Bitcoin (BTC)

Make better choices with bitcoin.

Before investing in Bitcoin it is important to understand it. With this in mind, we have made a jargon-free summary and compiled a list of where to go in order to buy bitcoin wisely.

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All Time High:
  • Current Bitcoin Price:$ 6,445.15
  • Today:$ 7.41
  • Past 12 Month:65.06%
  • Market cap:$ 111.43 B
  • Volume 24:$ 322,709,250.2
  • Supply:Ƀ 17,289,037.0

What is Bitcoin?


This guide lays out the basics: what Bitcoin is and the different ways it can be used. If you're already up to speed then scroll down for more specialist information.

1a - What is a blockchain?

This is the first thing anyone needs to know in order to understand what Bitcoin is. The blockchain is the technology that makes cryptocurrency possible.

In layman’s terms, a blockchain is a publicly accessible accounting book (ledger) that records all transactions made with a single currency. Blockchain technology can actually record transactions of any form of digital information, but its most important use to date has been enabling the movement of cryptocurrency between different people.

A good way to understand how a blockchain functions is to compare it to a regular accounting book. A traditional accounting book is usually maintained and updated by a singular person or entity such as a bank. It’s the bank that acts as a central authority by keeping track of how much money people have in their accounts and any transfers they make or receive. In this way a regular accounting book is ‘centralised’, with the bank acting as the middleman for all transactions.

A blockchain, on the other hand, is ‘decentralised’. This means that transactions are recorded on its ledger without a central authority verifying them. It might sound a little complicated, but the following analogy should help you get to grips with how it works:

Think of a 5-a-side football game that you’re playing with your friends, where there isn’t a referee (central authority) present. As players, you can keep track of the score as the game goes on, and the game only continues if everyone agrees on the score shown on the scoreboard (ledger). If one person from the ten thinks that the score is different, for instance they insist that their team is winning 3-1 when the others know the score is actually 2-1, the majority’s opinion takes priority. The same democratic process takes place with each new goal scored, and the score is then adjusted to reflect which team scored the goal.

The blockchain is the football game, the score is the transaction history, and agreeing whether a goal has been scored and who scored it is the verification of a transaction. All taking place without a central authority (referee) updating the ledger (scoreboard).

Now you’ve got the basic premise, let’s look at how an actual blockchain works. Don’t worry if everything hasn't clicked into place yet, going through the following sections will help you build a better picture of what Bitcoin is.

1b - What is a ‘block’ within the blockchain?

Blocks are groups of transactions stored on a blockchain.

Imagine keeping a record of your personal finances in a new, empty accounting book. As soon as you start to record your transactions in the book, the pages within it start to get filled, and new pages will continually be added as the old ones are full. If you picked out a transaction from any individual page and changed it, the accounting book becomes useless after that point, as the balance shown on the following pages would be incorrect.

A ‘block’ within a blockchain is just like an individual page of an accounting book: it is a record of different transactions. When new transactions on the blockchain are verified, they are grouped together in a single block. New blocks are then added on top of those that have been created before, updating the ledger and creating a chain of connected blocks: a blockchain.

In the same way that you cannot change one of the transactions on a previous page in your personal accounts book without invalidating all the subsequent pages, you cannot alter a block once it has been added to the blockchain.

1c - Why should you care?

In a sentence, blockchain technology is important because it removes middlemen. You no longer need a centralised authority (such as a bank) to have control over regular transactions, giving power back to regular people.

At present, if you were to go to your local high street shop to buy a pair of shoes with your debit card, the transaction would look a little like this:

You > Your bank > The shop’s bank > The shop.

This is because banks control your money for you. They have to verify that you have enough funds to complete a payment before they can transfer your funds to someone else; that ‘someone else’ will be the shop owner’s bank, which will then add the money to his/her account for them. Sounds like an over complicated way to buy shoes, no?

Blockchain technology removes the need for an intermediary such as a bank to oversee and record transactions. Here’s how a blockchain transaction works:

You > The shop.

During this process, no centralised banks are needed as this verification process is carried out by the users of the blockchain themselves - just like how the score was maintained in the football game in section 1a. Once this transaction has occurred, it will be added to a block, which will later be added to the blockchain.

1d - What problem did blockchain technology solve?

Blockchain technology provides a solution to what is commonly known as the ‘double-spending problem’. Put simply, a blockchain stops people from being able to spend the same money twice, while removing the need for a central authority to oversee and verify transactions.

Take the example of cash. The double spending problem doesn’t exist when spending cash because the exchange is physical: if you give a £10 pound note to someone, you no longer have that note and cannot therefore give it to another person. However, if you spend £10 pounds digitally, it is more complicated to verify that you no longer have it in your possession and stop you spending it again.

With digital currencies, a system needs to be in place to stop people spending the same money more than once. Banks have patched over this problem through centralised control: taking charge of verifying every transaction that takes place between people’s accounts. By controlling everyone’s transactions, the bank decides how much money each person has in their account and ensures that nobody can transfer the same £10 to two different people.

But there’s a catch. This also means that banks have complete control over your money. If a bank is compromised by a malicious third party, or decides to act in a fraudulent manner, its account holders could lose their money because ultimately their accounts are owned and controlled by the bank.

Blockchain technology solves the double spending problem without the need for a bank. Each transaction on a blockchain is verified by its users, and then added to the public ledger of the blockchain (as explained in section 1b). Once you transfer £10 to someone else, the transfer is recorded on the blockchain, proving that you no longer have that £10 and cannot spend it again.

The crucial part of this is the decentralisation of the process: you no longer have to place your trust in a central body to handle financial transactions. When banks are controlling everyone’s money, all the data is hidden away to be seen and managed by a select group of people. These people have a great deal of power, if they are corrupt or incompetent, then everyone with money in the bank is at risk. The blockchain is public and transparent, granting equal power to all of its users and taking it away from shady financial institutions.

Solving the double spending problem with blockchain technology is what made cryptocurrency a viable alternative to ‘regular’ currencies.

1e - So, what is a cryptocurrency?

A cryptocurrency is a digital currency that uses a blockchain technology to record transactions.

When you need to make a payment to someone, instead of transacting with regular fiat currency (e.g. pounds, euros, and dollars), you will need to use the cryptocurrency supported on that blockchain. For example, the bitcoin currency sits on top of the Bitcoin blockchain. You cannot have a cryptocurrency without a blockchain.

The ‘crypto’ in cryptocurrency refers to cryptography. Cryptography is the process of encrypting information so that it cannot be read by anyone other than who it is intended for. Children passing coded notes in class that the teacher can’t understand is a basic form of cryptography, the Enigma code used by Germany in World War 2 is a much more advanced example.

When something has been encrypted, third parties can see it’s there but can’t understand it. This is how cryptocurrency moves on the blockchain. When coins are transferred between people, the blockchain publicly displays how much cryptocurrency was moved, but not the identities of the people involved in the transaction.

To understand this revolutionary form of digital currency further, it’s time to move on and look at the cryptocurrency that started it all: Bitcoin.

2a - What is Bitcoin?

Bitcoin is the first ever cryptocurrency, supported by the first ever blockchain.

It was created in 2008 by person(s) unknown named Satoshi Nakamoto, shortly after they published an academic journal article entitled 'Bitcoin: A Peer-to-Peer Electronic Cash System'. This article not only put forward the idea of cryptocurrency, but also detailed exactly how a blockchain would work. It is Nakamoto’s paper that introduced blockchain technology to the world.

In order to understand Bitcoin, it is important to know why it was created and where it came from. Continue reading and we'll take you through all the details you need to know, before moving on to explaining how Bitcoin works and how you can use it today.

2b - Who or what created Bitcoin?

Nobody knows for certain. In 2008 an academic journal article was published called 'Bitcoin: A Peer-to-Peer Electronic Cash System', with the author listed as Satoshi Nakamoto. Nakamoto was also responsible for writing the code of the Bitcoin blockchain and creating its first ever ‘block’ of transactions.

There has been an enduring mystery about who this person is, or whether it is in fact (as many believe) a pseudonym for a group of people. Despite many attempts to uncover the truth, and a few individuals coming out in public professing to be Satoshi Nakamoto, the identity of the person(s) behind Bitcoin still remains a mystery.

2c - Why was it created?

There are many potential reasons for this, but the event that certainly did most to influence the creation of Bitcoin was the 2008 financial crash. On the first block of the Bitcoin blockchain (the ‘Genesis block’), Satoshi Nakamoto cited an article from The Times titled ‘Chancellor on brink of second bailout for banks’.

It appears that Satoshi Nakamoto’s creation of the first Bitcoin block was a direct response to their own unhappiness with the global financial system in the wake of the crash. Through the creation of a whole new form of decentralised currency, the immense power of ‘too big to fail’ banks could be challenged.

2d - Who owns the Bitcoin blockchain?

No one owns the Bitcoin blockchain. The nature of a blockchain is to be decentralised, which means that no one person, group, or entity controls it.

On a technical level, the Bitcoin blockchain is a form of open-source software, meaning that it is controlled by its users, who vote on any proposed changes to the code through direct democracy (like the football game with no referee in section 1a). People can freely look at the source code of the blockchain and suggest edits to it, but updates require an ‘economic majority’ to be successfully incorporated.

Just like any app on your phone, updates are made to the blockchain to help it work more efficiently, increase security, or any other improvements it may need. However, when updating an app, it’s the company that owns it that will decide and enact the updates; with Bitcoin, only updates that the majority of users agree to are implemented.

This democratic approach to the management of Bitcoin is not only what sets it apart from the global banking system, but is also a core component of how Bitcoin works.

3a - How are bitcoins transferred?

Imagine sending someone (e.g. your friend Sarah) an email that reads ‘1 bitcoin’. You would:

  1. Log into your email account
  2. Enter Sarah’s email address
  3. Type ‘1 bitcoin’ into the body of the email
  4. Hit send
  5. Sarah would receive a message reading ‘1 bitcoin’

A bitcoin transfer works in a similar way, but instead of email accounts you and Sarah each have ‘wallets’. If you were sending 1 bitcoin to Sarah, she would receive 1 bitcoin in her wallet, rather than an email in her inbox.

From a user’s perspective, wallets function like email accounts, but they are much more secure. Each wallet has a public address used to send and receive bitcoin (like your email address), and a ‘private key’ used to access your funds (like your password).

A bitcoin wallet public address (also known as a ‘public key’ or ‘wallet address’) is comprised of a string of 26-35 letters and numbers, starting with numbers 1 or 3. Here’s an example of a bitcoin wallet address:

1S0xjzn7AcGd7wl7AyLqmLYL2oFl

Users of the blockchain can transfer funds to your wallet by entering your public address, and if you transfer bitcoin to somewhere else it will be recorded on the blockchain as having been sent from your wallet address.

Private keys are comparable to your password. They are what enable you to access the bitcoin you have received, and send bitcoins to other wallets. But private keys are much, much more secure than email passwords. Private keys take the form of a 64 character long string of letters (A-F) and numbers (0-9). Here’s an example of one:

072DDD3DE3017A3D82CDEA29E585004AD25
F132CE36BA7D0D48B73736822353C

So, if you wanted to make a payment to Sarah, you would first need to have your wallet’s private key to gain access to your bitcoin wallet and the funds held within it. You can then choose to send funds from your wallet to Sarah’s through entering her wallet’s public address.

The transaction will then be publicly recorded on the blockchain as a transfer of one bitcoin from your wallet to Sarah’s.

3b - Can you have less than one bitcoin?

Yes you can. Bitcoins are divisible, and can be broken up into fractions of up to 8 decimal places. The smallest fraction of a bitcoin that you can store on a wallet, or to transfer to others is 0.00000001 BTC (one hundred millionth of a bitcoin), which is known as a ‘satoshi’.

The divisibility of bitcoin works just the same as regular currency. In the UK, the currency is pounds, but you can get 50p, 20p, 10p, 5p, 2p, and 1p pieces.

3c - What is Bitcoin mining?

Mining is the process that verifies the legitimacy of Bitcoin transactions and adds them to the Bitcoin blockchain in the form of new blocks.

Remember the football players from the game in section 1c, who kept score of the game without the need for a referee? They are the miners: the users of the blockchain who verify transactions without a central authority calling the shots.

When it comes to bitcoin, mining involves computers competing to solve mathematical equations in a process known as ‘hashing’.

To imagine how mining works, it is best to envision a situation where multiple people are working on solving 5 by 5 rubik’s cube, where the first person to complete the cube is rewarded with £100.

With mining, instead of solving a rubik’s cube, miners are working on verifying bitcoin transactions, grouping them into blocks, and adding them to the blockchain. Once this process is complete, instead of £100, the successful miner is awarded with a set amount of bitcoins as a ‘block reward’. This reward is what encourages more people to participate in bitcoin mining, which is what keeps the blockchain decentralised.

The mathematics behind mining are complicated, and it is not necessary to understand them fully in order to use and spend bitcoin - just as you don’t have to be able to build a computer in order to use one, or understand investment banking to have a debit account.

If you’re interested in learning how to mine bitcoin, you can do so on our designated ‘Mining’ pages. For now we’re going to move on to how you can buy, store, and invest in bitcoin.

4a - How do I buy bitcoin?

If you are looking to buy bitcoin using the money in your bank account, the best and easiest option is to use a brokerage.

A bitcoin brokerage is essentially an online bureau de change for bitcoin. Brokerage platforms sell bitcoin at a fixed price, depending on the time and date of the transaction. Just like when exchanging pounds for euros at the airport, the price at which you can buy bitcoin from a brokerage will be set by the current exchange rate, plus whatever commission the broker charges for exchanging your money.

Because of their commission rates, brokerages are the most straightforward way to purchase bitcoin but not necessarily the cheapest. To find the best price, trading bitcoin on an exchange is your best option. This will be explained in section 4c, but first you’ll need to know how to store any bitcoins that you buy.

4b - How do I store my bitcoins in a wallet?

In order to store bitcoin, you’ll need a bitcoin wallet. In section 3a we learned what bitcoin wallets are, how they work, and their importance in the movement of bitcoin, so now let’s run through the different types of wallet that you can get.

There are 5 different types of wallets: online wallets, desktop wallets, mobile wallets, paper wallets, and hardware wallets. Each wallet type functions as an account to store your bitcoins, and enables you both to send bitcoin to, and receive it from, other wallets. The difference between the different types of wallet is in the way they secure your private keys (essentially your password that allows you to transfer bitcoin out of your wallet).

There are pros and cons to each wallet type, which you can learn about in our ‘Wallets’ section. If you’re getting your first bitcoin wallet, then it’s easiest to get an online wallet, for which you’ll simply need to register with an email address and create a password. These wallets are commonly attached to exchanges (see 4c) or brokerages (see 4a) through which you can also buy bitcoin.

Once you have a wallet, you’re ready to buy or trade bitcoin on an exchange. Also, if you want to trade bitcoin without needing a wallet then that’s also possible with CFD platforms. Keep reading and we’ll explain your bitcoin trading options.

4c - How do I trade bitcoin?

If you want to trade bitcoin, then your two main options are exchanges and CFD platforms. These platforms are more complicated than brokerages, but provide more options for making profit out of bitcoin. The only difference between the two is that exchanges require you to own and store the bitcoins you’re trading in a wallet, whereas CFDs do this for you.

Trading bitcoin with the above platforms is similar to regular day-trading. Users can try to profit through making trades around the price fluctuations of bitcoin, just like with any other store of value like gold or regular fiat currency (pounds, euros, dollars).

On exchanges you’ll be trading your bitcoins directly for other cryptocurrencies, and on CFD platforms you’re basically making bets with the trading platform about whether the price of bitcoin will rise or fall. For this reason, you will need a wallet to use an exchange, but not to trade on a CFD platform.

As mentioned, these platforms are more complicated to use than brokerages, so it’s recommended to read our pages detailing how CFD platforms and exchanges work, which will guide you through the process and help you start trading for profit - if that’s how you want to use bitcoin.

By now you’re probably wondering if bitcoin has any uses other than trading for profit. The answer is a definite yes, and so the final stage of our bitcoin tour will take you through the different ways you can use bitcoin.

5a - What is bitcoin used for?

It’s now a decade since bitcoin was created, and you can now use it for almost anything for which you’d usually use ‘regular’ currency. To give examples, many Australians today pay their household bills using bitcoin, you can gamble with bitcoin in many online casinos and betting sites, and you can even top up your XBOX Live account, buy furniture from Overstock, and send remittance payments using your bitcoins. Bitcoin is particularly suited to the latter of these because it can be transferred anywhere in the world instantly with no conversion fees.

If you’re interested in learning more about bitcoin gambling, our ‘Gambling’ pages will take you through everything you need to know. What we’re going to do next is run you through how you can spend your bitcoins in real shops, both online and offline.

5b - Who accepts Bitcoin?

If you want to spend your bitcoins, this is the most important question. Transactions with bitcoin can only be completed with shops/individuals that accept it as a payment option and have a wallet address to receive bitcoins. If this is the case, spending your bitcoins usually involves the simple process of scanning a QR code generated by the shop’s wallet and inputting the amount of bitcoin you wish to send.

If a shop or online platform accepts bitcoin, it will be listed in their payment options. We’ll always keep you updated with new places that allow you to shop with your bitcoins.

5c - What about shops that don’t accept bitcoin?

It’s reasonable to think that if a shop doesn’t accept bitcoin, then you can’t pay with it. While it may seem like this would make spending your bitcoins impossible, this is actually not the case.

Companies have created products to encourage the adoption of bitcoin into existing payment schemes around the world, rather than just waiting for every shop to accept bitcoin directly. Bitcoin prepaid cards and bitcoin debit cards allow you to pay with your bitcoins anywhere that accepts ‘regular’ card payments.

Both varieties of bitcoin cards (prepaid and debit) are loaded with bitcoins, but allow you to pay in shops that only accept card payments. This means that it’s possible to incorporate bitcoin into your day-to-day life easily, and you can even start paying for monthly expenses such as a mobile phone contract from your bitcoin debit card.

6a - Where can I go to learn more?

Congratulations! You have completed our crash-course on Bitcoin. Further information on everything we have discussed here can be found across CryptoSupermarket. If you have any questions to which you can't find an answer, then we’re always available via live chat to handle any queries.

Is Bitcoin a good investment?


Why it is

  • Bitcoin is the most proven cryptocurrency
  • It has the highest growth of any asset in history
  • There is long-term stability in bitcoin, despite market fluctuations
  • There's a finite number of coins so it's likely to retain value
  • Bitcoin is very secure and anonymous

Why it isn't

  • Like any cryptocurrency, bitcoin could depreciate in value
  • Many other competitors have emerged
  • Bitcoin sometimes fluctuates wildly in price
  • The transaction speed is slow
  • Bitcoin is well-established, so it's not easy to make fast money

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