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Cost Effective Bitcoin Use: hardware wallet & own node

Making Bitcoin Cost Effective and Easy

Photo by Niclas Illg on Unsplash

Here at Ministry of Nodes, Ketan and I are often thinking of easier and more cost effective ways to teach Bitcoin the self sovereign way. New developments in the ecosystem have recently shifted the balance as of September 2020.

What’s our goal and where are most Bitcoin users right now?

Where possible, we want more people to be using Bitcoin with their own node and hardware wallet. If possible, air gapped, and using multi signature, if technical competence allows.

Where are most Bitcoin users right now? Many in the ‘casual Bitcoiner’ camp are simply leaving their coins on an exchange. Or they are using a single signature hardware wallet Trezor or Ledger, trusting Trezor or Ledger’s node.

What was our typical recommendation up until recently?

We generally work with people to help them learn to run their own bitcoin node, typically a package node like myNode (see MoN myNode series here), RaspiBlitz, nodl, or their own nodebox setup. This required the new bitcoiner to purchase the required gear and learn lots of new things about how to run a Raspberry Pi or desktop nodebox. E.g. Keeping it up to date, running Electrum, pointing it to their own electrs, internal networking, and a range of other things.

This is a pretty big lift for most people! It requires someone with a high commitment to learning and persevering through various hurdles.

Also, a typical Raspberry Pi node setup can range from $300-$500 AUD depending on what parts are used and if the user is purchasing myNode premium.

If we can lower the cost both in monetary terms, and in time spent learning, we can dramatically improve the conversion rate of casual bitcoiners to node-using bitcoiners!

What’s changing about our default guidance?

Specter Desktop has easy double-click installs available for Windows or Mac, and the ability for it to automatically use the local Bitcoin Core instance. This means a whole new level of simplicity of install and use.

For anyone interested in hearing about Specter Desktop, see my interview with Stepan Snigirev (CTO Crypto Advance) and Ben Kaufman of the Specter Desktop project here.

So the high level steps for Windows/Mac now are:

  • Buy a 1TB USB HDD (SSD if you can afford it, as performance will be much better) and plug it into your existing computer
  • Download and double click install bitcoin core from bitcoin.org
  • Set the Bitcoin blockchain directory to the external HDD
  • Edit the bitcoin.conf file (using NotePad/WordPad) , adding these two lines:
    • server=1
    • blockfilterindex=1
  • Download and double click install Specter Desktop from GitHub repo releases page here.
  • When running Specter Desktop for the first time, set it to ‘local Specter’, and point it to the Bitcoin blockchain directory on your external HDD
  • Initialise your hardware wallet (e.g. Coldcard) and export the xPub into Specter Desktop as a device
  • Set up a single signature wallet in Specter Desktop using that hardware device
  • Wait for Bitcoin core to finish initial sync
  • Use the wallet receive addresses to stack

See Ketan’s video demonstration here and subscribe to the Ministry of Nodes channel:

Why is this lower cost?

In practice, this means you can teach your newcoiner family and friends to simply use their existing laptop. If they need additional space to store the 340GB bitcoin blockchain (at time of writing), then you can get them to buy an external USB 1TB hard disk drive for about $80 AUD (~$57 USD).

This makes the overall process much cheaper and easier for them. Instead of having to pay the $400 AUD or so for a Raspberry Pi node package, they are simply buying an external HDD.

In many cases, the time saving in terms of ease of install & use may be far more than the monetary saving here.

For people ordering a Coldcard from Coinkite.com, use code LIVERA for discount.

What are the wins with this approach?

It’s easier or better to teach this in a few important ways:

  • Cheaper (About $80 AUD for a 1TB HDD vs ~$400 AUD for a Raspberry Pi node set up)
  • They mostly use the hardware they already have (e.g. laptop or desktop PC)
  • No learning Linux, command line and installing packages to get hardware wallets working
  • It’s easier to teach and promote bitcoin only products like Coldcard given the simplicity and ease of Specter Desktop
  • The newcoiner doesn’t have to go learn about internal networking to point their Electrum Wallet to their own Electrum Server
  • Ramping up from single signature to multi signature security in future is much simpler with Specter Desktop

What are some downsides here?

  • This set up is not conducive to using other aspects of bitcoin e.g. running a lightning node, using coinjoins, using your own block explorer and so on.
  • The newcoiner will periodically have to resync the node rather than having an always on node.
  • Specter Desktop is relatively new software and not as ‘battle tested’.

Fundamentally these are not a big deal, they can simply progress further and learn about other aspects of Bitcoin later. With resyncing, this should be fairly quick as most of the work is in the initial sync anyway.

As for Specter Desktop being new, let’s remember that the private keys are still on the hardware wallet (not on the hot computer etc), and the hardware wallet is ultimately displaying the addresses for the user receiving or sending bitcoins.

What do most newcoiners want?

At the end of the day, we believe that most new people coming into Bitcoin will be here for NgU (Number Go Up) and HODLing. For them, simply being able to stack into their hardware wallet with their own node is 95% of what they need.

While we can of course teach them lightning, coinjoins and so on, we must be realistic about where most of the incoming demand is.

Where does that leave us?

This doesn’t mean we won’t be presenting other node options such as myNode, RaspiBlitz, nodl, or Ronin Dojo, or BTCPay for merchants. This is just another useful tool in the toolkit for teaching Bitcoin.

We appreciate that not everyone is a hardcore Bitcoiner, so this approach is a good blended balance of usability, sovereignty, security, and low cost for a casual Bitcoiner. Hopefully you find these tips useful for yourself, or for teaching your newcoiner family and friends.

Cost effective bitcoin use is the name of the game.