Bitcoin for Complete Beginners
As Bitcoin's price continues to rise, so does the amount of interest in the digital currency on behalf of the general public. This mini-article is for the very people aforementioned, those who have little to no prior knowledge of Bitcoin. I will quickly give an overview of what Bitcoin is, how to begin saving with Bitcoin, and finally a few things to do moving forward to further increase your knowledge on this intricate subject.
What Is Bitcoin?
I'm going to keep my Bitcoin definition free of too much specific or technical info, as there are a plethora of articles out there that go into much more detail in describing Bitcoin than I wish to; I want to make Bitcoin as simple as possible for the average person to understand.
Bitcoin is simply a digital currency, of which only 21,000,000 will ever exist. Bitcoin lives on the Bitcoin blockchain, which is a network of computers running the Bitcoin source code that document Bitcoin transactions. This computer network is one of the largest and most secure networks on this planet, and has never been hacked. The network is anchored by thousands upon thousands of individual 'miners' who confirm transactions with specialized computer equipment in exchange for fees and Bitcoin rewards, ensuring that all of the rules for the network are being followed; therefore, Bitcoin is backed by an immense amount of computing power and energy.
Bitcoin is a decentralized network, meaning that there are no central servers or authorities responsible for its upkeep (just like the internet). No government can ban Bitcoin or inflate away its value. If you use proper security techniques, nobody can take your Bitcoin from you or prevent you from buying more. Since Bitcoin uses encryption, it is difficult (if not impossible under certain conditions) for anyone to know who you are and how much Bitcoin you have.
Bitcoin is a trustless network, as all transactions are published to the blockchain for all to see, nobody can double spend their Bitcoin. Bitcoin is the fairest money on Earth, with that fairness being enforced by cold, hard computer code. Bitcoin is thus the most secure, incorruptible, and scarce money on the planet today.
How Do I Get Started With Bitcoin?
To start saving with Bitcoin, you will need to choose a point of purchase for your Bitcoin, and plan for how you wish to store your coin. I will only discuss KYC (Know Your Customer) methods of Bitcoin purchase, but there are non-KYC options that exist. Cash App, Coinbase, and Gemini are all reputable Bitcoin exchanges that are relatively user-friendly when it comes to buying Bitcoin. One of the best ways to save with Bitcoin is to buy the same amount in regular intervals, also known as dollar cost averaging. For example, buying $25/week for the past three years would have netted you $13,885, a 253.77% return for a $3,925 principal.
Once you have purchased Bitcoin, it is time to transfer it to your personal wallet. Remember, NEVER leave your Bitcoin on an exchange. The Bitcoin network has never been hacked, but exchanges have been hacked several times during Bitcoin's existence. If an exchange gets hacked, there are really no options for getting your Bitcoin back, as the nature of Bitcoin means that transactions cannot be reversed. Wallets come in two formats for the most part: hardware and software. Hardware wallets are physical devices used for storing your Bitcoin offline (cold storage), meaning your wallets are not constantly connected to the internet. Trezor and ColdCard are the two hardware wallets I would recommend, Trezor being the best for novices. Software wallets can be wallets used on your smartphone or your desktop/laptop computer. Wasabi, Samourai, and Blockchain aren't bad choices for software wallets. Storing your Bitcoin in a wallet that is connected to the internet is considered 'hot storage,' and a good rule of thumb is to transfer all of your Bitcoin into cold storage as quickly as you can, to lower the risk of hacking. Seed phrases are 12 or 24 ordered word lists that are your wallet backups, they can be used to access your funds if you forget or cannot access your wallet login. Seed phrases can also be compatible with a range of wallet services, not just the one you had been using. NEVER tell anyone your seed phrase, enter your seed phrase into a computer, or take photos of your seed phrase. The best storage for your seed phrase, in my opinion, is memorization.
Furthering Your Bitcoin Knowledge
Now that you are a Bitcoiner, there are always other things you can do to further your knowledge. The first step I would recommend is buying a book called "The Bitcoin Standard" by Saifedean Ammous. This book was a life-changing experience for me, and will teach you many things as to why Bitcoin is changing the world. I would also follow some leading Bitcoiners on Twitter:
Pierre Rochard (@pierre_rochard), Saifedean Ammous (@saifedean), Anthony Pompliano (@APompliano), Max Keiser (@maxkeiser), Michael Saylor (@michael_saylor), Jack Mallers (@JackMallers), Marty Bent (@MartyBent), Michael Goldstein (@bitstein), Matt Odell (@matt_odell), and Vijay Boyapati (@real_vijay).
I will have most certainly left off many other great people from this list, but these are who came to mind at this time.
Finally, take the time to read some of the great minds of the Austrian economic school, such as Rothbard, Hayek, and Mises.
You should always consider seeking financial advice from a licensed advisor before making decisions with your money, and you should not consider anything I write as financial advice but merely my opinion. Getting your financial house in order is a prerequisite for Bitcoin saving, in my opinion.
Disclosure: nothing in this article should be considered financial advice and I am not a financial advisor. Do your own research as everything in finance carries risk.