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We\u2019re going to climb a ladder together today. It\u2019s perhaps one of the more important ladders you will ever climb: the ladder of financial sovereignty. Until last year when I began to learn about Bitcoin, I didn\u2019t know that such a ladder even existed and I\u2019m guessing you didn\u2019t either. What this ladder symbolizes is one of the more important human freedoms available to us in the 21st century. <\/p>\n
This ladder is needed most in war-torn regions of the world like Syria or Afghanistan. [Hat tip to Alex Gladstein for his amazing articles that highlight the financial repression<\/a> found in some of these regions.] This ladder is needed in regions of the world where the nation\u2019s currency is rapidly losing value and where financial repression is out of control. This ladder is needed by those who don\u2019t trust their government to act in their best interest. This ladder is for people who don\u2019t trust central bankers to act in their best interest. This ladder is for people willing to accept 100% responsibility for their finances. For these reasons, this usually ends up being a relatively small number of people expressed as a percentage of the population. All have this ladder available to them, but few will choose to climb it all the way to the top.<\/em><\/p>\n\n\n\n\n Before we begin climbing this ladder I\u2019d like to share my thoughts on why it is important to climb this ladder. The reason it\u2019s important to climb this ladder today is because of the rampant theft by stealth that is happening in every currency on the planet. If there is a government-mandated currency anywhere in the world that is holding its value across time, I\u2019m unaware of it. Our most vulnerable, the poor and the elderly, are being hurt the most by central banks and governments everywhere. That ought to sicken all of us. That probably sounds harsh to some, but if you do your homework you\u2019ll learn this is true.<\/p>\n\n For the first time in the history of money, there is a way for the average person to save their wealth in a form that can\u2019t be devalued while it remains in your possession. You can set up your own \u201cdecentral bank.\u201d You can save your wealth in a form that can\u2019t be confiscated. You can save your wealth in a form that has no middlemen or rent-seekers. You can save your wealth in a form that gives you a level of property rights that were heretofore impossible to conceive let alone achieve. <\/p>\n Now that we\u2019ve gotten those issues out of the way, here are the steps we must take to achieve financial freedom. You aren\u2019t required to take these steps in sequence, but in most cases that is the best way forward.<\/p>\n\n\n\n Gain awareness of Bitcoin.<\/strong> This awareness can be based on your brother-in-law telling you to buy it or reading an article about it. To really understand Bitcoin requires you to go far beyond awareness. Learning about Bitcoin isn\u2019t easy, but it\u2019s worth the effort. For the wise few who make it a subject of study they will be rewarded. As New York Digital Investment Group (NYDIG) CEO Ross Stevens says<\/a>, \u201cLearning Bitcoin is like learning a foreign language.\u201d You can buy bitcoin in very small increments in a matter of minutes. That doesn\u2019t mean you speak the language of Bitcoin yet, or that you think in Bitcoin; that will take hundreds or thousands of hours. It\u2019s a large commitment with an equally large payoff.<\/p>\n\n Purchase bitcoin on a centralized exchange.<\/strong> It is not required that you buy bitcoin on a centralized exchange but the simple reality is most people will start there. If you\u2019re savvy enough to buy bitcoin without using a centralized exchange, congratulations! You can skip this step. There are some who trade silver or gold for bitcoin directly with no middleman or central exchange taking their cut. There are many central exchanges for buying bitcoin such as Swan Bitcoin, BlockFi, Coinbase, Kraken, Binance and many others. All have varying levels of user-friendliness and I\u2019m not going to suggest one over the other. The key to remember with all of them is you don\u2019t own bitcoin yet; you have an IOU for bitcoin from the exchange. <\/p>\n\n\n\n If their systems go down or get hacked you are exposed to the loss of bitcoin or you may be prevented from being able to spend or move your bitcoin off their platform. Most are user-friendly and a large percentage of people are likely to never move past this step on the ladder to financial freedom. Too bad. As longtime members of the Bitcoin community will tell you, \u201cNot your keys, not your coins.<\/em>\u201d <\/p>\n Note: There are also derivatives of bitcoin that you can buy likeGrayscale Bitcoin Trust (GBTC), Osprey Bitcoin Trust (OBTC), ProShares Bitcoin Strategy ETF (BITO, a futures ETF) but these are really not the same since you can\u2019t ever take possession of your private keys. There are four Canadian Bitcoin ETFs that are directly tied to the spot price of bitcoin as well if you live in Canada or have the ability to buy these Canadian ETFs in your country. The stock symbols for these are BTCC, EBIT, BTCX and BTCQ. There are also publicly-traded bitcoin mining companies like Hut8 Mining, Riot Blockchain, Marathon Digital Holdings and several others. <\/p>\n\n Derivatives might make sense if you have an IRA or some other retirement account that doesn\u2019t allow you to purchase bitcoin directly. I\u2019m sure that these will become popular with sovereign wealth funds and retirement funds who are prohibited from owning bitcoin directly for a myriad of reasons. If you buy these derivatives, you will not have the option to take possession of the private keys. Many bitcoin purists will scream, holler and warn you away from these derivatives, but for those of you who are not tech savvy this may be as far as you go up the ladder. Hopefully, you will become well-informed enough to take the next step on the road to financial sovereignty. I\u2019m not recommending any of these options just trying to give you some idea of the best-known choices for this step on the ladder. <\/p>\n\n\n\n One final option for those who want to hold their private keys in an individual retirement account (IRA) is a company called IRA Financial. The reason I put it at step two and not the next step is because although you may hold the private keys in collaborative custody, you are often restricted by how soon you can access your bitcoin. Holding bitcoin in an IRA doesn\u2019t give you the same freedom as steps three or four because the company will probably hold your private keys in collaborative custody, meaning that you will be charged a penalty by the Internal Revenue Service for early withdrawals that happen before you are age 59, and IRS rules also require you to start withdrawing your bitcoin no later than age 70 1\/2. That IRS rule will trigger forced liquidation of your bitcoin when you may not want to.<\/p>\n\n Take possession of your private keys. <\/strong>This is really the step where you begin to understand that bitcoin is a novel form of property rights that have never existed before and is enabled through software and cryptography. Bitcoin is a zero-to-one invention which means there is likely never going to be another asset or property like it. <\/p>\n Private keys are really just a long string of numbers and letters that allow you to transfer your ownership and transact or spend your bitcoin. This step on the ladder to financial freedom is best approached with care and caution so you don\u2019t lose your private keys or get scammed in ways too numerous to cover. There have been volumes written on this topic and I encourage you to do your homework in this area. Andreas Antonopolous<\/a> has many YouTube presentations on private keys and custody, and BTC Sessions<\/a> has some outstanding how-to videos on YouTube that explain how to use your own personal sovereign wallet(s). <\/p>\n\n\n\n There are several ways to take possession of your private keys. One is on a USB-like device called a hardware wallet. There are dozens of options which can make it confusing to even choose which one best suits your situation. Well-known brands of hardware wallets include Ledger, Trezor, BitBox 2, and Opendime. These are quite secure but also leave you vulnerable to a single point of failure if you lose the device, or the device gets destroyed or stolen. All but Opendime require you to back up the hardware device by writing down seed words; this has its own learning curve and list of issues for how to secure the seed words in case you lose the device. For example, I\u2019d suggest that you write down the seed words and store them in a tamper-proof pouch that you put in a safe or safety deposit box. <\/p>\n\n The other type of wallet is called a hot wallet and is usually something you download onto your smart phone or your desktop\/laptop. These hot wallets are quite secure but are vulnerable to hackers who gain access to your phone or laptop. They are also vulnerable to loss if your phone gets stolen or destroyed. The way it has been explained to me is to view the hardware wallet as equal to your savings account and the hot wallet as your checking account. You\u2019d put most of your bitcoin on your hardware wallet for longer-term storage while the hot wallet will contain far less bitcoin and be accessible for day-to-day purchases.<\/p>\n\n\n\n Hold your wealth in collaborative custody.<\/strong> Collaborative custody (also known as multisig) is considered by many to be the gold standard for holding bitcoin. What it means is it takes two or more hardware devices to spend your bitcoin. Two-of-three or three-of-five are the most common multisig setups, but there are corporate and institutional situations where collaborative custody could involve five or more signers needed to move\/spend the coins. With the introduction and rollout of Taproot the possibilities for this have become easier, more private and more secure.<\/p>\n There are do-it-yourself ways to set up collaborative custody (Caravan is one example), but for most of you reading this article (including me) that is well beyond our skill set. Typically it\u2019s engineers and very tech-savvy individuals that will set up multisig on their own. For the rest of us, it is worth it to hire a company to guide you through this. The two most well-known services for multisig or collaborative custody are Casa and Unchained Capital. Both of these services have different products to choose from at varying price points depending on how much bitcoin you\u2019re trying to secure. The advantage of holding your private keys in collaborative custody is it eliminates the single point of failure from having one device. This is considered by many to be the safest and most secure method for storing your bitcoin.<\/p>\n\n\n\n\n There are other steps on the ladder to financial freedom which I will list but will save for another more qualified person to explain:<\/em><\/p>\n Run your own node.<\/strong> Two companies that create hardware that have plug-and-play solutions that allow you to run your own node are Umbrel and Start9. <\/p>\n Open your own Lightning Network channels. <\/strong><\/p>\n Mine your own bitcoin.<\/strong><\/p>\n Use bitcoin as your unit of account.<\/strong> This \u201cfinal\u201d step is only possible when you start thinking in bitcoin. I\u2019d liken it to when you learn a second language and you become so comfortable with the language that you dream in that second language. You can begin using bitcoin as your unit of account as early as step two, but most won\u2019t. We need time to learn the language of Bitcoin.<\/p>\n Most people will probably not move beyond step two on the ladder, but it\u2019s always helpful to have a scorecard. What I\u2019ve noticed about Bitcoiners is they are generous in devoting time to teaching others about this new monetary technology for the 21st century. Most are well-aware of the steps on this ladder of financial freedom. I urge you to get on the ladder and keep moving up the ladder as if your financial sovereignty depends on it \u2026 because it does. <\/p>\n\n\n\n\nThe Good News<\/h2>\n
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