Before the end of December, upwards of ten tons of gold had been obtained from the Victorian goldfields, and the supply appeared to be inexhaustible, so that no sooner did the news of these extraordinary discoveries reach Europe and America, than a great tide of population began to flow outward in the direction of the new land of Ophir. Upwards of fifteen thousand immigrants arrived by sea during the latter part of 1851; ninety-four thousand in the year following, and nearly a quarter of a million in 1853-4-5. Week after week vessels continued to arrive in Hobson’s Bay, landing passengers and discharging cargo as they best could, for they were usually deserted by their crews as soon as they dropped anchor; and there was no accommodation for a fiftieth part of the new arrivals in Melbourne. So an encampment as large as an extensive village sprang up on the south side of the Yarra, which became known as Canvas Town, and there men, women and children —those who had been gently born and nurtured, and those who had been familiar with a rough life in old countries; professional men, artisans, husbandman from rural England, fugitives from justice in California, political refugees from France and Germany, escaped convicts from the other side of the Straits, and people who had quitted the mother country with visions of becoming suddenly rich upon the Victorian goldfields —were forced into a strange companionship, and were depressed to the same social level by the force of untoward circumstances. At the same time, a horde of Asiatics descended on the colony from the Straits Settlements and from Canton; and not less than twenty-five thousand Chinamen were allured to the goldfields by the widely-spread rumours of their richness.

For a period of ten years the yield of the precious metal was enormous, but it reached its maximum only two years after its discovery when no less than twelve million six hundred thousand pounds worth was taken from the soil in the space of twelve months; while the value of the gold raised from 1852 to 1860 inclusive was upwards of ninety-five millions sterling, the population of the colony in the latter year being a little over half a million. All the splendid prizes in the captivating lottery of gold digging were discovered in the early days. The first large nugget, weighing one thousand six hundred and twenty ounces, was unearthed in Canadian Gully, Ballarat, in February, 1853, and was surpassed in weight by another found on Bakery Hill, in the same district, in June, 1858. This turned the scale at two thousand two hundred and seventeen ounces; while the heaviest ever found was procured at Mount Moliagul in February, 1869, for this weighed two thousand two hundred and eighty ounces. Men mining on Golden Point, Ballarat, were known to be making as much as from three hundred to four hundred sterling per day each; and Governor Latrobe, who visited this spot in 1851, mentions that he saw eight pounds weight of gold washed from two tin dishes of dirt, and heard of a party that had raised sixteen pounds at an early hour of that day, and had succeeded in obtaining thirty-one pounds before nightfall. But there were many blanks, and numbers of disappointed diggers betook themselves to their former employments, at which they found they could earn from a pound to twenty-five shillings per day. Not a few turned carters, for as much as one hundred sterling per ton was paid for the transport of stores from the seaport to the principal goldfields; and it is recorded that one publican, owning or controlling as many as a hundred and twenty-two publichouses or shanties, disbursed no less than one thousand five hundred pounds sterling a week for cartage during seven consecutive months of 1853. The criminal element in the population, composed chiefly of convicts who had escaped from Van Diemen’s Land, became a source of danger and depredation to the community. On the 2nd of April, 1852, a gang of these desperadoes boarded the "Nelson," lying in Hobson’s Bay, and succeeded in carrying off gold-dust to the value of twenty-four thousand pounds; escorts were robbed on their way down from the goldfields to Melbourne, and life and property became so insecure that diggers slept and moved about from place to place with loaded revolvers by their side.

Mr. Latrobe was succeeded as Governor by Sir Charles Hotham, who arrived in Melbourne on the 21st of June, 1854, and inherited a legacy of troubles left by his predecessor. The separation of Port Phillip from New South Wales had been attended by the creation of a legislative council, composed of ten nominee and twenty elected members. But among the latter there were no representatives of the great mass of the population concentrated on the goldfields. One of the first acts of this body was to impose a license fee of thirty shillings per month —which was raised for a time to sixty shillings —on every person searching for gold. The license was not transferable; it was only available for use within half a mile of the police camp from which it had been issued, and it had to be produced whenever demanded by a police officer. This was the most irritating circumstance connected with the license, for digger-hunting became a popular pastime with the young cadets who wore the Government uniform and was often practised with a harshness and tyranny which were altogether indefensible. Every digger who had neglected to procure or to renew, or who had lost or mislaid his license, was liable to be apprehended; and it was no uncommon spectacle to see fifty or sixty men handcuffed together like so many felons and dragged to the camp, there to be fined or otherwise dealt with. An agitation for the suppression of this impost, which was inequitable in its operation, and was exacted with exasperating insolence of language and harshness of conduct, was commenced at Bendigo in 1853, and soon spread to the other goldfields. Leagues were formed, and the Government, far from exhibiting a conciliatory spirit, issued an order in October, 1854, that the police should devote two days a week to hunting down unlicensed diggers. Nowhere was the public indignation inspired by this mistaken policy stronger than at Ballarat, and an accident kindled this indignation into a flame. In a scuffle a digger named Scobie was killed in the Eureka Hotel on Specimen Hill, kept by one Bentley, who was believed to be implicated in the murder. The police magistrate, before whom Bentley was brought, acquitted him —under corrupt influences, it was alleged. Certain it is that he was removed from office; he afterwards migrated to British Columbia, embezzled some money there, and committed suicide in Paris. Indignation meetings were held, and at one of these, on the 12th of October, the hotel was set on fire and burned down. Bentley himself escaped on horseback. Three men, not one of whom was concerned in the act, were arrested, and a public meeting was promptly held, at which resolutions were adopted demanding their release, and affirming the right of the people to the exercise of political power, and at the same time asking for the abolition of the license fee. The three prisoners —MacIntyre, Fletcher, and Westerby —were conveyed to Melbourne for trial, and each was sentenced to short terms of imprisonment. Another demand was made for their release, but was refused, and the aspect of affairs was so threatening at Ballarat that two detachments of infantry were ordered up from Melbourne. They reached that place on the 28th of November, and were attacked by the diggers who followed them to the camp, from which a strong body of police made a sortie and drove the assailants back. Two days afterwards, the local authorities ordered another digger-hunt, and the military were called out to support the police. The diggers resisted, and matters had now reached such a pass that they organised themselves for an armed defence, elected Mr. Deter Lalor as their commander-in-chief, and entrenched themselves behind a stockade close to Eureka Street. On the 3rd of December a force consisting of two hundred and seventy-six men of all ranks, including a strong body of cavalry, proceeded to attack the stockade.

After several volleys had been fired on both sides, the first line of defence, a rough barricade, was crossed, and the police sprang over the inner barrier and captured the flag hoisted by the insurgents. The military followed, and in spite of the gallant resistance offered by the diggers, carried the entrenchment at the point of the bayonet. During the engagement, which lasted for nearly half an hour, several vollies were fired on both sides. Captain Wise, of the 40th, was mortally wounded; Mr. Peter Lalor was left for dead in the stockade, but escaped with the loss of an arm; Lieutenant Paul, of the 12th, was severely wounded; about thirty of the insurgents are believed to have been killed, one hundred and twenty-five were taken prisoners, while the casualties among the military were four dead and many wounded. All the tents within the enclosure were burnt down and the district was placed under martial law. Upon the 1st of April, 1855, the prisoners were arraigned on a charge of high treason in the Supreme Court at Melbourne, but the three leading actors in the insurrection, Messrs. Lalor, Vern and Black, succeeded in evading the vigilance of the police, and the first-named gentleman has been for years Speaker of the Legislative Assembly of Victoria.

Public sympathy was so powerfully enlisted on behalf of the insurgents, owing to the character of the provocation they had received to take up arms in resistance to the maladministration of the law, that no jury could be found to convict the men who had been placed upon their trial. Their defence was gratuitously undertaken by several of the leading barristers, and their acquittal was hailed with general satisfaction. It was followed by an amnesty, and by the judicious removal of the causes which had led to the outbreak. A commission of inquiry declared that the diggers had been goaded to insurrection by bad laws badly enforced, and recommended the introduction of constitutional government, with a broad franchise as the basis of its representative system.

Between the last hours of the year 1855 and the first of the year 1856 Sir Charles Hotham succumbed to an attack of dysentery, brought on or aggravated by mental worry, and the administration of the Government devolved on Major-General Macarthur. A few weeks before this event, namely, on the 23rd of November, 1855, a new constitution prepared by the Legislative Council of Victoria, and sanctioned by the Imperial Parliament, was proclaimed. It established responsible government and created two chambers, both of them elective. The first cabinet, with Mr. Haines as its chief, took office, and at the first general election, Messrs. Lalor and Humffray —the latter also one of the insurgents at the Eureka stockade —were returned to the Assembly for the district of Ballarat.

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