UNBACKED? Bitcoin’s Backed by its Products and Services
It recently occurred to me just how legitimate the bitcoin space has become.
For years, interacting with bitcoin felt sorta risky. Exchanges were constantly getting hacked. Offline bitcoin storage was mostly reserved for hardcore tech geeks. Knowledge highlighting bitcoin’s value proposition circulated through unknown chat forums. And there wasn’t much your bitcoin could DO other than just sit there.
Over the last few years all of that has changed.
When you’re in the thick of it every day it’s easy to miss just how easy bitcoin has gotten to use and interact with. What would look like magic to an early bitcoiner is, today, the boring status quo. But it’s this explosion of high quality products and services that is turning bitcoin into an asset that can compete on the global stage.
When people say bitcoin isn’t backed by anything you can tell they haven’t ever used bitcoin. Because it is. It’s backed by a growing product ecosystem.
Buying bitcoin today has never been easier. Coinbase is the obvious leader in this regard due to its slick design and close to 10 year track record. But there are so many niches that are beginning to form.
Services like SwanBitcoin have exploded in popularity by introducing the Dollar Cost Averaging strategy for entering a bitcoin position. Swan has shown that buying your bitcoin over an extended period, instead of all at once, is more effective for long term holders.
Their service does Dollar Cost Averaging better than any other service on the market, and is the perfect way to get the bitcoin curious into a position. A lot of would-be buyers have been turned off because of bitcoin’s volatility. This strategy reduces that uncertainty and risk.
For those looking to gamify their bitcoin investment, services like Fold and Lolli now let you earn bitcoin whenever you shop. It harkens back to the days when websites had “bitcoin faucets” that would drip tiny amounts of free bitcoin every few hours. I know a few friends who really enjoy these kinds of rewards programs, and feel very comfortable getting bitcoin exposure through these services.
For those with money locked up in their retirement account, getting bitcoin exposure has become much easier. Today, Grayscale Bitcoin Trust (GBTC) and Bitcoin IRA have helped otherwise stranded capital get into the bitcoin markets. Many more investment vehicles like these have been announced, and it’s only a matter of time before the options will be limitless.
Even though these services are geared towards a more mainstream audience, bitcoin’s cypherpunk ethos is alive and well. For hardcore users who are looking for a fully decentralized experience when interacting with bitcoin, Bisq has become a quite legitimate way to get KYC-free bitcoin exposure.
INTEREST BEARING ACCOUNTS AND LENDING
While ridiculed by hardcore bitcoiners, services that pay you for holding bitcoin are on the rise, and they are a massive step forward in the financialization of bitcoin.
One of the largest arguments against bitcoin in the early days was that bitcoin did not pay an investor to hold it. They could not earn any interest. Today, BlockFi is completely changing the game on that front by offering up to 6% interest on bitcoin held on their exchange.
I’m a huge fan of BlockFi, and its one of the main ways that I do my part to “stack sats”. However, since it does come with some risk (BlockFi lends out your bitcoin to others), I keep a very small portion of my bitcoin on the exchange and tell my friends and family to do the same.
For the hardcore bitcoiners, Sovryn has been a very new entrant into the bitcoin ecosystem, and is a decentralized competitor to BlockFi and Ethereum’s DeFi economy. Their service also allows you to earn interest on your Bitcoin, albeit much lower than what BlockFi offers. However, they’ve also got the coolest design of any bitcoin website I’ve ever seen, so, ya.
More than just interest, BlockFi can also lend you cash against your bitcoin. In my opinion, this is a HUGE development for the space. Instead of selling your bitcoin and taking a massive tax hit, you can now get cash by putting your bitcoin up as collateral. Once you pay off the loan, you get your bitcoin back. Taxes? What taxes!
Services like these turn your passive stack of bitcoin into an asset that you can use to power other avenues in your life. It makes “buy and hold” more versatile.
For most of bitcoin’s life, storing bitcoin by yourself had more risks for the average user than just keeping the bitcoin on an exchange.
Ledger and Trezor were some of the first movers in this space that struck gold, creating an easy way for average folks to securely hold their bitcoin off exchanges. Both their products remain phenomenal, but new products now exist to help bitcoiners on every stage of their journey.
Blue Wallet is a free mobile app that allows you to store bitcoin on your phone. For new bitcoiners holding small amounts, this is a brilliant solution that costs $0 and introduces them to the power of self-sovereignty.
For the middle of the road bitcoiners looking to take control of their bitcoin, Ledger and Trezor are still the stand out brands. But for a more technical user, they may fall in love with the versatility and uniqueness of ColdCard, or even with a ColdCard paired with Specter.
As a bitcoin holder’s position increases in value, they can sometimes find that they’re holding significant capital. Until recently, storing hundreds of thousands or even millions of dollars on a hard drive was, well, kind of sketchy.
But companies like Casa and Unchained Capital have bridged this gap and taken bitcoin security to the next level. For small amounts of bitcoin, having a single master key that grants access to your bitcoin is solid security. However, this (single-signature) has some drawbacks, and is less versatile for the storage of larger amounts.
Casa and Unchained have blazed the trail for non-technical bitcoiners who want to use a set of private keys (multi-signature) to protect their bitcoin. This can be set up so that 3 of 5 devices are required to sign off on a given bitcoin transaction in order for your bitcoin to move.
In my opinion, Casa’s 3 of 5 multi-signature service that is tailored to meet a client’s individual needs may be one of the most secure ways of holding any capital asset in history. Seriously.
The rub is this: for the first time in bitcoin’s life, it is now easier to self-custody your bitcoin than it is to hold it on an exchange. The proof is in the metrics: more bitcoin is leaving exchanges than at any other time in bitcoin’s history.
LEARNING ABOUT BITCOIN
I was introduced to bitcoin through a Bloomberg article in 2014. It taught me very little about bitcoin’s underlying economic curiosities. It was another four or five years and thousands of hours of research before I truly started to grasp bitcoin’s full potential.
Today, I’m able to introduce new bitcoiners to a wealth of knowledge within a few hours that quickly de-mystifies the asset and gives them a long-term investment thesis.
On the web, resources like Dan McArdle’s Case for Bitcoin is a super great resource to get the quick bitcoin pitch. Longer reads from writers and investors like Saifedean Ammous, Lyn Alden, Nic Carter, Parker Lewis, PlanB, and others can give any reader going down the worm hole a wealth of fantastically mind-bending information.
Bitcoin podcasts are perhaps the best way to get up-to-date and informative deep dives into all the new developments happening in the industry. Most of them didn’t exist a few years ago, but today, they’re must listens! My favorites are Marty Bent’s and Matt Odell’s Tales from the Crypt, The Stephan Livera Podcast, Swan Signal, NLW’s The Break Down, On the Brink, and the Bitcoin Standard Podcast.
Until only a few years ago bitcoin’s narrative took a lot of digging and a bit of luck to really find and understand. Today it is being mainstreamed.
BRINGING IT ALL TOGETHER
Understanding, investing, and holding bitcoin has never been easier thanks to the entrepreneurs and developers who have innovated in the industry. It is their products that sustain bitcoin’s price. Without them we would still be in bitcoin’s stone age.
I’ve recently launched an experimental app to help on board new users to bitcoin and help current hodlers gain a deeper understanding of bitcoin’s game changing potential. The app aggregates some of the best content in the space, and I hope it can be a valuable resource for all of us as we move forward into hyperbitcoinization and the “Century of Bitcoin”.