More and more people are becoming aware of Bitcoin and why it exists. They’re starting to see a real need for it.
The next step is to explore the how of Bitcoin. This is often times very confusing to navigate for new comers to the space.
This article gives a brief overview of some available options for you, depending on what you’re looking to achieve.
The method by which to acquire Bitcoin is a hotly debated topic. The question that’s being asked is “To KYC, or not to KYC”. KYC stands for “Know your Customer” and it occurs when you hand over government issued identity in order to purchase Bitcoin, usually from a Bitcoin exchange.
You should read up on this before you decide to acquire Bitcoin as it leaves a permanent record against your name, which could later potentially be used against you.
An excellent resource that is worthwhile reading through is No KYC Only.
The above site lists some options for where to acquire non-KYC Bitcoin. Earning bitcoin in exchange for your goods, services and labour is another great option to acquire bitcoin, but not everyone is in a position to do that. After reading through the above website, you might think it is best for you to acquire bitcoin through non-KYC avenues. It’s important to be a bit more vigilant when conducting trades going down this path. Try it out with a small amount first, then work your way up to larger amounts as you build trust with the counterparty to your trade. Going down this path, you’re going to need a Bitcoin wallet. Keep reading on.
A reputable Bitcoin exchange, on the other hand, provides an additional safety net, but at the cost of giving up much of your financial privacy. You will find larger volumes on a Bitcoin exchange than in a peer-2-peer exchange. Some exchanges have additional features such as AutoDCA, which stands for Automatic Dollar Cost Averaging, where you can set recurring bitcoin buys at time intervals of your choice. If you decide to go down the path of acquiring bitcoin off an exchange, the exchange will hold the bitcoin for you under their full custody. This is an enormous risk. You will want to get your bitcoin off the exchange.
It is completely up to you which path you go down. You can even go down both, keeping a “KYC” stash and a “Non-KYC” stash, segregating both out for different use cases.
Self custody is when you (and only you) hold the private key to spend your bitcoin. For the first time in the history of humanity, an individual can take sole custody and responsibility for their electronic money. I recommend and advocate this. You’ll want to learn how to do this and do this well. I believe everyone should learn to take full control and ownership of their own bitcoin, whilst understanding the risks.
Some terminology you should know:
1. Seed phrase or Recovery Phrase – the 12 or 24 words required for backing up your wallet. It is given to you by the wallet software. Order of the words matters. Never give this out to anyone. Never type this anywhere, no exceptions. Guard with extreme care. You will not be able to recover your funds without this.
2. Passphrase – think of this as your 13th or 25th word. The passphrase is required to access your funds. It is chosen by you, if you choose to use it. Again, guard this with extreme care. Without it, you will not be able to access your funds and nobody will be able to help you if you forget or lose it.
3. PIN – an application control to get into the app. Someone with physical access to your device would need this to get access to your funds.
All decent wallets provide good warnings on what you should protect. If it’s your first rodeo into Bitcoin, it’s worthwhile reading instructions carefully and finding out more about the wallet you’ve chosen.
That being said, here are some options to self custody your bitcoins.
There are other mobile wallet options out there as well, but the point is to get familiar with using your wallet, read the instructions and the associated website. Try it out with small amounts. Test out not only the receive functionality, but also (and more importantly) the send functionality. Get a feel for how bitcoin transactions work. Learn to recover your wallet should something happen to your phone. Join the associated Telegram chat group for your wallet.
A mobile wallet is generally considered a “hot” wallet, meaning the private key to spend your funds are stored on a device that is permanently connected to the internet.
Moving on from here, many prefer to move on to more “cold” storage solutions. These are generally referred to as hardware wallets, which are special USB devices designed to generate and store private keys and sign your bitcoin transactions.
I like the Coldcard Mk3 by Coinkite. There are plenty of tutorials and guides on it, including on the Ministry of Nodes YouTube channel. The Coldcard requires you to download and install software on your computer to interact with it. The most popular choice is probably Electrum Wallet.
There are some other promising up and coming pieces of software that you can also use with your Coldcard. These include Specter Desktop, Sparrow Wallet, Wasabi Wallet and Lily Wallet (coming soon). Read, research and see what you think serves you best. Don’t just read their positives, read where they could improve.
Up until now, you’ve familiarised yourself with holding your own keys, but you’re not quite considered a first class Bitcoin self sovereign citizen just yet. To do that, you need to run a Bitcoin node. The aim here is to hook up your existing wallet to your own Bitcoin node and use it. A Bitcoin node is a personal gateway into the Bitcoin network, a place where you broadcast your transactions, rather than going through someone else’s node. Your node also verifies any payments that are coming to you, rather than relying on someone else to verify them for you. Your node verifies that it is actually Bitcoin you’re receiving, part of the 21 million that are on issue. Think of it as a fake bitcoin detector. The idea is not to rely on someone else’s node, use your own!
Here are some node options you can look further into.
If you’re using Samourai Wallet, their full node software is called the Samourai Wallet Dojo. You can run it on a regular computer or a single board computer such as a Raspberry Pi. Take a look into the RoninDojo project. I have a video on the Ministry of Nodes YouTube channel about it.
Recently (September 2020), I’ve been searching for the easiest way to use a hardware wallet with your own Bitcoin node. As of now, I have landed on Specter Desktop. It is a new piece of software and could use some review. But, as of right now, I think it’s the easiest way to get up and running. I have a video tutorial on using a Coldcard with Specter Desktop and Bitcoin Core on Windows 10. If you’re keen to build and acquire a Bitcoin position for the long term, this is the easiest way to go about doing it, whilst maintaining the key principles of financial self sovereignty.
If you’re comfortable exploring and branching out further into things like Lightning Network, there are some other node options that are useful.
myNode is a full stack that you can run in a virtual machine or on a Raspberry Pi. It’s a nice beginner way to run your own node. I have created a comprehensive video series on how to go down that path.
Umbrel is another project that focuses on privacy by default and has a great user interface. It’s great for beginners as well.
Raspiblitz is another stack that you can run on a Raspberry Pi. It’s a little more advanced and has some great features. Its focus is security, privacy and lightning network.
Another option is my Ubuntu Node Box guide. This video tutorial series is for those who want to learn how to use Linux and run a bitcoin node with it. The playlist covers most of the major software in the Bitcoin space. I teach you how to download, install, configure, run and update all the software manually, so you become a little more self sovereign, rather than relying on others to help troubleshoot any issues. You end up learning how it all works under the hood from a user perspective. Takes a bit of time to learn, but I’ve found it rather rewarding.
I’ve provided you a lot of resources and links to get you going. It can get overwhelming. In Bitcoin, nobody can tell you what you can do with your money. You need to decide for yourself what is in your best interests, taking into consideration your personal circumstances and abilities. Ultimately only you can decide what is best for you. It’s going to take time to learn and assess. Whilst it’s great that we understand the why of bitcoin, there comes a time where you’ll need to learn the how.