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The number one complaint I hear about bitcoin is that it’s “bad for the environment.” This has caused a lot of FUD (fear, uncertainty, and doubt) about how positive bitcoin really is.
Now, while it’s easy to get caught up in the many biased Bitcoin articles arguing for or against this statement — typically with cherry picked statistics — here’s the reality: Most of us aren’t environmental experts, but I’ll bet that most of us care about the environment. Let’s look at this logically and put things into perspective.
Yes, Bitcoin requires a lot of energy to operate. Yes, some of our energy sources are unclean and bad for the environment. And yes, the Bitcoin network is a “waste” of energy — just like everything that requires energy is a “waste” of energy, depending on your perspective.

To many environmentalists, your modern appliances and big-city living habits are unspeakably hedonistic carbon footprint culprits. To others, energy usage for modern necessities isn’t so distressing. The same goes for Bitcoin: If you think it’s a useless fake internet money with no inherent value, then you’d question why we spend any energy on it at all.
As the numbers continue to change and all energy production leans towards clean, renewable sources, I’ll help paint a general picture for why we shouldn’t be too cynical. Bitcoin should not be scapegoated with “destroying the environment,” and here’s why.

Bitcoin Mining Incentivizes Clean Energy Production

To start, let’s consider this concept: Bitcoin works because every participant in the Bitcoin network is acting selfishly. The network is setup so that as long as we continue to act selfishly, we are also supporting the security and structure of the network as a whole (this was covered previously when we talked about how bitcoin is “unhackable”).
For miners, this means finding the cheapest long-term electricity in order to confirm transactions and receive new bitcoin rewards. It just so happens that clean, renewable energy is the cheapest, most sustainable source of power, while environmentally damaging fossil fuels are the most unsustainable. After all, the sun keeps shining and the winds keep blowing, but coal doesn’t burn unless we throw it in the furnace.
As such, bitcoin mining incentivizes a transition toward a 100% renewable, clean energy future.
Unfortunately, we currently don’t have the technology to store or transport clean power very well. This makes it so that tons of clean energy is curtailed and gone to waste, simply because we don’t have the ability to use it efficiently.
Here’s how bitcoin mining efficiently uses this wasted power.

Excess Regional Power

Take a look at the hydropower situation in Sichuan, China. When bitcoin mining was banned in China in early 2021, Sichuan was a lagging enforcer, allowing miners until September to withdraw from the province. This is due to the fact that in the summer, Sichuan has ample natural hydropower, but no means to utilize or store the excess energy produced. As much as three times the amount of normal power is produced during the summer, but power usage from ACs only increases by 30%. Thus, bitcoin mining uniquely allows Sichuan to not waste excess energy.
While unfortunate that mining has been banned in China now, similar circumstances play out worldwide where excess clean power is produced.

How Bitcoin Uses Energy

Contrary to popular belief, bitcoin transactions are not directly proportional to energy usage. In fact, it’s flawed to claim that bitcoin has a “per-transaction energy usage” at all. Transactions are batched into blocks at limited quantities due to the block size, and more transactions per block doesn’t mean more energy usage.
Lyn Alden proposes a great analogy: Imagine bitcoin block confirmations like running your dishwasher. No matter if your dishwasher is half full or completely full, it takes the same amount of water and energy to run every night. The same goes for bitcoin.
Your single transaction doesn’t marginally affect bitcoin’s energy usage, so you shouldn’t be guilted into not making a transaction just because a misinformed journalist told you your single bitcoin transaction could have powered 24 days of your household electricity.
Rather, a bulk of bitcoin’s energy usage comes from miners using proof of work to earn block rewards. Though it may seem like a “waste of energy” that so many miners spend so much energy just for only one miner to “win” a block, it ensures the security of the Bitcoin network, and I’d say that warrants bitcoin’s energy usage a place in this world — well, at least as much as your Christmas lights do.

On a mission to figure out what is up with all the bitcoin energy FUD? Tweet your concerns and questions with #21DaysofBitcoin

Today is the day you learn about self-custody. This is a challenging process that takes time to learn and is a daunting next-step to take. However, continue to ask questions (tweet them with #21DaysofBitcoin for help!) and do the necessary research, because self-custody is the entire purpose of owning bitcoin.

Why Self Custody?

Yesterday, we went over buying bitcoin from exchanges. However, the bitcoin you’re currently keeping on Coinbase isn’t technically “yours” yet. If someone hacks your Coinbase account (or Coinbase itself), there would be no way to recover your funds or trace who did the crime.
Even if you’re not worried about hackers, it is in the bitcoin ethos to strive for self-sovereignty; after all, if the government can access and seize your bitcoin because it’s on a centralized exchange, doesn’t that defeat the purpose of this decentralized asset?

What does it mean to “own” your bitcoin?

In order to truly own and protect your bitcoin, you will need to have your own set of “private keys” that only you have access to, unlike the publicly shared invoice address that you use to receive bitcoin with.

Private Keys Explained

Private keys are essentially very complex, randomly-generated passwords that allow us to access our bitcoin and to verify or “sign” our transactions. These keys are then represented in a 12 or 24-word “seed phrase,” which allows us to more easily record, memorize, and backup our private keys.

On an exchange like Coinbase, your bitcoin is stored in a “hot wallet,” where Coinbase owns your private keys. Because they own your keys, if they get hacked, so does everyone who keeps their bitcoin on there — yikes.
Only when you have control of your private keys will you have secure control over your bitcoin transactions.
Keep in mind though, that self-custody means you’re responsible for keeping these seed phrases offline and in a safe place where you won’t lose access to them. While there are methods of backing up your seeds onto physical, stainless steel cards, it’s not as easy as storing it in an online password manager.
Many of us have heard the woes of those who lost access to or forgot their seed phrases, thus losing access to millions of dollars worth of bitcoin. Let this be a lesson to us all: Keep your seeds safe, secure, and accessible.

Easy Self Custody Methods

In this lesson, I’ll introduce two easy forms of bitcoin storage methods so that you can begin your self-custody journey:
1. Software wallets
There are a few open source mobile options out there that are great starting points for beginners, such as Blue Wallet and Muun Wallet. Desktop versions like Electrum are also an option.

Although these wallets are connected to the internet, they generate a new private key that only you can control, which is a big step up from exchange-hosted wallets.
The great thing about having mobile/desktop wallets is that you can easily access your bitcoin anytime. The downside is that if you don’t take the right security measures, someone who has access to your phone or computer could also have access to your online bitcoin wallet.
While mobile wallets are good for on-the-go use, they’re not the most secure. If you are just starting out with minimal funds, software wallets are a great, free option.
Fortunately, there are also more advanced options to utilize your software wallets as “watch only” wallets, where they merely act as a user interface for your cold storage but do not hold your private keys. This would allow you to generate invoice addresses for receiving bitcoin, but would prevent a hacker from transferring anything out.

2. Hardware wallets

Hardware wallets are the most straightforward and popular form of offline cold storage. These wallets securely contain your private keys and typically come in the form of a flash drive-like device (popular ones include the Ledger Nano S or the Coldcard). The devices themselves are protected with a PIN so that your private key will still be somewhat safe even if your hardware wallet is stolen.

Because your hardware is not connected to the internet, it is considered “cold” and a much safer method of private key storage than online “hot” wallets. These physical devices allow you to access your bitcoin securely by storing your private keys offline.
It’s a common misconception to think that your hardware wallets “hold” your bitcoin — your bitcoin lives on the blockchain; the hardware wallet is merely a means of storing and using your private key to authorize transactions that move funds. Although a hacker could guess your pin to access your hardware wallet, it is extremely unlikely as most wallets will wipe themselves out after a few wrong guesses.
If this physical device is lost or stolen, you can still recover your funds with a new hardware or software wallet, as long as you have access to your seed phrase.

Additional Security Measures

With great power comes great responsibility, and the ability to self-custody your bitcoin is a great power indeed. Aside from removing your bitcoin off of exchanges, making sure your seed phrases are kept private and secure is of utmost importance — this is your only backup.
Many people like to take on additional security measures by storing backups of their seed phrases in vaults, or setting up more advanced multi-signature wallets that require additional private keys to authorize transactions.
On another note, be aware of phishing scams like fake hardware wallets being sold by scammers on Amazon or Ebay; always purchase directly from the manufacturer to ensure that your hardware wallet is the real deal.
It’s time to take your first step in bitcoin self-custody.
And, remember, not your 🔑, not your 🧀.
#21DaysofBitcoin

Friends,
You have spent the last two weeks learning about how bitcoin works and why it works. For this final week, we’ll be discussing what bitcoin can do for you, but more importantly, what bitcoin can do for the world.
Perhaps you’re a seasoned bitcoin expert and you’ve got bitcoin wallets hidden all over the world, like some people that went all in on bitcoin when it was just $900.
Or, perhaps you’ve only just discovered what bitcoin is.
In any case, bitcoin is something that is for everyone, accessible to all — no matter your social or financial standing.
Many big banks and brokers are telling people that only their wealthiest, “accredited,” elite customers have access to this relatively new asset class. This is a ridiculous ploy by the legacy financial system that continues to unfairly deny equal participation in financial services that should be accessible to all. Fortunately, bitcoin requires no permission to participate.

What Are We Investing In Exactly?

At the moment, bitcoin is still viewed by some as a risky and volatile asset class that one invests in, hoping to make significant returns on. While there exists a culture within bitcoin that tells you to “buy and hold,” there are many people out there actively trading, holding short-term, or using bitcoin as a diversification asset tool as well.
While you should continue to do your own research and make the financial decisions that best suit you, if you’re ready to buy, sell, or transact bitcoin, I’ll break down how to do all of that step by step.

How To Buy Bitcoin

The easiest way to buy bitcoin is off of an exchange. You can use any exchange you’d like (such as Strike, and CashApp is great for beginners), but there are plenty of options to choose from. Keep in mind, however, when choosing an exchange, to make sure you choose one that allows you to transfer your bitcoin off of the exchange. This means you should not buy any bitcoin off of Robinhood or similar exchanges, since you would have to sell your bitcoin to take your money off of the exchange.
When you buy from an exchange, you are required to go through a process called KYC (Know Your Customer). This process requires your social security number, photos of your ID, and photos of your face to prove that you are you. Many bitcoiners are concerned with greater privacy and security than these exchanges can accommodate, so they choose to purchase “non-KYC” bitcoin from peers off of websites like Bisq — at a premium.
After you purchase bitcoin, you should send your bitcoin to a self-custody solution, which we’ll go over tomorrow. This is to protect your bitcoin just in case an exchange is hacked — while it’s more and more unlikely to happen now, this tragedy has unfolded multiple times before.

Reasons To Invest In Bitcoin

Okay, aside from being philosophically and economically sound, why should someone buy bitcoin? Buying bitcoin means storing wealth for yourself or your family — it’s not for anyone else’s benefit.
As inflation burns through working-class American stories and hyperinflation paints entire countries blue, it’s important to protect your future before it gets printed away. Creating generational wealth may have been easier for our parents and grandparents, but those who are growing up today see astronomically high tuition, real estate, and costs of living that aren’t adjacent to wage growth. By buying bitcoin, you’re shielding yourself and your family from the battle against currency debasement.

I’m still skeptical…

A big reason why many people continue to shy away from their first bitcoin investment is because bitcoiners are so deeply passionate about onboarding them (since they want to see you protect yourself), in the same way that your old high school classmate suddenly wants to be your best friend as they try to get you to sign up for their MLM.
While bitcoiners are purely intentioned, it often comes off as them shilling a Ponzi scheme. And although that’s the case with many altcoin cryptocurrencies (otherwise known as scams), nobody individually stands to benefit from an additional bitcoin user. Rather, the network expands and strengthens, and users are rewarded for their long-term investment holdings. So, negating any of this as financial advice, if you want to buy bitcoin, you should assess your own portfolio risk management and consider an allocation.
And although previous price performance doesn’t predict the future of how an asset or stock will perform, it might satisfy you to look over bitcoin’s performance in the last decade.

The soundest recommendation for those who buy bitcoin (and most other investment assets) is simply to just hold it long-term. Timing the market and trying to trade doesn’t usually fare well, and you’re better off just setting and forgetting it. Remember this: play stupid games, win stupid prizes.

Investment Takeaways

Disclaimer: none of this is financial advice. I personally own bitcoin and I believe in its long-term success. However, with any investment, it’s important to do your own due diligence and understand exactly what you’re buying. With that said, many financial advisors today would tell you it’s considerably a good idea to allocate at least a small non-zero percentage of your investments into bitcoin. This way, you’re leveraging a low risk with a potential of high future returns.

Want advice from real people who have been transacting bitcoin for years? Tweet your questions with #21DaysofBitcoin!

In its core doctrine, bitcoin is about privacy, freedom, and self-sovereignty. Politically, many bitcoiners tend to be libertarian, with ideologies ranging across the conservative-liberal scale. No matter how they disagree on certain socio-economic stances, there is one unwavering, common belief: the government has no business dealing in your money.

A separation of state and money — this is what the bitcoin ethos is built on.

Let’s talk about politics

Ah, one of the two dreadful topics you never dare to bring up at the dinner table. It seems like everything is made political these days, from voting eligibility to how we deal with the COVID-19 pandemic. One thing is clear, from a bipartisan stance: these are topics that should not host a partisan divide, yet they manifest now more drastically than ever.
Bitcoin is dangerously close to becoming politicized — and many would argue that it already is.
With Elizabeth Warren, a highly influential Democratic senator in the United States publicly denouncing bitcoin, and Ted Cruz, a highly influential Republican senator publicly endorsing bitcoin, it seems like we’ve once again manifested a crooked path in a straight line down.
Contention is expected in the debate of bettering the world. But to paint things in black and white is certainly not how we progress forward, and it’s a misrepresentation of what bitcoin symbolizes for all of us.

Bitcoin Works for You, No Matter What You Believe In

Do you strongly believe in your freedoms and accesses (to guns, abortion, or whatever else) as laid out by your constitutional rights? Are you passionate about protecting the planet at all costs? Do you think you’re paying too many taxes for no good reason? Are you wearing a hoodie that says “Eat the Rich” on it?
If you answered yes, no, or I don’t care to any of the questions above, then bitcoin is for you!
In our modern political climate, those who are part of democratic nation-states hold a privilege of liberty and autonomy as allowed by the law — as long as we are not infringing on the individual rights of others. However, even in nations like the United States (known as the “land of the free”), many of us feel an injustice in the legal dictation of what is increasingly allowed or disallowed.
This all ties back to money: Policy is fueled by lobbying funding, elections by marketing budgets. Well, at least in countries like the United States.
Other nation-states are not so lucky. They deal with dictatorial control, exacerbated power imbalances, and extreme poverty and war as a result of corrupted and poorly structured leadership. Many of us could argue that, on a smaller scale, this is even happening in our own backyards.

Bitcoin Gives Us Back Our Independence

One of the most prominent arguments politicians make against bitcoin is that bitcoin fuels crime and corruption due to its pseudonymous transactional nature. But take a look at this from a different stance — global governing policies are not always ethically (or common sensibly) created.
There are states and countries out there where basic rights like access to education or personal banking services are denied to certain groups. It may be a crime to curb these policies with bitcoin, but most of us would probably argue that the real crimes are the existing laws themselves. To fight for justice, we need private and self-sovereign methods of storing our wealth. Really, it’s no different than hoarding cash. The difference though, is that with cash, we have potential issues with transporting wealth, counterfeiting, confiscation, accidental loss or theft, and robbery. Bitcoin solves all of this.

Seeing Bitcoin as a Solution

Whatever issues you’re concerned about, try and see how bitcoin can be a solution rather than another layer to our pile of problems. Over the next few days, I’ll dive into how bitcoin can help solve global wealth inequity, incentivize clean energy production, and protect the vulnerable from corrupt government regimes worldwide.
If bitcoin is pushed away by certain political parties, I’ll only hope we can go back and remember what we were fighting for — freedom, liberty, and justice. Bitcoin brings us closer to that commonwealth goal, no matter your party preference.
So the next time you’re at the dinner table surrounded by family members scattered across the political spectrum, I encourage you to talk about bitcoin. Bitcoin is apolitical, and everyone should be a part of the conversation.

Ready to talk politics? On Twitter? Yeah…that might not be a great…idea… BUT — you can talk about bitcoin with people across the political spectrum and find common ground with #21DaysofBitcoin!

Bitcoin is a novel invention that is hard for most people to wrap their heads around.
We can easily understand why gold and other precious metals have value. We understand that fiat money has value as assigned by our government. We understand that investing in a company is investing in its people and in their innovations.
But investing in bitcoin is just investing in…nothing that we can see, feel, or immediately understand. And this begs the question that comes to everyone’s mind when they first hear about bitcoin: What is its “intrinsic value?”

Bitcoin vs Gold

You might have heard the phrase, “bitcoin is digital gold.” Now, in the sense that it’s a store of value (and a better one than gold at that), this is true. However, at face value, gold is a tangible thing that can be seen, held, and used in jewelry and electronics. Bitcoin achieves…none of this. Yet, it is still a better store of value. Because while gold has the benefits of being seen and used as a physically tangible asset, these are the same things that make it a poorer store of value than bitcoin.
Let’s compare gold to bitcoin:

Shaving off pieces of your gold bar to pay for pumpkin spice lattes was never a viable option. Enter: fiat backed by gold, then eventually fiat backed by nothing but the government’s word.

What is the “intrinsic value” of the U.S. Dollar

That’s right, the dollar bills printed and distributed by the government aren’t backed by anything. Fiat money is just…paper with security tags on it? The only reason it has value is because the government says so, and this isn’t a good thing. Eventually, the cards will fall, and the housed trust that the government once held might someday render the dollar worthless.
This isn’t an unreasonable scare tactic, either. We’ve seen this play out in countries like Venezuela, where government corruption has rendered their national currency, the bolivar, effectively useless after suffering an inflation rate of nearly 54 million percent just a few years ago.
With bitcoin, nobody alone gets to dictate that there is value to it. Rather, the entirety of the Bitcoin network agrees to assign a certain monetary value to bitcoin, depending on its demand (which continues to rise over time). Not to mention, it does this without the threat of violence and power that all fiat currencies are upheld by. The value of the Bitcoin network and all the transactions that take place within it are secured by the blockchain, automatically managed without a middleman.

Do we need “intrinsic value”?

Unlike gold, bitcoin cannot be smelted to make jewelry or leafed to cover your gourmet soft serve. But bitcoin’s purpose isn’t to serve you in any physical way. It’s merely a medium of exchange, a store of wealth, and a peer-peer electronic cash that you can store access to in your memory.
And honestly, that’s a benefit over gold. Its value isn’t dependent on physical use cases — just purely predictable scarcity.
In a few emails, I’ll go over self-custody and what exactly that entails. But long story short, if you want to ensure security and ease of access, you can carry your bitcoin in a device no larger than a USB stick and keep a backup of it in your mind (pure magic). Or, you can buy heavy gold bars that are expensive to store and pray that we don’t start mining gold from asteroids and flooding the supply; if that were to actually happen, you wouldn’t be able to sell your gold fast enough.

The intrinsic value of bitcoin is a hot button topic. Join the conversation on twitter with #21DaysofBitcoin!

Previously, we talked about the bitcoin vs. bitcoin cash debate, where proponents of bitcoin cash argued that bitcoin isn’t scalable enough. Many people like to criticize Bitcoin’s limited network bandwidth by referencing payment processors like Visa and MasterCard, which process over 5000 transactions per second; in comparison, the Bitcoin network processes about five transactions per second.
There’s a valid concern here — how can bitcoin replace this existing payment network if it can’t even scale?
But the mistake people make is assuming that credit card processors act as payment settlement base layers. This is certainly not the case, and actual transaction settlements often take several days to resolve—instant credit card transactions are merely sitting on top.
So, why are people treating Bitcoin like a secondary payment layer when it’s really a base settlement layer?

Proposed Solutions

Numerous proposed solutions have been brought up over the years as the network continues to grow larger and larger. One such proposal is a conjunction system between the existing financial system and the Bitcoin network.
For a few brief decades from the late 1800s to the early 1900s, under the gold standard, banks held reserves in gold and handed out paper “certificates” or “bills” that represented an IOU to their gold reserves. To put it simply, people needed a way to pay in small denominations in a way that was easy to carry and store — they certainly weren’t going to run around cutting off little pieces of gold bars to exchange for groceries.
Under a similar hypothetical “bitcoin standard” we could hold bitcoin under custody and execute layered transactions as custodians batch them onto the blockchain. For instance, you can send bitcoin back and forth on CashApp for free, but you are not really “sending” bitcoin. Rather, you are receiving an IOU anytime someone pays you, and only when you transfer your bitcoin to your own wallet is when the transaction is confirmed on the blockchain.
There are other options like scaling via sidechains such as Blockstream’s Liquid, but the most popular in-use remedy at the moment is this layer 2 solution: the Lightning Network.

The Lightning Network

The Lightning Network was created in 2015, designed as a second layer protocol that would help scale bitcoin transactions in order to lower user fees and allow for instantaneous transactions.
When you transact with someone via Lightning, you only perform bitcoin base-layer transactions when opening and closing the channel. While the channel is open, you can send thousands of micro-transactions instantly with negligibly low fees (often less than a penny).
Additionally, you can send funds to those you aren’t directly connected to.
Imagine that you are back in primary school playing a game of telephone with your friends. In order for the person at the end of the line to receive the message, you need to whisper the message to the person next to you, who then passes it on to the person next to them, and on and on.
Since you’re not connected to the person on the end, you can’t just whisper the message to them — you need to pass it to someone else first. Lightning channels work similarly in that they can “pass on” transactions through shared channels, in a trust-less way. When you want to send a Lightning payment to a merchant, for instance, you don’t need to open a direct channel with them. Rather, the network finds the fastest route to channel your payment through, making the transaction process seamless and easy.

The Future of Scaling Payments

When bitcoin is realistically scaled, people won’t really need to know exactly how these payments are routed — just like how you probably don’t exactly know how your credit cards and wire transfer payments are settled. But, if Lightning is something that sparks a technical interest, you can read more on how it works here.
While Lightning is still a fairly new system, it’s developing at a fast pace. Already, it is being used practically en-masse for people to send tips or pay for consumer goods (like in El Salvador) instantaneously in bitcoin.
With solutions like Lightning, other altcoins such as litecoin or bitcoin cash that claim to solve the scaling problem are rendered inconsequential.
Bitcoin is a full on rainstorm, while fiat is a house of cards ready to collapse at any moment. As the world keeps their eye on Lightning and how it helps scale bitcoin in an entire small country, I only hope this will captivate the attention of other nation states to follow suit in adopting this sound, decentralized currency.

In this video, we explore how the lightning network makes Bitcoin scalable to a global audience.

The lightning network is a second layer that operates on top of the Bitcoin blockchain and anchors directly to it, allowing for millions of transactions per second and helping to solve Bitcoin’s scalability problem.

Watch Video

Confused? Have questions? Tweet them with #21DaysofBitcoin!

A fork in the road.

2017: Civil War

We’re starting today off with a small history lesson. While it seems like eons ago already, a fairly recent civil war emerged between two sides of the bitcoin community in 2017 — changing everything.
By now, you’re familiar with bitcoin, or what we know as BTC (alternatively, XBT on some exchanges). In 2017, Bitcoin Cash (BCH) emerged as the result of a “hard fork” that transpired. Hard forks are pretty intuitively explained by the graphic above, but in essence, when some people want to change the rules of a blockchain network (without full consensus approval), they break off into a separate blockchain completely to change their network’s rules. Kind of like a divorce, if you will.
This is exactly what happened with BTC and BCH. On August 1, 2017, everyone who held bitcoin now held an equal amount of bitcoin cash. The community soon decided that BTC would be the winner (as proven by the price difference and hash-rate today). But why the contention in the first place?

The Scaling Problem

If you ask many bitcoiners today what they think about bitcoin’s scaling issues, they will chuckle and tell you that bitcoin doesn’t have a scaling problem. However arguably problematic the scaling issue is, the underlying truth is still the same: bitcoin cannot scale on its own. It needs solutions if the world is to adopt it.
Tomorrow I’ll go over layered solutions for scaling bitcoin for use as a peer-to-peer cash, but today we’ll be covering how bitcoin cash attempts to natively scale bitcoin — on the blockchain.

The Blocksize Debate

Early adopters of bitcoin debated over how to scale bitcoin. While some argued that scaling should be solved with patiently developed off-chain solutions, others pushed for increasing bitcoin’s 1MB block-size, so as to not drive away new adopters when blocks became increasingly congested with transactions.

At first glance, it seems like a good idea to increase block size capacity and lower transaction fees for users. But going down this route would require more expensive and sophisticated hardware, making it less accessible for individual users (as opposed to massive corporations) to be able to verify blocks with their own nodes. As block size increases, it becomes more difficult for full nodes to efficiently validate blocks, thus increasing the barrier to entry for running nodes and making bitcoin less decentralized.
Bitcoin must scale, but it needs to do so without compromising security and decentralization.
Because of this contention in the bitcoin community, those who pushed for a larger block-size launched bitcoin cash by creating a bitcoin hard fork that would increase the block-size from 1MB to 32MB capacity.
Unfortunately for the bitcoin cash community, the last few years have phased it out of relevance. While there are still many proponents of bitcoin cash today, the general community has dictated bitcoin the winner, as proven by its market dominance and the mining power dedicated to the Bitcoin network.

Other Types of Forks

Many more hard forks have come out of different cryptocurrencies over the years. One of the most popular forks of bitcoin is Litecoin (LTC), and a prominent fork of bitcoin cash is Bitcoin SV (BSV).
Typically, hard forks result from those who are unsatisfied with an existing protocol’s rules, such as block size or the amount of time required to mine a new block. Although hard forks continue to emerge, it is highly unlikely that any of these cryptocurrencies become anything but a “pump and dump” scheme. If they do survive as a top cryptocurrency, such as litecoin has, their goals to replace bitcoin as an “improvement” are quite impossible; this is due to bitcoin’s existing network dominance, which I’ll cover next week.

As you continue researching bitcoin and cryptocurrencies in general, tweet your questions with the hashtag #21DaysofBitcoin.

You might have heard the alarming stories of DeFi and cryptocurrency exchange hacks…

Need a reminder? Bitcoin exchange Mt. Gox was famously hacked in 2014 and $460 million worth of bitcoin — equivalent to $38 billion today — was stolen. Ouch.

Just recently, a hacker stole $600 million worth of various cryptocurrency assets from DeFi project Poly Network. Most of the funds have since been returned, but I can’t imagine putting your trust and securities into an exchange, just to have a shadowy super coder make away with all of your investments.
With the cryptocurrency industry being hacked left and right, it’s important to proceed with caution. However, there are ways to protect yourself from these hacks: take your bitcoin off exchanges, and don’t play with altcoins.

In a few days, I’ll walk you through buying, transacting, and self-custodying bitcoin, step by step. But today, I want to discuss cryptocurrency network hacks. Specifically, why bitcoin is specially “unhackable” compared to the other cryptocurrency networks (DeFi/altcoin projects). While it’s technically possible for the Bitcoin network to be hacked and funds to be stolen directly off of the blockchain, it will never happen with bitcoin (though, it can and does happen to other cryptos).
Here’s why.

The 51% Attack

The reason why the Bitcoin network is so strongly decentralized is because of how many participants there are in it. With each additional miner and node that comes online, the overall security of the network is strengthened, and it becomes increasingly harder for some malicious entity or group to try and take over the network.
But if a blockchain network is not strong, then it is prone to something called a 51% attack, where if miners are able to gain a hold of over 50% of the network, they can effectively take over and “double spend” their existing crypto. Similar to counterfeit bills, hackers would be able to use “fake copies” of an existing cryptocurrency, thus inflating the supply and devaluing the currency.
A 51% attack on proof of work protocols like bitcoin are able to take place successfully since the network will always default to the longest chain with the highest mining power as the chain of truth.

But ultimately, this won’t happen on the Bitcoin network because Bitcoin’s proof of work algorithm requires a lot of power for a 51% attack to occur (as much power as a small country consumes along with more than $23 billion worth of hardware alone); it wouldn’t make much sense for a hacker to spend this much money in an attempt to make risky money.
Additionally, hackers cannot “steal” bitcoin from others — they can only “double-spend” their own bitcoin, just as counterfeiters make fake dollar bills instead of robbing a bank. Once again, this would be foolish to do because the value of bitcoin would quickly drop as the network recognizes that bitcoin has been double-spent and people start to lose confidence in bitcoin.

Quantum Computing Concerns

Many skeptics also bring up the concern for quantum computing rendering the Bitcoin network’s security useless, since quantum computing would be able to break the network’s encryption algorithms and reveal users’ private keys.
Another concern is that quantum computing could allow for “super miners” that can mine bitcoin at an extremely high speed, thus centralizing mining and allowing them to take control over the chain.
While these situations may appear daunting, they are far off into the future of quantum computing. In any case, the Bitcoin network has much time to “upgrade” to prepare for such dire circumstances and will inevitably be able to protect itself from any sort of attack we see coming. To do this, Bitcoin would “hard fork” to a protocol that accommodates quantum-secure features (tomorrow I’ll go over what it means for a cryptocurrency to “fork”).

What Can You Do To Protect Your Bitcoin?

For now, just continue to execute your best internet security practices, such as using password generators and turning on two-factor authentication for your crypto exchange accounts. Later on, I’ll teach you how to transfer your bitcoin off of exchanges and into your own self-custody solutions to prevent your bitcoin from potential hacker theft.
However, a word of warning: self-custody isn’t an inherently simple task yet for most people. It’s imperative for the industry to continue to develop and optimize user-experience for bitcoin wallets, but also to hold exchanges accountable for safeguarding people’s funds who aren’t ready for self-custody storage solutions yet. Ultimately, self-sovereignty is the end-goal for securing your bitcoin — but remember to take the time to learn first.

The nuances of bitcoin security go layers deep — if you have any questions, feel free to tweet them using the hashtag #21DaysofBitcoin.

There are three types of nodes that make up the bitcoin network:

• mining nodes
• full nodes
• light nodes

We just went over mining nodes (aka miners), which confirm pending transactions to the blockchain and mine new bitcoin. Full nodes and light nodes are what validate the new blocks and transactions submitted by the miners.
Bitcoin full nodes have three main jobs: to keep a copy of the entire Bitcoin blockchain, to validate transactions, and to enforce the rules of the network. Bitcoin light nodes do the same thing that full nodes do, but they don’t keep a copy of the entire blockchain history. We’ll mainly focus on full nodes.

The Purpose of Nodes in a Network

The more nodes that are distributed across a global network, the more decentralized a system is. Since the Bitcoin network has the most nodes (including miners) of any cryptocurrency, it’s the most secure blockchain. While many other cryptocurrencies are prone to hacks and blockchain attacks, Bitcoin is virtually immune — and I’ll explain exactly why tomorrow.
The role of a node is to communicate with the other nodes in the network directly, verifying that their history of transactions is aligned with the next node. As they verify new transactions, they check to see that the bitcoin being transacted has not been double-spent and that no bitcoin is being created out of thin air. If a node does see malicious transaction attempts, it along with the other nodes in the network will reject the transactions.
Bitcoin transactions are verified across nodes in a similar way that rumors are spread: Terrible and cruel, a rumor echoes through the network of gossip until everyone in the third grade knows about the crush you have on Joshua. But unlike rumors, full nodes only pass on transactions that they have verified themselves, according to the rules that they enforce and the blockchain history that they reference.
Since nodes run the Bitcoin core software that lists out all the rules of the network (such as the 21 million hard-cap), all full nodes help protect the network by only verifying proper transactions to a pending block, along with verifying completed blocks broadcasted by the miners. If by chance, a node accepts a malicious transaction onto a block, the other nodes in the network will reject the block altogether.

Running Your Own Full Node

Did you know that you can run your own node? It’s very easy with user-friendly, open source node installers like Umbrel! You can follow their guide for detailed instructions. It’s inexpensive, fairly straightforward, and helps contribute to the security of the Bitcoin network.
Although Bitcoin is fairly secure and many claim that running an extra node will not do much for enhancing the network, it helps to have an excess number of nodes worldwide in the case of rare Black Swan events, such as nodes under certain government jurisdictions being shut down all at once.
Running your own node also helps you eliminate the trust needed for other nodes to remain honest. Though most of them remain true, by running transactions through your own full node, you are essentially becoming your own bank. That’s a pretty cool feature that isn’t really possible with fiat, gold, or anything else that can be used as money.

Yesterday, we went over how Proof of Work functions in confirming transactions and creating new bitcoin. Today, I’ll paint a more general picture of what mining looks like and how new bitcoin is distributed over time.

What Does Mining Look Like?

Mining in the industrial age vs mining in the digital age:

Bitcoin mining is unlike any other kind of mining. It’s simple to set up, runs 24/7, and violates no human rights or labor laws.
Here’s how it works. Basically, a bunch of specialized computers (ASICs: application-specific integrated circuits) are set up to mine bitcoin somewhere where electricity is cheap (since miners require a lot of computing power). As stated yesterday, miners can work together in pools to split profits and increase their odds of winning a new block.
With each new Bitcoin block that is mined, batches of transactions are recorded and confirmed to the blockchain. By confirming transactions and computing a winning hash, miners are rewarded with newly minted bitcoin. However, this block reward won’t last forever, since the supply of bitcoin is capped.

The Halving: A Four Year Cycle

At the Bitcoin network’s genesis, 50 bitcoin were mined in each block.
For every 210,000 blocks — approximately every four years — the number of new bitcoin mined per block is cut in half. As of 2021, only 6.25 new bitcoin are mined in each block. Some time in 2024, the block reward will be cut to 3.125 bitcoin.
This is the Bitcoin halving schedule:

When the supply of new bitcoin introduced is cut in half, its rate of inflation is effectively cut in half as well. This brings us back to our basic concepts of supply and demand.
Over time, as more people are introduced to the Bitcoin network and start participating in it, demand rises. At the same time, supply growth shrinks because of the halvings. As a result, the price of bitcoin is pushed higher and higher over every four-year cycle.
Another reason for miners to receive fewer bitcoin rewards each halving cycle is with the anticipation of the network growth. As more users enter the Bitcoin network, more transactions take place. Each block can only hold so many transactions, so users must essentially “bid” on a spot for their transaction to be confirmed.
For miners, this means that they receive high fees from users as incentives to include their transaction in the next block.
For users, this means increasingly higher fees or slower transaction times.
This is an issue that has been thought about long and hard, and new developments are still in their early stages. But, there are viable solutions, such as the Lightning Network. As you continue to learn about Bitcoin over the next few weeks, I’ll go more deeply into solutions for scaling transactions and how we can continue to develop the network.

Tomorrow, we’ll explore an important part of the Bitcoin network that you can easily participate in yourself: full nodes.