What is Bitcoin?
Bitcoin is scarce, decentralized, and global digital money that cannot be censored.
- Transactions once confirmed generally cannot be reversed
- Less than 21 million Bitcoin will exist
- Bitcoin is highly divisible to allow for micro-transactions (up to 13 decimal places in a payment channel)
- Bitcoin is an open, collaborative project that no company or government controls belonging to the people
- Bitcoin is more than just money, but a secure timestamping ledger, payment rail, and smart contract platform
Please read the Whitepaper for an general overview of bitcoin as designed
https://bitcoin.org/bitcoin.pdf
Quick Advice
- Do not invest in Bitcoin until you do basic research, paid off all high interest debt, and have a emergency savings account of a stable fiat currency.
- If investing do not expect to get rich quickly. You should expect to wait at least 1-2 years before taking profits. Bitcoin is currently very volatile. In the interim spend and replace Bitcoin because it's a useful currency.
- Beginners should avoid all mining and day trading until at least very familiar with Bitcoin. Mining is very professional (You cannot efficiently mine with your computer and need to buy special ASIC machines) and most people lose money day trading.
- Never store your Bitcoins on an exchange or web wallet. Buy your bitcoins and withdraw it to your personal wallet where you actually own them instead of IOUs. Services like webull, and Revoult should be avoided because you cannot withdraw or use Bitcoin.
- Make sure you make a backup of your wallet (software holding keys to your BTC) and preferably keep it offline and physical and private. Typically 12 to 24 words you write down on paper or metal. This onetime backup will restore all your keys, addresses, and Bitcoins on a new wallet if you lose your old wallet.
- Beginners should avoid altcoins, tokens, and ICOs at least initially until they learn about Bitcoin. Most of these are scams and you should be familiar with the basics first. Bitcoin is referred to as BTC or XBT.
Common Questions
What happens when all the Bitcoin are mined; how will miners be paid?
This will happen when we all are dead near the year 2140.
Total block reward = Inflation (coinbase reward) + transaction fees
Where there is a slow transition as inflation drops in a controlled supply where more and more of the total reward is made up of transaction fees
https://en.bitcoin.it/wiki/Controlled_supply
After 2140 all of the reward for miners to secure the network will be transaction fees but sending bitcoin will still be inexpensive because most transactions will occur on other layers like lightning and in aggregate settle onchain .
Also keep in mind that if hashrate drops too low we can simply wait for more confirmations onchain to increase the level of security and this doesn't effect the end user much because if they use a lightning wallet once its setup they still get instant confirmations.
Some foundational Principles of security
If you don't own much value in Bitcoin these principles are not for you. There is no one solution and most people have different risk profiles and make multiple trade offs in a risk vs convenience spectrum.
- Never store your bitcoins in a web wallet or exchange . You own 0 bitcoins if you do not control your private keys.
- Do not trust strangers on the Internet to help you setup your personal wallet. This is someone you must do yourself or have a personal friend or family member help you with in real life where they cannot see your backup seed.
- Buy your hardware wallet directly from the producer or amazon site under the producers name. Verify the integrity of the hardware wallet if you are extra paranoid :
http://doc.satoshilabs.com/trezor-faq/threats.html#reflashing-the-trezor-with-evil-firmware
https://digitalbitbox.com/faq
https://coldcard.com/docs/ultra-quick
https://help.blockstream.com/hc/en-us/articles/5712308134809-What-are-the-best-practices-when-setting-up-Jade-
First update the firmware of your HW wallet before using
4) Never brag about your wealth to others
5) Never invest in any investment scheme or get greedy thinking you can quickly increase the amount of Bitcoin you have with daytrading
6) Consider more secure means of backing up your 12 or 24 BIP39 backups in case of floods or fire -
https://jlopp.github.io/metal-bitcoin-storage-reviews/
7) Setup your hardware wallet , transfer a small amount of btc to it, wipe it clean , and restore it to give you confidence that the backup was done right and give you experience in the recovery process.
8) Keep your Mnemonic 12 or 24 word seed secret and private and show to no one. Never use premade 12-24 word backups , you create new keys and backups upon setup.
9) The most secure , "active" wallet would be a hardware wallet integrated with a full node. HW wallet + electrum personal server and electrum is the popular way to do this
10) Use a passphrase with the hardware wallet (most the security concerns with HW wallets are solved with a passphrase.) keep the passphrase written down a separate from your seed words
https://wiki.trezor.io/Passphrase
https://help.blockstream.com/hc/en-us/articles/5131416184601-What-is-a-passphrase
https://coldcardwallet.com/docs/passphrase
https://shiftcrypto.support/help/en-us/21-optional-passphrase
Make sure the passphrase is also written down somewhere private so you do not forget it! Do not keep the passphrase in the same location as your 12-24 seed backup words. Passphrases should include random words and not words found in lyrics or literature or personal details related to your life.
Here is a good strategy for most people with hardware wallets -
Location 1 12 to 24 seed words preferably on metal
https://jlopp.github.io/metal-bitcoin-storage-reviews/
Location 2 same 12 to 24 seed words preferably offsite
Location 3 5-7 word passphrase unlocking your real wallet preferably offsite
Location your head pin for HW wallet and passphrase. If you don't use your passphrase at least once a month than its better to have 2 written copies stored on paper or metal as backups and kept separate than each other and seed words
Thus you have both the passphrase and seed word backup in 2 locations and can lose either one and if someone finds your seed words or passphrase alone they can only see your decoy wallet at most and under duress(torture) you can hand over one of your seed word backups or enter in your pin instead of passphrase and give the attacker your decoy wallet alone.
Every 6 months check to see if your backup seed words or passphrase written on paper or metal is disturbed or removed.(these need to be stored separately!) It is best to hide them in such a manner if you can tell if someone has tampered with them or found them so you are aware if either your seed words or passphrase becomes compromised.
Recommended Wallets
Best wallets for securing small amounts of BTC
Blue wallet Android and IOS and OSX
https://bluewallet.io/
https://www.youtube.com/watch?v=R9mq1a8bLbQ
electrum For Windows, OSX, Linux and Android
https://electrum.org/
https://www.youtube.com/watch?v=E4EhZg5QslI
Blockstream Green For Windows, OSX, Linux, IOS and Android
https://blockstream.com/green/
https://www.youtube.com/watch?v=DesN85bWmGA
Best wallets for securing small amounts of BTC and sending lightning transactions
Breez LN wallet for Android and IOS
https://breez.technology
https://www.youtube.com/watch?v=t_4b-y4T8bY
Or Green
https://www.youtube.com/watch?v=QtMXsJxx1X0
Other Lightning wallets - http://lightningnetworkstores.com/wallets
Lightning wallets are not intended for long term storage where you never open them for many months. They are intended for spending wallets that you regularly use.
Securing Larger amounts of Bitcoin
Trezor Safe 3 = ~79 USD https://trezor.io/trezor-safe-3
https://www.youtube.com/watch?v=qWRI4VTHiuI
Trezor Model T = ~219 USD https://trezor.io/trezor-model-t
https://www.youtube.com/watch?v=i3BIo5Ac_n4
Blockstream Jade = $65 https://blockstream.com/jade/
https://www.youtube.com/watch?v=cLFmd98mKNw
https://www.youtube.com/watch?v=d_9Dtcc1nlY
https://www.youtube.com/watch?v=z2VsgoFh78o
Cold Card Hardware wallet = $148 mk4 https://store.coinkite.com/store/coldcard
https://www.youtube.com/watch?v=kocEpndQcsg
https://www.youtube.com/watch?v=f8dBNrlwJ0k
Digital Bitbox 02 = 124 USD https://shiftcrypto.ch/bitbox02/
https://www.youtube.com/watch?v=tdP_7LgZw7s
https://www.youtube.com/watch?v=z7nRq2OEhiw
https://www.youtube.com/watch?v=6D4FgJo3j64
Seedsigner ~80 dollars per-assembled
https://seedsigner.com/
https://www.youtube.com/watch?v=AZqlIkJf0mA
https://www.youtube.com/watch?v=1c5SR8v8l1M
Best Advanced Bitcoin Wallet= Sparrow
Pros= Great privacy and security
Cons= UX is for more experienced users, takes ~week to sync and requires ~7GB minimum disk space if pruned. Only available in desktop so typically should be used with a hardware wallet
https://sparrowwallet.com/
https://www.youtube.com/watch?v=HLi8p9aTlBQ
https://www.youtube.com/watch?v=GSHyKTigNQY
Further Resources
https://www.lopp.net/bitcoin-information.html
https://www.lopp.net/lightning-information.html
https://10hoursofbitcoin.com/
https://bitcoin-resources.com
https://www.bitcoin101.club
https://21lessons.com
https://bitcoiner.guide
Common types of Scams to avoid
"Helping" Hand A thief will contact you privately by DM or email, or get listed in a directory as a "Professional Blockchain Expert" and help you setup a Bitcoin wallet , an exchange account, and buy Bitcoin but will end up stealing it later. One of their favorite wallets to use is Blockchain.com online web wallet(You should avoid using this wallet regardless for other reasons) where they can remotely help you. They will either ask for your 12 backup seed words or when you are logged in create another backdoor recovery to take over your wallet without you knowing. When setting up a wallet it is important that you do this yourself and never reveal any passwords , pins , passphrases, of backup seed words to anyone. Do not allow some stranger to remotely help you setup your wallet or account. If you need help in person and trust a family member or friend this is fine but have them walk away/turn their head when you create a password , and write down your backup seed words and never reveal this information to others. Use your own personal computer or cellphone and not theirs to create your account. After you have verified the backup words with the wallet software they can than help you further. Never allow them to see or copy your exchange or email passwords or backup authy/authenticator key as well. Do not keep your passwords in plaintext digital spreadsheets or word/text documents. Use a password manager like keepass/lastpass or at minimum keep a book of your passwords that is secure and privately written down outside the computer. This scam can also manifest itself after you have had your BTC stolen by a friendly "hacker" claiming they can recover your BTC for a modest fee, which is practically never the case.
Unfortunate Events Professional Beggars will create many posts or hundreds of DMs under various fake (shill) identities to solicit sympathy and ask for a Bitcoin donations because they were scammed or had some unfortunate crisis.
Advanced Fee Fraud- This is one of the most common forms of fraud, and is popular even outside the cryptocurrency ecosystem. With cryptocurrency it often takes to form of these variations:
a) The con artist will claim they have a large amount of Bitcoin "stuck" in an exchange because of legal reasons or some other excuse and need your assistance to withdraw the Bitcoin. They offer you their username and password to log into their account and claim that you can even keep a large reward and than send them the difference of Bitcoins to their personal wallet. When you login to withdraw the Bitcoin you will notice a high withdraw fee or deposit that needs to be made for verification before you are allowed to withdraw the Bitcoin that cannot be subtracted from the balance. Since the fee is much less than your expected reward and the exchange looks legitimate despite being one you are unfamiliar with you pay the fee and than realize that the exchange is a fake one that will never allow you to withdraw the Bitcoin.
b) You are trying to sell something online and someone offers you a pre-payment in fiat with a payment service, a cashiers check, or a regular check and than "accidentally" overpays and asks for a refund to be sent to them in Bitcoin or by other methods. You are confident you receive the money because you deposit the check and it appears to clear and shows up in your bank account or digitally shows in your paypal account or other platform and so you are happy to send them the difference in over payment. One key aspect is international money transfers, gift card payments, or Bitcoin are typically non-reversible while most other payments are reversible and this can occur at almost anytime in the future. The check or payment can be involved in fraud or be fake and the payment platform or bank will reverse the deposit(possibly leaving you with a negative balance) and you will be legally liable to reimburse the bank. You will than be left with having to reimburse the bank and be out of Bitcoin and the product you sold the scammer.
c) A company offers you an investment or mining opportunity and to gain your trust is even willing to send you some Bitcoin up front to gain your confidence. Problem is the Bitcoin is frozen in their platform , a watch only wallet, represented in a fake blockchain explorer, or you did not wait for a confirmation to insure that you can use it and you invest in them not knowing that the Bitcoin they sent you is unusable. Common scam here is saying that you can connect your blockchain.com wallet to their "mining server" to mine for free and than require you to pay a fee to withdraw BTC that is watch only because they setup your account for you.
d) A contest or free giveaway usually promoted by a celebrity(typically a fake account on twitter) offers you free Bitcoin or cryptocurrency if you make a small bitcoin deposit up front to enter. The grifter will take your BTC and run.
e) A company solicits to hire you for assistance in buying Bitcoin for them at various ATMs or with your account and offers a salary for this service. They will never pay you or send checks that will eventually bounce as fiat currency lacks transaction finality that bitcoin has.
f) Someone offers you a large amount of Bitcoin as a gift or to pay for a good or service by giving you words to import or a private key to import into a wallet instead of sending Bitcoin to an address you provided them from a wallet you setup independent of them. You open up the wallet and they claim that in order to unlock the full amount you need to buy more bitcoin and add it to the wallet or send to them when in reality the amount of bitcoin you imported is a small amount or unspendable.
Investment Opportunity- These take the form of a company that allows you to make an investment and has promised guaranteed returns due to them trading cryptocurrency, mining cryptocurrency, fx or binary option trading, or any other investment enterprise such as real estate. Some will simply take your Bitcoin and run and others are ponzi schemes which will slowly payout rewards to their platform that you can never withdraw or make payouts but these never add up to your total investment.
Two quickest warning signs that an investment scheme is extremely likely to be a scam is they promise guaranteed returns , and their promised returns exceed 10% per year.
Altcoins, ICOs, Security tokens 99% of these are pointless projects or scams which make dishonest marketing claims that most people don't have the technical ability to evaluate. Even projects that have the best of intentions fail because the incentives are all misaligned for an exit when you give 100% funding upfront without regulation, contract with preconditions, and invested from unqualified credulous investors. Sticking to projects that are 100% proof of work with no premine or instamine from the start is a way to filter through most of these projects but in the end you should do your due diligence and learn about the project before investing. This applies to Bitcoin as well. People should be free to invest in whatever project they wish but one should do so with an understanding in what they are investing in.
