You have probably heard of Bitcoin, also known as BTC or XBT, but it’s just as likely that you have only the vaguest idea of what it actually is. We’re here to explain how this newfangled digital money works, as well as its potential applications in online gambling.

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What is Bitcoin?

Bitcoin is a 100% digital currency alternative which allows you to make payments, purchases and other exchanges online without credit cards or bank transfers. It was launched by Satoshi Nakomoto on January 3, 2009, although the idea can be traced back as early as 1982 and owes much to the work of Wei Dai and Nick Szabo in the late ’90s.

Unlike standard national currencies such as the Australian dollar (AUD), the New Zealand dollar (NZD), the Euro (EUR), British pound sterling (GBP) and the United States dollar (USD), Bitcoin is a completely decentralised type of money which runs on a worldwide peer-to-peer (P2P) network. That means it isn’t regulated by a central financial institution, but is rather powered and managed by users on the World Wide Web.

One of the key differences between Bitcoin money and normal currencies is that there is a fixed amount of units that can be generated. Whereas central banks can manipulate the circulation and release of hard cash in response to economic inflation or deflation, Bitcoin flow increases in gradual geometric increments up to an absolute maximum of just under 21 million BTC – or 2,099,999,997,690,000 satoshis, to be precise.

Bitcoin is far and away the most used alternative currency in the world. As of June 2015, it holds a market cap of well over $4.5 billion.

Making Bitcoin deposits at real money casinos

As a growing currency option which is designed specifically for the Internet, Bitcoin seems like an ideal way to purchase real money credits for online gaming. The P2P network design means you wouldn’t have to put your faith in third parties such as banks or e-wallet operators, while the universal nature of the money would allow players from all over the globe to gamble on the Web safely – even in jurisdictions where using local currency for digital casinos and online bookmakers is illegal.

Despite the obvious benefits of using Bitcoins to fund a gambling account, none of our recommended online casino sites currently support it as a deposit or withdrawal option. This is partly because these operators already offer dozens of secure transaction methods, including debit cards, credit cards, Web wallets, prepaid cash vouchers and direct banking. And with so many currency options already available, adding Bitcoins into the mix might be seen as a bit of a luxury.

Nevertheless, there are a number of dedicated Bitcoin casinos out there already, with more popping up every year. The problem with these sites right now is a lack of proper regulation compared to our list of trusted real money casinos. Most Bitcoin sites we’ve seen don’t have genuine gaming licenses, third-party certification, or the eCOGRA Seal of Approval, which are all huge red flags when it comes to choosing an Internet casino.

Having said that, we expect the demand for Bitcoin gambling options to increase significantly over the coming years. With that will come tighter regulations and more exhaustive testing and auditing measures, as seen at all the best real money casino sites nowadays. Thus, we figure it can’t hurt to explain how and why you might use Bitcoin for real cash gambling online.

How do BTC transactions work?

Bitcoin runs on a peer-to-peer system, not unlike the file-sharing platforms many people use to download torrents. But instead of moving videos, music and other such materials from one computer to another, you can safely send and receive money without having to expose your credit card number or bank account details to the Web. Transactions are fast and take just a couple of minutes to clear.

The guts of the Bitcoin payment process is a public ledger called a ‘block chain’, which records all transactions made via the BTC network. Every block in the chain is like a virtual receipt for each digital funds transfer. Bitcoin users can view these details at www.blockchain.org.

That system is maintained by people called ‘Bitcoin miners’. In simple terms, these guys verify transactions and generate new Bitcoins by building blocks and adding them to the chain. This is done through complex calculations and requires significant computer power, for which the miners are compensated in Bitcoin rewards.

But is it secure? Every time a user makes a transaction, a new Bitcoin address and a private key is generated. These are unique, one-off codes which ensure accurate identity verification and proof of ownership for every BTC credit transfer.

How to buy and spend Bitcoins online

Before you can purchase XBT funds and start sending and receiving payments, you need to install a Bitcoin client. This is the ground-level software required to make online transactions with BTC.

While they aren’t dissimilar in operation to browser-based banking solutions such as PayPal, Neteller and Skrill Moneybookers, these Bitcoin wallets can be downloaded to a hard drive and accessed via your desktop – much like an online casino lobby. Leading providers such as Airbitz, Bither and Breadwallet also offer Bitcoin apps for Android, iOS and BlackBerry mobile devices.

Once you set up your BTC wallet, you can start filling it with funds. The most direct way to do this is to find an online money exchange that deals in Bitcoins. Here, you can trade real dollars (or any other major currency) for XBT money and vice versa. There are plenty of sites out there nowadays, so make sure to do your research and find the best exchange rate available.

Bitcoin currency denominations

The smallest element of virtual Bitcoin money is called a ‘satoshi’, after the network’s creator. The currency is usually written as BTC or XBT, which are also the common terms for the standard base unit (i.e. the equivalent of a dollar). Although there is no official set of Bitcoin denominations as yet, they are usually divided like so:

Bitcoin (BTC) = 1 unit
Bitcent = 0.01
MilliBit (mBTC) = 0.001
MicroBit (uBTC) = 0.000001
Satoshi = 0.00000001

What is Bitcoin Cash?

Bitcoin Cash, or BCH, is a separate currency that resulted from a hard fork in the blockchain in August 2017. It has since overtaken Ethereum as the world’s second-most valuable cryptocurrency. Find out more about Bitcoin Cash casino deposits here.

Do I have to pay XBT transfer fees?

Bitcoin transactions of 0.01 BTC (i.e. one Bitcent) or more usually incur no additional charges. However, it is common practice to pay a small fee over and above the transfer sum as an incentive to the miners – a bit like tipping a good waiter. This is especially the case with more complex transactions which use multiple Bitcoin addresses and require more data than a regular P2P money transfer. Even so, these extra charges are pocket change compared to standard bank and credit card fees.