246 lines
7.5 KiB
Plaintext
246 lines
7.5 KiB
Plaintext
WEBVTT
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Part 2, The five principles of Bitcoin.
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What to do and what not to do.
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I collected five principles for everyone using Bitcoin, for beginners as well
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as experts. You may recognise them as memes you've heard
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00:13.668 --> 00:19.920
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before. I chose memes
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as they are easy to remember. There are more principles that are helpful,
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however these five are the most important
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ones.
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1. Bitcoin, not crypto.
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The vision of Bitcoin is to be the best money there can be. This is achieved
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through focus on decentralisation.
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00:38.912 --> 00:48.523
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Without decentralization, someone could
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change the rules, make more Bitcoins out of nothing, redistribute other
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people's Bitcoins. All the
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00:48.724 --> 00:58.336
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other "cryptos" have a centralized team of people
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who determine the rules. There have been attempts in the past to change the
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rules of
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Bitcoin, and they failed. Changes in Bitcoin take many years to
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succeed and are more like optimizations than rule changes.
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01:08.347 --> 01:16.640
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Several years after the Bitcoin started, other project types came in waves.
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There was an altcoin phase, after that a DAOs phase, and now
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01:16.840 --> 01:25.132
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NFTs are
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everywhere. Many of these are just scams. Some may have interesting
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technological properties or have a narrow specialised uses.
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01:25.332 --> 01:33.625
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However, if you
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want to spend money on them, you're just gambling.
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01:36.380 --> 01:45.597
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2. Not your keys, not your coins.
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The Bitcoin balances are controlled by cryptographic signatures. This is what
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Bitcoin, is, a collection
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01:45.797 --> 01:55.015
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of crypographic signatures. In order to transfer
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Bitcoin, you need to perform this cryptographic signature and for that you need
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to have
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01:55.215 --> 02:04.433
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piece of data called "private key". In other words, having the private
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key, means, having Bitcoin. If you use a custodial service for
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handling your
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Bitcoin, like a bank or another service provider, it's, they, that have
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Bitcoins, not you. You're degrading your relationship
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02:14.051 --> 02:23.269
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with Bitcoin by relying
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on others to take care of your Bitcoins for you. This is exactly the problem
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that Bitcoin allows you to avoid. The
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02:23.469 --> 02:32.687
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custodian can make up all kinds of
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excuses to deny you control of Bitcoins they hold for you. Many don't even
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allow you to withdraw or send
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Bitcoins on your behalf. Even worse, they may run
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away with them, or lose them.
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With Bitcoin, you can self-custody. This requires some learning and some
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practice, but you can't get the full benefits without self-
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custody. You need to
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keep your private key, private. Anyone who sees it can take your Bitcoins. If
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you show it to somebody, they are gone.
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The private key needs to be protected
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against thieves, but also against damage. If the private key is damaged and
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it's the only copy, the
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Bitcoins are gone. Many people have suffered losses by
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not taking proper care of their private keys, and probably many still will.
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In a later video, I will teach you how to properly self-custody.
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3. Stacking sats.
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An easy way to get accustomed to Bitcoin is to accumulate Bitcoin
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periodically for the long run, commonly known as
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"Dollar Cost Averaging". Pick
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an amount that you feel comfortable with putting aside, such as a hundred
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dollars a month. Then, every month,
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preferably on the same day, buy one hundred
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dollars' worth of Bitcoin, or Satoshis (sats). Satoshi is the base unit of
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Bitcoin. there are
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one hundred million Satoshis in one Bitcoin. People often
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DCA once a month or once a week.
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The advantages of this approach are that it's repetitive, so you'll learn it by
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practice. It's simple, so you don't need to perform a lot
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04:12.773 --> 04:20.188
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of mental work. It
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doesn't depend on the market conditions, so you don't need to worry about
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understanding them. It doesn't depend on
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having trading experience, so you
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won't be influenced by psychology. It is working in small steps, so if you make
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a mistake (and this can
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04:28.003 --> 04:35.418
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happen for beginners), your losses will be small.
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Don't daytrade, or suddenly put huge mounts of money into Bitcoin. You don't
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understand how trading works, you'll lose money.
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4. HODL.
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Selling your Bitcoins has a broad range of disadvantages.
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The price of Bitcoin often moves very quickly. Inexperienced people may panic
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sell and make a loss.
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In many countries, selling can incur taxes. You may need to record your exact
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trading history for accurate reporting. In extreme cases, you
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may still owe
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taxes even if you make a financial loss!
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According to a recent news report, 69 year old Esther Freeman decided to sell
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some of her Bitcoins. Her bank, however, refused to allow her
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05:25.684 --> 05:34.748
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to deposit the
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900000 shekels from the sale, citing risks of money laundering and terror
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financing. Mrs. Freeman had to sue the bank in the
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05:34.948 --> 05:44.011
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court. In the meantime, she
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has 900000 virtual shekels she can't use, i.e., nothing.
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05:44.700 --> 05:54.052
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Don't end up like Mrs. Freeman. Try to avoid selling your Bitcoins, unless
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there is an emergency. The most advanced way to avoid this is to
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take out a
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loan, using Bitcoin as a collateral. There are specialised lending services, but
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traditional banks are starting to provide such
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06:03.804 --> 06:13.156
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services as well. However, doing
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this requires some level of financial experience, so I can't automatically
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recommend it to everyone.
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06:13.356 --> 06:18.025
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Another option is just to do nothing. This is very easy.
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Supposing you really do have some emergency expenses, you could also try to pay
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directly in Bitcoin, avoiding dealing with exchanges and
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06:24.449 --> 06:30.473
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banks. You could also
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try to sell only the minimum necessary amount. Smaller amounts are less likely
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to cause problems and losses are less
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painful.
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5. Don't trust, verify.
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Even if you have a private key, that alone doesn't tell you how many Bitcoins
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you have. For this you need to
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connect to a node and request information. But
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the node could lie to you. If you don't know how many Bitcoins you have at each
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moment, you
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can be a victim of fraud.
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Luckily, operating a node can be done cheaply. If you run a node, you have your
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own auditor to make sure you're getting the correct
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07:07.424 --> 07:13.220
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information. It probably
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isn't necessary that every single person runs one, but maybe you have a couple
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of friends or family members that
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do.
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If you want to run your own node, you should have a dedicated computer for this
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that can operate 24 7. It doesn't need to be an expensive
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computer, about 300
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dollars is probably enough, but it should be energy efficient and have a
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reliable internet connection.
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07:39.180 --> 07:40.031
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Summary.
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One, Bitcoin, not crypto.
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Two, Not your keys, not your coins.
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Three, Stacking sats.
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Four, HODL.
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Five, Don't trust, verify.
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