The Magnetic nature of the bacteria derives from tiny, iron based magnets formed in the bacteria. These magnets are typically chains of a magnetic substance. They do not simply react to a magnetic field like an iron nail, they are in effect tiny bar magnets. They act in much the same was as a compass does, with the tiny magnets tending to align in parallel to magnetic fields, normally the earth's magnetic field. The magnetic chains have a size that is typically measured in tens of nanometres (one nanometre = one thousandth of a millionth of a metre).
When the bacteria move, it is not simply the magnet that moves the bacteria towards or away from a magnetic pole- dead bacteria will rotate if you move the pole about, but the dead bacteria do not move far from their spot, unlike the live ones under the same conditions.
Nobody quite knows why some bacteria have developed to be magnetic and why others are not, but there are a few ideas on the subject. One of the more promising ideas is that magnotactic bacteria may use the earth's north and south pole to help them find nutrient or escape toxins. Such a hypothesis is based on the idea that if a bacterium restricts its movement to forwards and backwards directions in its search for nutrient, it will tend to find nutrient rich areas at the same speed or often faster than other bacteria that search both forwards and backwards, left and right, up and down. Computer simulations of this hypothesis support the idea. Are there any situations where this strategy might be a disadvantage? When might this strategy give the greatest advantage?
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