How does Bitcoin work and how do you buy it in Canada? Bitcoin has been around for almost a decade, but its no longer this weird, obscure concept that only excites nerds. Nope, its now this weird, obscure investment.
And now it is making some people filthy rich. So everybody wants in. So sit back, relax, and Ill answer five of the most googled questions about Bitcoin in under 5 minutes. Seriously, time me. Okay, that ones easy.
Bitcoin is a decentralized, peertopeer digital currency backed by cryptography that bypasses governments, central banks and other thirdparties to facilitate transactions. Next? Okay, so that probably made no sense.
Lets break it down. Bitcoin was originally designed as a digital currency, and how it functions is what makes it so unique. Every time a bitcoin is bought or sold, that transaction is verified and recorded on a public ledger of sorts called the blockchain.
Think of it as a list of every bitcoin transaction ever made, for all time. All of that blockchain data is stored on a network of bitcoin users around the world. Each individual user has a copy.
It updates automatically, it cant be deleted or altered. So its really hard to cheat the system. And because its stored on a network, no single government, central bank or company really own or control Bitcoin. Thats why people say its decentralized.
It is also supposed to be anonymous, and that was a big part of the appeal originally, but for all the wrong reasons. People were using it to buy drugs, guns and other illicit things online. Now law enforcement have better tools to track Bitcoin. So if you started googling this in hopes of financing criminal activitiessorry, this isnt that article.
Lets step back. Mining is the term for creating Bitcoin. Remember how I said every transaction is verified and added to the blockchain?
That whole process, which involves a lot of computational numbercrunching, is whats called mining. And miners are really just people using special hardware and software to crunch those numbers. In return for that work, miners are paid with, surprise, entirely new bitcoin. You used to be able to mine with just your desktop computer.
But not any more. Now only the first miner to process a block of transactions is paid with new Bitcoin, so miners are in constant competition and to win, they need the fastest mining rig with the most computing power. There are companies now that operate huge warehouses packed with mining hardware and they do nothing but mine around the clock. So, your desktop, it doesnt really stand a chance.
All of that computing power eats up a massive amount of electricity, too. Its been estimated that Bitcoin mining consumes as much energy as the entire country of Denmark. So miners are in an arms race not only to boost their computing power, but to get the cheapest electricity prices. Otherwise, they just lose money. Thats actually the easiest part of all this.
The major Canadian banks arent providing this service yet, but there are a handful online exchanges where you can buy and sell bitcoin, just like you would stocks. You sign up and verify your identity, which takes around 48 hours. After that, youre free to start sinking your hardearned cash into Bitcoin.
You can still pay for things with Bitcoin if you want, but these days people are treating it less like a currency and more like an asset, like gold. Its been a shockingly good bet so far. A single Bitcoin is worth about 13,000 dollars CAD. Thats an increase of more than 1500 in the past year. Whereas the Toronto Stock Exchange?
It only returned 5. Invest is probably the wrong word. Buying Bitcoin is more like gambling at this point. The price can swing hundredsif not thousandsof dollars in a single day. And nobody can adequately explain why.
There are wellfounded fears that Bitcoin is a bubble, and that people are only buying it because they believe it will be worth even more money down the road. But weve never seen anything like Bitcoin before, so its impossible to know whats going to happen. More importantly, if you dont understand Bitcoin and youre still scratching your head after watching this article, you might want to think twice before hopping on the crypto bandwagon.