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.

You are likely reading this article because someone told you that Bitcoin and her fellow cryptocurrencies are going to significantly change the world.

This statement is undoubtedly true.

  • Bitcoin was the first cryptocurrency ever created.
  • Bitcoin pioneered blockchain technology, the fundamental technology that underpins cryptocurrency.
  • Bitcoin and her fellow cryptocurrencies appear to be the next evolution of money.

gold nugget sitting next to bitcoin coin with black back ground

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. (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. For many people, Bitcoin is a better and more useful currency than the New Zealand dollar.

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

How are Bitcoins created?

The Bitcoin network sets a 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“. If I want to pay you 1 Bitcoin, I ask 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.

Person putting a coin ontop of a pile of coins

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 bits is called a “Satoshi” – named after the anonymous creator of Bitcoin. Currently, 5000 Satoshis are equal to 1 New Zealand dollar.

You can purchase Bitcoin in any amount that 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 NZD$5, 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 coin in front of a purple and blue galaxy

What’s so special about Bitcoin?

There are a lot of ways in which Bitcoin is different 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 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

People often ask how the Bitcoin system is so secure, and the answer is 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. With over 10 years of system uptime, the Bitcoin system has not been exploited once. In programming and hacking, a bug bounty is a reward offered to someone if they can crack a system. Bitcoin currently has 349 billion dollars bug bounty, so it’s safe to say that the system has been more than battle-tested by hackers over the past 10 years.

Bitcoin on a train track

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 4 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 70% of the total power consumption of New Zealand, and this is growing. If Bitcoin were a country, it would be the 58th 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$40 – 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.

Fiat cash moving through the back of a phone and turning into bitcoins

How do I buy Bitcoin in New Zealand?

Easy Crypto is NZ’s cheapest, easiest and safest place to buy and sell Bitcoin in New Zealand.

Easy Crypto trust pilot reviews screenshot

  • Easy Crypto has the best 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 freshly new to the cryptocurrency scene.

To get started with Easy Crypto, head to our homepage to create a free account to get started.