⚡ StackSats Saturdays | 2021 Week#6

📚 Books recommendations 🕵 Privacy issues 🆚 HODL vs trade

🤔 Why do so many people hold Bitcoin rather than trade it?

HODL is a purposeful misspelling of “hold” that implies holding on for dear life through crypto’s ups and downs. It is solid advice, but it is also much harder to pull off correctly that the memes imply (as HOLDing through 80% corrections takes a level of grit most people don’t have… and 80% corrections are common in crypto).

Check out Bitcoin ROI vs other assets.

Ever wondered what if you had invested U$10 in Bitcoin weekly?

Many public companies aren’t trading just storing in their treasuries.

The general wisdom of the internet is that HODL is a better strategy for new traders. Most people aren’t great traders. Especially when it comes to the insanely difficult to navigate and volatile cryptocurrency market. You won’t pay taxes until you cash out and your tax reporting is going to be very simple. Point here being, in almost every respect, HODL makes life simple and prevents you getting in your own way.

There are 2 levels of being smart,

  1. Having perfect knowledge of the future, that you’re able to trade 27 times between $1,000 to $1,000,000 and make profit.

  2. Buy and hodl, just as most people that profit from APPL, GOOG just buy once and hold.

In the event where you require fiat money, take a loan against your bitcoin. There’s plenty of borrowing/lending platforms to help facilitate that.

🤔 What are the best books on Bitcoin?

Check out some of the good books on this subject matter:

The Bitcoin Standard

This book moves on to explain the operation of Bitcoin in a functional and intuitive way. Bitcoin is a decentralized, distributed piece of software that converts electricity and processing power into indisputably accurate records, thus allowing its users to utilize the Internet to perform the traditional functions of money without having to rely on, or trust, any authorities or infrastructure in the physical world. Bitcoin is thus best understood as the first successfully implemented form of digital cash and digital hard money. With an automated and perfectly predictable monetary policy, and the ability to perform final settlement of large sums across the world in a matter of minutes, Bitcoin’s real competitive edge might just be as a store of value and network for final settlement of large payments—a digital form of gold with a built-in settlement infrastructure.

Digital Gold

Digital Gold is New York Times reporter Nathaniel Popper’s brilliant and engrossing history of Bitcoin, the landmark digital money and financial technology that has spawned a global social movement. The notion of a new currency, maintained by the computers of users around the world, has been the butt of many jokes, but that has not stopped it from growing into a technology worth billions of dollars, supported by the hordes of followers who have come to view it as the most important new idea since the creation of the Internet. Believers from Beijing to Buenos Aires see the potential for a financial system free from banks and governments. More than just a tech industry fad, Bitcoin has threatened to decentralize some of society’s most basic institutions.

The Internet of Money

In this book, Andreas goes beyond exploring the technical functioning of the bitcoin network by illuminating bitcoin’s philosophical, social, and historical implications. As the internet has essentially transformed how people around the world interact and has permanently impacted our lives in ways we never could have imagined, bitcoin -- the internet of money -- is fundamentally changing our approach to solving social, political, and economic problems through decentralized technology.

🤔 How does Bitcoin deal with privacy issues?

The open and transparent nature of the Bitcoin blockchain makes it possible for nation states or exchanges to mark certain bitcoins as being “tainted” by their use in proscribed activities. Although Bitcoin’s censorship resistance at the protocol level allows these bitcoins to be transmitted, if regulations were to appear that banned the use of such tainted bitcoins by exchanges or merchants, they could become largely worthless. Bitcoin would then lose one of the critical properties of a monetary good: fungibility.

To ameliorate Bitcoin’s fungibility, improvements will need to be made at the protocol level to improve the privacy of transactions. While there are new developments in this regard, pioneered in digital currencies such as Monero and Zcash, there are major technological tradeoffs to be made between the efficiency and complexity of Bitcoin and its privacy.

Several privacy technologies are being implemented:

  1. CoinJoin which takes all inputs from several transactions by different users and mixes them into one big, collaborative transaction. This one big transaction then sends the bitcoins mixed from different addresses out to different addresses. Because no one can tell where the spent bitcoins originally came from, the scent of the trail is obfuscated and the participants in the CoinJoin gain better privacy. The transaction sizes of mixed coins are much bigger than normal transactions because they contain so many different inputs.

  2. CoinSwap which uses a 4 multisig transactions (2 escrow payments, 2 escrow releases) to trustlessly swap coins between two parties. It’s less efficient than CoinJoin but can potentially offer much greater privacy, even facilitating the swapping of coins between different blockchains. When analysing a transaction, it’ll looks like two separate people are sending completely separate transactions. But under the hood, something else completely is happening.

  3. PayJoin (a special type of CoinJoin). The transaction then doesn't have the distinctive multiple outputs with the same value, and so is not obviously visible as an equal-output CoinJoin.

👀 Highlights of the week:

  • Bitcoin: A Hedge Against The Dystopian Present. (Bitcoin Magazine)

  • Home mining for non-KYC Bitcoin. (burn the bridge)

  • The Bitcoin Supercycle. (What Bitcoin Did)

  • Hacker Refuses to Hand Police Password for Seized Wallet With $6.5M in Bitcoin. (CoinDesk)

  • The institutionalization of BTC: Mining may be more profitable than buying. (Cointelegraph)

  • The ONE short clip to watch to GET it. (r/Bitcoin)

  • More Capital Ready to Enter Bitcoin, Reveals On-Chain Indicators. (Bitcoinist)

  • How to exactly measure the declining value of fiat currency? (r/BitcoinBeginners)

  • Bitcoin could soon feature on VISA network, CEO Al Kelly says. (Cryptoslate)

  • Twitter CEO Jack Dorsey Sets Up His Own Bitcoin Node. (CryptoPotato)

PS - Joined our community on Quora yet? A bunch of Bitcoin ₿elievers sharing, learning and looking out for each other.

Not financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Do your own research.