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 the largest and most prominent digital money in the world. It runs on a decentralized computer network, using open source code. It’s the first application of blockchain technology, which 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. For some it’s the financial implications, for others, it’s the interest in the technology. Below are some of the most important properties of Bitcoin.
- Native Internet Asset – It’s the first 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.
- Secure – Its proof of work mining and cryptography makes it nearly impossible to hack. The distributed network across the world also makes it difficult to interrupt.
- Programmable – While bitcoin is money, it’s also open-source technology. Meaning it can be programmed and improved on overtime.
- Independent and Trustless – Bitcoin is not controlled by any financial institution or government. 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).
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 article, The Bullish Case for Bitcoin, was published shortly after the end of the 2017 price run-up. It provides a great case on why Bitcoin could make a great future monetary base, and how its evolution is taking shape.
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.
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 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.