Exploring Bitcoin as Money

Bitcoin is a recent technology for money (2009) designed to allow anyone anywhere to be able to transact with others without permission, censorship, control, or confiscation. Its core essence is math, cryptography, and work designed to record and secure a permanent record of ownership and every transfer of ownership since the beginning of bitcoin. And it is a whole lot more.

  • A “whole” bitcoin is actually divided into 100 million parts, each called a satoshi or sat. You do not need to buy a whole bitcoin, or spend a whole bitcoin. You can exchange $1.00US into about 2,300 sats on March 1 2022.
  • Bitcoin is engineered to be scarce with a maximum of 21 million bitcoin. So, it is designed that over time, if bitcoin continues to prove valuable, you’d be able to exchange FEWER sats for the same item you wanted (whether a meal or a house) over long time periods. (Yes, this takes awhile to get our head around since our dollars, euros, and other fiat currencies were designed to be inflationary where things cost “more” over time.)
  • When people talk about bitcoin, they can be referring to both the asset (how many sats someone has the keys to), or the network (how ownership is passed).
  • The lightning network is build “on top of” the bitcoin network to allow sats to move anywhere in the world instantly at very low cost.

Money is a technology. It was immensely useful when it came about many thousands of years ago, and it has become essential to modern civilization. The money we use impacts what we can and cannot easily do in profound ways. For example, it would be hard to pay for Netflix using gold.

There are dozens of excellent books on bitcoin and money that I’ve read in the past year. I’ll be adding to this topic with quotes and links to those books over time. There are some amazing online resources, too, as well as thought leaders who have been with bitcoin as an asset and as a technology since early on – or who have joined this effort recently.

There’s no way a topic here can replace all that knowledge, so why start an exploration here? Well, I believe that how money serves a community has a lot to do with the needs and desires of that community! Freedom-loving people are going to have a different perspective on money than those who are playing “the game of money.”

You needs and desires may be quite different from mine. I invite you to consider what yours are, ask questions about how bitcoin might fit into meeting those needs long term, and how other money and assets might also enhance your thriving.

I do recommend the workshop Get Strong and Clear About Money as one entry point for that, to help clear the noise and gain some clarity.

Before we begin, because of legal and trust needs, please no that none of this – by me or anyone else – is designed to tell you what to do. It is neither financial advice or “what you should do.” If you find yourself thinking, “Oh, they are telling me I should…” then… STOP! Not just pause. STOP. Why? Because since money touches everything in our lives, it is truly crucial that you feel the choices you have and know what is right for YOU. Whether buying a home or stock or shifting energy into bitcoin, these are choices we assert are important enough to get your mindful clarity and take inspired action from that place. While bitcoin is indeed an opportunity to do money differently, like the wheel or the internet, it’s engineered for a LONG term utility. If it continues to prove itself, it would be just as useful and even more valuable to humanity 10-100 years from now.

So let’s begin! Your questions? And do share resources you find useful, too!

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I’ll probably answer these in pieces, @Rachael and also invite you and others to follow the questions here into other resources and bring back answers, too.

Energy of current U.S. dollars and banking

Let me give you an example of why I like the energy better. I could give hundreds of examples at this point, honestly, after just one year.

I used to keep my emergency fund in my credit union called Self-Help Credit Union. They paid me less than 1% interest. But guess what?! They could take my money and loan it out… at credit card rates. Car loan rates. And keep the difference. So if someone pays them 19.99% on my money, and they give me a generous 0.1% interest, they keep the rest. For being “middlemen” in the transaction. Uhh, that doesn’t feel fair.

It gets even more energetically complicated for me. Not only can they take every $1000 in my former emergency fund and loan it out to someone, they can do that over and over again. 20x times or more. It’s called fractional reserve banking. They essentially take my deposit and run it through a “copy machine” and loan it out many times. I never see any of that. And if my balance goes below a certain amount, they even charge me.

Worse, for me, is that if there IS an emergency, I have to go to the bank and get my money from them. A third party stands between me and my asset. Indeed, the US government also stands in the way, because they can freeze funds, order a bank holiday, change the rules, etc. We see this dynamic all over the world in just the past year, most recently in places like Turkey, Ukraine, Russia, Canada, etc.

I know I am privileged to be in the U.S. We have “the best” currency and our banking system touches most of world trade. But that doesn’t mean that those involved in deciding about our money are actually trustworthy or even have interests aligned with my family’s need for some “emergency funds.” And in some countries this is far, far, far worse.

If someone anywhere in the world exchanges some of their work results into bitcoin, and they hold the private keys themselves, they can go anywhere else in the world and take that property with them.

So my energy is now aligned with anyone, anywhere, who wants to have a place to store the fruits of their labor in a way that is separated from the state.

Bitcoin brings the separation of money and state. For me that is as wondrous an intention as the separation of church and state. Perhaps… even more crucial.

How much to invest?

This is for you to choose. For me it changed over time. I started with an amount that was “wallet money” – meaning, I could have that much in my wallet and not be looking everywhere for threats. :wink:

When I’ve been triggered by impatience, fear, FOMO, greed… I have paused or divided the amount by 10. And then educated myself further.

Some of the most actionable advice I’ve seen and seek to go by is this:

Put into bitcoin what you know you are very very unlikely to need for 4 years or more. Bitcoin is designed to be a long term store of value. While some people trade it, most of them get rekt (lose money). What that has done is help me have a much LONGER time horizon. Since bitcoin is engineered to add value/energy over time (just like the internet is more valuable to us the more humans use it), long term view helps dampen concern over short term volatility (which there is a lot of).

I started with wallet money, and learned. I then went to the next increment, and learned about myself and money and my responsibilities as steward of money.

One of the biggest mistakes people make is to get in with too much, have the price move against you, and bail out. I did that in 2018 (along with many others) partly because I got caught up in the dream and didn’t know the technology and compelling value of the asset and network. EVERYONE whose perspective I value in this space considers bitcoin something you convert into for 4+ years, and many (like me now) consider the exchange “one way.” I’ll spend my bitcoin directly on things that matter, but do not intend to transfer it back into dollars (except if absolutely needed in the crisis).

More later…

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Easy is good! That’s where I started, with Robinhood since I was already using it. BUT!

As I’ve learned, it became clear (because it is a crucial difference) that if you order bitcoin on a service, you might be investing in bitcoin’s appreciation over time… but YOU do not “own” any bitcoin unless YOU hold the private keys.

What does this mean? Well, if you get cash and hold it, you just have to take out your wallet to pay someone. No one else stands in the way. The dollars in your pocket or under your mattress are yours.

Your bank balance? That is an IOU from the bank to you.

Same with the bitcoin on your balance in Venmo, Coinbase, Paypal, Robinhood, etc.

Not your keys, not your coins.

You’ll hear this expression over and over from people who have been in the bitcoin world for a long time. Few people start with “self custody” of their keys, unless they have a friend to help, but there are some things to look for as you go forward.

For tax and safety and other reasons, you want to “own bitcoin” in a way you can transfer it to your own wallet. If you buy on Paypal or Venmo, the only choice you have right now (March 2022) is to SELL the bitcoin for your native currency (and perhaps pay taxes on any gain in value).

Can I transfer cryptocurrency into and out of Venmo?
Currently, you can only hold the cryptocurrency that you buy on Venmo in your account. Additionally, the cryptocurrency in your account cannot be transferred to other accounts on or off Venmo.

That is a significant gotcha.

Contrast this with the Cash App by Block (formerly Square) that even though they charge a relatively high fee to buy and sell, once you buy you can transfer your bitcoin to your own wallet. Profound difference.

As of right now, I use Strike.me in the U.S. because $0 fees to buy and send bitcoin and it supports the Lightning network, too. For those wanting to invest more than what they would keep in a wallet they carry, Keys.Casa is my choice. Both allow automatic investments as well.

Robinhood now allows some people to transfer off their app to wallets (still in beta). Coinbase also allows transfers out, but they really do charge a lot. Swan Bitcoin is another favorite. In Canada Bull Bitcoin has a great rep but I’ve never used them.

Rules and process do vary from state to state and country to country. For example, I don’t believe New York residents can use Strike because the financial “elite” block competition quite effectively except for those companies like Cash App that have billions to spend on New York’s legal compliance.

There are also countries like China that have made any owning or transferring cryptocurrency illegal, even criminal. But hey, you’re not allowed to use Facebook, Google, or Twitter there either. Bitcoin can be criminalized in freedom-hating countries. It cannot, though, be “stopped” because as a technology it is decentralized and permissionless.

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I want to honor that there are many who would and do disagree with my perspective here. I also want to honor that my perspective is well-informed and based on my decades of experience with technology and investments. With that in mind…

Bitcoin has all the money properties of gold including being superior to gold in each of those ways… except that it does not have gold’s 6000 year history as a store of value and money. This whitepaper by Fidelity goes over that:

bitcoin-first.pdf (1.6 MB)

My perspective is this: bitcoin is in a class and category of its own. It’s open source. It’s free to participate. No one has any more “say” within the bitcoin network just because they have more bitcoin. Work is involved. It’s decentralized. We trust the math and the code and the protocol – NOT “powerful” people. It aligns incentives for everyone involved, across the planet, without regard to status or any of the identities people seem to focus on. It’s proven useful. It’s proven resilient. The network is 24/7, producing block after block after block for over a decade with no downtime. You can even run your own FULL bitcoin node (and 30,000+ people do) on a $300 computer from your home to help validate and provide resilience to the network (I don’t yet, but I will someday).

Like the internet, bitcoin is engineered to survive attacks. Very key point. The internet can be attacked. It is attacked every day, every microsecond in fact! yet it endures and is, honestly, surprisingly reliable and robust. Bitcoin’s core principles are simplicity and security – which go together.

I believe it is useful to consider at this time that ALL other cryptocurrencies are investments in projects with an intention to earn a profit… not as “money.”

If you start engaging with people who are passionate about bitcoin, you will hear from some the term shitcoins used to apply to anything other than bitcoin. Why? Because cryptos often proclaim themselves “better than bitcoin” while making significant tradeoffs (and not disclosing them) or glossing over their importance. Also, with 1000+ coins out there, some are absolute scams. Others have their initial value “pumped” by promoters so insiders can “dump” them before the value craters.

Early in any new technology’s life cycle, there is speculation. Speculation (and both the optimism and often greed that can drive it) is not inherently bad. But it IS why I left the space back in 2018. The speculation was buffeting me and making me lose my balance, honestly. I didn’t have enough grounding in the difference between bitcoin (which I energetically found attractive) and all the other initial cone offerings (ICOs) that were flooding the market and distracting most people.

Today, there are some real projects out there. Ethereum is a real project, and there are a lot of people building on it today. Other Ethereum competitors are out there, too. What I can tell you about Ethereum is that there is a massive technological risk there that I can see clearly and most others are glossing over. They have been promising things for many years that have not come to fruition and it has all the red flags of a technology transition that “may fail” – whether gracefully or catastrophically.

Of course, Tesla was at that same place between the release of their Model S before the Model 3 was released and in mass production to much acclaim. But there IS a difference between “money” and “investment” – even though I believe we’ve been FORCED into making investments when what many want for their “money” is long-term holding of value. Meaning, if I work for a day and store the fruits of that labor, can I come back in 4 years or 40 years and get BACK a “day’s worth.”

I like some of the projects for what they might do over time. But my own personal nature is to RARELY be speculative – and only around things where the energy is something I really and truly want to boost and it’s okay if it goes to zero – because the project matters. I invested in Tesla AFTER the Model 3. I started moving energy into bitcoin for the Family Freedom Fund only after companies like Tesla started holding bitcoin on their balance sheet.

Yes, earlier gives more room for spectacular “returns.” I’ve just been burned in a prior part of my life chasing that, so today I look for technologies that are solid and look like they are highly likely to “cross the chasm” to widespread adoption. Tesla electric cars (and more), Yes. I say bitcoin YES, too. And this is where discernment and clarity really matter for each of us individually.

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I’ll paste an example definition:

Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system . A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.

Bitcoin is a ledger. Like if you had a sheet of paper and you gave your son 1 coin by recording his name, then a friend 2 coins, then your friend paid you for babysitting 0.5 coins, etc., etc., and the ledger kept track of who did what and the balance could always be calculated WITHOUT ERROR OR THREAT OF AN ERASER/CHANGER from the transactions that occurred before on the ledger.

In the above, on the bitcoin blockchain, we know that address ** bc1qu4q6jgutzw9adh238h3kckrxkyv720we30cwng** received 2.50853715 BTC with a current exchange rate of $109,855.86. We do not know WHO owns the keys to that address on the blockchain, but even within as short as an hour or so, this transaction will be SO SECURE through encryption that it will be considered “immutable” – meaning there’s no way to change it.

When it comes to money – what’s yours and what is everyone else’s – this is a huge breakthrough! But it is not “blockchain” that is the core breakthrough. It is the combination of technologies that came together to make this ledger work the way it does: public, decentralized, censorship-resistant, permissionless, immutable (non-changeable), as well as ownership being transferable anywhere within hours (or seconds on the lightning network) – whether $5 or $5 billion – irreversibly. Once it is recorded on the bitcoin blockchain, the person(s) with the private keys are the only ones who control those sats.

Legal Tender and El Salvador

Money is something that people decide they want to use for exchange, trade, and store value. Humans have used salt, seashells, beads, large stones, bronze, silver, gold, and more as money over the millennia. Gold was very useful because it is precious (rare) and requires WORK to mine.

Gold, of course, has other uses. It can be fashioned into jewelry. It can be used in electronic circuitries. So it can be both money and used for other things. Money doesn’t NEED to be useful for other things, though. It just has to be agreed upon to be money.

Dollar bills could be used for lighting fires, for example, but nobody NEEDS to use dollar bills for making fires, whereas gold is needed in much of the high reliability electronics we have today.

Legal Tender is when a governing authority states that a particular money can (or must) be used to pay taxes, settle debts and legal judgments, etc. The government is saying, “THIS is money here.”

We do not need to accept Euro as money in the United States. Nor do European countries need to accept dollars. The Euro is not legal tender in the United States. Nor are any of the other 140+ currencies.

So is bitcoin really money?

As of September 2022, El Salvador established bitcoin as a legal tender alongside the U.S. dollar (USD). Any citizen can pay taxes with either. Businesses who are technically able must accept either as payment for products and services. El Salvador has bitcoin in its treasury (along with USD and gold). There are places in El Salvador already where you can live, work, and play and never use anything but bitcoin. And, it’s still quite early.

Are other countries planning on making bitcoin legal tender? There are quite a number looking at it. El Salvador is small, has been ravaged by corruption and colonialism for such long time. Fresh leadership there wants to cultivate freedom and self-sovereignty. And honestly, they are quite fed up with the United States dictating to them and using the USD as a financial weapon.

By making it legal tender, it means bitcoin saved by Salvadorans is not subject to capital gains tax. Over the past 3-5 years, there were people who started saving a percentage of their income in bitcoin, have ridden the waves of exchange-rate volatility, and now have been able to afford investments in a home, a work truck, an more.

Even more stunning (which I did not realize) is because of war and corruption and gangs, a millions have left El Salvador to make a life elsewhere. But 25% of the El Salvador economy has been from money sent back to El Salvador from citizens abroad.

Want to know something really cool? Before El Salvador made bitcoin legal tender, companies like Western Union and Moneygram and other money changers/transmitters were taking $400 MILLION or more just to transmit money from outside the country back home. A person getting $100 USD from a relative might end up with as little as $70 in their pocket.

Now? They end up with $100.

If you ask me why I am so energetically compatible with this monetary technology, the way that it cuts out the money controllers is a big part of it. I sent a donation to a group of kids and teachers in El Salvador – a group with no bank account. They received the bitcoin across the lightning network in seconds, no fee did either of us pay, and with my donation and others from who-knows-where around the world could feed the kids pizza and ice cream after a long weekend of lifeguard training (for which they are paid bitcoin once they go to work).

Those of us who have Visa, Mastercard, Paypal, Venmo, and other financial tools honestly have no clue what it is like to be UNBANKED. Today there are schools teaching about money, programming, and more in countries arising into more freedom for their citizens… and bitcoin is a core part of this for many.

It means a lot to me to know I am side by side, sat by stacked sat, with people from every country. There are at least 100M people using bitcoin as daily money and a store of value over time. As PROPERTY they can own – many for the very first time.

Our interests are aligned. Ever bit of work I put it, storing some of the fruits of my labor in sats, enhances the value they put it, and so it is for everyone who participates this way.

Being aware of this energetic, of this initiative, for people who want freedom and a better life, who have been blocked from this by their government and especially by governments printing so much money that it inflates all their value away (think Venezuela, Turkey, Lebanon, Nigeria, and heck, the United States is doing it now, too)… it feels good to my soul.

It makes bitcoin for me much more about PEOPLE rather than PRICE.

The company Paxful is a leader in this arena with their #builtwithbitcoin education initiatives. But they are far from the only ones!

P.S. Because it is designed to be money, anything people can do with money is also something people do with bitcoin. There are currency speculators who trade one of the 140 currencies for another and back, to make money on the changes. That happens with bitcoin, too. There are criminals and thieves who try to steal others bitcoin or use bitcoin to try and transfer money. But by most research, today bitcoin is use less for criminal activities by far than banks and dollars even as a percentage of value. It’s one of the things you will hear.

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Lots of reading and learning to do! Thanks Rick.

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This is true worldwide. Those with financial advantages – never been redlined or excluded or discriminated against in financial matters – loans, mortgages, bank accounts, credit cards – feel pretty comfortable with what they know, their position near the source of money, and their future.

Those who are in countries with absolutely terrible currencies, no banking except for the government insiders and most wealthy… they crave property they own, that they can take with them, that they can share across borders without anyone stealing a big chunk of it.

It feels really good to me to have a protocol and ledger that are absolutely non-discriminatory. Of course, people who expect Advantages For Me but Not For Thee… tend to hate bitoin. Watch for it, you’ll see it.

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What is Money, Anyway?

This article by Lyn Alden covers a LOT of ground. I understand that a year ago before I had read 8 books and watched and learned and gotten more depth in my understanding that, well, a lot of this would not have been easy for me to understand.

Like the difference between a money and a currency. Like the difference between proof of work and proof of force. How what is money in a culture rises… and falls.

Like with the other information I’ve shared here, there’s an energetic/emotional aspect here that feels really important for me and perhaps other freedom-oriented people to understand.

Why might we be repulsed by the dollar? Perhaps it is because it has a lot of force and war and authoritarian energy behind it. Sure, as Lyn points out, people gravitate towards such structures for safety and security… but until I really groked the impact of those energies, it made it “foggy” for me to really get why I found dollars less comfortable than my actual comfort with financial energy!

I love that we can do things for one another in return for money! I really do! Like the apple grower example Lyn uses, it’s really darn convenient that when the harvest comes in, you can exchange apples for money, and then later exchange money for other types of services… and to share.

When we are sensitive to energy, and especially to security and resilience long term, HOW and WHERE we store our energy really matters. While it may not be emotionally true for everyone, I am 100% confident we’re in good company of a billion or three others who would like ways to store energy long term that are not under central control, debasement by kings and “committees” and the like.

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I will read the article and try to comprehend…

When I was in my twenties I was hit with the realization that each dollar we spend is like casting a vote. We think that in our various versions and iterations of democracy that once every few years we go out and vote and that’s what makes a difference…that’s how change, if desired, is set into motion. (the 'illusion of choice’ as George Carlin said…) But I had the intuitive realization that the real voting goes on on a much more mundane level…I cast my vote with every penny I spend…that’s what gives permission for something to exist or continue…that ‘vote’ says I agree, you have my support…carry on… Money is such a potent tool…it’s so ubiquitous and fundamental that we lose sight of it’s power. This system of ‘money’ is a sort of corporate authoritarian system embedded within what is outwardly a democratic system of politics…hmmmmmm…might there be a conflict of interest??

This. So much this. All I want is a way for my money to hold it’s value.
I lost bank invested money in my 20s and have been sceptical ever since. It annoys me banks (at least here) pay interest rates that are less than inflation, when they invest MY money and make money for themselves from it.

For context, what I know about bitcoin is what I’ve read in this thread.

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image

This chart is striking to me. What is shows is that if you had $100 in US dollars in 1792 with what that could buy, in 1913 you could… buy about the same! 120 years. Loaf of bread cost about the same. A horse about the same.

I want that. I do not proclaim that bitcoin is that now. I do believe that mathematically and technologically it could provide not only storing value across time… it could also function to help us actually benefit from technology and productivity advances without having to invest in one particular one (or company or class).

As you pointed out @Glenn how we spend our money is a vote, an investment, a directional indicator about what we value in the world. Of course, it isn’t a CLEAR signal – all the noise and interference can make it hard to see really marketplace votes of “more of this, please, less of that please” when current markets are so impacted by speculation and regulation and the like.

Still, I do want to opt-in to stores of energy and services that I want to see more of in the world. I like being side-by-side – power WITH – other freedom wanting beings from all over the planet, every culture, every background (almost).

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