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What is Bitcoin & How Does It Work?

It’s now been a decade since bitcoin (BTC) first made headlines as this decade’s best get-rich-quick scheme, and since, it has become a mainstay in global financial markets—but for the uninitiated, it might still seem impossible to comprehend. To the “I buried my savings in the yard” crowd: this one’s for you.

What is cryptocurrency?

In the journey toward understanding bitcoin and how it can earn you money, cryptocurrency—or crypto, we’re hip—is the first word you need to know. Crypto is an umbrella term for the thousands of digital currencies like bitcoin currently trading in global markets, totally online.

Cryptocurrency is what it sounds like: it’s a digital currency created and regulated by strong cryptography (hence, crypto-currency. Still with us so far?). Crypto is special because it’s a digital currency which is decentralized—as in, opposite to the way banks work.

When you put money into your bank account, those zeros and ones are slotted into systems that are controlled by your bank, and these are backed by the government. Crypto exists outside of those frameworks.

Instead of being regulated by a powerful few, crypto is managed and recorded in public distributed ledgers protected by super strong cryptography. This way, there’s no overreach or interference in the free trade of that currency.

These ledgers typically use blockchain technology. This is probably a term you’ve heard before, and lucky for us, it is also just what it sounds like.

Blockchain is a database which stores data in “blocks” that are then chained together in chronological order. See? Pretty straightforward. And what’s crucial about blockchain as a record, or ledger, is that the data, once entered, is unalterable; it’s always time stamped and visible. In this way, the market in which crypto operates can regulate and check itself.

What is bitcoin and where do I get one?

As of writing, one bitcoin is worth $22,250.33 CAD. In July 2010, when bitcoin began trading, one bitcoin was worth up to $0.08. As crypto gained more credibility, its value shot up. A lot. And then, seven years later, it fell. A lot.

A bitcoin is a digital token to which value is affixed, just like normal currency. There’s nothing about a $20 bill that makes it innately worth, in its materials, $20—but we accept that value as a standard tool for exchange. The same goes for bitcoin, only bitcoins live exclusively on The Net (as, increasingly, national currencies do as well!).

Each coin, then, can be thought of as a lil’ computer file that lives in an online, digital wallet; people with these wallets can own, trade, gift, and invest digital currencies. Every single one of these transactions is recorded in the blockchain, which ensures the ongoing regulation of the currency in a closed system.

WTF is a Satoshi??

Satoshis, or sats, are named for the group of very smart people (or the single very smart person, depending on who you ask!) that created bitcoin way back in the Before Times. Satoshi Nakamoto authored the infamous bitcoin white paper, and devised the first ever blockchain database. A satoshi is the smallest unit of a bitcoin, equal to 100 millionth of a bitcoin. Just like there are 100 cents in a dollar, there are 100 million sats in a bitcoin.

Now that bitcoins have risen to a rather substantial price tag, buying and selling satoshis is a simple, more cost effective way for people to break into the world of trading crypto.

Stacking sats, as the cool kids say (it’s us, we’re the cool kids), refers to the regular accumulation of a fixed number of satoshis. This strategy minimizes your exposure to risk by “dollar cost averaging,” lessening the impact of volatility on your overall purchase.

How can I buy bitcoin in Canada?

The process to purchase bitcoin is similar in most countries: get a digital “wallet,” or an app ; buy bitcoin using your own funds; and store your bitcoin within said wallet. It’s really that simple. To use your bitcoin, you can find vendors that accept BTC as payment; to invest, you’d treat your BTC purchases like regular commodity investments.


Why do people like bitcoin?

This is the million satoshi question. BTC can be volatile, it’s not affiliated with any central banks, and not all vendors accept it as currency. As it turns out, these traits are precisely the draw, especially that glorious je ne sais quois, that *chef’s kiss* decentralized, nongovernmental classification and the freedoms that come with it.

People like and use bitcoin because it can gain and lose value like a national currency would, and because cryptocurrencies are divested from governmental power. This keeps BTC users anonymous, and unanchored to any national currency (and those pesky corresponding exchange rates!).

Crypto represents, in many ways, the free market at its best: it is a self regulating marketplace which by nature is always accountable to all of its investors (blockchain, remember?). In these ways, crypto can represent an unprecedented opportunity for folks to earn money investing .

The other reason for BTC’s global success is its potential. Some say BTC is gold 2.0—yes, literally, the shiny, rare metal. The market cap of gold is $12 trillion, and the market cap of bitcoin is $450 billion; that’s a huge difference. But industry predictions suggest that within a decade, the market cap of BTC will surpass that of gold; whether that means the market cap of BTC will increase 26 times over or the two will meet in the middle is unclear.

Is bitcoin right for me? Are cryptocurrencies safe?

It would be entirely remiss of us to not be up front about the volatility of purchasing and using cryptocurrencies. Because banks and governments have no stake in its value, bitcoin could literally become worth nothing overnight. Conversely, this is basically impossible with most national currencies. But don’t get totally freaked out.

It’s been a decade now since bitcoin became a household name, and longevity isn’t the only plus: BTC has almost three times the market cap of the next five biggest cryptocurrencies combined. If you ask us what we think, we believe that BTC is here to stay.

We can’t tell you whether or not bitcoin is right for you. Do your research, assess your own circumstances, and make an informed decision. Bitcoin is a speculative asset and it comes with risks and you need to decide whether those risks are right for you. The people most exposed to such volatility can have three things in common:

  • They invest more than they can afford to lose
  • They don’t do their research into what they’re buying
  • They don’t diversify their portfolios, or don’t practice dollar cost averaging.

  • Listen. We hate to bring it up again. But honestly. Have you checked out Mogo Bitcoin & Rewards? We can offer a ton of tools to make managing your BTC easy as pie. How?

  • We offer a series of super helpful insights and info, called MoneyClass, all located in your app
  • We've created a simple, easy to follow interface so you can always see how much bitcoin you own
  • We offer free funding and withdrawal options, and we don’t charge you to store your bitcoin
  • You’ll have unparalleled visibility on your bitcoin, whether you’re slowly stacking sats or going hard in the BTC world

  • The bottom line: cryptocurrencies can represent promising sites of investment, but like any investment, there is risk.  Play it smart, stick with us, and before you know it, you’ll be a satillionaire.

    – The Mogo Team

    The content contained in this blog post is provided for informational purposes only, is not intended as investment advice, and is not meant to suggest that a particular investment or strategy is suitable for any particular person. It’s important to remember that past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. Bitcoin is a speculative asset and should be treated as such. Before buying bitcoin, you should do your own research and assessment of the risks to your personal financial position - be smart, never invest more in bitcoin than you can afford to lose. To be eligible for the Bitcoin and Rewards account (MogoCrypto), you must first pass Mogo’s identity and security verification process and agree to the MogoCrypto Terms and Conditions. Buying and selling bitcoin is risky and you may suffer huge losses. For more information, see MogoCrypto Terms and Conditions:


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