Matt Odell

Bitcoin for Dummies | Matt Odell on What Bitcoin Did with Peter McCormack

Check out the What Bitcoin Did Episode Page & Show Notes

Key Takeaways

  • Bitcoin is a sovereign way to store wealth and the most scarce asset available 
  • Most important thing about owning Bitcoin: Secure your private keys
    • Good starting points: mobile-phone wallets (like Blockstream Green or Dropbit)
    • Upgrade: HW wallets to securely store your private keys even if your computer is hacked (Ledger, Trezor, and Coldcard are popular choices)
  • Every wallet gives you a 12-word seed phrase as a backup, keep them safe and always store them offline
  • Bitcoin payments are irreversible, always double-check receiver address
  • Buying and Spending Bitcoin depend on where you are
  • If you are a merchant, BTCPayServer and Open Node let you accept bitcoin payments from anywhere in the world
  • Bitcoin is NOT anonymous, it’s pseudonymous; If your receiving addresses can be tied to your name, your payments can be tracked
    • Using CoinJoin services (like Wasabi) makes it harder to track your transactions
  • Running a Full node is essential to using bitcoin privately and with zero trust

Resources Mentioned

Intro

Why Own Bitcoin

  • Because it doesn’t rely on trusted third parties, Bitcoin is a sovereign way to store wealth
    • Additionally, It’s the most scarce asset there is
  • Bitcoin is a hedge against inflation and an insurance against the collapse of government-backed, fiat, currencies – (Fiat currencies are barely 50 years old)
  • Bitcoin allows you to send and accept payments seamlessly around the globe. There are no trusted third parties, and no gate keepers
    • “Good money can be spent and saved at will, without any permission, and that’s what Bitcoin is” – Matt Odell

Bitcoin for First Timers

  • Don’t invest more than you can afford to lose – for two reasons
    • Understand how to use it, so you don’t lose it
    • Get a sense of the volatility (up and down)
  • Bitcoin payments are irreversible, always double check receiver address
  • Know your local tax laws

Remember: “Not your Keys, Not your Coins”

  • The single most important thing about owning Bitcoin is securing your private keys
    • Owning bitcoins means having control of the private keys, theft of private keys is final and irreversible, just like theft of cash or physical gold
  • Storing your bitcoins on an exchanges exposes you to several risks, which can lead to loss of coins
    • The exchange could get hacked, shutdown by government, or lose coins due to technical problems (famous examples include Mt.Gox and Quadriga)
  • Alternatively, one can store their bitcoins under their control, and learn how to secure and backup the private keys
  • New users start off buying bitcoins on an exchange and later moving it to their own wallets
    • Good starting points: mobile-phone wallets (like Blockstream Green or Dropbit)
    • What not to do: Opening the App-store and searching for any bitcoin wallet

Use Hardware Wallets

  • Ideally your bitcoins should never have to touch an online device
    • HW wallets hold your private keys on a secure-dedicated drive with a pin
    • To steal coins, an attacker needs to steal the device and know your pin
  • The most popular HW wallets are Ledger, Trezor, and Coldcard
    • LedgerX can also be used with a phone app as well

How to Back up Wallets

  • Every wallet gives you a 12-word seed phrase as a backup
    • Important: Always keep them safe and store them offline
    • What not to do: Keeping the seed phrase on internet connected devices (For instance, never store it on Apple notepad or Gmail drive)
  • Both Matt and Peter recommend learning by doing; Go through the exercise of deleting a wallet and then restoring it, this will give you a better sense of things.

Buying Bitcoin

  • This will depend on where you are, try asking a friend who owns bitcoin
  • Before you buy, make sure the exchange allows bitcoin withdrawals (For instance, Robinhood doesn’t allow bitcoin withdrawals)
    • “it’s a red flag if you can’t pull your bitcoin off when you want to”
  • Even better: “Don’t buy bitcoin, earn it” – Andreas Antonopoulos
  • Keep in mind: Most services require ID/ bank account confirmation before buying bitcoin, so pick a reputable company
  • The most private way to get bitcoin is through mining, but this process is complicated and energy intensive

Spending Bitcoin

  • Again, this will depend on where you are
  • Websites like Bitrefill and Fold allow you to buy gift cards and use them at various stores
  • Fold and Lolli offer Satsback reward program – you get Sats instead of reward points (Satoshis are the smallest denomination of a bitcoin – 1BTC = 100M Sats)
    • “All my Amazon purchases now, they just go through fold, and I get 1.5% back in bitcoin, and it’s like I am Dollar cost averaging” – Matt Odell
  • If you are a merchant, consider accepting bitcoin – here is why;
    • You can protect your privacy and not be under the control of a centralized payment processor
    • Additionally, you can serve entire industries that are getting cut-off from traditional payment networks
    • BTCPayServer and Open Node let you accept bitcoin payments from anywhere in the world

Bitcoin Privacy

  • Bitcoin is NOT anonymous, it’s pseudonymous; If your receiving addresses can be tied to your name, your payments can be tracked
    • There are chain-analysis companies dedicated to analysing the bitcoin blockchain (public, permanent ledger of every transaction)
    • So keep in mind: Even if no one wants to track your transactions now, they could in the future
  • CoinJoin services (like Wasabi) lets you mix your payments with other people, making it harder to track your transactions
  • Pay attention to your general privacy practices (For instance, if someone can read your text messages, they can read your addresses)

“your Node, your Rules”

  • Nodes are essential to using bitcoin privately and with zero trust – Here is why:
    • Your node connects to the network and verifies consensus rules are being followed (e.g., there are only 21M coins)
    • They also verify the coins you receive are valid and haven’t been spent elsewhere
  • Not running your node means trusting someone else to verify payments (For instance, your wallet checks with its company’s node)

Closing Thoughts

  • Bitcoin is a volatile beast, so worrying too much about price movements means you have invested too much
    • Peter has a time horizon of 5 years. Matt, a decade
    • They don’t check prices, they just dollar cost average
  • 99% of people lose money trading
  • Alt-coins have historically traded to zero over time, don’t be tempted to create a “basket of crypto assets” – with that said;
    • If you still decide to get alts, monitor their price against BTC and not just USD (If your altcoins lose value against BTC, you are losing money and are better off just holding Bitcoin)
What Bitcoin Did : , , ,
Notes By Mostafa Khaled

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