What is Bitcoin? – New Zealand’s Easiest Guide

What is Bitcoin?

Launched in 2009 by an unknown creator going by ‘Satoshi Nakamoto‘, Bitcoin is a cryptocurrency that can be sent, received and stored through the internet.

Bitcoin is free to use, almost instant to send, extremely 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.

Bitcoin logo and Icon

That statement is undoubtedly true.

  • Bitcoin was the first fully operational cryptocurrency ever created.
  • Bitcoin and her fellow cryptocurrencies 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 keys to it.
  • The Bitcoin network is unhackable, or has proven to be over the past 10 years since it was created.
Bitcoin gold physical coin in mans hand with a handful of gold nuggets
Bitcoin only exists in the digital realm and is not an item you can physically touch. In saying that, Bitcoin is represented by a gold or orange coin with the letter B with two lines through it – as shown in the images above. 🙂

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 this data.

Bitcoin physical coin on top of a USD bank note with white background

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 takes up to 4 days using traditional money transfer systems.
  • Bitcoin can not be censored, and you can send your Bitcoin to anyone on earth without 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.

Bitcoin logo and icon next to gold bars with red and black back dop

Why do people buy Bitcoin?

This is a great question, which 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 it is valued higher and higher as more people adopt 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 their own 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 an extremely low price at almost instant speeds.
  • Because you would rather use Bitcoin as your primary currency than a government-issued currency.
  • 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. 🙂

 

Miners mining bitcoin in a mine shaft cartoon what is bitcoin nz

How is Bitcoin created?

The Bitcoin network has a preselected limit on how many Bitcoins can ever be created. That limit is 21 million, and currently, around 80% of those have been created.

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 runs on an individual’s computer, which 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 also 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.

Each of these 1/100,000,000 fractions of a Bitcoin is called a “Satoshi” – named after the anonymous creator of Bitcoin. Currently, 5000 Satoshis are equal to 1 New Zealand dollar.

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 floating in space in front of a purple and blue galaxy

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.
  • 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.

Bitcoin early adopters graph

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 system.

In programming and hacking, a ‘bug bounty’ is a reward offered to someone if they can crack a system or steal the money or assets inside. Bitcoin currently has a 290 billion-dollar bug bounty – so it’s safe to say that the system has been more than battle-tested by hackers over the past 10 years, at the Bitcoin network hasn’t been exploited once. 😎

Bitcoin hacker holding up a Bitcoin wearing a hood

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 has been the top-performing asset in the world in 2019, increasing 173% in price from the 1st of January this year to now.. Nothing is certain in 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 4 years:

2015: $423 NZD

2016: $905 NZD

2017: $6558 NZD

2018: $11,008 NZD

Bitcoin price from 2013 to 2019 in USD from coinmarketcap

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!
  • 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 would 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.

Bitcoin perhaps should be seen as more of a store of value, like gold, than an actual currency to use daily. 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.

New Zealand Dollars moving through the back of a phone and turning into bitcoin

How do I buy Bitcoin in New Zealand?

Easy Crypto is your cheapest, easiest and safest crypto broker to buy and sell Bitcoin through in New Zealand. ⚡

Easy Crypto trust pilot reviews screenshot

  • 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:

  1. 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 ( $255 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.
  2. 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.
  3. 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.

Bitcoin market cap in comparison to other global asset classess

Start Your Bitcoin experience by learning how to set up your own Bitcoin Wallet in NZ here. 🙂

Last updated 7th October 2019