Bitcoin FAQ

What’s Bitcoin?

Bitcoin isn’t just a new way to send money — it’s a new form of money entirely. Unlike dollars, bitcoins are unseizable, limited in supply, and not controlled by any central entity.

Limited supply, you say?

Only 21 million bitcoins will ever exist.

How can I buy if the price of a bitcoin is so high?

You can transact in small fractions of bitcoin. For example, a whole BTC costs about $7000 as of this writing, but you can buy a small slice for $10.

Where did Bitcoin come from?

Bitcoin was invented in 2008 by Satoshi Nakamoto.

Plot twist: no one knows who Satoshi is. Satoshi went to great lengths to hide his (or her, or their) identity. Satoshi sent an email in late 2008 describing Bitcoin, released the initial software implementation shortly after, then vanished a couple years later.

Satoshi’s anonymity may seem like a turn-off, but consider it a feature: there’s no influential leader to threaten, blackmail, or otherwise coerce in attempt to harm the system.

Is it too late to get into bitcoin?

No way! It’s still early. Asking if it’s too late to get into bitcoin is like asking if it’s too late to get into the internet. This thing is big and isn’t going anywhere.

What’s the best way to buy bitcoin?

If you’re in the US, register on Coinbase.com or Gemini.com. Then, you can connect your checking account and trade dollars for bitcoin. They’ll store the bitcoin for you, and you can easily transfer them elsewhere later if you’d like.

What’s the best way to store bitcoin?

If you’re storing a small amount, just leave them on Coinbase or Gemini. If you’re investing more and holding for longer (good call, you!) then shell out $100 for a “hardware wallet”, a device specifically designed to store bitcoin safely. Trezor or Ledger are good examples. When storing BTC on your phone or PC, beware that malware is increasingly designed to steal bitcoin.

How do other cryptocurrencies compare to Bitcoin?

The cryptocurrency space is a wild west. Bitcoin is the oldest and most popular cryptocurrency, but new coins pop up daily. The alternatives (“altcoins”) range from interesting technical experiments to blatant scams. Caveat emptor. If you want to take risks and spend a lot of brain cycles tracking the markets, you can make (… or lose) a lot of money trading altcoins.

Isn’t Ethereum, a newer cryptocurrency, basically Bitcoin 2.0?

That’s a false narrative perpetuated by the media. Bitcoin and Ethereum are different systems made for different purposes. Bitcoin was designed to be sound money. Ethereum was designed to be a big, distributed world computer. To the extent ETH is a store of value, it’s that by accident more than design. I’m not saying it’s not a good investment — maybe the ETH tokens used as fuel for those computations will continue to rise in value. I’m merely advocating knowing what you hold and why.

What if the price of bitcoin crashes?

I’d love for bitcoin to crash again, so I can buy even more of them cheaply. Sadly, I fear the days of buying a bitcoin for less than $1000 are behind us.

Should I spend my bitcoin?

Only spend your bitcoin if you have a compelling reason (e.g. you’re unbanked, concerned with privacy, or dealing with a business that only takes BTC). In general, try to pay using inferior money like dollars for as long as merchants let you get away with it.

Isn’t bitcoin that evil money used for drugs and other black-market stuff?

Dollars are still the dominant money in those markets. Does that make dollars evil? Opposing bitcoin because it can be used for drugs is akin to opposing the printing press because it could spread hateful texts.

What if the government bans bitcoin?

A ban would be great in that it would showcase one of bitcoin’s major strengths, resistance to central control and censorship. A safe tactic for governments is to create the perception they’re allowing and facilitating bitcoin’s success, rather than fighting it. The more they fight it, the more quickly it will become clear they can’t stop it.

Does it worry you that not many retailers accept bitcoin for payment?

Not at all. Some retailers like Expedia and Newegg already accept it, but Bitcoin isn’t very good yet as a payment mechanism and doesn’t need to be in order to skyrocket in value. The premiere use at this stage is as a store of value, similar to gold. Even if bitcoin takes a while to catch on as a method of payment, it can still easily surpass $100,000 per BTC in the meantime. While there are a few companies with global reach like Uber, Airbnb, and Amazon, that could move the needle on the bitcoin price by announcing support, that type of merchant adoption is far from necessary.

What’s your bitcoin price prediction?

I believe 1 BTC will be worth millions of dollars. That isn’t an arbitrarily high figure I throw around to entice potential buyers — that’s based on the market capitalization of bitcoin relative to its competitors, like precious metals, national currencies, and offshore accounts. However, ultimately the price of 1 BTC will be… 1 BTC.

… wait — what?

Bitcoin competes with currencies like the dollar, and it’s difficult from an economic perspective to see the bleeding stop even at a seemingly high point, due to how loose the rules and standards are around dollar-denominated credit creation. Eventually I expect the value of bitcoin to soar to the extent it will no longer make sense to measure against government-issued currency, a process referred to as hyperbitcoinization. If you’re interested in learning more about how that could play out, look into historical examples of Gresham’s Law and Thiers’ Law, as well as Speculative Attack by Pierre Rochard. For more on the societal implications, check out The Sovereign Individual.

Where can I learn more?

Overview: Bitcoin.org

Economics: Satoshi Nakamoto Institute.

Technicals: the writings of Jimmy Song.

Jameson Lopp’s collection of Bitcoin resources

What if you’re wrong about all of this?

¯\_(ツ)_/¯

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