The Bitcoin Starter Kit

The Bitcoin Starter Kit

TLDR:

Goals

  1. Learn about Bitcoin. Why it was created? What problems it is trying to solve? Understand the basics about how it works.
  2. If you understand what you learn, you may want buy some bitcoin. You can buy a fraction of a bitcoin. DYOR. This is not investment advice.
  3. If you buy some, learn how to take custody of all or most of your bitcoin.
  4. Continue you keep learning about bitcoin because you find it more and more interesting.

Before we get started

  • Money is usually Durable, Scarce, Divisible, Portable, a Store of Value, a Unit of Account, and  a Medium of Exchange.
  • Governments can declare money as Legal Tender.
  • There have been many forms of money throughout history like: salt, cattle, glass beads, large polished stones, metal coins and paper money.
  • Bitcoin is not the first attempt at digitally native electronic money. Some other serious attempts include e-Cash 1982, e-gold 1996, hashcash 1997, b-money 1998 and bitgold in 2005. Bitcoin was created by using many of these innovative ideas and you can see the footnotes in the White Paper.
  • Be open minded about learning about bitcoin. It is unique in many ways.
  • Bitcoin in an option. Bitcoin is a peaceful protest. Bitcoin is a financial lifeboat. Some say, bitcoin is freedom money.
  • The need for Bitcoin is easier to understand for someone who does not have a reliable banking system, or has lived with runaway inflation or is not allowed to transfer their money freely.
  • People who live under authoritarian regimes, with capital controls, or hyperinflation do not need to be convinced why they may want to have some savings in bitcoin, they already know why, they want to know how.
  • Bitcoin is a Computer Protocol. You already use computer protocols every day.
  • The "P"s  in TCP/IP represent the protocols in what we think of as the Internet. Transmission Control Protocol and Internet Protocol. The "P" in HTTPs is the protocol we use to transfer information for a website. SMTP stands for the Simple Mail Transfer Protocol we use for sending emails.

Let’s get Started!

The Bitcoin White Paper was published on a mailing list for cryptographers by Satoshi Nakamoto on 10/31/2008. These cryptographers were concerned with encryption and privacy of information. They were referred to as cypherpunks.  Satoshi Nakamoto was just a pseudonym or pen name for a person or group of people, no one knows for sure which.

You can read the whole White paper below but I suggest just reading the first page for now. It started with this line: 

“Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."

Read the First Page of the Bitcoin White Paper (The Abstract and the Introduction). 

Satoshi wanted to create a way for two parties to transact with each other without having to use a third party. He wrote: "Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model." He went on to say, "What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party".

Satoshi noted: "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".

Andreas Antonopoulos is one of the great early bitcoin educators. This is how many of the Bitcoiners who got started between 2014 and 2017 were introduced to Bitcoin.  "Introduction to Bitcoin: what is bitcoin and why does it matter", It's only about 38 minutes long. Antonopoulos has also written many great Bitcoin books that we recommend.

Now that you've gotten a taste of what bitcoin is about, We hope you realize that it is not just a new currency. It is potentially a new global monetary system that could replace Central Banks, so it definitely involves banking, economics and global trade. It also can be studied in a computer programing or mathematics class. Because bitcoin isn't constrained by borders in the same way that an email isn't constrained in the way a letter was, it affects monetary and fiscal policies of nations. This is what we call falling down the Rabbit Hole or peeling back the onion which only reveals an additional layer to be examined.

Our advice it to try not to get overwhelmed. There is a great book called. "the Little Bitcoin Book" that takes on describing the different aspects surrounding bitcoin in a relatively simple way. It's a great overview.

Another great recommendation is "The Bitcoin Standard" written  by Saifedean Ammous in 2018, which analyzes the historical context to the rise of Bitcoin, the economic properties that have allowed it to grow quickly, and its likely economic, political, and social implications. This was book was the "Ah Ha" moment for many. He has an equally wonderful follow up book called, "The Fiat Standard" as well.

This article written by Daniel Jeffries, "Why everyone Missed the Most Important Invention in the Last 500 Years" offers a slightly different path into understanding the decentralized nature of Bitcoin. It's a brief history of accounting, from single entry accounting, clay tablets, to double entry accounting which we use today in out banks, etc to triple entry accounting. Who knew accounting could be so interesting and important t the advancement of civilization?!

For the history buffs in the crowd, the documentary "Banking on Bitcoin" captures some of the cypherpunk ideology and explores the early use case of bitcoin on Silk Road,

Here are some of the more famous Precursors to Bitcoin that we referred to above. This is good for the "Bitcoin is the Myspace to Facebook” crowd. The fact is Bitcoin white paper dropped more that 25 years after e-Cash.(1982).

Other significant attempts to create a digital money include:

Now that you have started learning about Bitcoin, we hope you are interested continuing the journey. We have more books about bitcoin and topics that are related to bitcoin on the website and we hope you consider those as well. If books are not your thing, maybe try a podcast or two that you can tune into every week on your commute or exercising. We would recommend (in alphabetical order) Bitcoin Audible, Citadel Dispatch, Orange Pill podcast, Rabbit Hole Recap, Swan Signal, TFTC, Tales from the Crypt, The Stephan Livera podcast, What Bitcoin Did, and What is Money. Rabbit Hole Recap with Marty Bent and Matt Odell is easy listening and they cover a range of topics. Stephan Livera and Citadel Dispatch lean a little more to the technical side. When considering how you listen to the podcast you may want to try Fountain.fm or download the app and you can get paid in Satoshis for listening to podcasts. You can also send Satoshis to your favorite podcast hosts for providing value!

We have also listed a group of other great bitcoin websites that have way too much information than is needed in a starter kit. We also have lists of articles, blogs, dashboards with all kinds of information and statistics. Again, this is not necessary to needed to start but as you get more curious, we hope we have organized enough information that TheBitcoinStarterKit.com may be your go to place to start looking for more information.

If you are on Twitter, we have plenty of suggestions for who to start to follow also. Bitcoin Twitter has been a great place to learn about bitcoin. Many Bitcoiners are exploring Nostr, a decentralized social network, you may want to try that in the future.

So, you have gotten educated about bitcoin and after D.Y.O.R. (Doing Your Own Research), you have decided you would like to get some bitcoin.

How to buy bitcoin

Peer to Peer, P2P – You can buy bitcoin from a friend who is willing to sell you some. You could work for someone that is willing to pay you in bitcoin. Or maybe you could go out to dinner with a bitcoiner friend and you can pay the whole bill, and they can pay their share to you in bitcoin. Peer to peer is one of the most private methods but it would be hard to buy a lot this way. It could be a good way to start. If you are going to make a private purchase you would have to get a wallet or signing device for you to hold your bitcoin. More on wallets below.

Exchanges – You can open an account on a bitcoin exchange. This usually involves KYC, know your customer issues. Exchanges are required to ask you for your personal information. If you choose this method, you will also be able to keep your bitcoin on the exchange, which is convenient, but opens you up to counter-party risk. Since the exchange is holding your bitcoin, we say they are acting as your custodian the way a brokerage firm holds your stock certificates or a bank holds your cash. Since you do not control your assets, you only have an IOU that they will give you your bitcoin when you ask for it. If you are going to use an exchange to buy your bitcoin, we would suggest you also get a wallet and then take your coins off the exchange. In the US, the exchanges would be Binance, Coinbase, Gemini and Kraken.

Other On-Ramps –

Dollar Cost Averaging, DCA - There are other companies that you can use to purchase bitcoin but are not full exchanges. Some of these companies offer a service called Dollar Cost Averaging, DCA which can be a valuable tool when buying bitcoin. Bitcoin is a volatile asset and buying it over an extended period can be valuable. Dollar Cost Averaging means that you decide to buy a certain dollar amount of bitcoin consistently. Instead of buying $500 worth of bitcoin all at once, you may want to buy $25 of bitcoin every week for 20 weeks, or $10 per day for 50 days or $50 every month for ten months. If bitcoin goes up and down over the time you are buy or down, DCA will be beneficial. If bitcoin goes up in price from the first purchase, you would have been better buying all at once. So, you could buy $200 worth to start and then buy $20 per week for 15 weeks. Any combination that you choose.

Bitcoin Companies.

  • Cash App Android and IOS - buy, sell, send to your own wallet
  • Strike App https://strike.me/ – buy, dollar cost averaging, sell, get your paycheck in bitcoin, global payments, you can withdraw to your own wallet
  • Swan Bitcoin https://www.swanbitcoin.com/ - buy, dollar cost averaging, an IRAs, you can withdraw to your own wallet.
  • Unchained Capital https://unchained.com/ – buy, multi-sig custody, IRAs, inheritance services, you have control of your bitcoin. 

Getting a Wallet, or what is also called a signing device.

Once you have bought some bitcoin you want to start to use best practices. This means learning how to store your bitcoin yourself. This means you need a wallet.

IMPORTANT:

  • When creating your wallet, you will be given 12 or 24 seed words. Write them down Clearly. If you lose your seed words, you will lose your bitcoin.
  • Do NOT lose the seed words. There is NO resetting of a password. You need to write them down and store them safely. You may want to write down a second copy and keep it in a separate place in case of a fire.
  • Do not put them on your computer.
  • Do not make copies of them on you copying machine.
  • Once you create a wallet, practice by moving a small amount back and forth.

Mobile Wallet - for small amounts of bitcoin

  • Samourai Wallet --Android
  • Muun Wallet --Android and IOS

Hardware Wallets

 This Citadel Dispatch Podcast CD 43 by Matt Odell is a great beginners guide to best practices. Don’t let him scare you.