Interested in Bitcoin and Don’t Know Where to Start?
You should start here. There are plenty of deep-dive books out there on Bitcoin; I don’t want this guide to be that. I want to provide a simpler method to learning Bitcoin and getting into Bitcoin from a beginner perspective and provide resources to go deeper down the rabbit hole of Bitcoin, if you choose to. This includes a super surface level overview of what is Bitcoin. But the main goal here is to provide a list of curated books, deep-reads and a couple products to get you comfortable with Bitcoin usage. I do this with the belief that bitcoin is money and needs to be integrated into society in order for mass adoption to occur. This guide is designed as a primer to the day to day usage of Bitcoin technology. As you’ll read everywhere, this is not financial advice; and always DYOR (Do Your Own Research). And catch me on Twitter: @brewsbitcoin
Some new initiatives in the Bitcoin space include:
Nostr – I’l do a write-up on Nostr another day but if you are on it already, my npub is:
Bitcoin Ordinals (aka Inscriptions or Bitcoin NFT’s) – I am creating Ordinals for a couple different events under Chucktown NFT – Twitter @chucktownnft and at https://chucktownnft.com
For some basics on ordinals, this is a good write-up: Trust Wallet on Bitcoin Ordinals
Bitcoin is a monetary system designed to store value, provide a method of payment, and a ledger of accounts run by decentralized software that offers security, fungibility, scarcity, immutability, censorship resistance as well as a slew of other benefits.
Marty Bent (@martybent) is a writer and host of the Bitcoin-focused podcast “TFTC” and tweeted this:
Bitcoin provides the ability for individuals to receive, save and send money in a self sovereign fashion. Stomaching volatility is worth the level of control that no other money on the planet can provide. Every other monetary system wants to control you. Bitcoin takes that control away and hands it to you. It’s pretty simple. I know – I own x/21m. I control my keys, so no one can prevent me from sending or receiving. I can verify that my bitcoin (is) real on my computer. I believe more individuals will recognize this utility as time goes on.Marty Bent @MartyBent Twitter May 15, 2022
That is a good way of putting it. While this is it in a nutshell, the Bitcoin ecosystem runs much, much deeper than this. This is but a scratch on the surface covering the rabbit hole of what can be accomplished with Bitcoin. “Change the money, change the world” is a Bitcoin saying now and once you dive-in and take a look around, you’ll see that this system can change everything for the better.
Quick Start Index
- Bitcoin To Me
- What is Money
- On Ramp/KYC/AML
- Free Ways to Earn Sats
- Reading References
- Various Thoughts
- Bitcoin isn’t perfect. But the flaws that some naysayers perceive are actually intentionally designed.
- Bitcoin is only 13 years old and has achieved over a 1 Trillion US dollar asset marketcap. This is faster than any company EVER in the history of the world. The 2nd fastest is Google and took 21 years.
- We’ve only just begun seeing what the market will design for Bitcoin. Apps and uses that we haven’t even dreamed of may be in our future. Over time, we can fully opt out of the current fiat (government money) system and use Bitcoin much like we use fiat today, only better. Be patient, the tools we have are new. Updates and new ideas are implemented daily. Amazing things are coming from amazing minds.
The Super Easy Steps
The super easy steps…
- Buy bitcoin.
- Secure your bitcoin.
- Hold it for the long term.
- Repeat step #1 as often as possible.
- ***Support the bitcoin circular econmy by spending bitcoin. This may seem counter-intuitive to hodling – it’s not – just buy back more bitcoin as you spend it.
Notes on Bitcoin
- Bitcoin is a bunch of transactions kept historically that tell you what your running balance is when you view it. It’s your actual wallet that adds and subtracts the transactions to let you know your balance. These transactions are called UTXO’s (look it up if you want more information).
- Bitcoin is volatile. It has crashed at more than 60% of its value several times over its existence (twice over 80%). However, it’s also grown 40,000% over itself in 13 years. Can’t say that about the US dollar.
- With the growth in the value of Bitcoin, many are putting forth the narrative that Bitcoin is a hedge against inflation.
What is Bitcoin?
Bitcoin is a lot of things to a lot of people. One thing it’s not is “magic internet money”. I love this picture but…
There is no magic going on here. It’s pure math. And it’s sound money. And it’s validated by lots of people to be secure. It’s not a whim. It’s not a fad. It’s not magic. It’s not a ponzi scheme.
Bitcoin is a lot of things to a lot of people – it’s a store of value, it’s a medium of exchange, it’s a global unit of account, it’s a hedge against totalitarian government, it’s protection from government confiscation of assets. It’s this and more and this list grows longer everyday.
Security IS Key
This will be discussed further but I want to drive the point home. A bitcoin wallet holds the keys to access your precious bitcoin. The bitcoin itself is actually on the public blockchain ledger. Your wallet will generally be provided to you with protection called a ‘seed phrase’. This seed phrase is the key to your bitcoin. If someone gets your seed phrase (the private keys), they control your money and can empty your wallet without your knowledge (and it can never be recovered). NEVER EVER share your private keys with anyone. If someone asks for your private keys, block them – it’s a scam. Never type your seed phrase into an online social media site (or anywhere online for that matter). Don’t store them in the cloud such as Dropbox or Google Cloud. You never know who or what is snooping. There’s also an argument to never share your true public key with anyone as that will potentially dox (document who you are publicly and that you hold bitcoin – a security risk) you. Use a wallet that will generate new receiving addresses with QR codes for each new transaction.
NEVER EVER send Bitcoin out to someone on the promise that they will send you more back. This is ALWAYS a scam preying on the unsuspecting victim. Typically this is in the guise of someone famous (a fake account) stating they will donate to charity the same amount you send them and return it back to you double or triple what you donated.
Bitcoin To Me Is:
- Digital Currency – bitcoin was built to be spent as a digital payment method and is now being viewed as a store of value. Back in 2009, you could buy 4 bitcoin to a quarter. On June 1, 2022, 1 bitcoin is worth over $30,000 US. This growth also begets its potential of being a hedge against inflation, as historically, bitcoin has grown by 40,000% since inception even with its volatility. You can’t say that about the US dollar which has lost 80% of its value since 1971, when it came off the gold standard completely, with inflation debasing its value.
- Scarce – Only 21 million bitcoin will ever be created. This means it cannot be artifically inflated by central banks and devalue your holdings. However, each bitcoin is divisible by 100,000,000 smaller pieces called satoshis (or sats for short). Think of sats to a bitcoin as pennies to a dollar. This means that there will only be 2.1 quadrillion satoshis ever. But this can also be further divisible to make smaller units as needed (this is not inflation – we aren’t making more but using smaller denominations that become more valuable over time). Don’t get sucked into the argument that you need one whole bitcoin. That is called unit bias as “the sats is where it’s at”. Stack sats (buy sats as often as you can and make your wallet denomination in sats instead of bitcoin. The endgame value is the same but the numbers also look better in sats. Would you rather have 1,000,000 sats or 1% (1/100th) of a bitcoin?
- Open Source -all the programming code that goes into bitcoin is open to the public to review. This means any coder can go look at the base code (learn c++) and make sure it is written properly and doesn’t harbor bad codes that could corrupt or tarnish bitcoin’s value and ethos.
- Sound Money – as a scarce asset, it cannot be inflated or manipulated by a central government or currency overlord such as the IMF or IBS or even the US Central Banks.
- Secure – bitcoin is secured by the thousands of people that run nodes that duplicate the bitcoin blockchain and validate miner’s work to place transactions on the blockchain.
- Immutable – the historical record of transactions on the blockchain can never be changed EVER. There is no central authority to turn back time and start over thereby lessening your bitcoin value by their manipulation.
- Public Ledger – all transactions are on a public blockchain ledger that you can verify transactions if you choose.
- Decentralized – bitcoin is run on computers throughout the world and cannot be stopped by any one government or central authority.
- Store of Value – bitcoin has risen from fractions of a penny in 2009 to as high as $67,000 US. Compared to the US dollar, which through inflation, loses its value every year. Fun Fact: If you compare the value of the US Dollar and Bitcoin from when Bitcoin was last valued at a $1.00 US in 2012, the US dollar from then has a current value of $0.83 cents and the Bitcoin from then is currently valued at around $23,000 US (2022/08/07). That’s all the proof I need that it is a store of value regardless of the volatility of the Bitcoin price.
- Payment Method – Bitcoin can be used for payments but comes with transaction fees. However, there is a layer 2 Bitcoin network called Lightning that allows for nearly free instant transactions.
- One of a Kind – all other digital coins/tokens built after Bitcoin are imitations of Bitcoin and the concept of immaculate conception (the man or small group of devs that make up Satoshi Nakamoto is believed to have all passed away) of Bitcoin makes it special.
- Pseudonymous – transactions on the Bitcoin blockchain are not anonymous. Don’t be lured into thinking that it is. While your name may not be associated to a transaction on the Bitcoin ledger, your transaction leaves fingerprints back to you through your purchase of Bitcoin initially with traditional money from the exchanges or payment venues used to buy Bitcoin. All government regulated exchanges have KYC – Know Your Customer – requirements for ID verification. Non-KYC bitcoin can be purchased in peer-to-peer exchanges or by mining for your own bitcoin and fees.
What Is Money?
The study of money is a topic that can be argued ad infinitum forever. The base definition is that it is a method to exchange goods and services using a medium of exchange that holds value of time, energy and work. When I work for $15/hour, the work I put forth for an hour is worth $15. That $15 is stored in the money I hold and can be transferred to someone else. Thereby transferring the output of my energy and work for a good or service I find equally valuable.
In history, people have used all sorts of stuff as money from shells to glass beads to carved rocks to paper and metals. The problem with money is that it can be manipulated to be worth more or less by outside influences, thereby changing the scarcity of that money. If an item is less scarce (so much of that item is in the market), it is less valuable. If an item is more scarce (less frequently available in the market), it is more valuable. Ancient cultures would use local rocks or shells or glass beads as money, but other advanced cultures would come in and devalue a cultures money system by bringing in more of the same medium (shells, rocks, glass) that may have been easier to get elsewhere. Gold is an example of scarce money. It is difficult to get out of the ground. It is impossible to replicate (at least with our current technology). And people want it and cherish it and will fight for it. The problem with gold is that it is heavy and it can be confiscated. Paper money was the next best thing. It represented the value of gold in an easy to transfer piece of paper. A $10 bill was the equivalent of $10 in real gold. This was the Gold Standard. A $1 bill in the gold standard had to be backed by a $1’s worth of actual gold. The problem with paper money is that governments can manipulate the value of their paper money. They would set values of how much gold that $10 bill would buy to fit their needs. And then the governments of the world began coming off the Gold Standard and began the fractional reserve banking system that we use today. Fractional Reserve being that a bank could produce money out of thin air based on a fraction of their on-hand reserves backing it up. This process of printing money out of thin air is our current system we use today (and is also called ‘fiat’ money which just means it is created by law or decree to exist). It’s a never ending process of printing money that ends up devaluing the existing money. Hence a hidden tax on the wealth of anyone holding this money thru inflation and the never-ending dollar printing press.
Enter Bitcoin. Folklore says that Bitcoin was created by an indvidual named Satoshi Nakamoto. Most believe it was a small core group of developers that built the technology. The interesting thing is that after a couple years of guiding and watching Bitcoin grow, Satoshi Nakamoto disappeared leaving Bitcoin to do its thing on its own organic growth. Satoshi built Bitcoin to create a digital money system in direct response to the financial meltdown of 2008. Satoshi created a money that could not be tampered with, double spent or inflated. He created a system that posted transactions to a public ledger unlike the secret transactions of the modern bank. He also made it super secure with SHA-256 Hash encryption. And he gave it value by creating the Proof-of-Work concept – the expense of energy to create value just like in the real world when we earn our paychecks.
Bitcoin – I couldn’t let the list start with altcoins since Bitcoin is first. A digital, sound money published on a public ledger called a blockchain featuring security, immutability, scarcity, and other beautiful functions.
Altcoins – (synonym: shitcoins) any token or coin created after Bitcoin. Most are in the image of Bitcoin or purport to do things better than Bitcoin. Some may have real-world use-cases and value but personally, I think, if they think they are going to become money, they weren’t designed for that, or not well enough. They cause friction in a transaction more than anything. And most tend to be inflationary – they have endless supplies and will make more; or they are centralized and can change the course of their history through rollbacks (Research Ethereum to learn about that one). Examples include Eth, XRP, dogecoin, shiba and the myriad 10,000 crappy tokens out there.
bitcoin – note the lower case ‘b’ – in some Bitcoin groups this is the crypto currency, whereas Bitcoin is the programming code , infrastructure, and theory of what drives the bitcoin crypto currency. As a whole unit, it can only have 21,000,000 coins ever. It’s component part (the satoshi (or sats) is 100,000,000 sats per bitcoin. I will use Bitcoin interchangeably here and will put it in context with the discussion.
Blockchain – the public ledger that stores all bitcoin transactions ever created in a pseudonymous way. The main Bitcoin blockchain is Layer 1. The Lightning Network comprises Layer 2.
Consensus – the process at which nodes verify the latest block created by miners is approved by the majority of all nodes worldwide and then added to the blockchain.
Custody – In the traditional banking world, we trust (warranted or not) the banks (a trusted 3rd party) to hold our money. In the cryptoverse, your private keys (seed phrase) are your money and so you can hold your own keys (self-custody) or allow a custodian to hold your keys. There are benefits to both types but for asset protection from confiscation, self-custody is paramount. But if you do not have the comfort level to hold your own keys, a trusted 3rd party may be the best avenue for you.
Dollar Cost Averaging – (or DCA) the process of buying Bitcoin in regular amounts over time such as $50/week without concern of the current price of Bitcoin. This method allows for absorbing the highs and lows of a volatile market that sometimes is Bitcoin. Sometimes called ‘Set it and Forget it’ investing. The opposite method would be lump-sum buys of Bitcoin and trying to time the market for a dip (a lower price) to make a gain. Swan Bitcoin is one of the easiest platforms to do DCA.
Halving – Miner’s are rewarded with Bitcoin when they solve the current math problem. This reward halves every four years creating more scarcity of Bitcoin in circulation. The current reward is 6.25 Bitcoin and was set during the last halving in 2020. This will cut in half again in 2024 and will be set to 3.125 Bitcoin. This is scheduled to occur until approximately the year 2140. Historically, Bitcoin has grown substantially in value after the occurrence of a halving .
Hash – this is the basis of cryptography and keeping your digital assets safe. A hash is a one way transaction where you send data in to a hash function and get out data that cannot be converted back to the original data without a private key. SHA-256 is the protocol that Bitcoin uses to encrypt the transaction on the public blockchain. This encryption is so complex on an exponential level that the number of hashes it can create are more than the number of atoms in the universe. It is so vast that the odds of breaking a hashed 24 word seed phrase is considered a statistically impossible task due to resource constraints of time and energy. A private key is converted to a public address using the hash function to which funds can be sent to this address.
HODL – a misspelling of Hold that became a meme, used everyday to signify long term holder of Bitcoin.
Liquidity – typically this is a function of the exchanges (DEX and CEX) that allows you to convert one cryptocurrency for another. There must be enough of what you are wanting to trade for on-hand for a conversion to take place. Liquidity is also a major function of the Lightning Network that enables payments to move around the network.
Maxi – one who holds only Bitcoin or perhaps is a bitcoin evangelist. Probably used to be a shitcoiner that saw the error of his/her ways and divested out of that crap. Closely related is the Toxic Bitcoin Maxi but the Toxic Bitcoin Maxi is forceful about Bitcoin to the point of saying it’s Bitcoin or its nothing. Can’t we all just get along and fight the fiat battle together?
Miner – is a computer and its software that specializes in adding transactions (blocks) to the blockchain by solving a complicated math problem with the problem being easily verifiable by decentralized and independent nodes. This process prevents duplicate spending of bitcoin by bad actors. This process uses energy to create bitcoin which in turn creates the value of each bitcoin. This process takes place approximately every ten minutes. The winning miner to create the block is awarded with bitcoin.
Node – nodes hold the Bitcoin ledger, a public list of all transactions. Nodes verify that the latest block created by a miner is legitimate by verifying the answer (the hash output) of the problem solved. This is created by a consensus approval (a simple majority) of the nodes.
OG – the old guard of Bitcoin, possibly buying and holding Bitcoin from the earliest stages of Bitcoin history with a buy in of less than $1,000 per btc.
Ordinal Inscriptions – Segwit and Taproot (both are bitcoin core updates) provided new functionality to allow developers to inscribe NFT’s into the smallest monetary unit – the sat (or satoshi). This feature uses space in the Bitcoin chain that was being unused and now allows for full utilization of the Bitcoin block. You must use an ordinal enabled wallet to interact/view/use/create with these NFT’s.
Pleb – short for plebeian, pronounced “pleeb” or “pleb” – in Bitcoin parlance, an ordinary person knowledgeable in Bitcoin that wants to share their knowledge for the common good.
Trustless – Don’t Trust, Verify. This is a tenet of decentralization. You don’t have to trust a 3rd party to provide access to your funds (unless you want to).
Wallet – Storage of your cryptocurrency (Bitcoin, of course) private keys, this is the basis of generating your public keys from which people can send you more Bitcoin to hodl.
Whale – someone or organization that holds more than 1000 Bitcoin.
Wallets are a hot-button topic in the Bitcoin universe. There are two main types of wallets – hot or cold. And then there are derivations of each to provide more options. Have you heard the term, “Not Your Keys, Not Your Coin”? This is a saying that relates to the Custody/Self-Custody argument. Basically, if you do not control your private keys then ultimately you do not control your money. Wallets allow you to control your private keys under self-custody as a bearer instrument. BEWARE – you lose your private keys, you lose your Bitcoin – just as if you lost your paper money or if your real-world physical wallet is lost or stolen. A wallet is usually the mechanism to send/receive Bitcoin using a QR code or line of text to share with others.
It’s best to spread your funds around a few wallets too. Don’t put all your eggs in one basket applies here. And I also recommend putting funds in a hot wallet that you plan to spend but keep almost of our your funds, savings, investments in a cold wallet (see below). Also, explore multi-sig options to further protect yourself from single point of failure (discussed further below).
Hot Wallet – a digital wallet that is always connected to the internet, and hence, susceptible to being hacked and stolen. Wallets on exchanges such as Coinbase or Binance are hot wallets. Wallets on your cell phone are hot wallets. Wallets on a Lightning Network (LN) node are hot wallets – with the risk it entails – comes the nickname ‘Reckless’ – sort of a badge of honor among LN enthusiasts. These central exchanges supposedly use bank level encryption and security, and I feel that the major players, as regulated entities, will strive to protect their clients assets, up to a point (ahem, cough crypto.com cough). Always use strong, unique passwords and ALWAYS enable 2FA (two factor authentication).
Note – make sure the wallet you choose allows you to create/generate the 24 seed words per wallet. Also, if you lose your phone, you can recreate the wallet and access the funds with this 24 seed word – it basically represents your wallet in word format.
- Muun Wallet – an Android and iOS hot wallet. A self-custody wallet that is easy to use and is capable of Bitcoin and Lightning Network payments.
- Wallet of Satoshi – an Android and iOS hot wallet. A custodial wallet that is super easy to use and is capable of Bitcoin and Lightning Network payments. While it is easy, it is a custodial wallet which means it carries 3rd party risk no matter how slight. Remember, not your keys, not your coins.
- Blue Wallet – my current favorite because it is powerful – A self-custody wallet that just works well and has MANY features such as multisig, plausible deniability, Bitcoin & Lightning.
- Cake Wallet – a simple to use Bitcoin wallet that can send/receive and buy Bitcoin (and other crypto).
- Breez Wallet – yet another easy to use bitcoin and lightning wallet
- CashApp – easy to use app for cash and lightning payments
- Strike_App – the easiest and cheapest way to buy bitcoin and spend/send lightning payments. Mitigate spending bitcoin and capital gains by having the app spend your fiat on bitcoin purchases.
Cold Storage Wallet – typically a hardware device that has its private keys stored in an encrypted format. While the value of the Bitcoin is held on the public ledger, it takes the hardware wallet to access those funds. These come in many flavors such as air-gapped, paper, and hardware.
- Ledger Nano – these are very popular cold storage wallets. The Ledger Nano S is the company’s most popular wallet The interface is via a desktop application – not a mobile phone app. It plugs in via micro USB connection. Access is secured by a pin number and passphrase. Here is a video from BTC_Sessions on how to use the Ledger Nano X.
- KeepKey – another popular hardware wallet. Get a free one ($49 msrp value) by signing up with the South Carolina Emerging Technology Assocation and help establish/support crypto-friendly legislation in South Carolina. This effectively makes a student membership free and an individual membership half price. A video by BTC_Sessions on how to use the KeepKey.
Air-gapped Wallet – is a two device approach to asset storage. A dedicated smartphone/computer that is completely offline and has no connection to any network, thus it is air-gapped, produces QR codes to allow a network enabled device to send/receive funds to the air-gapped device. This is very secure.
Paper Wallet – just like it sounds – a piece of paper you store somewhere with your private keys on it. Not very secure and easily lost/destroyed. While this is a frequently used mechanism, it is better done by using a hardware device such as BillFodl to store your private keys. Unlike paper, the BillFodl is fire proof, water proof, shock proof, hacker proof, acid-proof and generally you-proof.
Non-Custodial Wallets – avoid these like the plague. These are hard-to-verify, untrusted (where trust is needed) wallets that are designed for ease of use between the provided card and your mobile phone. These include Ballet wallet, Arculus wallet, among others. You can spot them because they give you a card with seed words pre-generated or given to you (as opposed to you creating them) at set-up. This is a security risk because you don’t know their system of generation or if they keep a record of the private keys or if they are safely encrypted. It’s a gamble not worth taking. Spend $100 or so and get a true hardware wallet.
How To Find Places That Accept Bitcoin
IbexPay Registers – these are places that have installed IbexPay point of sale payment systems.
BTCMap.org – these are places that accept Bitcoin listed by volunteers
On Ramps / KYC / AML
You have to get your fiat money turned into Bitcoin – here are some ways and thoughts on it. I’ll be adding more to this section frequently.
- On Ramps
- SwanBitcoin – one of the best ways to hold Bitcoin for the long-term and also buy via (DCA) dollar-cost averaging. Transaction fees vary but are reasonable with annual 1% fees when paid up front.
- Strike App – zero fees for buying bitcoin and transferring it out. Bitcoin transactions are on the lightning network.
- ATM’s – typically higher KYC thresholds like $800 but also typically charges about 7-15% for transaction fees. Many sites track ATM locations. CoinATMRadar is a good one.
- Peer to Peer – BISQ is a great place for buying and selling Bitcoin on a personal level. So are friends of yours if you can talk them into selling Bitcoin to you.
- Exchanges – typically the easiest way to get money into crypto. Do the KYC, fund your account and buy bitcoin. See below for more on Exchanges.
- Wallets – A few have integrated buying bitcoin within the wallet but are not anonymous as the payment on-ramp will know that the purchase is for crypto. Some standard on-ramps are:
- SendWyre – solid but can be pricey on the fees.
- MoonPay – typically less expensive. If you find a wallet offering moonpay – use it.
- KYC/AML – Know Your Customer and Anti-Money Laundering Regulations – like it or not in the Bitcoin world but KYC/AML is omni-present in almost every crypto on-ramp. Follow the money and government is there. You’ll find KYC in almost every payment on-ramp over a certain dollar amount. But I’d still expect even the basic of data requests like a phone number, most likely a drivers license too, to verify. The peer-to-peer exchanges will be less friendly to KYC rules.
- No KYC – one of the major features of Bitcoin is to transact without 3rd party interference and one of the ways to do this is to buy/hold/trade/sell no-kyc bitcoin. You can do this through peer to peer exchanges and through some utilities and vendors such as Azteco or IbexHub.
I won’t spend a lot of time on the subject of exchanges. They have their positives and negatives. They are built for trading cryptocurrency – a speculative and generally high-risk high-reward endeavor. They are built to extract transaction fees from you to make a profit for them. I view them more as gambling casinos as the altcoins that are traded don’t have a lot of real world use and hardly any of them (if any of them) have made any semblance of a profit. Don’t be fooled into thinking that cryptocurrency are stocks. They aren’t. I messed around with trading for a time but if you don’t know what you are doing, you can lose it all quickly. And it takes regular work to become good at trading. One problem with trading is that there is a winner and a loser in every transaction and the odds aren’t in your favor.
Centralized Exchanges (CEX) are companies that make profits on transaction fees from a central authority position such as Coinbase or Binance or Gemini. Typically, these are the easiest ways to convert fiat money to crypto. Fees vary on the purchase, but Binance has one of the lowest fees of the centralized exchanges. Most will charge a high fee to transfer Bitcoin from their exchange hot wallet to your off exchange wallet. Centralized exchanges typically have hot wallets and warm wallets (not a cold wallet). This means the funds in a hot wallet are at a higher risk of exploitation or hacking so the recommendation is to keep a minimum amount in the exchange hot wallet. It is hot because it is directly connected to the exchange process. The warm wallets are a holding wallet. You can transfer out to a hot wallet to execute trades or send those funds to your cold wallet. These regulated CEX are designed to stay in business and will have bank technology protecting their assets (and yours hopefully). But remember, the bad guys are out there and hacks happen ALL the time. Protect your wallets and your assets with hard to break passwords and utilize 2FA (two factor authentication) all the time.
Decentralized Exchanges (DEX) are exchange platforms also but are run by smart contract rules and generally are decentralized. You’ll generally have limited support (maybe a user forum such as a telegram group) but can typically trade just about any cryptocurrency for another as long as there is sufficient liquidity to make the transfer. The DEFI market (Decentralized Finance) is run on various DEX such as Pancake Swap or Unicorn. The defi security is only as good as the experience of the programmer coding the platform. Buyer beware. Hacks of DEFI exchanges are frequent. People lose millions of dollars in crypto from these sites due to hackers. Only risk what you can afford to lose in case it happens to you.
Banking in crypto is new. Don’t expect the breadth of services you may get from a traditional bank yet, mainly due to bank regulations (that need to change to keep up with the tech). But also don’t expect to get a paltry 0.25% of interest on your savings. We, customers of traditional banks, have been taught that the meager income we make from our savings or money market account is provided by our friend, the bank, squeezing out what they can from their costs and graciously sharing that with us.
NOTE (2022-03-30) – A very disappointing thing is occurring in the crypto banking world for U.S. based accounts. These banks are being forced to NOT PAY interest on “savings accounts” due to over-regulation by US government regulators. One by one they are falling – I just saw an email from ledn.io that they were no longer offering interest on their accounts. Call your representatives and complain about this and tell them to make Bitcoin a legal tender instead of a commodity subject to capital gains tax. It is based on an archaic law from the after-math of the banking run of the Great Depression whereby banks cannot also sell securities. Although bitcoin is classified as a commodity (property), the altcoins are considered securities in the eyes of the SEC. Based on this guidance, the crypto banks chose to pre-emptively stop interest payments until regulation allows the practice once again.
The reality that we are finding out from the Cryptocurrency banks is vastly different. You can actually earn significant interest on Bitcoin that you loan out to people who need it via cryptobanks. Many of these banks and asset managers are coming online regularly and follow government regulations (not many as of yet) to be able to offer these products. These are listed for convenience and are not necessarily recommended or tested by @brewsbitcoin staff.
- Nexo.io – borrow cash or stablecoins from 6.9% APR without selling your crypto. That’s direct from their website.
- Unchained Capital
- ledn.io – full service crypto bank
I would be remiss to leave out a discussion of Celsius, FTX, Voyager, Terra Luna, and so many other entities that failed due to leverage plays, fraud, scheming, etc… Just note that buyer beware is alive and well as a way to go through life. If it sounds too good to be true, it probably is. If someone is promising high returns, they are probably getting those returns by either pump n dump (ponzi), or charging exorbitant fees to someone else (immoral), or gambling your money on highly speculative plays in a market (100x leverage garbage). Each one of the above listed entities had some major failure but also had glaring signs of impending doom (Celsius warned of US legal issues when they stopped paying interest on held Bitcoin) or untenable offers (150% APY interest) where someone else is getting hosed. Fraud is rampant so do your own research.
Here is a new one that I am a fan of, the Fold App debit card. Pre-load your Visa debit card with money you would normally spend on a weekly basis and then use this card instead of your bank card for purchases and earn bitcoin (satoshis) on what you spend. Super easy and super fun to earn bitcoin. They even add some fun to the app and let you spin a wheel for better earnings and play a game hunting for sats in an AR (augmented reality) game on your phone. I’ve earned 20K in sats in three weeks of using it. They are able to do this as a member of the Visa debit network and are sharing their transaction revenue with you.
The Lightning Network is a Layer 2 solution to increase bitcoin’s transaction volume and speed; and lower transaction costs. While hodling bitcoin is an ideal long-term goal, the use of bitcoin as a day to day method of exchange is less ideal – it takes ten minutes to confirm a transaction and the fees can be relatively high based on volume. Some brilliant minds wanted to change this without changing Bitcoin itself and invented the Lightning Network. Lightning takes bitcoin and puts it into its own network “off-chain” in Channels. It allows users to spend the satoshis in a peer-to-peer network in a fast and inexpensive manner and then recording the bitcoin transactions only when the network users close their channels and basically true-up back to Bitcoin. The communication pathways are called Channels and require liquidity (matching funds) to transfer from peer-to-peer-to-peer on down the line. Using your bitcoin in the Lightning network requires special Lightning wallets. You can also be a liquidity provider and earn transaction fees through routing payments on your own Lightning node. Lightning payments is a growing network and you can find many merchants accept lightning network payments. A use-case of Lightning can be seen in El Salvador’s El Zonte (Bitcoin Beach).
- Muun – well designed lightning wallet
- Blue Wallet -my favorite currrently
- Breez – well designed lightning wallet
- Strike – super easy wallet, easy to fund, easy to use, easy to buy bitcoin.
- Zap – wallet for an LND node holder like Start9.
Earn Free Sats (or some quid pro quo sats)
There are plenty of ways to earn sats without buying Bitcoin outright. Free is awesome. Look for companies providing a service for you to use and give you sats for the taking…
- As mentioned earlier the Fold App is great. You spend your own money via a pre-loaded debit card and earn sats as you spend. And now an enterprising user has documented paying all your bills via PayPal infrastructure using the Fold_App debit card.
- Here is one not on the mainstream but definitely a needed thing – give blood donations and earn $100 for each donation (up to $10,000 year!). OctaPharma needs blood plasma donors for blood products for medical use world-wide.
- A guy named Neal on Twitter posted a good list including (the Earn Carrot app, the Lolli app, the SmilesBitcoin app, signing up with SwanBitcoin for $10 in Bitcoin, sign up for the CashApp for $5 for free, signing up for Strike App for $5.
- Bitcoin Money by Michael Caras (The Bitcoin Rabbi)
- Sade’s Satoshi’s by Charlene Hill Fadirepo
For Entry-level Reading:
- The Little Bitcoin Book by various authors – this is great book for the average person just trying to figure it out. Easy to read and digest. Come by a Charleston Bitcoin Meetup and I’ll give you one.
- 21 Days of Bitcoin by Bitcoin Magazine – three weeks of easy-to-read daily email about the basics of Bitcoin. Earn 2100 sats at the end of the course, with a chance to win 1,000,000 sats.
For Moderate to Experienced Readers of Bitcoin – go down the rabbit hole type stuff:
- Layered Money by Nik Bhatia – Chapter 7 (A Renaissance of Money) is probably one of the most important in economic history ever written (yeah, I said it). Recommend Audible narrated by Guy Swann.
- The Bitcoin Standard by Saifedean Ammous – widely considered mandatory reading for those wanting to know about Bitcoin and monetary theory – I consider this a college level course and one of the best books out there.
- Bitcoin Whitepaper – the original doc that started it all. Take a look at the depth of material while here at bitcoin.org.
- Inventing Bitcoin by Yan Pritzker, free copy available, in-depth bitcoin technical quick read at 108 pages. Yan also blogs – here is one on Bitcoin and its “old” technology.
- Bitcoin and the American Dream by various authors, discusses Bitcoin topics to engage with politicians – topical and fact-based 59 pages of good information.
- Bitcoin and Blockchain by Dr Ben Kim – follow this guy on twitter and read his stuff – very good.
- Bitcoin: Sovereignty Through Mathematics – by Kurt Svanholm – deep dive into the math behind bitcoin. Get it on Audible as read by Guy Swann.
- Bitcoin Magazine – News to your Inbox and provider of 21 Days of Bitcoin intro email’s on Bitcoin – highly recommended.
Tales From the Crypt – Marty Bent’s super popular bitcoin podcast.
Fun With Bitcoin – @coinicarus interviews the Bitcoin devs and movers/shakers.
What Bitcoin Did – Peter McCormick interviews folks in the industry
Talks and Interviews
Michael Saylor of Microstrategy
Alex Gladstein’s article at Bitcoin Magazine on El Salvador’s legalization of #Bitcoin (the good and the bad)
Various Thoughts on Bitcoin
- There is a knock against Bitcoin that the blocks are too small and this limits the speed and number of transactions capable on the Bitcoin blockchain. The answer to this is the layer 2 Lightning Network which provides faster transactions and low transaction fees. If the Bitcoin network as a whole wants improvements, they can vote for its use. Larger blocks are hence unneeded as there is a Layer 2 solution.
- Some say that volatility of price is a hindrance to day to day payments acceptance. There is a competing argument that day to day volatility will subside once more acceptance of Bitcoin becomes mainstream. Look to El Salvador’s use of Bitcoin for the last two years in El Zonte and @bitcoinbeach. Take a look at YouTube for lots of videos on the BitcoinBeach for more.
- Bitcoin’s effect on climate and electricity usage – this topic actually makes me laugh as it is regurgitated quarterly in the press and usually by uninformed, well-intending politicians (here’s looking at you Senator Elizabeth Warren). Take a look at this article on Bitcoin Energy Usage and why it’s not the problem the press or the uninformed shovel out.
- I also write about self-sovereignty, the start9 embassy personal server, and technology. Catch my blog from time to time on those subjects.
- A Ponzi scheme? Nope. A ponzi scheme relies on new money coming in to pay off those who invested before them. This also infers inflation as there is no cap on the amount of people being sold to in order to bring in more money. Bitcoin is volatile because there are speculators in the value of the asset. But many more people are holding (hodl) Bitcoin for the long-term – this causes scarcity of the asset that also causes the price to go up. Further, with a hard cap of the amount of Bitcoin, you are not creating more of an asset out of thin air – it takes work to create that asset and only so much of the Bitcoin asset can ever be created.
I talk Beer and Bitcoin. I may offer a product from time to time that I have tested and may earn a referral commission on your purchase. If you want to chat, please DM me on Twitter @brewsbitcoin.