Learn About Bitcoin (FAQ)

Bitcoin is a stateless, open source, decentralized, permissionless, uncensorable, and unconfiscatable internet currency. What do all these fancy words mean? Where does one begin the journey of learning about Bitcoin? Is there more to this than pure speculation?

Here are some resources to help you learn about Bitcoin. The list will be updated to include all of your questions – so if you have any, then leave a comment.

Also, I’m trying to translate this guide in every language in the world, to help spread the word. If you’d like to contribute, send me an e-mail.

Articles & Podcasts

Bitcoin Origin Story: Was Bitcoin created by the CIA or the NSA? Is it some occult project by the elites to somehow enslave us with the kind of money that big banks, governments, and corporations can’t control? Read about Bitcoin’s cypherpunk and libertarian tradition in “Calling Bitcoin a CIA/NSA Project Is Disrespectful to Cypherpunks“.

Who Invented Bitcoin? Philosophically and technically speaking, Bitcoin is the invention of the cypherpunk culture. The likes of David Chaum, Nick Szabo, Wei Dai, Adam Back, Tim May, and Hal Finney share their merits of paving the way for Satoshi Nakamoto’s creation.

Since the 1980s, cypherpunks have been very interested in digital money and privacy. Learn more about this movement from this podcast interview with Donald McIntyre.

Does it matter who Satoshi Nakamoto is? No, not at all. Bitcoin is a scarce digital commodity whose source code and circulation are open and transparent. Creating a cult around the creator defeats the invention’s purpose.

Why Bitcoin? Bitcoin is provably-scarce and transparent non-governmental money – so why use it? Just like US dollars, gold, or stocks, Bitcoin can be used to transact, store value, and/or invest.

But thanks to its unique properties, Bitcoin can protect you from wealth confiscation, defend your financial privacy, and also help you cross borders with nothing but a hardware wallet in your luggage or 12 words written on a piece of paper (that you can also memorize) .

Essentially, it’s an instrument to protect the fundamental human rights that your government sometimes purposely chooses to ignore (see article 17 of the Universal Declaration of Human Rights).

Learn more about how Bitcoin protects your human rights from this presentation by Alex Gladstein (Chief Strategy Officer at the Human Rights Foundation).

Bitcoin and Austrian Economics: It’s no secret that Bitcoin has strong ties with the Austrian school of economics. The decentralized cryptocurrency has a limited supply and improves on some inconveniences of gold (which is heavy, and hard to verify, store, and transfer). To learn more about the topic, listen to this interview with Libbitcoin developer Eric Voskuil and read his free book “Cryptoeconomics“.

How Many Bitcoins Exist? Currently, about 18.5 million. But there will only be 21 million and they’re going to be distributed as mining rewards until the year 2140. One of the most important features of Bitcoin is that you can always verify the supply.

Bitcoins vs Satoshis: Just like 1 US dollar has subunits named cents, Bitcoin has satoshis. 1 bitcoin = 100.000.000 satoshis. These small units make it easy to account for microtransactions and seem to become the more popular unit of account as the price of BTC increases over the years.

Unlike Fiat Money & Physical Property, Bitcoin Is Unconfiscatable: All governments have a history of wealth confiscation. Just because your government hasn’t done this recently, it still doesn’t mean that your money, real estate, and other forms of property shall be legitimately passed to your preferred heirs. Thanks to its encryption and censorship resistance, Bitcoin is a time-tested store of value and Protects Your Private Property Better Than Your Government.

Is Bitcoin a Ponzi or Pyramid Scheme? No, Bitcoin has no central ownership and allows anyone to mine, run a full node, and transact without requiring permission. Ponzis and Pyramid Schemes have central points of failure, known leaders, autocratic governance, hierarchical multi-level systems, and unrealistic promises about making money. Bitcoin is a decentralized financial system in and of itself.

Bitcoin Is Faster Than Banks & Altcoins: Some people will complain that the 10-minute block time on the Bitcoin network and the high demand for low block space make it slow. But after 6 confirmations on the Bitcoin network, your transaction is final and costs dozens of millions of dollars to revert.

In the case of altcoins, that can take weeks or even months. In the case of banks, you have no control and they might revert it themselves and close your account. Bitcoin’s “slowness” means that network participants from all across the globe, regardless of internet speed, can synchronize in their participation.

Read more about it in my article “Bitcoin Is Not Slow – It’s Highly Secure” and watch my video on the same topic.

Being a Bitcoin User Means Running a Node: It’s very simple, really. To be sure that you’re receiving valid transactions, you must run your own validator. And thanks to breakthroughs in accessibility and UI, you can do it on your home computer by simply downloading the Bitcoin Core client and using it to send and receive BTC.

If you’d like to have a dedicated device that also runs the Lightning Network, you can use an old laptop/computer, build your own Raspberry Pi system with this guide (it will cost you around $250 in total and you’ll learn something new), or purchase a “plug and play” device (such as Fulmo’s RaspiBlitz or MyNodeBTC).

Learn more about the importance of full nodes from Venezuelan bitcoiner Alessandro Cecere. Also, read my article on the cheapest Bitcoin full node.

Bitcoin and Governments: Some think that Bitcoin is a money-making game for wealthy westerners, but there are people in the world who need it and understand its value proposition a lot better. Born in Czechoslovakia, Alena Vranova knows all about the abuses of governments and the hegemony of the nations that own the biggest armies. In this context, she explains taxation and how Bitcoin can lead to fairer and more accountable politics.

Money Printer Go BRRRR? Bitcoin Number Go Up: From a financial perspective, Bitcoin has become a hedge against inflationary government money. Whenever you purchase BTC, you bet against inflation and corruption. Legendary investor Paul Tudor Jones has done it, business intelligence company MicroStrategy has done it too.

At some point in the future we might stop valuing Bitcoin in government money such as USD, EUR, JPY, and CNY. Read more about it in the article “Bitcoin Will Soon Reach All-Time Highs – But USD Valuation Becomes Irrelevant“.

Bitcoin Relies On Users Who Need It, Not Institutions: We’re not here waiting for institutions to get in the game and potentially pump the price. Bitcoin was not invented to just make people rich, it’s actually a useful form of money that people all around the world need.

Individuals who can’t access a bank account can use BTC to make transactions and participate in the world economy, and money savers can leverage its scarcity to hoard (or HODL) larger amounts and hedge against government inflation. Read more about it in “Institutions Suck, Bitcoin Is Always Bullish“.

What Is Bitcoin Mining? Can I Mine? Bitcoin mining is the process of doing quadrillions of mathematical calculations with computer hardware, in order to find a particular number. The participant that solves the problem first gets the reward.

Essentially, miners provide a defensive service to the network (they protect it against 51% attacks) and get paid for it with block rewards (coinbase + transaction fees). At the same time, user full nodes keep miners in check and make sure that everybody else respects the rules of the network. So it’s important to run a full node, so you’re sure that there’s never any inflation and you don’t receive fake bitcoins.

And yes, Bitcoin mining is permissionless. You can mine yourself, you can join a pool (though this requires someone’s permission to adhere), and you can join in or leave whenever you want. Just keep in mind that mining is very computation-intensive and you have very low chances of finding blocks with a regular computer or GPU. It takes application-specific devices (ASICs) to be competitive with the rest of the network.

Is Bitcoin An Oligopoly of Centralized Mining Pools? Simply put, no. Mining pools consist of individuals who own hardware devices and decide to join forces to increase their chances to discover new blocks. They are not unitary entities, and their participants can leave at any time or switch to another pool which better serves their interests.

Also, mining pools can collapse and lose their power in influence in a matter of months. For example, look at Bitmain – once feared as the entity that can centralize Bitcoin and attack it, today it’s struggling to regain its relevance after making a series of terrible decisions.

Can China Shut Down Bitcoin? No, Bitcoin is a global decentralized network. The only reason why miners are there in great number is that the electricity is cheap, the power plants’ infrastructure is new, and the energy produced would get wasted otherwise. But if China bans Bitcoin mining, the miners will either move somewhere else or try to bribe corrupt local authorities to conceal the activity in their reports.

Play Video Games, Earn Your First Bitcoins: Bitcoin Bounce is a mobile video game which rewards your participation with small fraction of a bitcoin. You just need to install it on your phone and also download a Lightning Network wallet such as Blue Wallet or Wallet of Satoshi. Get it on iOS or Android, and also read my review.

Satoshi’s Games is yet another great website which allows you to earn bitcoins by playing video games. In this interview, creator Carlos Roldan talks about his project. On the Satoshi’s Games website, you can play games such as Lightning Agar, and Bit-Man: both of which will help you earn some satoshis (the hundredth millionth part of a full bitcoin).

Currently, the studio is working on a Fortnite clone named Lightnite, which helps you earn BTC whenever you pwn enemies. It will get released during the fall of 2020.

Where Do I Buy My First Bitcoins? Depending on where you are in the world, you can buy your bitcoins in different ways and from different kinds of businesses. But no matter what, stay away from Coinbase because they are bad actors in the space.

For centralized exchanges, Kraken and Bitstamp are a lot more honest. Even Bitfinex, in spite of its Tether controversy, has a better record for being on the side of Bitcoin. But before buying, check to see if your jurisdiction allows you to make the purchase/is supported by the exchange.

For peer to peer exchanges, use Bisq in the USA and Hodl Hodl in most countries around the world. They are more advanced and replicate the action of buying in person: by making use of an escrow, the BTC seller deposits the coins and waits for the bank transfer (which, unlike a Bitcoin transaction, is reversible) to go through.

After this peer to peer transaction is finalized, it’s highly recommended for the party that sold bitcoins to withdraw the money from the ATM so chargebacks become impossible.

You can also buy bitcoins in person at various meetups around the world, but you should be very careful: receive the coins in your full-node wallet so you verify the transaction yourself, wait for at least one network confirmation before you hand your fiat money, and make sure you don’t expose yourself to physical violence and extortion. When you leave the meetup, take a longer way home to be sure that nobody is following you.

Bitcoin Is a Lot Like Pokemon?! If you’re a Pokemon fan, then you will find Bitcoin a lot easier to understand. Read more about it in my article “Bitcoin in 11 Pokemons” and watch my video on the topic, you will get it.

How Can You Secure Your Bitcoins? For small amounts, it’s fine to just use your Bitcoin Core full wallet node. But if you accumulate more BTC, you might want to keep it offline, outside the risk of having your computer hacked.

For this purpose, it’s a good idea to invest in a hardware wallet such as Trezor and a metal plate such as Billfodl (referral links). To better understand threat models and the open source philosophy of Bitcoin security, listen to these interviews with Slush (Trezor co-creator) and Peter Todd (Bitcoin developer and security expert).

More advanced security methods include multisigs, Shamir Backups, and cold storage solutions.

What are the Lightning Network and Liquid? Lightning is a second layer that’s built on top of Bitcoin to provide speed, privacy, and scalability. Liquid is a sidechain which aims to take some large transactions off of Bitcoin’s base layer. The former is designed for regular users and is permissionless, the latter is created for BTC exchanges and big trader, and also requires the permission of a federation functionary to join and leave.

They seem to be competing, but have entirely different target audiences and have proven to serve different use cases. Forevermore, Blockstream (the company behind Liquid) has created a bridge between Lightning and Liquid so users can onboard and leave their project in a faster way. The same company also works on the c-lightning implementation.

Learn more about the apparent competition between them, and understand how both Lightning and Liquid work from the linked interviews.

Is Bitcoin Private? Though it often gets portrayed by the media as ultra-private black market money, Bitcoin is actually not anonymous. It’s based on an open ledger which makes all transactions public, except that they are pseudonymous: this means that you can’t associate a transaction with someone’s identity unless they expose their public key and/or generated addresses.

If you share your extended public key (xpub) with somebody else, they will be able to see all of your past, present, and future Bitcoin transactions. And since it’s a bad idea to tell other people how much money you have, it’s always better to run your own full node and have this kind of information stored on your own computer.

Transaction privacy is achieved in Bitcoin through obfuscation. This comes in the form of CoinJoins, a form of mixing money which makes the coins equally-tainted by the fingerprints of all participants. It’s as if everyone puts a $10 bill on the table and proceeds to put their fingerprint on every bill, so nobody will be able to determine which one belongs to whom.

Learn more about this kind of privacy mechanism from Nopara73, creator of CoinJoin wallet Wasabi. Max Hillebrand also explains really well why privacy-cautious Bitcoin users should CoinJoin.

Feel free to submit your own questions, I will do my best to answer them here!