Whatever your reasons for wanting to learn more about Bitcoin, there are some practical considerations that need to be looked at when starting your journey into the Bitcoin world. This article looks into the those considerations and points you to further resources to help you make informed choices.
Acquiring Bitcoin
The first consideration when looking to acquire bitcoin is how best to acquire it. There are 3 ways to acquire bitcoin.
1. You can buy it
2. You can earn it
3. You can mine it
Buying Bitcoin
Buying bitcoin is the easiest and probably the most popular acquisition method. There are two ways broad ways you can buy bitcoin. You can do so by opening up an account on a regulated exchange and buying it on that platform. During this process you will be asked to hand over personal identification information. The other way is you can buy it using a peer to peer exchange such as Bisq or HodlHodl.
Here is a quick summary of the advantages and disadvantages of the two approaches.
Buying on regulated exchange (advantages)
- It's less likely that you will get scammed or robbed. High security benefits from reputable exchanges.
- You can purchase large amounts all in one go. We call this a "large smash buy"
- It's quick and easy to get a decent position in bitcoin at a purchase price you are happy with.
- Exchanges also offer ways of automating your purchases on regular intervals (weekly, monthly etc) based on your pay cycle.
Buying on regulated exchange (disadvantages)
- It requires you to hand over personal identifiable information (passport, drivers license, selfies) - this can harm your security and privacy in the future
- You are added on a permanent list of people who have acquired bitcoin. This list can be hacked, sold or distributed to unintended parties. It can be used against you in the future. Think ransoms.
Buying on peer to peer exchanges (advantages)
- Requires no use of personal identifiable information. Less likely to be subject to threats of violence in the future from governments, corporations and individuals.
- Using bitcoin as stated in the whitepaper - a peer to peer electronic cash system.
- Your bitcoin is held directly in your wallet (something only YOU control), not on an account held by an exchange.
- Leave behind minimal paper trails about how much bitcoin you've acquired and at what price.
Buying on peer to peer exchanges (disadvantages)
- Difficulty in finding large volumes of bitcoin to buy
- Might have to pay a slight premium (perhaps 2-5%) above the market price
- Building your desired position will take time and may not be at the ideal price (depending on price fluctuations)
Earning Bitcoin
If you have goods and services you wish to sell on, consider taking bitcoin as payment for those goods and services rendered. This is a great way to acquire bitcoin. You can use software such as BTCPayServer to integrate bitcoin payment processing into your online shop or point of sale terminals.
Mining Bitcoin
There is a growing number of people who are mining bitcoin at home and directly acquiring it straight from the tap. It requires a bit of technical knowledge and an initial investment in hardware to get this going. Admittedly, I have very little knowledge on this topic of home mining. I would refer you to learning more from Diverter and Econoalchemist about this way of acquiring bitcoin. They have some great guides and information.
Your decision
It's ultimately up to you how you want to acquire bitcoin. It's important to assess the information available to you to make an informed decision based on how you think the world is heading, You make your decision and accept the consequences of that decision.
I would strongly recommend listening to Citadel Dispatch Episode 43 for more in depth conversation for beginners to learn more.
Storing Bitcoin
In the process of acquiring bitcoin, you will need to understand a thing or two about bitcoin wallets. The idea is to hold and protect your private keys. This is a really important step in moving away from government issued money and into decentralized freedom money. Which Bitcoin wallet should you use?
There are plenty of options for Bitcoin wallets but here are my recommendations as of March 2022.
For desktop, I recommend Sparrow Wallet.
For mobile, I recommend Samourai Wallet for Android and either Muun Wallet or Blue Wallet for iPhone.
For hardware wallets, I recommend a Coldcard paired with Sparrow Wallet.
I have created an extensive video on understanding bitcoin wallets. I would strongly recommend having a watch through it below. It goes into concepts and vocabulary you need to know when dealing with a bitcoin wallet.
If I had to pick one option for large savings, I would use a single signature Coldcard with a strong passphrase. Manage this using Sparrow Wallet.
If I had to pick one option for spending and privacy best practices, I would use Samourai Wallet on an Android device. Purchase an android phone for this purpose, I recommend a Google Pixel device.
An important part of your bitcoin wallet is the recovery process and seed words that back your wallet up. The seed words should be etched into a metal backup product such as a cryptosteel, cyphersafe or billfodl and ideally stored in a safe at home. When ordering bitcoin related goods such as hardware wallets and metal backup products, do not use your home address as the delivery address. Use a PO Box, parcel locker or order it to your work address. It's also ideal to use bitcoin or cash to purchase the products, rather than PayPal or your credit card which gives identifying information away to the vendor.
Verifying Bitcoin
When we talk about verifying bitcoin, we mean running your own bitcoin node and connecting that to your existing wallet. This is the most trust minimized way of knowing you actually hold bitcoin and not some fake numbers on a screen. It also allows you to transact on the bitcoin network without being censored or blocked.
I explain in further detail the importance of running your own bitcoin node in this video below. The rest of the series goes on to explain one of the raspberry pi node implementations in the space called myNode.
There are several more projects in the space, depending on what you're interested in.
- Umbrel
- Start9
All of these projects have their pros and cons depending on what you're looking to achieve. My preferred method is doing it all yourself. I have an extensive tutorial series on installing and configuring bitcoin and other bitcoin related software on a spare computer which you can view below.
Privacy best practices
It is no secret that a weakness of bitcoin is privacy. When you make a bitcoin transaction, you make a permanent change to the public ledger written to thousands of computers across the world. If you follow bitcoin privacy best practices, you should be able to transact (send and receive) bitcoin in a way that is considerably more private than default. There are simple techniques you can use, such as not re-using bitcoin addresses and using coin control. Good bitcoin wallets will have these functionalities built in.
My recommendation is also learn to use more advanced procedures with Samourai Wallet whirlpool coinjoins and post-mix tools to obfuscate the footprints you would otherwise be leaving behind.
Other Resources
Great resources for learning more:
Hopefully you can go through these topics in more detail with the references I have provided. If you want further information or wish to discuss further, I am available for one on one consulting. You can book in a time on my calendar here. Weekends is when I have more availability.
All the best with your bitcoin journey!
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