Nothing can be loved or hated unless it is first understood.
No one understands money, and as such, no one understands Bitcoin. It makes sense; we’re not taught what money is, nor its function, nor its purpose. It’s arguably the most important thing in our lives that we constantly interact with, yet we greatly misunderstand it. I’m aiming to fix that with this guide.
This guide serves as a tell-all to educate about money and Bitcoin, highlighting why the latter is incredibly important today. The guide is full of links to learn and explore concepts in greater depth, with a larger number of resources at the end.
Overview
Bitcoin is two things: digital money and a computer network.
It is a way to send value peer-to-peer without the need for a trusted third party. There are no banks and no financial institutions that act as middlemen to surveil and take their cut.
It is an immutable public ledger audited every 10 minutes by thousands of computers around the globe on a decentralized network. The public runs these computers; I run one myself.
It is a disruptive technology and is the next advancement in the evolution of money.
It represents a paradigm shift in how we think about money and finance. It is a different and contrarian way to look at these things, and will forever change how we view them.
It is a protocol with an unstoppable network effect. In the land of protocols, the winner takes all.
Bitcoin is not “the new best thing”; it is the thing. There will never be another Bitcoin, and as such, there is no “next Bitcoin”.
Why does Bitcoin matter?
Bitcoin fixes the money in the world.
This is a problem that most people aren’t consciously aware of. However, it’s a problem that impacts everyone and is felt when we buy groceries, fill our gas tanks, and pay bills for goods and services: the money is broken.
Under the current monetary system, prices rise forever as governments and central bankers continually create more money. While wages also rise, they do not increase at the same rate as monetary inflation (money creation).
Since the current money is forever in a state of increasing abundance, it becomes increasingly less valuable over time. There are forever more and more monetary units to pay for the same quantity of goods and services. Eggs, gas, your house – these are not becoming more valuable. The monetary units they are priced in (dollars) are becoming less valuable, requiring more of them to purchase the good.
How is the money “broken”?
The money in the world broke in 1971 when the United States and the world officially left the Gold Standard. While gold has its flaws, it wasn’t necessarily broken as money. The fiat money of today, however, is completely broken.
The money is broken for several reasons. However, the majority of them go outside the scope of this guide. For a better introduction to money, the banking and financial system, and why it’s all broken, I recommend Lyn Alden’s primer video.
- Inflationary & Credit/debit-based
- Fiat money is entirely based on the need for it to inflate and grow. If deflation occurs in a fiat-based system, it collapses. We are consistently creating more and more money to “grow” an economy.
- Decades ago, a slowly growing pile of debt was being offset by an increase in GDP (productivity). However, the point has been reached where the debt is compounding and has outpaced GDP. Today, $4 trillion in debt is required to create $1 trillion of productivity. As of the end of 2024, the U.S. debt-to-GDP sits at 121. This means the United States consumes 21% more than it produces. In other words, the United States is unprofitable and effectively bankrupt.
- To make matters worse, issuing more credit is an issuance of more debt, and is the creation of more money. This monetary expansion further devalues the money. Since the system requires issuing credit to survive, money is constantly being devalued, and people’s savings are losing purchasing power.
- Centralization
- The world’s money is effectively controlled by a board of 7 people, together with 12 bank presidents. These individuals are the Federal Reserve. Such great power in the hands of a select few is objectively dangerous, and the decisions of these select few can have massive, unchecked implications
- Centralization ultimately leads to a lack of transparency and accountability
- Centralized systems and centralized power lead to censorship and control systems that tend to benefit a select, small group of the population
- Centralization in financial systems leads to bureaucracy, inefficiencies, and waste
Why is Bitcoin’s network effect as a protocol significant?
While new technologies are always being created, new protocols do not come around often. When they do, they tend to stick around for a long time. TCP is the protocol the internet is built upon, was introduced in 1971, and we still use it today. SMTP is the protocol that email uses, was introduced in 1981, and is still used today. USB is the protocol we use for data and power transmission, was introduced in 1996, and we still use it today.
Once a network effect is established, it is nearly impossible for a competitor to enter the space and compete. From a financial standpoint, Bitcoin is larger than the rest of the cryptocurrencies by an order of magnitude. From a factual standpoint, Bitcoin stands and will always stand alone. Bitcoin is money, while Ethereum, Doge, XRP, and all of the rest are not.
Do I need a Computer Science or Economics Degree to understand Bitcoin?
No! From the outside, Bitcoin can seem complicated and overwhelming. However, with studying and critical thinking, it can be easily understood.
Why does Bitcoin seem confusing and complicated?
Bitcoin belongs to a system completely different from the system we’ve lived in for our entire human history. There is nothing to compare to in a history book. Something like Bitcoin has never existed before.
Bitcoin belongs to a finite and deflationary system that operates as a true, free market. It allows for true Capitalism to exist and thrive.
Understanding Bitcoin and this system requires a different way of thinking and evaluating the world that is contrarian to our current world. Furthermore, the system that Bitcoin belongs to and our current system are completely incompatible. It does not make sense to compare the two.
Don’t we live in Capitalism now?
No. We live in a Corporatocracy (Crony Capitalism).
In true Laissez-faire Capitalism based on hard money like Bitcoin, prices fall forever. Consumers constantly get more value for their money as businesses and entrepreneurs are in a constant fight to offer more value to customers.
When the money cannot be manipulated and inflated, there is a need to offer more value for less money. When there is less money to circulate, consumers need to be offered enough value to part with their valuable money.
I highly recommend The Price of Tomorrow by Jeff Booth, as well as this interview with him, to fully explore and understand this contrarian concept.
Bitcoin Basics & Fundamentals
What’s the difference between Bitcoin and bitcoin?
Bitcoin with an uppercase B is the Bitcoin network, while bitcoin with the lowercase B is for the money itself.
Do I need to have $100,000 to buy bitcoin?
Nope! 1 bitcoin is made up of 100 million units called sats (short for Satoshi). This divisibility allows for greater distribution among the population, as well as using bitcoin as a unit of account (pricing goods/services).
- When 1 bitcoin = $100,000
- $1 = 1000 sats
- $0.01 = 10 sats
- 1 sat = 10% of 1 U.S. cent
Everyday purchases are priced in sats while larger purchases are priced in bitcoin. A cup of coffee costs 3000 sats, a car costs 0.25 bitcoin, and a house costs 3 bitcoins.
If 1 bitcoin can be divided into 100 million units, doesn’t that mean it’s not scarce?
If you cut 1 pizza into 100 slices, do you still have just 1 pizza?
Who made Bitcoin?
An anonymous person(s) using the pseudonym Satoshi Nakamoto created and proposed Bitcoin to the world in 2008 via the Bitcoin White Paper. Their identity is a mystery, and they were last heard from publicly in 2010.
Why does it not matter who Satoshi Nakamoto is/was?
It doesn’t matter who Satoshi is/was because it’s irrelevant. Satoshi being anonymous or known doesn’t change anything about the Bitcoin network, nor Bitcoin as money, nor its function.
It’s better that Satoshi is both anonymous and has disappeared.
Not having its creator active allows Bitcoin to be more decentralized. It enables people not to be swayed by an influential opinion. It also removes Satoshi as a pseudo-central authority. While Bitcoin has no actual central authority, the creator being active could be seen as a central authority, or someone whose opinion is more valuable than others. Satoshi stepping away also allows Bitcoin to truly be for everyone. Bitcoin doesn’t belong to Satoshi, but to everyone.
Furthermore, an anonymous and inactive creator eliminates a logical target. An active and known Satoshi would’ve most definitely been targeted by governments and others in the world of global finance. Bitcoin is truly decentralized; there is no one to target.
If Satoshi came back, wouldn’t they have special access to the Bitcoin network through a secret software “backdoor”?
No, there are no backdoors in the Bitcoin source code. We know this because the code is open-source; free to view and audit by anyone.
Who controls Bitcoin?
No one! Well, everyone!
Bitcoin is a consensus protocol controlled by everyone who participates in the Bitcoin Network. No one person, company, or board has control over the network. Everyone is equal on the Bitcoin Network, regardless of how much money they may have, political power, or societal influence. You and I have the same power as Jeff Bezos and Elon Musk, which is the same amount of power that Donald Trump has, and anyone else you want to name. Everyone is equal.
How are bitcoins made?
New bitcoins are “minted” every time a new block is mined and added to the public ledger (blockchain). This occurs on average every 10 minutes, and will always be 10 minutes on average. The person or entity that mined the block receives these new bitcoins as a block subsidy for having put in the time and energy to mine.
How many bitcoins exist?
Around 19.8 million bitcoins currently exist. In total, only 21 million bitcoins will ever exist. This is baked into the protocol and cannot be changed. New bitcoins will continue to be mined for the next 115 years, with the last bitcoins being mined in 2140. The supply schedule of Bitcoin is controlled by a formula in the source code, known as the supply or halving formula.
What is the halving formula, and how does the release schedule work?
The halving formula is an equation in the Bitcoin protocol that governs the release of new bitcoins. It determines how many bitcoins are released per block (block subsidy), as well as how often the supply halves. It is effectively Bitcoin’s monetary policy.
In 2009 when the Bitcoin network launched, the block subsidy was 50 bitcoins. The current block subsidy is 3.125 bitcoins.
The block subsidy halves every 210,000 blocks mined, which equates to every 4 years. The next halving is in 2028, when each new block will yield 1.56 bitcoin. Click here for more information on the halvings.
What is the significance of the supply schedule?
When the Bitcoin network was launched, there needed to be a way to distribute the bitcoins to the world. The supply schedule solved this by creating a pre-programmed and self-governing supply schedule based on an initial block subsidy and timekeeping with blocks.
Combining the requirement of real-world resources and time to mine blocks with the supply schedule created a fair and ethical way to release bitcoins to the world.
Why 21 million?
It is not explicitly known why Satoshi chose 21 million bitcoins. It is, however, the sum of the mathematical formula that determines the release schedule of new bitcoins, and does result in true, absolute scarcity. 21 million was most likely not arrived at through arbitrary selection, but rather the natural sum of a thought-out release schedule.
Who can use Bitcoin?
Everyone and anyone who has an internet connection can use Bitcoin!
There is no central authority or governing body that grants people permission to use and participate in the Bitcoin Network. It is completely permissionless and accessible to all humans. Bitcoin is the world’s only true global free market.
Is Bitcoin a Ponzi scheme?
No. Bitcoin is morally and ethically sound. I recommend this article by Lyn Alden that details Ponzi schemes and compares and contrasts them to Bitcoin.
Has Bitcoin ever been hacked? Can it be?
No. In theory, Bitcoin could be hacked, but this is mathematically virtually impossible due to the encryption standards used by the network. Because of the encryption that Bitcoin uses, the only way to hack a Bitcoin address is to try and guess every possible address through trial and error. I recommend this video to help understand how massive the numbers are in 256-bit security and why it is “impossible” to crack.
The concept of “hacking” Bitcoin is also only applicable to single addresses. The network itself can not be hacked as it is completely decentralized without a single point of attack or failure.
Why have I seen in the news that people hack people’s bitcoin?
People “hacking” other people’s bitcoin is people stealing private keys due to ineffective or faulty security measures. This is not a flaw with Bitcoin itself but rather the fault of the persons or institutions that are storing the private keys.
Money, Bitcoin, And Their Value
Why do we price Bitcoin in U.S. dollars? Doesn’t this prove that dollars are superior?
We use U.S. dollars to price Bitcoin (and everything else) because it is the most salable (marketable) and liquid currency. This is also why countries conduct trade in dollars even when the U.S. is not one of the trading partners involved. U.S. dollars used to be priced in gold.
So, what is “inflation”?
Inflation is money losing its value. Inflation is not prices increasing over time naturally.
This inflation is not what the U.S. government tells us?
Correct. The CPI (consumer price index) that the government uses to tell you what the inflation level is is not indicative of the real inflation. Instead, it is a manipulated index of a basket of goods and services that does not accurately portray price increases.
For an in-depth look into CPI and how it is calculated, check out this article.
So, what’s the real inflation?
The number to look at is the amount of money that gets created per year (monetary inflation). This is historically 7-10% per year. This means that the US dollar loses 7-10% of its purchasing power per year.
Why does the dollar have value?
Contrary to popular belief, the dollar is not backed by gold and has not been backed by an asset since 1971. Since there is no work required to create dollars, the dollar has no actual value attached to it.
We as a society subscribe to it having value by putting our faith and trust in the U.S. government. The government must see its value and accept it for payment. However, individuals and private companies do not need to accept it or believe in its value.
Why does gold have value?
The majority of gold’s value is derived from its relative scarcity and the amount of time and energy necessary to create it in an exchangeable form. Scarcity and desirability are linked together in its value proposition.
However, the amount of time, energy, and resources needed to find and remove gold from the ground and transform it into an exchangeable commodity are the driving forces behind the value.
It’s impossible to cheat one’s way or leverage technology against others to obtain gold, which has helped it endure 5000 years as the world’s most valuable commodity. The same can not be said for salt, tobacco, cattle, and other commodities that failed as money and gave rise to gold and precious metals as money.
Why does Bitcoin have value?
Bitcoin is valuable because it is everything that hard, good money wants to be. It has the valuable qualities of gold to a supercharged degree, with none of the defects and flaws.
Unlike gold, Bitcoin is: easy to verify by anyone, easily and sufficiently divisible, quick and cheap to transfer, and easy to store and preserve for the future. While gold is relatively scarce, Bitcoin is the only true, mathematical scarcity.
What is Bitcoin backed by?
There is no asset backing Bitcoin, like how gold used to back the U.S. dollar. However, I view the necessity of something needing to be backed by something else as a flaw and proof that it doesn’t hold value by itself.
However, it can be said that Bitcoin is backed by time and energy, as well as cryptography and mathematics. Ultimately, it is also the people who back Bitcoin, keeping it decentralized and secure.
What is fiat money?
Fiat money is a government-issued currency not pegged to gold, silver, precious metals, or any commodity. It has no value beyond the value that is agreed upon by a society. Since 1976, all of the major currencies in the world have been fiat.
Bitcoin Specifics & Technical Details
Why is Bitcoin volatile?
Bitcoin is volatile for several reasons:
- It is the world’s only market accessible to every person on the planet
- Compare this to the roughly 165 million people who trade the U.S. stock market
- It is the only true free market
- Unlike the U.S. stock market, there are no “circuit breakers” to trip if there is a large movement in either direction. If a stock moves too quickly up or down, trading of the stock is halted for 15 minutes. This doesn’t exist for Bitcoin
- It is accessible 24/7, 365 days a year
- The U.S. stock market trades 32.5 hours a week. Bitcoin trades 168 hours a week (all of the hours)
- Because of the above points, people around the world can react to events and news instantly, both selling and buying bitcoin at will
- Bitcoin has arguably become the global economic thermometer
- Bitcoin is the best measuring stick to measure currency debasement as the hardest and scarcest commodity
- Bitcoin is a disruptive technology in its growth phase, it is natural for it to experience volatility
- While Bitcoin is growing, its liquidity (amount of money traded daily) is still small compared to other major markets. This means it takes less money to move the market
Is Bitcoin’s volatility bad?
No. From a long-term point of view, volatility is good! Volatility allows people to accumulate bitcoin at many different price points and effectively capture the average price over time. This enables people to “buy the dip”.
While large dips are common in Bitcoin, they are historically followed by even larger price increases. Historically, Bitcoin is volatile to the upside. Volatility is the price long-term holders pay for performance.
What is Bitcoin mining?
In simple terms, Bitcoin mining is trying to guess a large and random number. In technical terms, Bitcoin mining is solving cryptographic hash functions.
In practice, computers try to solve for a possible input for an equation with a known output. However, the input can only be solved by plugging a number into the equation, doing the math, and seeing if the number is correct. This means the only way to solve the equation is to constantly insert random numbers into the equation, do the math, and see if you guessed correctly.
This process is crucial and is called Proof-of-Work.
What is Proof-of-Work?
Proof-of-work (PoW) is the process of expending time and energy to create something of value. In Bitcoin’s case, it is the consensus mechanism used to produce new bitcoins and maintain the blockchain. It is one of the most crucial aspects of Bitcoin, and understanding it is fundamental to understanding Bitcoin.
I recommend this article for an in-depth look and understanding of Proof-of-Work.
Why is Proof-of-Work important to Bitcoin?
Proof-of-work is important to Bitcoin as it ties the network to the physical world and gives the coins and the network value. Furthermore, PoW is crucial to keeping the network safe and secure and allows consensus to be reached and maintained by the decentralized network.
I recommend this article for an in-depth explanation of Proof-of-Work’s importance to Bitcoin.
The U.S. dollar and all other fiat monies do not use Proof-of-Work. The Federal Reserve can create money out of thin air with simple keystrokes. In other words, the U.S. government is reaping what it did not sow.
Is it possible to change the block reward or how often blocks are mined?
No. The formula that derives the 21 million bitcoins is baked into the Bitcoin protocol. The algorithm that determines how long it takes to mine blocks is also baked into the protocol. It is only possible to change the Bitcoin protocol through the majority consensus of the network, requiring the majority to believe the changes to the protocol are a good idea. This is virtually impossible.
Why is Bitcoin different than Ethereum, Doge, Solana, XRP, and the other cryptocurrencies?
Bitcoin differs from the other cryptocurrencies because Bitcoin is the only one that is truly decentralized and secure. While others may advertise themselves as being “faster” or “better” than Bitcoin, they sacrifice either security or decentralization in the process.
Furthermore, these other coins do not utilize a proof-of-work timestamping scheme. Bitcoin’s use of proof-of-work timestamping creates a link to the physical world, where physical world resources (electricity) and time are needed to mine blocks and secure the network.
Finally, Bitcoin is money and focuses on being it, while the rest are not.
For a deeper dive into Bitcoin vs the rest, I highly recommend Jeff Booth’s article Finding Signal In A Noisy World.
Can my bitcoin be counterfeit?
No. Counterfeit bitcoin cannot exist because there is no way to create it in the network. If someone were to take the public ledger and modify it, the new ledger would be rejected by the nodes on the network.
Can someone steal my bitcoin?
Your bitcoin can only be stolen if someone gains access to your private key(s). As long as you securely store your private key(s), your bitcoin can’t be stolen. This is no different than securely storing anything else you have of significant value.
How does Bitcoin work?
For an in-depth breakdown of how Bitcoin works, I recommend this video.
A simplified breakdown:
- One person sends bitcoin to someone else and creates an unconfirmed transaction
- This transaction gets sent out to a globally decentralized network of computers (nodes) that check the transaction and verify that it is valid
- When the nodes verify that the transaction is valid, the transaction is sent to a pool (Mempool) of transactions waiting to be confirmed
- Computers around the world try to guess an incomprehensibly large and random number by guessing at random (these are the Miners)
- Once a miner guesses the large, random number, it wins the right to add a block to the blockchain
- Pending, unconfirmed transactions in the Mempool are packaged into a block by the miner and added to the blockchain. The miner receives the block reward as well as transaction fees
- The block, and thus the new version of the blockchain, is broadcast out to a globally decentralized network of computers (nodes)
- The nodes check the new block and verify that the block conforms to the rules of the protocol and that all transactions are valid, confirming the block and the transactions inside
- Process repeats itself
How Bitcoin works on the technical level is complicated and requires time and effort to understand. Thankfully, understanding the specifics and technical aspects of Bitcoin is not necessary for using it, nor understanding its function and importance as money!
Bitcoin Ownership – Buying, Selling, Storing
Buying, storing, and using Bitcoin is the epitome of financial self-sovereignty. Saving in Bitcoin is the single greatest way to preserve our time and energy and carry our purchasing power into the future. Below, I’ll break down how you can buy, store, and use your bitcoin.
Buying Bitcoin
Bitcoin can be bought in person from another person or, more commonly, from a Bitcoin exchange. There are dozens of exchanges to use, though I’ve listed the more common and reputable ones below. I use River and Strike.
- United States
- Latin America
- Europe
- Non-KYC
- Bisq
- Robosats
- Peach
- In person at a Bitcoin meetup
What is KYC? Should I care?
KYC is short for Know Your Customer.
It is a way for financial institutions to know and evaluate their customers. It is also a massive amount of data harvesting that can ultimately do much more harm than good.
While the government frames KYC as a protective measure to increase security and protect the customer, the collection and centralization of customer data and information is dangerous.
In May 2025, employees of Coinbase sold customer information to cybercriminals.
While no keys or money were lost or stolen, sensitive and personal information of many customers was sold, including account balances. Because of KYC practices, the wealth and personal, sensitive information of many individuals are exposed to the world.
It is up to you to decide if you should care or not about KYC, however, it is something to keep in mind.
How should I go about buying bitcoin?
Everyone’s financial situation is different. However, the most important thing is to get off zero and own some bitcoin.
A common way to buy bitcoin is to utilize a strategy called dollar-cost-averaging (DCA). With DCA’ing, you set recurring buys to buy bitcoin at a fixed schedule, regardless of the price. This ensures that you buy bitcoin at the average price over time.
I recommend people use DCA to gain their exposure and buy in larger chunks when a price dip presents itself.
Why not buy the Bitcoin ETFs like $IBIT and $FBTC?
ETFs are a great option for retirement accounts and other money that is locked out of your complete control. However, owning actual bitcoin is the best option, second to none.
ETFs incorporate counterparty risks and also have fees. More importantly, ETFs are an investment vehicle for increasing the amount of dollars you have, when ultimately your goal should be increasing the amount of bitcoin you have.
Storing Bitcoin
There’s a saying in the Bitcoin community: not your keys, not your coin.
Your bitcoin is “locked” to you and can only be “unlocked” with your private key. It is possible to have multiple private keys, which are tied to a single seed phrase. Before going further, I want to discuss the types of storage.
There are 2 types of storage: hot storage & cold storage. Hot storage implies that the wallet is connected to the internet, while cold storage is not. It is best to store your bitcoin in cold storage using a hardware wallet.
You never want to leave a significant amount of bitcoin in your account on the exchange.
By leaving your bitcoin on the exchange, you place your trust in the exchange to hold your money safely and securely. While some exchanges are trustworthy to an extent, there is always the risk that they are not. Exchanges have been hacked in the past. Exchanges have also been caught running fraud schemes.
By moving your bitcoin to a hardware wallet in cold storage, the only person you need to trust is yourself.
Cold storage can be achieved by using a hardware wallet.
A hardware wallet is a small device that you plug into your computer (in most cases) that stores your private key, generates Bitcoin addresses, and allows you to interact with the blockchain simply. It can be thought of as an encrypted flash drive/USB stick.
Popular makers of hardware wallets include:
I use Trezor and Coldcard. I have no experience with the others, but they’re common in the Bitcoin community. You should buy your hardware wallet from the manufacturer itself rather than on Amazon or elsewhere.
I won’t cover setting up your hardware wallet, as they include excellent documentation and tutorials for setting them up when you receive them.
However, I will explain your private key, your public key, and your seed phrase.
What is my private key?
Your private key is a large cryptographic number that proves you own your bitcoin. It is generated by your wallet using your seed phrase.
Your private key has a few uses:
- Prove ownership of your bitcoin
- Generate public keys and receiving addresses
- Sign your transactions to prove they are valid
You won’t be interacting with your private keys directly; your wallet manages them.
What is my “seed phrase”?
Your seed phrase is a sequence of 12 to 24 words that acts as a master key for your wallet. It is sometimes referred to as a backup phrase, mnemonic phrase, or recovery phrase. Multiple private keys can be tied to and generated by a seed phrase.
The seed phrase is the single most important piece of information that you own.
You can think of the seed phrase as the master key to your wallet. If someone were to gain access to your seed phrase, they would then have access to all of your private keys and be able to move and steal your bitcoin.
The seed phrase will be randomly generated by the wallet; however, you can also generate one yourself via dice rolling.
One of the most important functions of the seed phrase is to recover your wallet and your bitcoin in the event your wallet gets stolen, damaged, or stops working.
As long as you have your seed phrase, you have control and sovereignty over your money.
With your seed phrase, you can destroy your physical wallet, move to the other side of the world, and retrieve your wallet again.
Because of the utmost importance of the seed phrase, it is crucial to protect and keep it secure.
Tips for securing your seed phrase
- Physically write down your seed phrase
- Never store your seed phrase on your computer
- Never store your seed phrase in your email
- Never store your seed phrase on the cloud
- Do not take pictures of your seed phrase to have a “backup”
- Engrave your seed phrase into a titanium or stainless-steel plate
- Burn the paper where the seed phrase was written after engraving
- Store the seed phrase plate in a secret location where it won’t be found
What is a public key?
The public key is mathematically derived from your private key and digitally signs your transactions. You will not interact with it directly, nor ever really see it. The Bitcoin network uses it to verify your transactions. Your public key is not revealed when receiving bitcoin, only when sending.
While the public key is derived from a private key, it is mathematically impossible to derive the private key from the public key.
What is a bitcoin address?
A bitcoin address is an alphanumeric string that is shared publicly to receive bitcoin. It is derived from the public key.
While the address is derived from a public key, it is mathematically impossible to derive the public key from the address.
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As someone new to Bitcoin, these terms and concepts can be confusing. However, it can be simplified by thinking of the keys, addresses, and seed phrases by using a mailbox analogy.
- Address – Street address to send mail (bitcoin) to
- Public key – A unique identifier to verify that the mailbox at the address belongs to you
- Private key – The key to open your mailbox
- Seed phrase – Locksmith and master of the whole mailbox system
Anyone can send mail to your mailbox; however, the owner of the mailbox is anonymous, and only the person who has the key can open the mailbox and see inside.
I recommend this article to learn more about public and private keys and how they work together. For a deeper dive into Bitcoin addresses, I recommend this article.
Why shouldn’t I leave my bitcoin on an exchange?
Not your keys, not your coins.
Unless you hold the private keys to your bitcoin, it is not your bitcoin. It is the exchange’s bitcoin owed to you, but not yours. You’re trusting the exchange to hold your bitcoin safely and securely and ultimately give it to you when you want possession of it.
Being in control of my own money sounds like a lot of responsibility?
It is, but it’s a great and fortunate responsibility to have. Why would you want to trust other people and institutions to hold and manage your money and let you have it and move it only with their permission?
What if I lose my keys?
Then your bitcoin is gone, forever. Keep your keys in a safe and secure place, just like you would with anything else of great value to you.
Spending Bitcoin
Since Bitcoin is money, you can use it as such! Many people use Bitcoin as a savings tool and treat it as an investment. Other people (like me) use Bitcoin as their money and spend it and transact with it when possible. If you want to transact with Bitcoin, there are two main ways: on-chain or off-chain using the Lightning Network.
Lightning & Layer 2
Bitcoin can be built upon in layers due to its nature as a protocol. While Bitcoin doesn’t scale globally as a payment system on the base layer, protocols are being developed on the base layer that allow Bitcoin to scale globally. One of the largest protocols is Lightning that lives on Bitcoin layer 2.
Lightning is how Bitcoin can be used to complete everyday transactions. If you wanted to buy a coffee using Bitcoin, you would do so by using Lightning instead of a transaction on the base layer.
Lightning is still Bitcoin, with transactions being irreversible. However, Lightning transactions are instant (unlike the 10 minutes required on the base layer for a block to be mined), significantly cheaper to execute (free in most cases or fractions of a US cent), and also much more private and anonymous.
Lightning Wallets & Transacting
Lightning wallets are like the leather wallet you carry in your pocket. They hold the money you need to complete everyday transactions.
Lightning wallets can be both custodial (a third party holds the bitcoin) and non-custodial (bitcoin in your custody). I mostly use a custodial wallet, meaning that I am trusting the company that manages the wallet to behave responsibly and ethically. However, I feel comfortable doing so because I only have Bitcoin in my Lightning wallet that I am willing to lose.
A best practice is to only keep an amount of Bitcoin in your Lightning wallet that you are willing to lose. You can think of your cold-storage Bitcoin as your savings account, with your Lightning Bitcoin being your wallet or checking account.
Wallets I Like
- Wallet of Satoshi
- Custodial
- Simple
- Built-in PoS for businesses
- Lightning & Bitcoin
- Non-KYC (Know Your Customer)
- Not available in the USA (is returning soon)
- Phoenix
- Non-custodial
- Non-KYC
- More advanced settings and features, but not necessary for use
- Strike
- Custodial (you trust Strike with your Bitcoin)
- KYC (Strike will collect your personal and taxpayer identifying info)
- Bitcoin exchange & wallet
- Can hold a cash balance
- Can easily buy/sell Bitcoin
- Zeus
- Non-custodial
- Non-KYC
- Most advanced and technical wallet, but not necessary for use
Moving bitcoin from Lightning Wallet to Cold Storage
Once you accumulate enough bitcoin in your wallet, you’ll want to move it from your wallet to your cold storage for safekeeping. This can easily be done once your hardware wallet is set up.
- Generate a Bitcoin Receiving Address from your hardware wallet and copy it
- Will start with “bc1” and look something like this: bc1qwzrryqr3ja8w7hnja2spmkgfdcgvqwp5swz4af4ngsjecfz0w0pqud7k38
- In your Lightning wallet, click Send
- Paste in your address
- Depending on your wallet, it will ask you how quickly you want the transaction to be confirmed. The quicker the transaction, the higher the fee will be
- Done!
At this point, you wait for the transaction to be confirmed and added to a block.
Your bitcoin balance in your hardware wallet will update once the transaction is confirmed.
You can also use a blockchain explorer like Mempool.space to view your Bitcoin address and see the bitcoin that gets sent to it, among other technicals. Example address above
As a best practice, you should always generate a new receiving address when sending bitcoin to your hardware wallet. This increases user privacy and keeps your total bitcoin balance private.
Myths & Misconceptions
Myth: Bitcoin uses too much energy and is bad for the environment
The Bitcoin network currently uses less than 150 TWh of electricity a year. This represents 0.1% of global energy consumption. 60% of this energy is from renewable sources, and this is increasing.
Miners are constantly chasing cheaper electricity as it is needed for a mining operation to be profitable. To reach stranded natural energy sources, miners are building electricity infrastructure in parts of the world that previously did not have it.
Miners are also setting up operations in areas that experience large differences in electricity usage in peak hours vs non-peak hours. This helps the electricity producers balance the grids, not let already produced energy go to waste, and lower prices for other customers.
Lyn Alden did an incredible deep dive on this topic that is worth reading. Michael Saylor has also laid out facts about Bitcoin and the environment. Joe Nakamoto has done videos on off-grid mining operations. The documentary No More Inflation features communities that are experiencing electricity for the first time, thanks to mining.
Misconception: Bitcoin is only for criminals and illicit activities
Bitcoin is a freedom technology used freely by all people on the planet. Due to its accessibility and functions as a superior, trustless, and permissionless money, it was used in its early days to conduct trade in online black markets.
Though who is to say who is a criminal and who is not? The definition of such is completely subjective to every jurisdiction around the world. If you are a woman in Afghanistan and have a bank account, you are a criminal. If you are homosexual and live in Russia, you are a criminal.
Knives are used by criminals in addition to their many ethical and useful functions.
If we want to stoop down to judging money based on just one of the ways it’s used, the U.S. dollar is by far the most widely used currency for drug trade, money laundering, and other illegal activities.
Bitcoin is the best money in the world and allows people to exchange value directly with one another without the permission or oversight of a subjective government or authority.
Myth: Governments will ban Bitcoin
Governments can try to ban Bitcoin, but they will not succeed. It is impossible to ban citizens from using Bitcoin, as there are always ways via VPN, the black market, and direct peer-to-peer. China has famously “banned Bitcoin” several times over by now.
The fact of the matter is that it is impossible to ban a truly decentralized, open-source, and permissionless protocol like Bitcoin.
Misconception: Bitcoin is a bubble
Bitcoin’s explosive volatility gets it frequently labeled as an economic bubble. While Bitcoin experiences the boom/bust cycles of bubbles, it always recovers to higher highs and higher lows. Furthermore, the fundamentals of the network and its use as money give Bitcoin its inherent value.
Misconception: Quantum computers will break Bitcoin
While quantum computers will be able to break the encryption standards of the Bitcoin network, this is far from a reality. This is also theoretical, as the algorithm needed is theoretical in the sense that it has never been used or tested before. Furthermore, quantum-resistant encryption standards are being developed, and Bitcoin could be updated to incorporate them. Michael Saylor spoke about this recently in an interview. I also recommend this article for a more in-depth look into Bitcoin and quantum computing.
In the distant future, where quantum computing is a threat to Bitcoin, it is also a threat to modern banking, governments, defense systems, public and private companies, privacy, and everything digital in the world. I view the Bitcoin network as something not to worry about being under attack.
Food For Thought
The journey and scope of this guide are almost complete! However, I’d like to leave a collection of quotes, bits of information, ideas, and thoughts to think about as you go further down the Bitcoin rabbit hole.
“Bitcoin is a bank in cyberspace, run by incorruptible software, offering a global, affordable, simple, & secure savings account to billions of people that don’t have the option or desire to run their own hedge fund.”
Everything falls in price when priced in bitcoin, forever. Everything increases in price when priced in fiat currencies (dollars, euros, pesos, yen, etc.). The value of your house is not increasing. The value of the currency that your house is priced in is decreasing.
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.”
You spend 80,000 hours of your life working. Money is time and energy in an abstract form. Does it not make sense to spend some hours learning how to preserve your time and energy?
“I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop”
Bitcoin represents a paradigm shift in money. Money is technology, and Bitcoin is the next evolution of this technology. Think of Bitcoin to money, as the Internet is to information and communication.
Bitcoin is the world’s only true absolute scarcity and is deflationary money.
Bitcoin seems complicated and difficult to understand because it is a part of a system that is completely different from the current monetary system, and is different from every system humanity has ever created. There is nothing to compare it to, and no history book will help you to understand it.
Resources To Dive Deeper
To continue your journey down the Bitcoin rabbit hole, I recommend you first watch Lyn Alden’s Broken Money primer video, followed by the documentary God Bless Bitcoin.
I also believe it is fundamental to read the Bitcoin White Paper, even if it won’t make much sense on your first read-through. From here, follow your path and explore your interests and questions within Bitcoin.
I’m a science and logic-based person. Early on in my Bitcoin journey, Michael Saylor’s interviews resonated greatly with me due to his scientific and logical approach to Bitcoin and his explanations. I included a list of these interviews below.
- Websites
- Videos
- Broken Money
- God Bless Bitcoin
- No More Inflation
- Introduction to Bitcoin
- Michael Saylor – Bitcoin, Inflation & The Future of Money
- How Secure Is 256-bit Encryption
- How Does Bitcoin Actually Work
- Masterclass Inflation, Deflation, Bitcoin
- What’s The Problem?
- The Stories We Tell About Money
- The Cost of Our Inheritance
- YouTube Channels
- Michael Saylor
- Books
- Podcasts
- Articles
Book a one-on-one Bitcoin conversation with me.
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