone. These also have the added benefit of scannable QR codes, which saves time on entering long bitcoin addresses when you want to send money.
Who accepts bitcoin in Australia?
Now that you know how to get bitcoins, you’ll probably want to know what you can do with it. As cryptocurrency continues to become more popular in Australia, the range of things you can spend your bitcoin currency on is getting bigger and bigger. You could be paying for anything from your daily coffee order to getting your teeth checked with bitcoins.
There’s actually a place you can go to easily find out what stores or ATMs near you accept bitcoin. Coinmap allows you to find Bitcoin shops and businesses anywhere in the world. Below is a heat map from Coinmap of places you can use bitcoin in Australia. Check out Coinmap directly for a more detailed view.