Bitcoin can be intimidating to navigate—whether you’re just starting out, managing significant personal holdings, a high net worth individual or representing a company exploring balance sheet allocation. Its self-sovereign nature is in complete contrast with the modern world, placing full responsibility for asset protection on the individual(s). This makes operational security essential. From configuring secure wallets and eliminating single points of failure to planning for inheritance, professional consultants offer tailored support for a wide range of needs.

In a space grounded in the principle of “don’t trust, verify,” that same skepticism should extend to advisory services. The Bitcoin consultants listed below each bring a unique approach to Bitcoin security and management. Your task is to find the one best aligned with your threat model, comfort level, and goals.

Common services offered by Bitcoin consultants include:

• Education and Training: Providing resources and guidance to deepen clients’ understanding of Bitcoin and best practices for its management.
• Wallet Setup and Management: Assisting clients in choosing and configuring wallets that align with their security preferences and usage patterns.
• Operational Security (OPSEC): Implementing measures to protect against threats such as hacking, phishing, and physical coercion.
• Collaborative Custody Solutions: Utilizing multisignature (multisig) arrangements to distribute control and reduce risks associated with single points of failure.
• Estate Planning: Developing strategies to ensure seamless transfer of bitcoin to heirs.

Below is a curated list of reputable Bitcoin consulting services, each offering unique expertise to cater to diverse client requirements.

Bespoke Consultants for Sovereign Self-Custody

The Bitcoin Way

• Location: Global
• Website: https://thebitcoinway.com/
• Cost: Not specified
• Primary Services: Multisig (noncollaborative) setup, air-gapped wallets, Bitcoin node installation, cybersecurity (encrypted vaults, DNS, firewalls, VPNs, mesh networks), and Plan B residence acquisition.

Why we chose them: The Bitcoin Way takes a comprehensive approach to Bitcoin security, catering to individuals and businesses alike. Their expertise spans setting up air-gapped wallets, implementing non-collaborative multisig setups, and running Bitcoin nodes to maximize sovereignty. They also provide guidance on advanced cybersecurity measures, ensuring that digital and physical security are tightly integrated. They also offer Plan B residence acquisition (helping clients establish second homes in Bitcoin-friendly jurisdictions), which further differentiates their services. By emphasizing education and actionable steps, The Bitcoin Way empowers clients to confidently take full control of their bitcoin.

Bitcoiner Consulting

• Location: Germany / Global
• Website: https://www.bitcoinerconsulting.com/
• Cost: 500 000 sats per hour
• Primary Services: Bitcoin education, personal consulting, product development, business advisory.

Why we chose them: Bitcoiner Consulting, the trading name of Benjamin de Waal, provides strategic guidance to individuals and businesses integrating Bitcoin. Its services include education, one-time consulting sessions, and long-term advisory partnerships. The company also specializes in product development for businesses entering the Bitcoin ecosystem. Known for its extensive expertise and personalized approach, Bitcoiner Consulting tailors solutions to diverse needs — whether educating newcomers or supporting companies in developing Bitcoin-based offerings.

The Bitcoin Adviser

• Location: Not specified
• Website: https://www.thebitcoinadviser.com/
• Cost: Not specified
• Primary Services: Bitcoin security, collaborative custody, estate planning, personalized advisory services.

Why we chose them: The Bitcoin Adviser helps clients secure their bitcoin holdings with services such as collaborative custody, which eliminates single points of failure. Their expertise in estate planning ensures smooth inheritance transfers without compromising security. Unlike product-linked firms, The Bitcoin Adviser offers impartial recommendations based on the client’s unique needs, emphasizing education, and empowerment. Their hands-on approach and tailored advice make them a valuable resource for both beginners and experienced holders.

Emerge21

• Location: UK/Ireland
• Website: https://www.emerge21.com/
• Cost: Not specified
• Primary Services: Bitcoin education, custody solutions, estate planning.

Why we chose them: Emerge21 specializes in saving individuals and businesses time by accelerating their understanding of Bitcoin. With hundreds of hours of tailored content, they provide concise, personalized guidance to help clients grasp Bitcoin concepts quickly. Their services include 1-to-1 consultations, group seminars for small businesses, and a monthly “Bitcoin Breakthrough” event designed to teach Bitcoin basics.

For businesses, Emerge21 offers strategic advisory services, helping companies integrate Bitcoin as a balance sheet asset and enabling Bitcoin payment solutions. They also contribute to the wider Bitcoin community through their podcast and regular educational blog posts. Emerge21 is an excellent choice for those new to Bitcoin or businesses seeking expert guidance on adoption and implementation.

Sovreign

• Location: Not specified
• Website: https://www.sovreign.io/
• Cost: Not specified
• Primary Services: Secure storage solutions, Bitcoin strategy consulting.

Why we chose them: Sovreign provides premium advisory services for high-net-worth individuals and businesses. Their focus on bitcoin storage and strategic consulting ensures that clients can securely manage their holdings while optimizing long-term strategies. Sovreign’s independence allows them to tailor recommendations to their clients’ unique needs without being tied to specific products. Their high-touch approach and emphasis on security make them an ideal partner for those seeking bespoke Bitcoin solutions.

Sound Money Solutions

• Location: Global
• Website: https://soundmoneysolutions.io/
• Cost: $1000 – $12 000
• Primary Services: Multisig non-collaborative setup, air-gapped hardware wallets, Bitcoin node set up, cybersecurity, Bitcoin Consultancy.

Why we chose them: 

Sound Money Solutions specializes in advanced Bitcoin self-custody and security services for individuals and businesses seeking true financial sovereignty. They provide tailored solutions that help clients protect their Bitcoin from theft, loss, and surveillance whether that’s through secure wallet setups, inheritance planning, full node deployment, or private payment systems. They offer three pricing tiers, each tier includes one-on-one consulting and two of the three tiers offer custom hardware packages to help clients set up their own non-collaborative custody solution. Their approach ensures clients maintain full control over their assets without relying on centralized exchanges or third parties.

Their hands-on, expert-led service, guided by industry veterans like Max Hillebrand and Jack Minnick. Sound Money solutions build bespoke systems for high-net-worth individuals, family offices, and companies who value privacy, security, and long-term Bitcoin resilience.

Consultancy Firms with Product-Led Solutions

Unchained Capital

• Location: Austin, Texas, USA
• Website: https://unchained.com/
• Cost: Not specified
• Primary Services: Collaborative custody solutions, Bitcoin-backed loans, financial services for high-net-worth individuals.

Why we chose them: Unchained Capital is a leading provider of Bitcoin financial services, specializing in collaborative custody, trading, and IRA solutions for individuals and institutions looking to secure their bitcoin holdings. They also offer consultancy and advisory services, with a primary focus on their collaborative custody solutions. Clients are guided through the implementation of a secure multisig setup that eliminates single points of failure. Unchained pairs this service with personalized consultations, ensuring clients understand and maximize the security and functionality of their custody arrangements. Beyond custody, Unchained advises high-net-worth individuals and institutions on financial strategies, including bitcoin-backed loans that provide liquidity without selling bitcoin holdings, inheritance planning to secure generational wealth, and corporate treasury management.

21st Capital

• Location: Global
• Website: https://21stcapital.com/
• Cost: Not specified
• Primary Services: Smart Vault, inheritance planning, priority support.

Why we chose them: 21st Capital offers a wide range of consultancy and advisory services tailored to diverse client needs, extending beyond their flagship Smart Vault product. Their expertise includes Bitcoin wallet recovery, security and privacy education, and investigative services with specialized support to individuals and institutions. These offerings complement their advanced self-custody solution, which features customizable multisig setups and innovative recovery options like timelocks and Miniscripts. With a focus on personalized guidance and practical solutions, 21st Capital ensures clients can manage their bitcoin securely and effectively.

Onramp Bitcoin

• Location: Dallas, Texas, USA
• Website: https://onrampbitcoin.com/
• Cost: $150 per month for balances up to $250,000; contact for higher balances.
• Primary Services: Multi-institution custody, Bitcoin IRA rollovers, educational services.

Why we chose them: Onramp Bitcoin’s consultancy is centered around their multi-institution custody product, which leverages a 2-of-3 multisig setup involving independent key holders. This approach minimizes single points of failure while maintaining user control. Onramp also supports Bitcoin IRA rollovers, helping clients integrate bitcoin into their retirement planning. Their focus on onboarding and education ensures that new users feel confident managing their bitcoin within a secure framework.

Important disclaimer: Bitcoin Magazine does not specifically endorse or recommend any particular consultant listed here. Readers must exercise their own judgment when selecting a service provider. Additionally, you should NEVER share your seed phrase or private keys with any company, website, or individual—regardless of their credentials or promises. This information must be kept private and secure at all times. The consultants featured here are in the business of teaching you how to properly secure your bitcoin yourself, not taking custody of it for you.

This post 9 of the Best Bitcoin Consultants To Help You Secure Your Bitcoin in 2025 first appeared on Bitcoin Magazine and is written by Conor Mulcahy.

In today’s world of constant surveillance and daily data breaches, it’s never been more important to take control of your own privacy. Whether you’re protecting your emails, securing sensitive files, or just trying to keep nosy governments and cybercriminals at bay, one of the most effective tools at your disposal is PGP (Pretty Good Privacy). For anyone dealing with bitcoin or any kind of sensitive information, PGP isn’t just useful—it’s essential.

In this article, we’ll dive deep into what PGP is, why you need it, and most importantly, how you can start using it today. By the end, you’ll not only understand PGP but also be ready to use it like a pro.

Why Should You Use PGP?

You might be asking yourself, “Why should I use PGP? I don’t have anything to hide.” But that’s missing the point entirely. Privacy isn’t about hiding things you’re ashamed of—it’s about protecting yourself from those who would misuse your information.

Let’s take a look at some of the key reasons why you should consider using PGP:

1. Emails Aren’t as Private as You Think

The U.S. Supreme Court has ruled that emails are private, but the reality is far from reassuring. In practice, emails are often weakly protected, and encryption is the only way to ensure that your communications remain private. Imagine your email “security” as a door locked with a cheeto instead of a proper deadbolt—technically locked, but not actually secure.

PGP fixes this by encrypting your emails, ensuring only the intended recipient can decrypt and read them.

2. Protect Yourself From Hackers and Cybercriminals

Cybercrime is at an all-time high. Hackers constantly look for ways to access private communications, personal data, and even financial records. PGP can safeguard your communication about transactions, wallets, and passwords from prying eyes. Even if you’re not dealing with bitcoin, cybercriminals can leverage your personal details in identity theft or blackmail.

3. Keep Your Personal and Professional Life Separate

Whether it’s workplace politics or family drama, you probably don’t want certain people snooping through your private messages. PGP ensures that sensitive information—be it personal or professional—remains private and secure, protecting you from prying eyes.

4. Freedom from Government Surveillance

One of the strongest reasons to use PGP is to protect yourself from government surveillance, as revealed by Edward Snowden and Julian Assange. Snowden’s 2013 leaks exposed how agencies like the NSA collect massive amounts of data on everyone—not just criminals—by tapping into tech giants like Google and Facebook. PRISM and other programs made it clear that no one’s data was safe from government eyes.

Julian Assange’s work with WikiLeaks further highlighted how governments use private information against citizens without their knowledge, sparking global concerns over privacy rights. The idea that “if you have nothing to hide, you have nothing to fear” is flawed. As Snowden famously said, “Saying you don’t care about privacy because you have nothing to hide is like saying you don’t care about free speech because you have nothing to say.”

5. Privacy Is Not a Crime

One of the most common arguments against using encryption tools like PGP is, “Why bother if you’re not doing anything illegal?” But this thinking is dangerous. You shouldn’t have to give up your privacy just because you’re following the law. Privacy is a fundamental human right, and it protects you from a host of dangers—like intrusive governments, malicious hackers, or even people in your own social circle who would use your private information against you.

How Does PGP Work?

Now that you understand PGP’s importance, let’s get into how it actually works. The magic of PGP lies in its use of public-key cryptography, a sophisticated form of encryption that allows secure communication between two parties without them having to share a private key beforehand.

Here’s how it works in simple terms:

1. Public and Private Keys: When you set up PGP, you generate a pair of keys—a public key and a private key. These two keys are mathematically linked, but while the public key can be shared with anyone, the private key is kept secret and known only to you.
   • The public key is used by others to encrypt messages that are sent to you.
   • The private key is used by you to decrypt those messages.
2. Encryption: When someone wants to send you an encrypted message, they use your public key to lock the message. Once the message is encrypted, it can only be unlocked by your private key, ensuring that only you (and no one else) can read it.
3. Digital Signatures: PGP also provides a system for verifying the identity of the person sending a message. This is done through digital signatures. When you send a message, PGP creates a unique signature using your private key. The recipient can then check this signature against your public key to verify that the message is really from you and hasn’t been altered in transit.

A Real-World Example of PGP Use

Imagine you’re a journalist covering a controversial topic (or any topic that’s not government “approved”), and you’re communicating with a confidential source. You don’t want your emails intercepted by hackers or government agencies. By using PGP, you can send encrypted emails to your source, ensuring that only they can read your messages. Additionally, your source can use PGP to send encrypted replies, keeping both sides of the conversation private.

This is precisely the kind of privacy protection that whistleblowers like Edward Snowden have relied on to expose government wrongdoing without fear of immediate detection.

How to Get Started with PGP

Alright, enough theory. Let’s talk about how you can actually start using PGP. There are a few different tools out there that allow you to use PGP, but we’ll focus on two options: Keybase and Kleopatra. Both are great, but they cater to different users.

1. Keybase.io: The User-Friendly Option

If you’re new to PGP and want something simple, Keybase.io is the way to go. It’s a free, easy-to-use platform that integrates PGP encryption with a sleek interface, making it accessible for beginners. Plus, it works on all major platforms—Windows, Mac, iPhone, Android, and Linux—so you can use it no matter what device you’re on.

Here’s how to set it up:

1. Go to Keybase.io and download the version that fits your device.
2. Install the software and create an account.
3. Choose a username (this can be anything, so feel free to go anonymous if that’s your style).
4. Skip adding your phone number and email if you want to maximize privacy.
5. Set up your public and private keys through Keybase. It’s a seamless process that the software handles for you.

Now you’re ready to encrypt your emails, messages, and files with ease. You can also use Keybase to verify identities through digital signatures, ensuring that any encrypted message you receive really came from the person it says it did.

Pros of Keybase:

• It’s pretty easy to use.
• It works on all major platforms.
• Key management and identity verification are simple to use.

Cons of Keybase:

• Keybase was acquired by Zoom, which does raise some privacy concerns. Zoom has been criticized for its connections to China and its checkered history with security and privacy issues. While Keybase remains a solid tool, you might want to consider these concerns if you’re extra cautious about your privacy.

2. Kleopatra: The Power User’s Tool

For those who want more control over their encryption, Kleopatra (part of the Gpg4win suite) is an excellent option. While it’s a bit more complex than Keybase, it gives you more granular control over your encryption and is perfect for advanced users.

Setting up Kleopatra is straightforward but requires a bit more manual configuration. Here’s a basic guide to get started:

1. Download the Gpg4win suite from Gpg4win.org.
2. Install the software and follow the prompts to generate your public and private keys.
3. Kleopatra also offers key management, making it easier to import and export keys for your contacts.
4. You’ll need to manually integrate PGP encryption into your email client, but the security benefits are well worth the effort.

Pros of Kleopatra:

• More control over your encryption settings.
• Great for power users who want higher customization.
• Built-in key management system.

Cons of Kleopatra:

• Not as user-friendly as Keybase.
• No mobile support, so it’s best for desktop use.

Why You Should Start Using PGP

PGP isn’t just a tool for technologists or privacy fanatics—it’s for anyone who values their freedom and security in a world where everything is increasingly monitored and vulnerable to attack. With government surveillance at all-time highs and cybercriminals becoming more sophisticated by the day, protecting your communications is no longer optional.

By using PGP, you can take control of your privacy, secure your personal and professional communications, and protect yourself from anyone who might want to use your information against you. Whether you’re a journalist, a bitcoin user, or just someone who values privacy, PGP is a powerful, time-tested tool that should be part of your everyday digital toolkit.

So, what are you waiting for? Take the plunge, set up PGP, and start enjoying the peace of mind that comes with knowing your communications are safe from prying eyes. Privacy isn’t a crime—it’s your right.

This post How to Use PGP for Enhanced Privacy and Powerful OPSEC first appeared on Bitcoin Magazine and is written by Conor Mulcahy.

I. Introduction

Bitcoin is often praised as a long-term savings technology, but its role as a medium of exchange is just as important—especially for businesses. From local cafés to large corporations, more merchants are considering bitcoin as a payment option, drawn by its low fees, fast transactions, and ability to reach a global, young and tech savvy customer base.

This guide explores how local businesses can start accepting bitcoin, covering both the immediate benefits and long-term strategic advantages. As digital payments evolve, understanding Bitcoin’s potential isn’t just an option—it’s becoming essential for businesses looking to stay ahead.

II. Benefits of Accepting Bitcoin for Small Businesses

There are three main reasons for a small business to accept bitcoin:

1. Grow revenue from energetic, tech-savvy, and potentially hugely loyal customers. Bitcoiners are often delighted to pay and tip in bitcoin, and they regularly travel far and wide just to visit and support local businesses that accept bitcoin.
2. Save on fees: Fees for bitcoin payments are low and paid by the customers, so merchants can save 2-3% in credit card fees by simply accepting payments on one of Bitcoin’s second layers (e.g., Lightning or Liquid).
3. Preserve value: Bitcoin serves as a long-term solution to inflation, preserving the value of earnings due to its fixed supply. While the bitcoin price is volatile in the short term, over a number of years this volatility has been up more than down, driving the price higher. 

Some other benefits include:

4. Banks are not needed: Bitcoin provides a global, decentralized banking solution, enabling secure and affordable transactions for everyone, anywhere, anytime.
5. Instant settlement — no risk of chargebacks: On Bitcoin, settlements are final, which means that charges cannot be reversed. Online commerce now comes with guarantees for the business.
6. Greater flexibility: Accepting bitcoin provides greater flexibility if and when the traditional payment system falters. Furthermore, many bitcoin payment tools allow the merchant the option to invoice in dollars and receive either bitcoin or dollars.
7. Environmental benefits: Contrary to popular belief, Bitcoin is a net positive for the environment as the process of mining enhances energy companies’ efficiency and empowers the growth of renewables. As the industry leans towards sustainable energy sources, the carbon footprint of Bitcoin transactions is set to decrease.

III. Implementing Bitcoin in Business Operations

Every business, whether a cozy corner café or a sprawling enterprise, has its own unique needs when it comes to accepting payments. For that reason, it’s essential to understand how bitcoin could fit into your specific business: A café might find it perfectly suitable to use a simple mobile Bitcoin wallet for transactions, but larger businesses (or those seeking a polished and professional approach) might opt for a more comprehensive integration. Whatever your business size or aspirations, this guide is tailored to provide insights and steps to seamlessly incorporate bitcoin payments.

• Bitcoin Atlantis Conference – BTCPay Server
• Wilson & Wilson Dentistry – Zaprite
• How Hodl Hodl used BTCPay to accept bitcoin payments – BTCPay Server
• How Cherito Café is using Bitcoin to power his business – Blink

Step 1: Learn about Bitcoin

Before we dive in, it’s important to learn about Bitcoin and why it should become a vital part of your business. It’s more than just another payment method; it’s a groundbreaking new currency and a powerful monetary network. Adopting Bitcoin won’t just expand your payment alternatives but could also lower operational expenses. 

The Bitcoin network is the world’s most secure computer network. It’s an unchangeable, censorship-resistant, immutable, global network of value which is beyond the purview of governments and conventional banking systems. Furthermore, it boasts a limited supply of twenty-one million coins — each divisible into smaller units, marking the advent of a genuinely limited and robust currency. Notably, bitcoin is a bearer asset, which means that those who hold bitcoin possess the actual asset, not just a debt or an IOU as is the case with fiat bank accounts.

Read more >> What is Bitcoin & Why Does it Have Value

Step 2: Understand Transaction Layers

Layer 1 (High security and settlement in minutes)

Bitcoin’s base layer is a triple-entry ledger accounting system (timestamp server) where transactions are timestamped, irreversible, publicly verifiable, and secured by nodes and hash power. This makes it the most secure financial settlement network ever created.

With settlement roughly every 10 minutes, Layer 1 is best suited for high-value transactions where instant finality isn’t required—such as buying a car, settling invoices, or large business payments.

Layer 2 (Medium security, with settlement in seconds)

The Lightning Network enables near-instant bitcoin transactions without compromising the security of the base layer. Operating as a second-layer protocol, it allows users to transact off-chain while remaining secured by Bitcoin’s triple-entry accounting system. When a channel is opened, funds are locked into the base chain, and from that point, transactions occur off-chain as state updates between channel participants—similar to an abacus keeping track of balances. The base chain remains unaware of these transactions until a channel is closed, at which point the net result is settled on-chain. With settlement speeds faster than Visa or Mastercard, Lightning is ideal for everyday payments in cafés, retail shops, and beyond.

Now that we understand the layers, let’s talk about wallets. 

Step 3: Choose a Bitcoin Wallet

Accepting Bitcoin without proper security measures is counterproductive. Wallets function as digital safes for bitcoin, ensuring its security and facilitating transactions by generating Bitcoin addresses.

Businesses transacting in Bitcoin should prioritize self-custody. While some might consider entrusting their bitcoin to third parties, it’s important to be aware of the associated risks. Should a third party mismanage your bitcoin or become insolvent, your business will lose its bitcoin; bitcoin held with a third party isn’t your bitcoin. 

Instead of relying on third parties, businesses should use a cryptographically secure Bitcoin wallet. Various wallets support both transaction layers, capable of generating unique Bitcoin addresses for transactions on either layer. 

Businesses should store bitcoin for the long term in a layer-1 hardware wallet or a multisig wallet. Sending bitcoin from a Lightning software wallet to a Bitcoin hardware wallet is relatively straightforward. We recommend keeping less than a month’s worth of bitcoin in a Lightning or hot wallet.

1. Hardware Wallets are available for layer 1 only. They are typically small hardware devices similar in size and form to a USB drive. They only connect to the internet when connected via USB or Bluetooth, therefore they are considerably more secure.

2. Multisig Wallets are a specialized type of Bitcoin wallet that necessitates the approval of multiple private keys for transactions. These keys can be distributed among senior staff members and directors. For instance, in a 2-of-3 or 3-of-5 setup, the bitcoin can only be transferred if two out of three (or three out of five) keys authorize the transaction. This security measure ensures that no single individual has unilateral control over the stored bitcoin.

Step 4: Point of Sale (POS) Payment Solutions

When deciding on a payment solution for Bitcoin transactions, you should determine if a simple wallet is adequate or if it’s necessary to use a specialized payment app.

Option 1: Use a Basic Lightning wallet

Lightning wallets are primarily designed for personal use and not for commercial transactions. That said, some provide a light-touch POS solution and as such serve as an introductory tool for businesses to familiarize themselves with bitcoin payments. 

To proceed, simply download a Lightning wallet from the Android or App Store. 

• Wallet of Satoshi, a well-known Bitcoin Lightning wallet, introduced a point-of-sale system in 2023. It’s a simple and convenient wallet to use, making it accessible to almost any user. However, Wallet of Satoshi is a custodial wallet, so the company holds the private keys on behalf of its users, meaning you don’t have full control of your bitcoin while it’s on the app. If your intention is to utilize the Lightning network for more extensive transactions beyond small tips or the occasional $1 bitcoin purchases, opting for a non-custodial Lightning network wallet is a more prudent choice. (WoS is not available in the USA.)

• Blink, another well-known Bitcoin wallet (formerly known as “Bitcoin Beach Wallet”) has merchant features that make it easy and flexible for businesses to receive payments over Lightning and on-chain, including LN address, a Lightning cash register, and a printable pay code. Payments can be received in bitcoin and stablesats (a proxy for USD). Finally, transactions can be exported via a CSV file for record keeping. 

We recommend upgrading from simple Lightning wallets should the amount of bitcoin received begin to grow, as basic wallets introduce a number of minor challenges that are easily overcome with a more customized solution.

Option 2: Use a Bitcoin Point-of-Sale app

Specialized payment apps should be the preferred solution for local businesses as they provide a plethora of features necessary to run a business. 

• Labeling: Without labels, payments are received without any descriptive context, creating unnecessary accounting challenges. 

Transaction with labeling: “2023-08-24: Coffee – Latte – $3 – Invoice #12345” 

Transaction without labeling: 2023-08-24 – XYZ123 – $3”

• Address reuse: If a merchant consistently uses a single wallet address for transactions, savvy customers can trace that address on the open Bitcoin network and view the total funds received. To maintain privacy it’s advisable not to reuse addresses, which specialized payment apps can help with. 

Note: While payment processors don’t address the risks associated with zero-confirmation transactions, the Lightning network does. Accepting payments without network confirmations, known as “zeroconf,” can lead to potential double-spending issues.

All that’s required is a mobile phone loaded with one of the following apps, which can be downloaded from the Google Play Store or the App Store. 

• Breez requires nothing more than a cell phone and is instantly operable as a non-custodial Lightning POS terminal. Retailers can easily add items in the app, create a manager password, print a receipt, and send funds out to an on-chain address if needed.

• Zaprite offers a POS-like experience, allowing merchants to accept bitcoin payments in person with ease. Service-based merchants can set up tip pages, enabling customers to leave gratuities in bitcoin. Fiat payments are accepted by connecting payment gateways such as Stripe.
  
• Coinos is a user-friendly Bitcoin web wallet designed for both individuals and merchants. It emphasizes non-custodial solutions, allowing users to maintain full control over their funds with the flexibility to withdraw anytime. It caters to merchants seeking efficient retail transactions.
  
• Opago allows small merchants around the world to accept bitcoin in a fast, easy, and secure way by giving access to the Lightning network in their own custom POS terminals. Opago provides a merchant dashboard that details all transactions and provides a rather useful tax reporting feature — particularly for EU merchants. The fee is 1% for all transactions processed through the POS terminals, which cost €99 to buy.
  
• Bitcoin Suisse Pay is an easy-to-set-up, KYC-free solution. Business owners have the option to choose to instantly receive bitcoin in their preferred Bitcoin wallet or to auto-convert bitcoin to euro and receive the payments the following day in the selected bank account. Each account has one primary device and any number of “receive only” devices, which is suitable for business owners to allow employees to receive payments on their phones, without being able to access the funds. Watch their 90-second promotional video.

• Coin Corner: Checkout offers a simple Bitcoin payment solution. With CoinCorner Checkout, businesses can accept bitcoin payments in-store, online, or via email invoicing. Fees are just 1% and when accepting bitcoin, merchants can either hold BTC or convert instantly to EUR which removes any risk of price volatility. Although CoinCorner can hold bitcoin on behalf of businesses, they do allow recurring Lightning payments to the merchant’s personal wallet should they wish to take custody.

• In VoltPay, merchants can set a tip, but the customer doesn’t get to choose. You can create an inventory of products within the app, which can be useful for a small café with a limited number of products. All payment invoices are visible in the invoices tab. The app can export a spreadsheet of transactions and withdraw bitcoin to a wallet manually.

• Flash is a streamlined Bitcoin point-of-sale solution that leverages the Lightning network for rapid, secure, and cost-effective transactions. The app features a user-friendly interface that generates detailed, labeled invoices while safeguarding privacy by avoiding address reuse.

These setups can be enhanced by using a dedicated phone embedded in an NFC-enabled POS terminal, loaded with any of the necessary apps listed above. These terminals are better than using just a phone, as the customer can see clearly where to tap their phone or Bolt Card to pay for a transaction. 

Option 3: Use an enterprise POS solution

• IBEX Pay specializes in offering enterprise payment solutions over the Lightning network. IBEX Pay allows retailers to assign specific wallet addresses, currencies, and terminals with different branches. Each branch can then use the associated IBEX Pay app to receive payments. IBEX Pay allows retailers to determine whether they wish to receive the payment entirely in bitcoin, dollars, or a mix of both.

• BTCPay Server is a self-hosted, open-source cryptocurrency payment processor designed for businesses. It emphasizes security, privacy, and censorship resistance, allowing businesses to accept bitcoin payments with zero fees and without relying on third-party services. The platform offers essential built-in apps, including a POS app for physical stores and invoicing tools for smoother bookkeeping. While it integrates with e-commerce platforms, its primary value for retail businesses lies in its direct payment processing capabilities and native wallet management. The onus is on the operator to manage the liquidity of channels (in and out) in order to make and receive payments.

• OpenNode provides a comprehensive Bitcoin payment solution tailored for businesses. It facilitates lightning-fast, low-cost Bitcoin transactions through its robust API, e-commerce plugins, and hosted payment pages. Merchants can accept Bitcoin payments and opt for automatic conversion to receive local currencies like EUR, GBP, and USD. OpenNode ensures instant settlements via the Lightning network and offers protection against price fluctuations by allowing automatic bitcoin-to-fiat conversions. Additionally, the platform emphasizes security, eliminating concerns of fraud and chargebacks, and promotes global reach with its cross-border payment capabilities.

Option 4: Are legacy POS solutions available?

Most legacy point-of-sale (POS) systems do not yet support native Bitcoin payments, as traditional payment processors remain heavily tied to the fiat banking system. However, some providers are beginning to experiment with Bitcoin integration, recognizing the growing demand from businesses and consumers.

As demand increases, more traditional POS providers will likely integrate Bitcoin payments, but for now, merchants must use workarounds or hybrid setups to accept Bitcoin while still using their existing systems.

Step 5: How to Process a Transaction

A. Brick and Mortar Payments

Whether you’ve opted for a simple Lightning wallet, or a POS app, the process to accept payments is more or less the same. 

1. Customer places an order: When a customer orders a coffee or any other item, tally the total cost in your local currency as you would for any other transaction.

2. Generate a Bitcoin invoice: Using your payment app, put in the total dollar amount of the order. The app will automatically convert this amount into its equivalent in bitcoin or satoshis (fractions of a Bitcoin) based on the current exchange rate.

3. Display the payment prompt: Once the invoice is generated, your app will display a QR code or activate an NFC instance for the customer to scan or tap with their phone.

4. Customer initiates payment: The customer will open their Lightning-enabled wallet app on their phone. They will then either:

a. Scan the QR code displayed on your device, or

b. Tap their phone against yours if both devices support NFC.

c. Alternatively, if the customer has a Bold Card (Bitcoin NFC card), they can tap that against your device.

5. Payment verification: Once scanned or tapped, the customer’s wallet app will display the payment details, including the amount in bitcoin/satoshis and the merchant information (i.e., your café). The customer should verify that the amount and details are correct.

6. Customer approves the transaction: After verifying the payment details, the customer will be prompted to confirm and accept the transaction on their app. They’ll click or tap the “Accept” or “Confirm” button.

7. Transaction confirmation: Your payment app will instantly receive the payment and notify you of a successful transaction. The Lightning network ensures that this process is quick, often within seconds.

B. Invoicing

Zaprite, CoinCorner Checkout, and Bitcoin Suisse Pay are services that allow anyone to create customized invoices that can be paid with bitcoin or even a bank transfer. The beauty of using such solutions is that the invoice can be issued in dollars, paid in dollars, and still be received in bitcoin. They need not ever know that bitcoin is being transacted; the payer need not even know the payee received bitcoin. 

C. E-commerce Integration

For businesses with an online presence, integrating bitcoin payments can be seamless with solutions like Zaprite, BTCPay Server, OpenNode, Flash, CoinCorner Checkout, or Bitcoin Suisse Pay.

Shopify also supports Bitcoin payments through third-party integrations like BTCPay Server, and OpenNode. Merchants using Shopify can easily add these payment processors to their stores, allowing customers to pay in Bitcoin while keeping checkout smooth and familiar.

Step 8: Educate Staff and Stakeholders

Like any new technology or system adopted by a business, proficiency is critical to leverage its full potential and ensure seamless integration into existing workflows. Stakeholders need to learn about Bitcoin, so as to not make uninformed or rash decisions about the business and its Bitcoin implementation. 

Meanwhile, staff members are at the forefront of daily operations, and their ability to manage Bitcoin transactions effectively will directly impact customer satisfaction and the company’s reputation. Simply put, adequate knowledge safeguards the company’s assets, maintains trust with its clientele, and guarantees that the decision to adopt bitcoin yields the desired advantages. Further, using a solution like Bitwage or CashApp, your staff can be paid in bitcoin, which may lead them to view the company as forward-thinking and progressive in nature. It may also give them the sense of having a vested interest in the business and value their work more.

Step 9: Accounting and Tax Considerations

It’s critical to be aware of the tax implications and accounting requirements when dealing with bitcoin. Regularly consulting a financial advisor or accountant familiar with cryptocurrency can ensure compliance and proper reporting. In the USA, the Financial Accounting Standards Board (FASB) has allowed fair value accounting from 2024. So businesses based in the USA can mark their treasury up or down on their books accordingly.

In most jurisdictions, taxation only applies when the asset is being sold. So a reasonable goal for most small businesses could be (at least in the early stages) to stack a small percentage of bitcoin that will appreciate in value over time. It’s important to keep a record of transactions so that capital gains can be calculated accurately in due course.

Should a business have tight cash flows, then it would be useful to keep the volume of bitcoin received low, which can be done by setting up the payment app to receive payments mostly in dollars. 

Tax advisors: Many accountants still give outdated or inaccurate guidance when it comes to Bitcoin. It’s important to consult a tax advisor in your country who understands Bitcoin’s legal and accounting treatment. To begin your search, perhaps consider starting with Clams and Satoshi Pacioli.

Disclaimer: This article, including any advice and information contained herein, is provided for general informational purposes only and should not be construed as tax advice. Bitcoin Magazine and the author are not offering tax advice to readers. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Readers should consult their own tax advisor or accountant to understand the tax implications of their investments and financial decisions.

Step 10: Bitcoin Accepted Here

Let everyone know you accept bitcoin. At the very least, display a sticker or sign at the checkout to signify that bitcoin is a valid payment method. Additionally, placing a sign on your shop’s window or exterior wall can attract the attention of passers by, especially Bitcoiners.

Collaborate with local Bitcoin enthusiasts and join Bitcoin meetups to promote your services within the local Bitcoin community. Consider contacting local bloggers and/or media to create a local PR campaign, which would inform the broader community about this alternative payment option. Making payments in bitcoin more attractive than dollars would also be hugely advantageous to businesses, assuming the margins are not already too thin. A business that can build bitcoin reserves should benefit greatly from its long-term appreciation.

The above image is a snapshot of BTC Map, 2024.

Of course, you should add your business listing to Satmap and BTC Map, so that your business is noticeable to potential visitors from around the world.

IV. Challenges and Considerations

Bitcoin is young: Bitcoin is still in its nascent stages. Drawing parallels to the early days of business websites, it should be considered an addition to traditional payment systems, not a replacement. The benefit of accepting bitcoin early is better than having a business website in the ’90s. By receiving bitcoin and adding it to your company’s treasury, your business benefits from its price appreciation relative to traditional currencies. Companies like Newegg, Starbucks, Microsoft, Bed & Beyond, Tesla and much more recognize the benefits and accept payments.

POS hardware solutions like Clover, Toast, and Square will integrate bitcoin in due course, if they haven’t already done so. Until then, the onus is upon small businesses to learn about bitcoin and implement a solid solution for their business. 

Price volatility: Bitcoin’s price can be volatile. However, with strategies like immediate conversion or fund splitting, businesses can mitigate potential risks.

Security protocols: Adopting best practices for securing bitcoin assets and transactions is crucial to prevent potential breaches.

Regulatory landscape and taxation: Staying updated with regulations and tax laws is essential to ensuring compliance. In most jurisdictions the taxing authorities treat bitcoin as an investment subject to capital gains tax. We recommend talking to your accountant or tax advisor on how tax would be applied to any bitcoin you receive. 

This post How Local Businesses Can Use Bitcoin For Payments first appeared on Bitcoin Magazine and is written by Conor Mulcahy.

Inflation is an ever-present danger in a monetary economy, especially one that runs on fiat money. Inflation makes your economic eyesight worse: It becomes harder to plan, harder to forecast and harder to determine whether or not you’re making ends meet. And of course, any cash or bank balances you happen to hold buys you less stuff tomorrow. 

Consumers in a monetary economy have no choice but to hold cash from time to time. To prepare for retirement, a rainy day or even next month’s bills, you must dabble in money and set aside your monetary assets in some fashion. 

When the money becomes unstable and prices run away, this task moves from difficult to hopeless. Inflation comes for us all — of the hyperinflation kind, the unexpected kind, or the regular 2-4% a year kind. And we must find a way to deal with it; in inflationary environments, therefore, we need better glasses. 

Defining the problem

A general increase in all (or most) prices is what marks inflation. While the term at one point was reserved for increases in the money supply, economists nowadays use “money expansion” or “money contraction” for that, instead treating inflation as a synonym for the general increase in the price level. 

A change in the general price level reshuffles the purchasing power of assets. It impacts the real meaning of wealth, it causes headaches for consumers trying to make use of prices to do monetary calculation and it erodes the value of money held as cash or cash balances.

Browsing the table makes it shockingly obvious what Michael Saylor means by the dollar as a melting ice cube. If you wish to preserve purchasing power — instead of making a real donation to Uncle Sam, the currency issuer — you cannot hold cash. 

Be proactive about inflation

The best time to prepare for high inflation and potentially even higher inflation to come, is before it happens and before anybody else expects it. The burden of (high) inflation depends on to what extent it was anticipated, and who correctly anticipated it. Financial markets, where most of our assets reside, are forward-looking and fears of inflation get priced into stocks, bonds, yields and mortgage rates at the speed of light. 

The most basic inflationary defense available to most households 2020 and 2021 was to lock in mortgage rates at less than 3%. At 6% CPI, a real interest of -3%, you’re effectively getting paid for having a mortgage. Hurl the burden of inflation onto your banker! 

If you were late to the inflation party, banks have now severely restricted the credit available: The same mortgage that would have cost you less than 3% a few years ago now routinely fetches above 6%.

Most asset prices have already adjusted. Bitcoin, stocks and real estate moved up rapidly in 2020 and 2021 as a result of money printing. You can’t buy insurance on the house after it’s already on fire. 

The question on everybody’s mind is whether inflation will slow to its historic 3-4%, stay elevated at 6-8% or runaway to the double-digits that many other countries are seeing. 

What Does Inflation Mean For You?

Everyone is affected differently by inflation. No matter the Fed’s single-minded focus on broad inflation rates, or the financial press’ obsession with the CPI number, all prices move up at different rates. Some even fall. The bundle of goods and services that you consume are unique to you, a postmodern rate of inflation suitable just for you.

Measures of inflation capture general averages. Some people will face prices going up much faster, others seeing a rate of inflation in their consumption baskets rising much slower.

If you just had a baby or have kids in school, you’re exposed to different price rises than a student, different yet from a retiree. One’s financial circumstances are as much an outcome of decisions we make in life as they are about where and when we are. Those aspects also determine what sorts of evasive maneuvers we can take to protect ourselves against inflation and try to avoid as much of the pain as possible. Factors that matter:: 

• Age determines where we are in the life cycle, how much of our lifetime earnings are ahead of us or behind us, and consequently how much risk we can take with our savings and in our professional lives. 
• Incomes and occupation: some industries are more sensitive to inflation and accompanying changes in interest rates. A high-income earner has a different set of possibilities and risks than a low-income earner; a gig worker is different yet from a tenured professor or government employee. Inflation presents different kinds of risks and opportunities for all.
• Savings and assets: what you already own impacts what decisions you must take to counter inflation or how much attention you must pay to protecting the assets you already have vs. acquiring more, or searching for different income streams. 
• Dependencies: if you have kids or elderly family members that depend on you, safeguarding income streams or assets from inflation becomes even more important. Holding non-yielding assets that don’t pay off for years, for instance, becomes infeasible since you have expenses today. 
• Geography: inflation affects different countries, and regions within countries, differently. Moving within a country or relocating (fleeing?) to another country can be one of the most impactful decisions available. 

How to Protect Against Inflation

The exact anti-inflationary measures depend on your circumstances. Fortunately, a lot of the risks with inflation — in the high but stable kind or the disastrous hyperinflation kind — are different only in degree. Similar actions can be taken in more or more extreme ways. 

Most high-inflation regimes don’t devolve into hyperinflation. But some stay elevated for long, their societies and economies in turmoil for decades; others return to low single-digits. 

1/ Take a Close Look At Your Budget and Expenses

Pay more attention to expenses. Inflation worsens our ability to economically see, so we need more safeguards: like a driver in foggy conditions should keep a greater distance, households in inflationary environments should keep higher margins. That means more savings.  

Paradoxically, more uncertain economic conditions should push us to hold more of our wealth in liquid assets or cash — but non-yielding and fixed-rate assets are precisely the ones that lose purchasing power the most under inflation. 

One set of strategies that work differently in countries with merely high inflation and countries under accelerating, double-digit or hyperinflation, is how to think about purchases. With high inflation, you can lock in current prices by signing up for yearly subscriptions instead of monthly. Buying in bulk is time-tested advice for both lowering your costs and tying up deteriorating money in real goods and services. Under high enough/hyperinflation, the main consumption strategies become a struggle to push as many purchases as far into the future as possible. 

When inflation gets high enough and there is no end in sight, offloading the burden of a melting currency to others becomes the order of the day: have your bosses pay you daily, or several times a day; buy goods in installments, down to clothes and kitchen appliances. You beat inflation by buying as much as you possibly can, as soon as you possibly can, while trying to delay nominal payments. 

Mind your income side too, making sure that your wage adjusts to inflation — the sooner, the better. If you work day jobs or are employed in the gig economy or black-market economy, you might not have the benefit of automatic inflation adjustments to your salaries. If you’re a retiree your income is at the mercy of compensatory calculations like the U.S. COLA, the cost-of-living-adjustment that increased Social Security by 8.7% in January 2023.

There might be important time lags where expenses rise sooner (or faster!) than your wage can adjust. Similarly, you might be lucky to have a nominal wage increase now but you’re still in a fixed-contract for some portion of your expenses (mortgage, rent, insurance); don’t get too comfortable with the windfall, as inflationary pressures will come around to those contracts too (and then some!). Be careful not to confuse Cantillon effects rolling through the economy with increases in your standard of living.

Inflation record-holders like Argentina and Turkey routinely see the ranks of the poor grow, with fewer and fewer people having access to the life-saving escape vehicles of foreign currencies, gold, bitcoin or land.

In Turkey bigger firms, the rich and more financially savvy individuals have avoided much of the inflating lira by holding property and hard currency (physically or with foreign banks). The bagholders are those holding the literal bag of paper money — forced to, because they need to transact or receive salaries, yet unable to protect the value of their earnings by ditching the currency. The Lebanese in the 2020s use black market dollars; Venezuela is filled with dollars and Colombian pesos; Argentina is said to have one of the largest stashes of physical dollars outside the U.S.

2/ Don’t get too comfortable in cash

Cash provides flexibility, leaving you able to tackle unexpected costs. But cash under higher inflation rates is “expensive”; they lose value fast. Unnecessary cash balances are the first thing to economize on. They are the melting ice cubes. 

While simple stories about inflation tell that it benefits the rich who can protect their assets, or it expropriates the poor who hold cash, the reality is often much muddier. The wealthy are often the ones expropriated by a raving government hiking taxes or confiscating assets; the poor might not have that many assets to lose or even hold cash for very long before spending it. 

On a societal level, the problem with a currency collapsing is that economic affairs get harder to navigate. It’s trickier to find out what’s going on; consumers and savers find themselves jumping from one slippery rock to another, never finding solid balance. 

If your wages or incomes rise before general prices do, you benefit. If your wages or income lag the rise in prices, you lose out. That’s the unfortunate and unfair outcome of inflation.

Consider Adding Some Inflation-Resistant Hedges

Avoiding inflation is a game to get out of the currency and into hard assets. In hyperinflating countries that means foreign currencies with less inflation — like the U.S. dollar, euro, or Swiss franc. It also means getting your hands on hard assets, resistant to the eroding effects of inflation: bitcoin, gold, land and real estate.

Bitcoin

In the history of fiat money and asset classes, bitcoin is a new entrant. Even if it hasn’t been around that long, it has shown its value as a hedge against money printing and a seamless way to flee warzones with your wealth intact. Since it hasn’t been around for decades or centuries, we have only limited data on how bitcoin’s financial returns have been under high inflation or hyperinflation. 

The limited data is promising, for instance during the banking crises of 2023 — a high inflationary period — bitcoin performed impressively as a safe haven. This can be attributed to its properties of scarcity and durability, plus its lack of counterparty risk, which are known to be strong store of value attributes. 

Leaving banking fragility aside, bitcoin has been the best-performing asset class in all but three of the previous 13 years. In 2014, U.S. REITs outperformed bitcoin; in 2018 it was U.S. cash; commodities were the best performing asset of 2022. The three years of underperformance coincide with bitcoin’s inherent cycles and U.S. monetary expansion. Monetary expansion is the primary driver of inflation and “bitcoin is a hedge against credit inflation” as per Greg Foss.

Should bitcoin continue on its current monetization path and the bitcoin standard becomes the de facto monetary standard, then there will no longer be a requirement to have an inflation hedge at all, as bitcoin will reprice all other assets to their marginal cost of utility. 

However, it is still early days for bitcoin, and other investment classes will continue to provide value for the foreseeable future, although they come with their own inherent risks, especially during times of uncertainty when their counterparty risk becomes most apparent. 

Gold & Other Commodities

Under inflation you want to own the things that get more expensive, ditch (or short) the worthless paper that gets cheaper. With economic growth, commodities usually get cheaper (relatively speaking) as productivity leads us to economize on their use and find ways to extract more of them from the Earth’s core. 

During (hyper)inflationary episodes, however, prices of commodities tend to react fast and brutally, and often be involved in setting off initial price rises (oil and natural gas, both in the 2020s and 1970s). 

Storing commodities is often a problem. Most financial instruments for commodities today are paper claims, and while taking physical delivery is possible it requires some knowledge of the industry, some preparation on your part and often sizable transactions. 

Gold has a long history of outperforming many other assets during periods of high inflation, but can offer sluggish returns at other times. While gold can be held in smaller quantities like coins, and avoid the trouble of financially traded paper claims, they are still difficult to transact with — both in your immediate surroundings as well as over long distances. It’s hard to pay with gold coins online; it takes a lot of effort to cross borders with gold bars in your backpack. 

Real Estate

Properties and land are classic assets to avoid some of inflation’s effects. Since they’re real rather than nominal and since they produce variable income streams (rents that can be adjusted; commodities whose prices often rise with inflation), they can offer great protection against a collapsing currency. 

As a way to escape inflation, of the high or hyper caliber, real estate can work well, provided that 

• You can keep the house, property or land; that society doesn’t fully collapse; and that you’re not forced to flee or sell it at a loss. 
• You own it with decent leverage. A mortgage is the most basic and widespread way to short the currency and in inflationary periods that can pay off handsomely.

Like most assets that do acceptably well under high inflation regimes, the liquidity can be tough to manage, and you might have to hold the assets for years before being able to realize their “return” — or even get a price estimate for them. 

In the longest time series we have for real estate, reaching back hundreds of years, real property prices have had an upward trend for about 400 years. They can fall for as long as a generation or two, and judging from the historical record during wartime the drawdowns can be quite steep. Real estate is not bulletproof, as some instances of rapidly falling property prices occurred in inflationary periods in the double or triple digits.

Foreign (Harder) Currencies; Inflation-Indexation

Living in monetary economies we have little choice but holding some cash for transactional purposes.

People in developing countries suffering under hyperinflation often amass stacks of physical dollar bills. In countries close to the eurozone, like Eastern Europe or North Africa, euros might also do the trick. The Swiss franc has a long reputation of being a safe haven, having been the fiat currency that’s inflated the least in the last half century or so. 

The downside with holding less inflationary fiat currencies is that you’re still holding melting ice cubes; the reduction in purchasing power is smaller, but just as guaranteed. 

 In countries with a well-functioning financial system, where the inflationary period doesn’t hurl the country into failed-state territory, there are often opportunities to hold inflation-indexed assets. These are assets that provide a given return plus the official rate of inflation measured in CPI. Some examples in the U.S. involve TIPS or I-bonds, but in both cases you’re trusting the U.S. government — both as a counterparty or custodian of the asset not to renege on the promise, and as an oracle for the accurate calculation of CPI. Money market mutual funds, earning roughly the yield on (short-dated) Treasuries, minus some small management fees, can be a viable option for funds you need to spend in the next few weeks or months. 

Unless you expect the inflation to run out of control, the counterparty custodian to rug-pull you or the government to outright default, these types are short-term money stacks combats the loss of purchasing power while leaving you near-instant access to your funds.

Stocks

Numerous studies have looked at the effect of inflation on stock returns. Unfortunately, they often produce conflicting results. Most researchers have found that higher inflation has generally correlated with lower equity valuations, which means that stocks can’t really be relied upon to counteract the effects of inflation. 

Historically, you can do fairly well owning stocks during inflationary periods, provided you bought them cheap enough: If you bought stocks at attractive valuations before an inflationary period – before WWI or WWII, say – U.S. stocks proved good inflation-hedges and even gave decent real returns. If you did the same before the 1970s inflation, you would have underperformed even bonds, losing purchasing power quite spectacularly. 

Stocks as an asset class aren’t clear winners or losers during inflationary periods.

Bottom line

Inflation turns everyone into a price speculator. With inflation, consumers must spend time and effort managing their liquidity and making sure that cash in the bank or the wallet don’t lose too much purchasing power. It’s an ever-losing battle where any amount of cash not earning a return enough to compensate you for inflation is a net negative to your finances. But you have bills coming due, and holding assets exposes you to losses in market prices. 

Lose-lose: You either hold cash for a guaranteed value loss (but gain peace of mind) or you hold assets that could outperform inflation, but may abruptly fall in value (and cause you sleepless nights). 

Instead of merely balancing their incomes and expenses without thinking about the broken money, households must balance what they hold in value-losing cash against the known and unknown expenses they have coming up. 

Inflation, whether high or low, hurts everyone by making the economy harder to navigate. The higher it gets, the more it becomes a struggle for survival where offloading the burden of inflation to somebody else becomes the name of the game. 

It’s impossible to avoid inflation entirely. Some of the best escape hatches have been hard assets such as gold, land or property, but since bitcoin was invented in 2009 those looking to protect themselves against inflation — or flee a hyperinflating country with their wealth intact — bitcoin now provides the ultimate life raft. 

This post How To Protect Your Savings From High Inflation first appeared on Bitcoin Magazine and is written by Conor Mulcahy.

As Bitcoin matures from being recognized as a risky asset to gaining acceptance at corporate and even sovereign levels as the future of digital capital, its utility in financial applications continues to expand. Bitcoin-backed loans are a key example of this evolution, allowing holders to leverage their bitcoin for liquidity without selling it. These loans build on Bitcoin’s robust security and decentralized design, creating a pathway for a financial system free from intermediaries and censorship.

Read our in-depth guide on how bitcoin-backed loans work, which explains the mechanics of these loans to help you make well-informed decisions. A helpful rule of thumb to keep in mind: loans with lower repayment rates often come with higher risks, as they typically leverage your collateral to reduce the APR.

Below, we explore some of the most notable platforms offering bitcoin-backed loans. Each has unique features, advantages, and trade-offs. It’s essential to research each one thoroughly to find the solution that best aligns with your needs.

Bitfinex

Bitfinex, established in 2012, is a well-known cryptocurrency exchange that also offers Bitcoin-backed loans through its lending platform. Bitfinex Borrow allows users to borrow funds using their bitcoin as collateral with a loan-to-value (LTV) ratio of up to 80%, one of the highest in the market. Interest rates are competitive and vary based on loan duration and market conditions.

The platform supports flexible loan terms and multiple currencies, including USD, USDT, and EUR. Borrowers maintain custody of their collateral through Bitfinex’s secure storage solutions, which utilize multi-signature wallets. However, higher LTV ratios come with increased liquidation risks, so borrowers should monitor their collateral closely. Bitfinex Borrow is available to eligible users worldwide, excluding certain restricted jurisdictions.

Coinbase

Coinbase offers a seamless bitcoin-backed loan product, powered by Morpho, that allows users to borrow against their BTC holdings. The U.S.-based exchange provides loans in USDC stablecoin directly through the Coinbase app, making it accessible to long-term bitcoin holders seeking liquidity without triggering a taxable event.

Borrowers can access funds almost instantly once bitcoin collateral is deposited, with no credit checks or fixed repayment schedule. Interest rates are variable and determined by market conditions within Coinbase’s lending protocol, with rates typically between 4-8%. Loans can reach up to $1 million in USDC.

Coinbase’s bitcoin-backed loans are overcollateralized and carry a liquidation threshold around 86%, meaning that if bitcoin’s value drops significantly, collateral can be sold to cover the loan. The service combines Coinbase’s familiar interface and compliance standards with decentralized infrastructure, offering a convenient option for bitcoin holders who want cash flow without selling their bitcoin.

Debifi

Debifi is a peer-to-peer lending platform under development by Hodl Hodl, set to launch in 2025. It is designed to allow users to borrow long-term loans in fiat currencies or stablecoins using bitcoin as collateral. Loans are structured through non-custodial multi-signature smart contracts, ensuring borrowers retain control of their bitcoin while minimizing counterparty risk.

Debifi offers flexible terms where lenders and borrowers can set their own parameters, such as interest rates and repayment schedules. The platform emphasizes privacy and decentralization, requiring no KYC for participants. Borrowers should monitor their loan-to-value (LTV) ratios closely to avoid liquidation risks. Debifi aims to cater to a global audience, offering an alternative to traditional lending with a focus on censorship resistance and user autonomy.

Firefish

Firefish is a Bitcoin-focused financial platform established in 2022 and headquartered in Prague, Czech Republic. Serving primarily the European market, Firefish offers a range of services including trading, custody, and bitcoin-backed loans. Its lending product features loan-to-value (LTV) ratios of up to 50%, with interest rates determined by the loan’s duration and terms. Loan terms typically range from 3 to 18 months, providing flexibility to borrowers.

Collateral is secured in multi-signature wallets, enhancing security and minimizing counterparty risk. Firefish does not rehypothecate user bitcoin, ensuring borrowers retain full control over their assets. Loans are disbursed in EUR or CZK directly to borrowers’ bank accounts. With its transparent, no-nonsense approach, Firefish is an excellent choice for individuals in Europe seeking liquidity while preserving their bitcoin holdings. Borrowers should carefully review the terms and monitor LTV thresholds to manage potential liquidation risks.

FUJI Finance

Fuji is a Liquid-based non-custodial protocol that enables the borrowing of synthetic assets (tokens that are digital representations of derivatives), such as stablecoins and synthetic stocks or bonds, against over-collateralized bitcoin positions.

Anyone can use Fuji to borrow any asset offered on the platform after locking L-BTC (Liquid Bitcoin) as collateral in a smart contract. The smart contract creates 1 fUSD (Fuji USD) for each $1.50 worth of BTC locked. More collateral automatically decreases the risk of liquidation.

The borrower can always get the entire collateral back once the debt is settled. Repayment occurs upon burning the same amount of Fuji assets issued for this collateral, plus a small 0.25% payout for the redemption of the locked collateral.

HODL HODL

In 2023, P2P (peer-to-peer) bitcoin trading and lending company Hodl Hodl will launch the new platform Debifi, which will allow users to borrow long-term loans in stablecoins and fiat currencies using their bitcoin as collateral.

Some financial institutions have already shown interest in joining the platform as lenders. The platform already offers bitcoin-backed loans, but support by better liquidity providers such as banks should be an added benefit for Hodl Hodl and its customers.

Their current offer includes non-custodial P2P bitcoin-backed loans that both lenders and borrowers can benefit from anonymously, and by setting their own terms, including loan duration, interest rates, and currencies used.

The company creates a multisig escrow contract where the borrower’s bitcoin is held. The lender transfers the loan amount to the borrower according to the contract. When the loan is repaid, the lender releases the bitcoin back to the borrower’s wallet.

Lava

Lava is a decentralized financial platform established in 2022, offering Bitcoin-backed loans and other services such as wallet integration and trading tools. Operating primarily in the United States, Lava provides borrowers with a streamlined, non-custodial lending solution. Loans feature loan-to-value (LTV) ratios of up to 60%, with interest rates starting as low as 4%, depending on the collateral used.

Collateral is managed via trustless smart contracts, ensuring that borrowers retain full oversight of their bitcoin throughout the loan term. The platform’s transparent, KYC-free approach appeals to those who prioritize privacy and decentralization. Borrowers should carefully monitor market volatility and LTV thresholds to mitigate liquidation risks, especially in rapidly changing conditions.

Ledn

Ledn is a Canadian cryptocurrency platform that provides BTC and USDC savings accounts to its customers, who can earn interest on these assets or borrow against them. Ledn provides Proof-of-Reserve attestations overseen by an independent certified public accountant.

Clients’ privacy is preserved with a unique anonymized ID for every client reference number; the individual’s identity is never revealed to the independent accounting firm. Moreover, Ledn uses BitGo for cold storage of clients’ deposited bitcoin. In their T&C’s, they state that they may pledge, repledge, hypothecate, rehypothecate c

Ledn bitcoin-backed loans require an initial LTV ratio of 50%. When it reaches 70%, Ledn starts warning the borrower that it will liquidate enough BTC to repay part of the debt. If the LTV hits 80%, then all of the collateral Bitcoin will be liquidated unless more collateral is added to the loan.

Ledn only requires one payment at the end when the client wants to close the loan and avoids monthly interest payments, which is more convenient for the borrower.

The company has also started rolling out bitcoin mortgages in Ontario, Canada, allowing borrowers to use BTC as collateral in addition to the property’s value to secure the loan. Pairing it with the property’s value, the mortgage becomes overcollateralized, meaning that the collateral backing a loan is worth more than the loan itself, drastically reducing the chances that a loan is liquidated.

Sovryn Zero

Sovryn is a decentralized trading and lending protocol built on RSK (Rootstock). RSK is a Bitcoin side-chain that is simultaneously merge-mined with Bitcoin for enhanced security. It has a native currency called RBTC, which is meant to be a 1:1 BTC peg.

BTC conversion to RBTC is required to access Zero, a decentralized protocol that enables customers to borrow ZUSD — a USD-pegged stablecoin — with zero interest using BTC as collateral. People must still place trust in an intermediary, in this case, the centralized platform.

The Sovryn loan’s minimum collateral ratio (collateral/debt) is 110%, which means that you must keep your loan collateralized above 110% at all times, without exception. BTC must first be converted into RBTC and then transferred to the Rootstock bitcoin sidechain to be used as collateral. Sovryn claims that the Zero protocol is non-custodial, governed by stakers according to the Bitocracy protocol rules, and operated by smart contracts that users interact with in a KYC-free manner.

Unchained Capital

Unchained Capital is a bitcoin-only financial services company offering bitcoin-backed loans in the U.S. The Texas-based company was established in 2017 to offer bitcoin collaborative custody, trading, and lending.

Long-term bitcoin holders can apply for loans and get a decision rather quickly, usually within 24 hours. It provides no rehypothecation and no credit checks; all that is required is a bitcoin deposit as collateral.

Fees and interest rates are variable depending on duration, but annual percentage rates (APRs) start at 12.58%, interest rates at 11%, and origination fee at 0.75%.

Verifi21

Verifi21 is a bitcoin-only lending company set to launch for European customers in Q1 2025. The platform offers a straightforward loan application process, claiming it can be completed in approximately five minutes, with necessary KYC verification. Initially, funding will be available in USD stablecoins and Euros. Verifi21 accepts only bitcoin as collateral and does not rehypothecate client assets, ensuring that collateral is stored securely with institutional custody partners. The company conducts bi-annual proof of reserve audits to maintain transparency. While specific interest rates are yet to be announced, initial loans are expected to have a one-year term. Borrowers will be notified to top up their collateral if bitcoin’s price declines significantly, approaching a risky LTV ratio; failure to do so may result in collateral liquidation to settle the loan, with any excess returned to the client.

ZEST

Zest protocol is an on-chain bitcoin capital market that allows clients to borrow cash from liquidity providers (LPs) who join professionally managed lending pools. LPs can earn 4-6% bitcoin yield this way, while borrowers can obtain on-chain bitcoin loans directly against their balance sheets. Zest is exclusive to institutional and corporate borrowers at this stage.

Strict KYC procedures are applied to borrowers who must be approved following a standard process.

This post Best Bitcoin Backed Loans first appeared on Bitcoin Magazine and is written by Conor Mulcahy.

Bitcoin has consistently outperformed all major asset classes over the past decade, solidifying its role as the benchmark for digital asset investors. For those committed to Bitcoin’s long-term vision, the ultimate financial goal often shifts from acquiring more dollars to maximizing their Bitcoin holdings.

Bitcoin is the Hurdle Rate

Bitcoin is to digital assets what treasury bonds are to the legacy financial system—a foundational benchmark. While no investment is without risk, Bitcoin held in self-custody eliminates counterparty risk, dilution risk, and other systemic risks common in traditional finance.

With BTC outperforming every other asset class in 9 of the past 12 years (by orders of magnitude), it’s no surprise that it has usurped treasury bonds as the “risk free rate” in the minds of many investors – especially those knowledgeable about monetary history and thus the appeal of Bitcoin’s verifiable scarcity.

Another way to phrase this would be that the financial objective of digital asset investors is to acquire more BTC rather than acquire more dollars. All investments or spending are viewed through the lens of BTC being the opportunity cost.

MicroStrategy has demonstrated what this looks like in the corporate world with their new KPI: BTC Yield. To quote from their September 20th, 8-K form: “The Company uses BTC Yield as a KPI to help assess the performance of its strategy of acquiring bitcoin in a manner the Company believes is accretive to shareholders.” MicroStrategy has taken full advantage of the tools available to them as a multi-billion dollar public company: access to low interest rate debt and the ability to issue new shares. This KPI shows that they are acquiring more BTC per outstanding share despite the fact that they are engaging in the traditionally dilutive activity of new share issuance.

Mission accomplished: they are acquiring more bitcoin.

But MicroStrategy has an advantage that the average fund manager or retail investor does not: they are a publicly traded company with the ability to tap into capital markets at little to no relative cost. Individual holders are unable to issue shares into the public market in order to raise capital and acquire BTC. Nor can we issue convertible notes and borrow dollars at a near zero % interest rate.

So that begs the question: how can we accumulate more bitcoin? How can we have a positive ‘BTC Yield’?

Bitcoin Mining

Bitcoin miners acquire BTC by contributing computational power to the Bitcoin network, and receiving a greater amount of BTC than what it costs in electricity to operate their machine(s). Now this is easier said than done. The Bitcoin protocol enforces a predetermined supply schedule using “difficulty adjustments” – meaning that more computational power dedicated towards Bitcoin mining results in the finite block rewards getting split up into smaller pieces.

The most effective Bitcoin miners are those that maximize their computational power while minimizing their operational costs. This is accomplished by acquiring the latest, most-efficient Bitcoin mining hardware, and operating with the lowest possible electricity rate.

Under current market conditions (as of 11/21/2024), 1 bitcoin has a price of ~$98,000. However, an Antminer S21 Pro mining with an electricity rate of $0.078/kWh is able to produce 1 BTC for ~$40,000 in electricity. This is an operating margin of nearly 145%. A business is typically considered to have “healthy profit margins” if they are in the 5-10% range – mining beats this easily. This is in spite of the fact that as of the April 2024 Bitcoin halving, they earn half as much BTC per unit of compute.

Price Growth Outpacing Difficulty Growth

The price of a financial asset – specifically bitcoin – is set at the margin. This means that the asset’s price is determined by the most recent transactions between buyers and sellers. In other words, the price reflects what the last buyer is willing to pay and what the last seller is willing to accept.

This, in part, is what enables BTC’s notoriously volatile price action. A lack of sellers at price X means buyers must bid the price higher than X in order to find the next marginal seller. Inversely, a lack of buyers at price X means a seller must lower their ask to find the next marginal buyer. BTC can quickly move up or down based on a lack of sellers or buyers in a specific range.

Consequently, the velocity at which the Bitcoin price can move is much higher than that of network mining difficulty. Substantial growth in network mining difficulty is not achieved by marginal bid/ask spreads, it is achieved by the culmination of ASIC manufacturing, energy production, and mining infrastructure development. There is not shortcutting the time and human capital necessary to increase the total computational power on the Bitcoin network.

This dynamic is what creates opportunities for Bitcoin miners to accumulate vast amounts of bitcoin.

The chart here illustrates the explosive growth of Bitcoin mining profitability that takes place during bull markets. “Hashprice” measures the amount of revenue that Bitcoin miners earn per unit of compute on a daily basis. On a year-over-year basis, hashprice has increased by more than 300% at the height of each bitcoin mining cycle. This means that miners have had their profit margins more than triple in a 12-month span.

Over the long-run this metric trends down as more entities begin mining bitcoin, miners upgrade to more powerful & efficient machines, and the block subsidy is cut in half every four years. However, during bull markets, the combination of the forces that are a positive catalyst for mining difficulty (and thus net-negative for mining profitability) pale in comparison to the rapid growth in the price of bitcoin.

Price Volatility in Bitcoin Mining Hardware

In addition to wider profit margins during bull markets, Bitcoin miners have the simultaneous benefit of the fact that ASIC prices tend to move in tandem with the Bitcoin price. During the 2020 – 2024 cycle, the Antminer S19 (most efficient ASIC at the time) began trading at ~$24/T. By November 2021 – when the BTC price was peaking – they began trading for north of $120/T.

Bitcoin mining hardware retaining resale value is becoming increasingly the case with each new generation of hardware. In the early days of Bitcoin mining, technological advancements were swift and forceful – to the point that new ASICs would make older models obsolete overnight. However, the marginal gains of new ASICs have diminished to the point that older models are able to remain competitive for multiple years after release.

Since the S19 was launched in 2020 and retains a non-zero market price today, it is reasonable to expect that the S21 line of machines will be able to retain value for even longer. This gives miners a significant leg-up when it comes to a
ccumulating bitcoin, because the upfront cost of purchasing machines is no longer “sunk”. Their machines have a price, one that is correlated to bitcoin, and there is a resource available to get liquidity.

Blockware Marketplace

Blockware developed this platform to enable any investor – institutional or retail – the opportunity to gain direct exposure to Bitcoin mining. Users of the marketplace are able to purchase Bitcoin mining rigs that are hosted at one of Blockware’s tier 1 data centers and have access to industrial power prices. These machines are online already, eliminating lengthy lead times that have historically caused some miners to miss out on those key months in the cycle in which price is outpacing network difficulty.

Moreover, this platform is built by Bitcoiners, for Bitcoiners. Which means that machines are purchased using Bitcoin as the medium of exchange, and mining rewards are never held by Blockware – they are sent directly to the users own wallet.

Lastly, this provides miners with the aforementioned opportunity, but not obligation, to sell their machines at any time and price. This enables miners to capitalize on volatility in ASIC prices, recoup the cost of their machines, and accumulate more BTC faster than they would with a traditional “pure play” approach.

This innovation removes the obstacles that have historically made hosted mining difficult, enabling miners to concentrate on the mission: accumulating more Bitcoin.

For institutional investors looking for bulk pricing on mining hardware, contact the Blockware team directly.

This post Maximizing Bitcoin Accumulation – Beyond the Benchmark first appeared on Bitcoin Magazine and is written by Blockware.

Ever since its 2009 development by the mysterious Satoshi Nakamoto, Bitcoin has become foundational to the cryptocurrency and fintech landscape. As the first decentralized cryptocurrency, Bitcoin has driven significant growth in blockchain technology, becoming the most visible and widely adopted coin on the market. With the ability to conduct seamless transactions on the blockchain, Bitcoin has been adopted as legal tender in some countries and embraced worldwide for a variety of uses.

Today, Bitcoin is used by people globally for various services. Notably, Bitcoin has gained adoption not only as legal currency in El Salvador but also for every day transactions—whether trading a pizza from Papa John’s or depositing funds at online casinos and sports betting websites.

Bitcoin’s value lies in its enhanced privacy, cryptographic security, and the development of encrypted wallets that ensure safe transactions on a global scale. Let’s dive into how Bitcoin works, how to use it, and the best ways to keep it secure:

What is Bitcoin (BTC) & How Does it Work?

Despite being around for more than a decade, newcomers may still wonder, “what is bitcoin?” Simply put, Bitcoin is a decentralized digital currency that operates independently of any central bank. Instead of relying on a traditional financial institution, Bitcoin transactions are verified by networked computers through a process known as mining, which involves solving complex mathematical problems. Once mined, Bitcoin can be transferred directly to others or used for purchases with bitcoin-accepting vendors, with each transaction recorded on a public ledger—the blockchain.

This decentralized, peer-to-peer system ensures that all Bitcoin transactions are transparent yet pseudonymous. Even though each transaction is publicly available on the blockchain, the identities of the transacting parties can remain private.

How to Use Bitcoin Online

Before first buying and using bitcoin, you will need to set up a wallet in which to store it. Here’s a simple guide to start using Bitcoin:

Set Up a Wallet: Choose a secure Bitcoin wallet for your needs. You’ll need both a public key (like an account number) for receiving funds and a private key (like a password) for authorizing transactions. Many hot wallets and cold wallets are available, each with its pros and cons for different users.

Find Vendors that Accept Bitcoin: Many online services and products now accept Bitcoin, although some may only accept other cryptocurrencies. Once you’ve found a vendor, you can use your wallet to send Bitcoin directly for goods or services.

Send Bitcoin to Other Users: Bitcoin transfers are similar to traditional bank transfers, though they remain independent of banks. Ask the recipient for their wallet address, then transfer funds directly to their wallet.

How to Store Bitcoin Safely

When using Bitcoin, securing your funds is critical. Here are key wallet types and best practices for safe Bitcoin storage:

Hot Wallets: These are digital wallets connected to the internet, such as mobile or web apps. Hot wallets are convenient for frequent transactions but are more vulnerable to cyber threats. When using hot wallets, consider diversifying to reduce risk.

Cold Wallets: Cold wallets, like hardware wallets, are offline storage solutions, ideal for long-term holdings. These wallets are disconnected from the internet, making them less accessible to potential hackers. While they’re more secure, they can be less convenient for immediate transactions.

Seed Phrases and Private Keys: When you set up a wallet, you’ll often receive a seed phrase—a recovery phrase that enables you to restore your funds if you lose access to your wallet. It’s essential to keep both your seed phrase and private key secure and offline. The public key can be shared with anyone for receiving Bitcoin, but the private key must remain private to ensure the safety of your funds.

Why You Should Use Bitcoin

There are many reasons why people choose to use Bitcoin, and here are some of the most popular benefits:

1. Privacy and Decentralization: Bitcoin’s independence from central banks and financial institutions allows users to make private, pseudonymous transactions. This feature makes it an appealing choice for those looking to protect their financial privacy.
2. Global Payment Solution: Bitcoin allows users to conduct transactions across borders without worrying about exchange fees. You’ll only need to pay a small transaction fee on crypto exchanges, with no need to exchange fiat currencies like dollars to euros.
3. Wider Acceptance: With increased adoption, Bitcoin is now accepted by a growing number of companies and online platforms. Whether it’s for gaming on sites like Stake.com or making everyday purchases, Bitcoin’s utility continues to expand.

Bitcoin: The Future of Finance

Bitcoin offers a decentralized, secure method of conducting transactions that emphasizes user control, privacy, and a simplified financial process. As Bitcoin continues to grow in use and adoption, learning how to use and store it safely has never been more critical. Following these best practices can help you protect your assets and enjoy the benefits of this revolutionary digital currency.

This post How to Use & Store Bitcoin Safely first appeared on Bitcoin Magazine and is written by Bitcoin Magazine.

Bitcoin could be on the verge of a major new bull run. According to Tuur Demeester of Adamant Research, in his publication How to Position for the Bitcoin Boom, we may be in the early stages of a new multi-year bull market that could propel bitcoin prices into six figures.

“During this accumulation phase, we expect bitcoin to trade in a range of $22,000 to $42,000, until a new multi-year bull market pushes it well north of $120,000,” Demeester noted.

Imagine securing a substantial allocation of bitcoin before this bull run begins—an allocation that could appreciate completely tax-free, funded by an old retirement account that you might have totally forgotten about!

Step 1: Purchase hardware wallets

The first step is obtaining the tools you need to ensure your bitcoin is secure. A hardware wallet allows you to store your bitcoin keys offline, giving you full control of your funds.

Begin by purchasing a couple of hardware wallets, such as those offered by Trezor or Ledger. Unchained currently supports a range of devices, including the Ledger Nano X, Trezor Model T, and Coldcard Mk4. Check out the full list of hardware wallets Unchained supports.

For optimal security, it’s recommended to buy directly from the manufacturer, but purchasing from a trusted third-party retailer, like Best Buy, is also acceptable. This is especially true in the context of multisig which eliminates any single key as a single point of failure.

Make sure to get at least two wallets—you’ll need both to set up your Unchained IRA vault.

Step 2: Create an account on Unchained.com

Next, go to Unchained and create an account. The process is simple: provide your name, email, phone number, and create a strong password. Unchained takes your privacy seriously.

Once your account is created, select the type of account you need—in this case we’re creating an IRA account. If you prefer personalized assistance, consider opting for Unchained’s Concierge Onboarding, where a bitcoin custody expert will guide you through every step.

Step 3: Create your Unchained IRA account—with no setup or account fees for the first year!

Now it’s time to set up your IRA account. With an Unchained IRA, you can save bitcoin in a tax-advantaged manner while maintaining full control of your keys. There is no third-party risk because you hold the keys—ensuring that no one else can access your bitcoin.

Setting up an account is straightforward—there are no setup fees, account fees don’t start until the second year, and you can see trading fees on our pricing page. Unchained’s IRA offers both Traditional and Roth options, allowing you to choose the best fit for your retirement strategy.

Step 4: Follow the Self-Service guide for vault setup

After setting up your account, it’s time to set up your multisig vault—one of the most secure ways to secure bitcoin. Multisig requires more than one key to authorize a transaction, which mitigates the risks associated with custodian and exchange hacks, bad business practices, or individual mistakes.

You can set up this secure multisig configuration in under an hour using Unchained’s Self-Service Onboarding. Simply follow the guide at diy.unchained.com to get started—if you’re using two hardware wallets to build your vault, you’ll choose the Lead custody model.

Step 5: Roll over your existing 401k/IRA

Next, you’ll need to fund your new IRA, and there are a few ways to do it: an IRA-to-IRA transfer, a 401(k)-to-IRA rollover, or an annual contribution. The most common method is rolling over funds from an existing 401(k) or IRA into your new Unchained IRA.

While this process can feel tedious—particularly if your 401(k) administrator needs to issue you a physical check—it is straightforward. Once you receive your funds, Unchained will convert them to bitcoin with our trading desk and deposit them into your IRA vault.

If you already hold bitcoin in another IRA, you can do an in-kind transfer to move your bitcoin directly to Unchained without converting to cash first. If you want to learn more about how to fund your IRA, we have a full Knowledge Base article for that.

Step 6: Enjoy the benefits of tax-advantaged bitcoin

Congratulations—your retirement savings are now secured in bitcoin! Unchained offers flat annual fees. Starting in year two, you’ll pay a flat $250 annual fee for your IRA account.

Holding bitcoin in a tax-advantaged account combines the inflation resistance of bitcoin with the benefits of an IRA. Most importantly, you remain in charge of your bitcoin—not an exchange or third party. If the bull run is approaching as many suspect, the Unchained IRA could put you in position to watch your retirement savings grow.

This article is provided for educational purposes only, and cannot be relied upon as tax or investment advice. Unchained makes no representations regarding the tax consequences or investment suitability of any structure described herein, and all such questions should be directed to a tax or financial advisor of your choice. Statements regarding market or other financial information, are obtained from sources that we believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information.

This post 6 steps to move an old 401k into a bitcoin IRA first appeared on Bitcoin Magazine and is written by Unchained Capital.

The following is an essay originally published on Unchained.com by Dhruv Bansal, CSO and Co-founder of Unchained, the Official US Collaborative Custody Partner of Bitcoin Magazine. For more information on services offered, custody products, and the relationship between Unchained and Bitcoin Magazine, please visit our website.

Click here to download a PDF of this 7,000 word essay on the origins of Bitcoin.

Bitcoin is often compared to the internet in the 1990s, but I believe the better analogy is to the telegraph in the 1840s.[1]

The telegraph was the first technology to transmit encoded data at near-light speed over long distances. It marked the birth of the telecommunications industry. The internet, though it is bigger in scale, richer in content, and manyto-many instead of one-to-one, is fundamentally still a telecommunications technology.

Both the telegraph and the internet rely upon business models in which companies deploy capital to build a physical network and then charge users to send messages through this network. AT&T’s network has historically transmitted telegrams, telephone calls, TCP/IP packets, text messages, and now TikToks.

The transformation of society through telecom has led to greater freedoms but also greater centralization. The internet has increased the reach of millions of content creators and small businesses, but has also strengthened the grasp of companies, governments and other institutions well-positioned enough to monitor and manipulate online activity.

But bitcoin is not the end of any transformation— it’s the beginning of one. Like telecommunications, bitcoin will change both human society and daily life. Predicting the full scope of this change today is akin to imagining the internet while living in the era of the telegraph.

This series attempts to imagine this future by starting with the past. This initial article traces the history of digital currencies before bitcoin. Only by understanding where prior projects fell short can we perceive what makes bitcoin succeed—and how it suggests a methodology for building the decentralized systems of the future.

Outline

I. Decentralized systems are markets
II. Decentralized markets require decentralized goods
III. How can decentralized systems price computations?
IV. Satoshi’s monetary policy goals led to bitcoin
V. Conclusion

A central claim of this article is that bitcoin can be thought of as an adaptation of Dai’s b-money project that eliminates the freedom to create money. Just weeks after this article was originally published, new emails surfaced in which Satoshi claimed to be unfamiliar with b-money, yet admitted that bitcoin starts “from exactly that point.” In light of this new evidence, we believe this central claim, while not historically accurate, is still a meaningful and helpful way to think about the origin of bitcoin. 

How did Satoshi think of bitcoin?

Satoshi was brilliant, but bitcoin didn’t come out of nowhere.

Bitcoin iterated on existing work in cryptography, distributed systems, economics, and political philosophy. The concept of proof-of-work existed long before its use in money and prior cypherpunks such as Nick Szabo, Wei Dai, & Hal Finney anticipated and influenced the design of bitcoin with projects such as bit gold, b-money, and RPOW. Consider that, by 2008, when Satoshi wrote the bitcoin white paper,[2] many of the ideas important to bitcoin had already been proposed and/or implemented:

• Digital currencies should be P2P networks
• Proof-of-work is the basis of money creation
• Money is created through an auction
• Public key cryptography is used to define ownership & transfer of coins
• Transactions are batched into blocks
• Blocks are chained together through proof-of-work
• All blocks are stored by all participants

Bitcoin leverages all these concepts, but Satoshi didn’t originate any of them. To better understand Satoshi’s contribution, we should determine which principles of bitcoin are missing from the list.

Some obvious candidates are the finite supply of bitcoin, Nakamoto consensus, and the difficulty adjustment algorithm. But what led Satoshi to these ideas in the first place?

This article explores the history of digital currencies and makes the case that Satoshi’s focus on sound monetary policy is what led bitcoin to surmount challenges that defeated prior projects such as bit gold and b-money.

I. Decentralized systems are markets 

Bitcoin is often described as a decentralized or distributed system. Unfortunately, the words “decentralized” and “distributed” are frequently confused. When applied to digital systems, both terms refer to ways a monolithic application can be decomposed into a network of communicating pieces.

For our purposes, the major difference between decentralized and distributed systems is not the topology of their network diagrams, but the way they enforce rules. We take some time in the following section to compare distributed and decentralized systems and motivate the idea that robust decentralized systems are markets.

Distributed systems rely upon central authorities

In this work, we take “distributed” to mean any system that has been broken up into many parts (often referred to as “nodes”) which must communicate, typically over a network.

Software engineers have grown adept at building globally distributed systems. The internet is composed of distributed systems collectively containing billions of nodes. We each have a node in our pocket that both participates in and relies upon these systems.

But almost all the distributed systems we use today are governed by some central authority, typically a system administrator, company, or government that is mutually trusted by all nodes in the system.

Central authorities ensure all nodes adhere to the system s rules and remove, repair, or punish nodes that fail to do so. They are trusted to provide coordination, resolve conflicts, and allocate shared resources. Over time, central authorities manage changes to the system, upgrading it or adding features, and ensuring that participating nodes comply with the changes.

The benefits a distributed system gains from relying upon a central authority come with costs. While the system is robust against failures of its nodes, a failure of its central authority may cause it to stop functioning overall. The ability for the central authority to unilaterally make decisions means that subverting or eliminating the central authority is sufficient to control or destroy the entire system.

Despite these trade-offs, if there is a requirement that a single party or coalition must retain central authority, or if the participants within the system are content with relying upon a central authority, then a traditional distributed system is the best solution. No blockchain, token, or similar decentralized dressing is required.

In particular, the case of a VC- or government-backed cryptocurrency, with requirements that a single party can monitor or restrict payments and freeze accounts, is the perfect use case for a traditional distributed system.

Decentralized systems have no central authorities 

We take “decentralized” to have a stronger meaning than “distributed”: decentralized systems are a subset of distributed systems that lack any central authority. A close synonym for “decentralized” is “peer-to-peer” (P2P). 

Removing central authority confers several advantages. Decentralized systems:

• Grow quickly because they lack barriers to entry—anyone can grow the system by simply running a new node, and there is no requirement for registration or approval from the central authority.
• Are robust because there is no central authority whose failure can compromise the functioning of the system. All nodes are the same, so failures are local and the network routes around damage.
• Are difficult to capture, regulate, tax, or surveil because they lack centralized points of control for governments to subvert.

These strengths are why Satoshi chose a decentralized, peer-to-peer design for bitcoin:

“Governments are good at cutting off the heads of… centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.” – Nakamoto, 2008

But these strengths come with corresponding weaknesses. Decentralized systems can be less efficient as each node must additionally bear responsibilities for coordination previously assumed by the central authority.

Decentralized systems are also plagued by scammy, adversarial behavior. Despite Satoshi’s nod to Gnutella, anyone who’s used a P2P file sharing program to download a file that turned out to be something gross or malicious understands the reasons that P2P file sharing never became the mainstream model for data transfer online.

Satoshi didn’t name it explicitly, but email is another decentralized system that has evaded government controls. And email is similarly notorious for spam.

Decentralized systems are governed through incentives

The root problem, in all of these cases, is that adversarial behavior (seeding bad files, sending spam emails) is not punished, and cooperative behavior (seeding good files, only sending useful emails) is not rewarded. Decentralized systems that rely upon their participants to be good actors fail to scale because they cannot prevent bad actors from also participating.

Without imposing a central authority, the only way to solve this problem is to use economic incentives. Good actors, by definition, play by the rules because they’re inherently motivated to do so. Bad actors are, by definition, selfish and adversarial, but proper economic incentives can redirect their bad behavior towards the common good. Decentralized systems that scale do so by ensuring that cooperative behavior is profitable and adversarial behavior is costly.

The best way to implement robust decentralized services is to create markets where all actors, both good and bad, are paid to provide that service. The lack of barriers to entry for buyers and sellers in a decentralized market encourages scale and efficiency. If the market’s protocols can protect participants from fraud, theft, and abuse, then bad actors will find it more profitable to either play by the rules or go attack a different system.

II. Decentralized markets require decentralized goods 

But markets are complex. They must provide buyers and sellers the ability to post bids & asks as well as discover, match and settle orders. They must be fair, provide strong consistency, and maintain availability despite periods of volatility.

Global markets today are extremely capable and sophisticated, but using traditional goods and payment networks to implement incentives in a decentralized market is a nonstarter. Any coupling between a decentralized system and fiat money, traditional assets, or physical commodities would reintroduce dependencies on the central authorities that control payment processors, banks, & exchanges.

This means that decentralized systems cannot execute payments denominated in any traditional good. They cannot even determine the balances of fiat-dominated accounts or the ownership of real estate or physical goods. The entire traditional economy is completely illegible from within decentralized systems.

Creating decentralized markets requires trading new kinds of decentralized goods which are legible and transferable within decentralized systems.

Computation is the first decentralized good

The first example of a “decentralized good” is a special class of computations first proposed in 1993 by Cynthia Dwork and Moni Naor.[3]

Because of deep connections between mathematics, physics, and computer science, these computations cost real-world energy and hardware resources—they cannot be faked. Since real-world resources are scarce, these computations are also scarce.

The input for these computations can be any kind of data. The resulting output is a digital “proof” that the computations were performed on the given input data. Proofs contain a given “difficulty” which is (statistical) evidence of a given amount of computational work. Most importantly, the relationship between the input data, the proof, and the original computational work performed can be independently verified without appeal to any central authority.

The idea of passing around some input data along with a digital proof as evidence of real-world computational work performed on that input is now called “proof-of-work”.[4] Proofs-of-work are, to use Nick Szabo’s phrase, “unforgeable costliness”. Because proofs-of-work are verifiable by anyone, they are economic resources that are legible to all participants in a decentralized system. Proofs-of-work turn computations on data into decentralized goods. Dwork & Naor proposed using computations to limit the abuse of a shared resource by forcing participants to provide proofsof-work with a certain minimum difficulty before they can access the resource:

“In this paper we suggest a computational approach to combatting the proliferation of electronic mail. More generally, we have designed an access control mechanism that can be used whenever it is desirable to restrain, but not prohibit, access to a resource.” – Dwoak & Naor, 1993

In Dwork & Naor’s proposal, an email system administrator would set a minimum proof-of-work difficulty for delivering email. Users wanting to send email would need to perform a corresponding number of computations with that email as the input data. The resulting proof would be submitted to the server alongside any request to deliver the email.

Dwork & Naor referred to the difficulty of a proofof-work as a “pricing function” because, by adjusting the difficulty, a “pricing authority” could ensure that the shared resource remained cheap to use for honest, average users but expensive for users seeking to exploit it. In the email delivery market, server administrators are the pricing authorities; they must choose a “price” for email delivery which is low enough for normal usage but too high for spam.

Though Dwork & Naor framed proofs-of-work as an economic disincentive to combat resource abuse, the nomenclature “pricing function” and “pricing authority” supports a different, marketbased interpretation: users are purchasing access to a resource in exchange for computations at a price set by the resource’s controller.

In this interpretation, an email delivery network is really a decentralized market trading email delivery for computations. The minimum difficulty of a proof-of-work is the asking price for email delivery denominated in the currency of computations.

Currency is the second decentralized good 

But computations aren’t a good currency.

The proofs used to “trade” computations are only valid for the input used in those computations. This unbreakable lilnk between a specific proof and a specific input means that the proof-of-work for one input can’t be reused for a different input.

This constraint is useful – it can be used to prevent the work done by one buyer in the market from being re-spent by another. For example, HashCash, the first real implementation of the market for email delivery, included metadata such as the current timestamp and the sender’s email address in the input data to its proof-of-work computations. Proofs produced by a given user for a given email can’t be respent for sending a different email.

But this also means that proof-of-work computations are bespoke goods. They aren’t fungible, they can’t be re-spent,[5] and they don’t solve the coincidence-of-wants problem. These missing monetary properties prevent computations from being currency. Despite the name, there is no incentive for an email delivery provider to want to accumulate HashCash, as there would be for actual cash.

Adam Back, inventor of HashCash, understood these problems:

“hashcash is not directly transferable because to make it distributed, each service provider accepts payment only in cash created for them. You could perhaps setup a digicash style mint (with chaumian ecash) and have the bank only mint cash on receipt of hash collisions addressed to it. However this means you’ve got to trust the bank not to mint unlimited amounts of money for it’s own use.” – Adam Back, 1997

We don’t want to exchange bespoke computations for every individual good or service sold in a decentralized economy. We want a general purpose digital currency that can directly be used to coordinate exchanges of value in any market.

Building a functioning digital currency while remaining decentralized is a significant challenge. A currency requires fungible units of equal value that can be transferred among users. This requires issuance models, cryptographic definitions of ownership and transfer, a discovery and settlement process for transactions, and a historical ledger. None of this infrastructure is required when proof-of-work is thought of as a mere “access control mechanism”.

Moreover, decentralized systems are markets, so all these basic functions of a currency must somehow be provided through paying service providers…in the units of the currency that’s being created!

Like compiling the first compiler, a black start of the electrical grid, or the evolution of life itself, the creators of digital currencies were confronted with a bootstrapping problem: how to define the economic incentives that underlie a functioning currency without having a functioning currency in which to denominate or pay those incentives.

The first decentralized market must trade computations for currency

Progress on this bootstrapping problem comes from properly framing its constraints.

Decentralized systems must be markets. Markets consist of buyers and sellers exchanging goods. The decentralized market for a digital currency only has two goods that are legible within it:

1. Computations through proof-of-work
2. Units of the currency we’re trying to build

The only market trade possible must therefore be between these two goods. Computations must be sold for units of currency orF equivalentlyF units of currency must be sold for computations. Stating this is easy—the hard part is structuring this market so that simply exchanging currency for computation bootstraps all the capabilities of the currency itself!

The entire history of digital currencies culminating in Satoshi’s 2008 white paperF was a series of increasingly sophisticated attempts at structuring this market. The following section reviews projects such as Nick Szabo’s bit gold and Wei Dai’s b-money. Understanding how these projects structured their marketsF and why they failed will help us frame why Satoshi and bitcoin succeeded.

III. How can decentralized systems price computations?

A major function of markets is price discovery. A market trading computations for currency must therefore discover the price of computation itself, as denominated in units of that currency.

We don’t typically assign monetary value to computations. We typically value the capacity to perform computations because we value the output of computations, not the computations themselves. If the same output can be performed more efficiently, with fewer computations, that is usually called “progress”.

Proofs-of-work represent specific computations whose only output is proof that they were performed. Producing the same proof by performing fewer computations and less work wouldn’t be progress—it would be a bug. The computations associated with proofs-of-work are thus a strange and novel good to attempt to value.

When proofs-of-work are thought of as disincentives against resource abuse, it is not necessary to value them precisely or consistently. All that matters is that the email service provider sets difficulties low enough to be unnoticeable for legitimate users yet high enough to be prohibitive for spammers. There is thus a broad range of acceptable “prices” and each participant acts as their own pricing authority, applying a local pricing function.

But units of a currency are meant to be fungible, each having the same value. Due to changes in technology over time, two units of currency created with the same proof-of-work difficulty— as measured by the number of corresponding computations—may have radically different realworld costs of production, as measured by the time, energy, and/or capital to perform those computations . When computations are sold for currency, and the underlying cost of production is variable, how can the market ensure a consistent price?

Nick Szabo clearly identified this pricing problem when describing bit gold:

“The main problem…is that proof of work schemes depend on computer architecture, not just an abstract mathematics based on an abstract “compute cycle.” …Thus, it might be possible to be a very low cost producer (by several orders of magnitude) and swamp the market with bit gold.” – Szabo, 2005

Early digital currencies attempted to price computations by attempting to collectively measure the “cost of computing”. Wei Dai, for example, proposes the following hand-wavy solution in b-money:

‘The number of monetary units created is equal to the cost of the computing effort in terms of a standard basket of commodities. For example if a problem takes 100 hours to solve on the computer that solves it most economically, and it takes 3 standard baskets to purchase 100 hours of computing time on that computer on the open market, then upon the broadcast of the solution to that problem everyone credits the broadcaster’s account by 3 units.” – Dai, 1998

Unfortunately, Dai does not explain how users in a supposedly decentralized system are supposed to agree upon the definition of a “standard basket”, which computer solves a given problem “most economically”, or the cost of computation on the “open market”. Achieving consensus among all users about a time-varying shared dataset is the essential problem of decentralized systems!

To be fair to Dai, he realized this:

“One of the more problematic parts in the b-money protocol is money creation. This part of the protocol requires that all [users] decide and agree on the cost of particular computations. Unfortunately because computing technology tends to advance rapidly and not always publicly, this information may be unavailable, inaccurate, or outdated, all of which would cause serious problems for the protocol.” – Dai, 1998

Dai would go on to propose a more sophisticated auction-based pricing mechanism which Satoshi would later say was the starting point for his ideas. We will return to this auction scheme below, but first let’s turn to bit gold, and consider Szabo’s insights into the problem.

Use external markets

Szabo claims that proofs-of-work should be “securely timestamped”:

“The proof of work is securely timestamped. This should work in a distributed fashion, with several different timestamp services so that no particular timestamp service need be substantially relied on.” – Szabo, 2005

Szabo links to a page of resources on secure timestamping protocols but does not describe any specific algorithm for secure timestamping. The phrases “securely” and “distributed fashion” are carrying a lot of weight here, hand-waving through the complexities of relying upon one (or many) “outside the system” services for timestamping.[6]

Regardless of implementation fuzziness, Szabo was right—the time a proof-of-work was created is an important factor in pricing it because it is related to the cost of computation:

“…However, since bit gold is timestamped, the time created as well as the mathematical difficulty of the work can be automatically proven. From this, it can usually be inferred what the cost of producing during that time period was…” – Szabo, 2005

“Inferring” the cost of production is important because bit gold has no mechanism to limit the creation of money. Anyone can create bit gold by performing the appropriate computations. Without the ability to regulate issuance, bit gold is akin to a collectible:

“…Unlike fungible atoms of gold, but as with collector s items, a large supply during a given time period will drive down the value of those particular items. In this respect bit gold acts more like collector s items than like gold…” – Szabo, 2005

Bit gold requires an additional, external process to create fungible units of currency:

“…[B]it gold will not be fungible based on a simple function of, for example, the length of the string. Instead, to create fungible units dealers will have to combine different-valued pieces of bit gold into larger units of approximately equal value. This is analogous to what many commodity dealers do today to make commodity markets possible. Trust is still distributed because the estimated values of such bundles can be independently verified by many other parties in a largely or entirely automated fashion.” – Szabo, 2005

To paraphrase Szabo, “to assay the value of… bit gold, a dealer checks and verifies the difficulty, the input, and the timestamp”. The dealers defining “larger units of approximately equal value” are providing a similar pricing function as Dai’s “standard basket of commodities”. Fungible units are not created in bit gold when proofs-ofwork are produced, only later when those proofs are combined into larger “units of approximately equal value” by dealers in markets outside the network.

To his credit, Szabo recognizes this flaw:

“…The potential for initially hidden supply gluts due to hidden innovations in machine architecture is a potential flaw in bit gold, or at least an imperfection which the initial auctions and ex post exchanges of bit gold will have to address.” – Szabo, 2005

Again, despite not having arrived at (what we now know as) the solution, Szabo was pointing us at it: because the cost of computation changes over time, the network must respond to changes in the supply of computation by adjusting the price of money.

Use internal markets

Szabo’s dealers would have been an external market that defined the price of (bundles of) bit gold after its creation. Is it possible to implement this market within the system instead of outside it?

Let’s return to Wei Dai and b-money. As mentioned earlier, Dai proposed an alternative auction-based model for the creation of bmoney. Satoshi’s design for bitcoin improves directly on bmoney’s auction model[7]:

“So I propose an alternative money creation subprotocol, in which [users]… instead decide and agree on the amount of b-money to be created each period, with the cost of creating that money determined by an auction. Each money creation period is divided up into four phases, as follows: 

Planning. The [users] compute and negotiate with each other to determine an optimal increase in the money supply for the next period. Whether or not the [network] can reach a consensus, they each broadcast their money creation quota and any macroeconomic calculations done to support the figures.

Bidding. Anyone who wants to create b-money broadcasts a bid in the form of where x is the amount of b-money he wants to create, and y is an unsolved problem from a predetermined problem class. Each problem in this class should have a nominal cost (in MIPS-years say) which is publicly agreed on.

Computation. After seeing the bids, the ones who placed bids in the bidding phase may now solve the problems in their bids and broadcast the solutions. Money creation.

Money creation. Each [user] accepts the highest bids (among those who actually broadcasted solutions) in terms of nominal cost per unit of bmoney created and credits the bidders accounts accordingly.” Dai, 1998

B-money makes significant strides towards the correct market structure for a digital currency. It attempts to eliminate Szabo’s external dealers and allow users to engage in price discovery by directly bidding against each other.

But implementing Dai’s proposal as written would be challenging:

• In the “Planning” phase, users bear the burden of negotiating the “optimal increase in the money supply for the next period”. How “optimal” should be defined, how users should negotiate with each other, and how the results of such negotiations are shared is not described.
• Regardless of what was planned, the “Bidding” phase allows anyone to submit a “bid” to create b-money. The bids include both an amount of b-money to be created as well as a corresponding amount of proofof-work so each bid is a price, the number of computations for which a given bidder is willing to perform in order to buy a given amount of b-money.
• Once bids are submitted, the “computation” phase consists of bidders performing the proof-of-work they bid and broadcasting solutions. No mechanisms for matching bidders to solutions is provided. More problematically, it’s not clear how users should know that all bids have been submitted – when does the “Bidding” phase end and the “computation” phase begin?
• These problems recur in the “Money ]reation” phase. Because of the nature of proof-of-work, users can verify the proofs they receive in solutions are real. But how can users collectively agree on the set of “highest bids”? What if different users pick different such sets, either due to preference or network latency?

Decentralized systems struggle to track data and make choices consistently, yet b-money requires tracking bids from many users and making consensus choices among them. This complexity prevented b-money from ever being implemented.

The root of this complexity is Dai’s belief that the “optimal” rate at which b-money is created should fluctuate over time based on the “macroeconomic calculations” of its users. Like bit gold, b-money has no mechanism to limit the creation of money. Anyone can create units of b-money by broadcasting a bid and then doing the corresponding proof-of-work. 

Both Szabo and Dai proposed using a market exchanging digital currency for computations yet neither bit gold nor b-money defined a monetary policy to regulate the supply of currency within this market.

IV. Satoshi’s monetary policy goals led to bitcoin

In contrast, a sound monetary policy was one of Satoshi’s primary goals for the bitcoin project. In the very first mailing list post where bitcoin was announced, Satoshi wrote:

“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” – Satoshi, 2009

Satoshi would go on to describe other problems with fiat currencies such as risky fractional reserve banking, a lack of privacy, rampant theft & fraud, and the inability to make micropayments. But Satoshi started with the issue of debasement by central banks—with a concern about monetary policy. 

Satoshi wanted bitcoin to ultimately reach a finite circulating supply that cannot be diluted over time. The “optimal” rate of bitcoin creation, for Satoshi, should thus eventually be zero. 

This monetary policy goal, more than any other characteristic they personally (or collectively!) possessed, was the reason Satoshi “discovered” bitcoin, the blockchain, Nakamoto consensus, etc. —and not someone else. It’s the short answer to the question posed in the title of this article: Satoshi thought of bitcoin because they were focused on creating a digital currency with a finite supply.

A finite supply of bitcoin is not only a monetary policy goal or a meme for bitcoiners to rally around. It’s the essential technical simplification that allowed Satoshi to build a functional digital currency while Dai’s b-money remained just a fascinating web post. 

Bitcoin is b-money with an additional requirement of a predetermined monetary policy. Like many technical simplifications, constraining monetary policy enables progress by reducing scope. Let’s see how each of the phases of b-money creation is simplified by imposing this constraint.

All 21M bitcoin already exist

In b-money, each “money creation period” included a “Planning” phase, in which users were expected to share their “macroeconomic calculations” justifying the amount of b-money they wanted to create at that time. Satoshi’s monetary policy goals of a finite supply and zero tail emission were incompatible with the freedom granted by b-money to individual users to create money. The first step on the journey from bmoney to bitcoin was therefore to eliminate this freedom. Individual bitcoin users cannot create bitcoin. Only the bitcoin network can create bitcoin, and it did so exactly once, in 2009 when Satoshi launched the bitcoin project.

Satoshi was able to replace the recurring “Planning” phases of b-money into a single, predetermined schedule on which the 21M bitcoin created in 2009 would be released into circulation. Users voluntarily endorse Satoshi’s monetary policy by downloading and running the Bitcoin Core software in which this monetary policy is hard-coded. 

This changes the semantics of bitcoin’s market for computations. The bitcoin being paid to miners is not newly issued; it’s newly released into circulation from an existing supply. 

This framing is crucially different from the naive claim that “bitcoin miners create bitcoin”. Bitcoin miners are not creating bitcoin, they’re buying it. Bitcoin isn’t valuable because “bitcoin are made from energy”—bitcoin’s value is demonstrated by being sold for energy. 

Let’s repeat it one more time: bitcoin isn’t created through proof-of-work, bitcoin is created through consensus.

Bitcoin is priced through consensus

This freedom granted to users to create money results in a corresponding burden for the bmoney network. During the “Bidding” phase the b-money network must collect and share money creation “bids” from many different users. 

Eliminating the freedom to create money relieves the bitcoin network of this burden. Since all 21M bitcoin already exist, the network doesn’t need to collect bids from users to create money, it merely has to sell bitcoin on Satoshi’s predetermined schedule. 

The bitcoin network thus offers a consensus asking price for the bitcoin it is selling in each block. This single price is calculated by each node independently using its copy of the blockchain. If nodes have consensus on the same blockchain (a point we will return to later) they will all offer an identical asking price at each block.[8]

The first half of the consensus price calculation determines how many bitcoin to sell. This is fixed by Satoshi’s predetermined release schedule. All bitcoin nodes in the network calculate the same amount for a given block:

The second half of the consensus asking price is the number of computations the current subsidy is being sold for. Again, all bitcoin nodes in the network calculate the same value (we will revisit this difficulty calculation in the next section):

Together, the network subsidy and difficulty define the current asking of bitcoin as denominated in computations. Because the blockchain is in consensus, this price is a consensus price.

Users in b-money also were presumed to have a consensus “blockchain” containing the history of all transactions. But Dai never thought of the simple solution of a single consensus asking price for the creation of new b-money, determined solely by the data in that blockchain.

Instead, Dai assumed that money creation must go on forever. Individual users would therefore need to be empowered to affect monetary policy – just as in fiat currencies. This perceived requirement led Dai to design a bidding system which prevented b-money from being implemented.

This added complexity was removed by Satoshi’s requirement of a predetermined monetary policy.

Time closes all spreads

In the “Computation” phase of b-money, individual users would perform the computations they’d committed to in their prior bids. In bitcoin, the entire network is the seller – but who is the buyer?

In the email delivery market, the buyers were individuals wanting to send emails. The pricing authority, the email service provider, would set a price that was considered cheap for individuals but expensive for spammers. But if the number of legitimate users increased, the price could still remain the same because the computing power of individual users would have remained the same. 

In b-money, each user who contributed a bid for money creation was supposed to subsequently perform the corresponding number of computations themselves. Each user was acting as their own pricing authority based on their knowledge of their own computing capabilities. 

The bitcoin network offers a single asking price in computations for the current bitcoin subsidy. But no individual miner who finds a block has performed this number of computations.[9] The individual miner’s winning block is proof that all miners collectively performed the required number of computations. The buyer of bitcoin is thus the global bitcoin mining industry. 

Having arrived at a consensus asking price, the bitcoin network will not change that price until more blocks are produced. These blocks must contain proofs-of-work at the current asking price. The mining industry therefore has no choice if it wants to “execute a trade” but to pay the current asking price in computations. 

The only variable the mining industry can control is how long it will take to produce the next block. Just as the bitcoin network offers a single asking price, the mining industry thus offers a single bid—the time it takes to produce the next block meeting the network’s current asking price.

To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour. If they’re generated too fast, the difficulty increases. – Nakamoto, 2008

Satoshi is modestly describing the difficulty adjustment algorithm, often cited as one of the most original ideas in bitcoin’s implementation. This is true, but instead of focusing on the inventiveness of the solution, let’s instead focus on why solving the problem was so important to Satoshi in the first place. 

Projects such as bit gold and b-money didn’t need to constrain the rate in time of money creation because they didn’t have a fixed supply or a predetermined monetary policy. Periods of faster or slower money creation could be compensated for through other means, e.g. external dealers putting bit gold tokens into larger or smaller bundlers or b-money users changing their bids. 

But Satoshi’s monetary policy goals required bitcoin to have a predetermined rate at which bitcoin was to be released for circulation. Constraining the (statistical) rate at which blocks are produced over time is natural in bitcoin because the rate of block production is the rate at which the initial supply of bitcoin is being sold. Selling 21M bitcoin over 140 years is a different proposition than allowing it to be sold in 3 months. 

Moreover, bitcoin can actually implement this constraint because the blockchain is Szabo’s “secure timestamping protocol.” Satoshi describes bitcoin as first and foremost a “distributed timestamp server on a peer-to-peer basis,” and early implementations of the bitcoin source code use the world “timechain” rather than “blockchain” to describe the shared data structure that implements bitcoin’s proof-of-work market.[10]

Bitcoin’s difficulty readjustment algorithm leverages this capability. The consensus blockchain is used by participants to enumerate the historical bids made by the mining industry and readjust the difficulty in order to move closer to the target block time.

A standing order creates consensus 

The chain of simplifications caused by demanding strong monetary policy extends to the “Money creation” phase of b-money. 

User-submitted bids in b-money suffer from “nothing at stake” problem. There is no mechanism to prevent users from submitting bids with a huge amount of b-money for very little work. This requires the network to both track which bids have been completed and only accept the “highest bids…in terms of nominal cost per unit of b-money created” in order to avoid such nuisance bids. Each b-money participant must track an entire order book worth of bids, match bids with their subsequent computations, and only settle such completed orders with the highest prices. 

This problem is an instance of the more general problem of consensus in decentralized systems, also known as the “Byzantine generals” or sometimes the “double-spend” problem in the context of digital currencies. Sharing an identical sequence of data among all participants is challenging inside an adversarial, decentralized network. Existing solutions to this problem – socalled “Byzantine-fault tolerant (BFT) consensus algorithms”—require previous coordination among participants or a supermajority (>67%) of participants to not behave adversarially.

Bitcoin doesn’t have to manage a large order book of bids because the bitcoin network offers a single consensus asking price. This means bitcoin nodes can accept the first (valid) block they see that meets the network’s current asking price— nuisance bids can easily be ignored and are a waste of a miner’s resources. 

Consensus pricing of computations allows the matching of buy/sell orders in bitcoin to be done eagerly, on a first-come, first-served basis. Unlike b-money, this eager order matching means that bitcoin’s market has no phases—it operates continuously, with a new consensus price being calculated after each individual order is matched (block is found). To avoid forks caused by network latency or adversarial behavior, nodes must also follow the heaviest chain rule. This greedy order settling rule ensures that only the highest bids are accepted by the network.

This combination eager-greedy algorithm, where nodes accept the first valid block they see and also follow the heaviest chain, is a novel BFT algorithm which rapidly converges on consensus about the sequence of blocks. Satoshi spends 25% of the bitcoin white paper demonstrating this claim.[11] 

We established in previous sections that bitcoin’s consensus asking price itself depends on the blockchain being in consensus. But it turns out that the existence of a single consensus asking price is what allows the market for computations to eagerly match orders, which is what leads to consensus in the first place! 

Moreover, this new “Nakamoto consensus” only requires 50% of participants to not be adversarial, a significant improvement on the prior state of the art. A cypherpunk like Satoshi made this theoretical computer science breakthrough, instead of a traditional academic or industry researcher, because of their narrow focus on implementing sound money, rather than a generic consensus algorithm for distributed computing.

IV. Conclusion

B-money was a powerful framework for building a digital currency but one that was incomplete because it lacked a monetary policy. Constraining b-money with a predetermined release schedule for bitcoins reduced scope and simplified implementation by eliminating the requirement to track and choose among user-submitted money creation bids. Preserving the temporal pace of Satoshi’s release schedule led to the difficulty adjustment algorithm and enabled Nakamoto consensus, widely recognized as one of the most innovative aspects of bitcoin’s implementation.

There is a lot more to bitcoin’s design than the aspects discussed so far. We have focused this article on the “primary” market within bitcoin, the market which distributes the initial bitcoin supply into circulation. 

The next article in this series will explore the market for bitcoin transaction settlement and how it relates to the market for distributing the bitcoin supply. This relationship will suggest a methodology for how to build future markets for decentralized services on top of bitcoin.

Acknowledgements

I’ve been ranting about bitcoin and markets for years now and must thank the many people who listened and helped me sharpen my thinking. In particular, Ryan Gentry, Will Cole and Stephen Hall met with me weekly to debate these ideas. I would not have been able to overcome countless false starts without their contributions and their support. Ryan also helped me begin talking about these ideas publicly in our Bitcoin 2021 talk. Afsheen Bigdeli, Allen Farrington, Joe Kelly, Gigi, Tuur Demeester, and Marty Bent, have all encouraged me over the years and provided valuable feedback. I must also apologize to Allen for turning out to be such a lousy collaborator. Finally, Michael Goldstein may be better known for his writing & memes, but I’d like to thank him for the archival work he does at the Nakamoto Institute to keep safe the history of digital currencies.

Footnotes

[1] The title of this series is taken from the first telegraph message in history, sent by Samuel Morse in 1844: “What hath God wrought?”. 

[2] Bitcoin: A Peer-to-Peer Electronic Cash System, available: https://bitcoin.org/bitcoin.pdf 

[3] Pricing via Processing or Combatting Junk Mail by Dwork and Naor available: https://www.wisdom.weizmann.ac.il/~naor/PAPERS/pvp.pdf 

[4] Despite originating the idea, Dwork & Naor did not invent “proof-of-work”—that moniker was provided later in 1999 by Markus Jakobsson and Ari Juels. 

[5] Hal Finney’s RPOW project was an attempt at creating transferable proofs-of-work but bitcoin doesn’t use this concept because it doesn’t treat computations as currency. As we’ll see later when we examine bit gold and b-money, computations cannot be currency because the value of computations changes over time while units of currency must have equal value. Bitcoin is not computations, bitcoin is currency that is sold for computations. 

[6] At this juncture, some readers may believe me dismissive of the contributions of Dai or Szabo because they were inarticulate or hand-wavy on some points. My feelings are the exact opposite: Dai and Szabo were essentially right and the fact that they did not articulate every detail the way Satoshi subsequently did does not detract from their contributions. Rather, it should heighten our appreciation of them, as it reveals how challenging the advent of digital currency was, even for its best practitioners. 

[7] Dai’s b-money post is the very first reference in Satoshi’s white paper, available: http://www.weidai.com/bmoney.txt 

[8]There are two simplifications being made here:
a. The number of bitcoin being sold in each block is also affected by the transaction fee market, which is out of scope for this article, though lookout for subsequent work.
b. The difficulty as reported by bitcoin is not exactly the number of expected computations; one must multiply by a proportionality factor. 

[9] At least not since the bad old days when Satoshi was the only miner on the network. [10] Gigi’s classicBitcoin is Timeis a great introduction to the deep connections between bitcoin and time, available: https://dergigi.com/2021/01/14/bitcoin-is-time/ 

[11] Satoshi blundered both in their analysis in the white paper and their subsequent initial implementation of bitcoin by using the“longest chain” rule instead of the “heaviest chain” rule. 

This post How did Satoshi Think of Bitcoin? first appeared on Bitcoin Magazine and is written by Unchained Capital.

Introduction

As we approach the conclusion of the third epoch, the countdown to the next Bitcoin halving is firmly underway. The halving (also known as the “Halvening”) is one of the most important and innovative features of Bitcoin. Every 10 minutes, the Bitcoin network issues new bitcoin and approximately every four years (every 210,000 blocks, to be precise) the amount issued (the “block subsidy”) is cut in half. The block subsidy is the reward miners receive for validating and recording new transactions on the blockchain.

The halving of the block subsidy is a critical factor in bitcoin’s eventual capped supply of 21 million bitcoin. In addition, miners also collect transaction fees that users attach to their transactions to encourage miners to include them in the next block. Therefore miners often earn more bitcoin for mining a block than just the subsidy. .

WHEN IS THE NEXT BITCOIN HALVING?

The next Bitcoin halving is anticipated to take place on April 20, 2024 EST, reducing the block reward from 6.25 to 3.125 BTC. This halving period — or epoch — will increase the supply by 164,250 bitcoin (from 19,687,500 to 20,671,875), a mere 328,124 bitcoin from the maximum supply limit of 21 million.

TO CALCULATE THE NEXT HALVING DATE

1. Determine the block interval: While it’s true that Bitcoin’s block time (the time between each block) is approximately 10 minutes, the time can vary slightly due to hash rate and network adjustments.
2. Find the current block height: You need to know the current block height, which you can find on various blockchain explorer websites or directly from your Bitcoin node if you’re running one.
3. Calculate the blocks remaining until the next halving: Bitcoin’s halving occurs every 210,000 blocks. Subtract the current block height from the next halving block height.
4. Calculate the estimated time remaining: Multiply the number of blocks remaining by the approximate block interval (in seconds) to estimate the time remaining until the next halving.
5. Convert the time into a date: Convert the estimated time remaining into a date format to find out when the next halving is expected.

Current block height: can be found here.

Block time: can be found here.

Current date: xx/xx/xxxx

Blocks per epoch: 210,000

Next halving block height: 210,000 times next halving number

Calculation:

(((Next Halving Block Height – Current Block Height)*10)/60)/24 = Days remaining

Hash rate and difficulty adjustment are two variables which constantly shape the speed at which blocks are processed and therefore the intervals between blocks. The date of the next halving can vary as a result, so it’s important to keep running the calculation.

HISTORY OF BITCOIN HALVINGS

As of March 2024, there have been three Bitcoin halvings:

1. On November 28, 2012, Bitcoin’s block subsidy decreased from 50 BTC per block to 25 BTC per block.
2. On July 9, 2016, the second Bitcoin halving decreased the block subsidy from 25 BTC per block to 12.5 BTC per block.
3. On May 20, 2020, the third Bitcoin halving reduced the block subsidy from 12.5 BTC per block to 6.25 BTC per block.

BITCOIN HALVING 2012

The 2012 halving was Bitcoin’s first halving.

Halving:

Date: November 28, 2012

Halving number: 01

Block height: 210,000

Block reward: 25

Mined supply: 10,500,000 (amount of bitcoin already issued when the halving occurred)

Epoch:

Subsidy: 5,250,000

Percentage of mined supply: 25%

BITCOIN HALVING 2016

The 2016 halving was Bitcoin’s second halving.

Halving:

Date: July 9, 2016

Halving number: 01

Block height: 420,000

Block reward: 12.5

Mined supply: 15,750,000 (amount of bitcoin already issued when the halving occurred)

Epoch:

Subsidy: 2,625,000

Percentage of mined supply: 12.5%

BITCOIN HALVING 2020

The 2020 halving was Bitcoin’s third halving.

Halving:

Date: May 20, 2020

Halving number: 03

Block height: 630,000

Block reward: 6.25

Mined supply: 18,375,000 (amount of bitcoin already issued when the halving occurred)

Epoch:

Subsidy: 1,312,500

Percentage of mined supply: 6.25%

BITCOIN HALVING 2024

The 2024 halving will be Bitcoin’s third halving.

Halving:

Date: April 19, 2024 (estimated)

Halving number: 04

Block height: 840,000

Block reward: 3.125

Mined supply: 19,687,500 (amount of bitcoin issued when the halving occurred)

Epoch:

Subsidy: 656,250

Percentage of mined supply: 3.125%

FUTURE BITCOIN HALVINGS

The blocktime variable will introduce some variance in estimated halving dates, but it is possible to project approximate dates until the conclusion of block subsidies in 2140. Below, we provide a succinct overview of anticipated halving dates from 2024 to 2060, offering valuable insights into these upcoming milestones.

HISTORICAL IMPLICATIONS OF THE BITCOIN HALVING

Halving events have consistently preceded significant increases in bitcoin’s price, making them a focal point for market analysts.

Price Appreciation

Historically, bitcoin’s price has experienced significant upswings following halving events due to the combination of reduced supply and increased demand. These events substantially influence the overall supply of bitcoin, thereby affecting its price. Nevertheless, it is essential to acknowledge that the price dynamics are influenced by many factors beyond halving events.

• After the 2012 halving, the bitcoin price rose approximately 9,000% to $1,162.
• After the 2016 halving, the bitcoin price rose approximately 4,200% to $19,800.
• After the 2020 halving, the bitcoin price rose approximately 683% to $69,000.

Bitcoin issuance rate gets reduced in half roughly every four years.

Challenges for Miners

Halving events can pose challenges for miners, as their income decreases when block rewards are cut in half. To remain competitive, miners must operate efficiently, potentially driving the development and adoption of more energy-efficient mining technology. It is quite common for miners to go bankrupt, which often impacts the network’s hash rate, the supply of available for-sale bitcoin, and ultimately bitcoin’s price. Through the upheaval, the difficulty adjustment eventually restores equilibrium and the Bitcoin network and ecosystem continues to march forward.

FAQs:

Will Bitcoin go up at the halving?

Bitcoin’s historical performance after a halving event has shown a remarkable upward trajectory. The reduction in the rate of new supply is Bitcoin’s path to absolute scarcity. This event often sparks increased interest and demand. However, it’s vital to exercise caution and not view the halvings as guaranteed paths to quick profits. The prudent approach is to understand the long-term potential of bitcoin and consider it as a store of value rather than attempting to time the market with buying and selling.

Is Bitcoin halving bullish?

The Bitcoin halving is unquestionably a bullish event, as it shifts the supply dynamics in favor of price appreciation. While the halving is generally seen as a bullish event, it’s wise to remember that bitcoin’s price is influenced by several factors. Caution is advised.

How many days after Bitcoin halving does it hit its peak?

A look at the past three halving events shows that a significant price rise usually begins within a few months of the halving event. Also, before a halving event, the price of bitcoin tends to rise as investors anticipate a price rally post-halving. After the halving, the price usually takes over 12 months to reach its peak.

Should you buy bitcoin before the halving?

Instead of trying to understand when to buy and sell bitcoin, it’s advisable to understand the value of the asset. That said, a pattern has played out in the past where buying 6-12 months before the halving and selling 12-18 months after the halving tends to return a sizable profit. Past performance and behavior is not a guarantee of future performance. Our best advice to those who are not experienced traders would be to buy and hold for many cycles. 

This post When is the next Bitcoin Halving? first appeared on Bitcoin Magazine and is written by Conor Mulcahy.