I’ve always believed that the internet is a powerful tool for decentralization and the empowerment of individuals across the world. I also view sound money as a requirement for free people.
Bitcoin has provided a potential future where capital can be saved, traded, and built upon without the need for a “trusted” 3rd party. It can be a new digital reserve asset for the internet-enabled world.
As part of my journey into Bitcoin, I’ve had many friends ask me questions on how to get started. I’ve put together this Frequently Asked Questions section below to provide initial thoughts.
What is Bitcoin?
Bitcoin is digital money. It runs on a decentralized computer network, using open source code. It allows for peer-to-peer transactions without requiring a trusted 3rd party (typically a bank or government).
Why should I own Bitcoin?
There are many reasons why you may be interested in owning Bitcoin. Below are some of the most important properties of Bitcoin.
- Native Internet Asset – It’s a currency that is native to the internet. This makes it a great protocol to store, and transfer wealth online. In the future, it could become the reserve currency of the internet.
- Fixed Supply – Unlike government currencies that are inflated away over time, Bitcoin has a fixed supply schedule. There will only ever be 21 million Bitcoins created, making it the hardest money available to us.
- Divisible – A Bitcoin is divisible down to 1/100,000,000 of a coin. This means you can purchase or transact fractions of a Bitcoin. The smallest unit is called a Satoshi, or “sat”, named after Bitcoin’s anonymous founder.
- Secure – Its proof of work mining and cryptography makes it nearly impossible to hack or manipulate. The distributed node network across the world means that anyone can verify the blockchain themselves.
- Programmable – While Bitcoin is money, it’s also open-source technology. Meaning it can be programmed and built upon. Layered settlement solutions integrating with Bitcoin are allowing it to scale, while the base network focuses on stability and security.
- Independent and Trustless – Bitcoin is not controlled by any financial institution, government or organization. It has no leader. It’s an independent asset that’s value is derived from the protocol itself.
What about other cryptocurrencies?
I would only invest in Bitcoin. While there are other cryptocurrencies that tout unique “features” or “improvements”, these ultimately come at the cost of less security and/or more centralized control. Bitcoin is the asset with the most decentralized network, the strongest history of value creation, and the most immutable monetary issuance (its fixed supply has never been altered). Additionally most (nearly all) other cryptocurrencies started with a “pre-mine”, which reserves a stock of the token supply to founders and investors. Fidelity has a great whitepaper here explaining why Bitcoin is the digital asset of choice.
Where can I buy Bitcoin?
There are many ways to purchase Bitcoin. I’d recommend looking for exchanges that offer Bitcoin as a primary asset, and also those that allow you to withdraw (if you choose to) your Bitcoin to another wallet. My go-to recommendation right now is Cash App by Square. Other recommended services are Swan Bitcoin and River Financial.
How much Bitcoin should I buy?
How much Bitcoin to purchase is a very personal question, and highly dependent on your individual financial situation. To give some context though, Fidelity’s digital investment group’s historical models showed investing 3-5% of your portfolio had improved returns without notably increasing risk.
Is now a good time to buy Bitcoin?
If you believe in the future where Bitcoin has a significant role in world commerce, as well as a 4-5 year minimum time horizon, it’s probably a good time to buy Bitcoin. Its market price can be swing fairly dramatically on a day-to-day basis. This is not something that I would suggest trading or use as a get-rich-quick scheme. Dollar-cost averaging, or buying the same amount on a regular basis, is a great way to avoid timing the market.
Is Bitcoin too expensive?
No, you don’t need to buy a whole bitcoin. You can fractions of a Bitcoin, down to one hundred millionth of a single bitcoin (0.00000001 BTC).
Does Bitcoin use too much energy?
Bitcoin uses energy and computational power to independently secure the blockchain and create new tokens. This is called “proof-of-work”, and is a feature of Bitcoin. It allows for no central control or influence over the network (unlike other money/cryptocurrencies). Additionally, Bitcoin mining as an industry has one of the largest mixes of renewable energy inputs.
Where can I learn more about Bitcoin?
My favorite book on Bitcoin is “The Bitcoin Standard” by Saifedean Ammous. It’s a fairly dense read, that provides an overview of the history of money, the case for sound money, and thoughts on how Bitcoin might fill that roll in the future.
“The Bullish Case for Bitcoin” by Vijay Boyapati, is a nice intro read to Bitcoin. It provides a quick history of how Bitcoin came to be, the case on why Bitcoin could make a great future monetary base, and how its evolution is taking shape.
Is this financial advice?
No, this is not financial advice. You should always do your own research before making investment decisions. This FAQ post is simply to provide my answers to common questions that friends ask me related to Bitcoin.
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