Bitcoin 101: Not your keys, not your coins!

(Last Updated on February 17, 2021)

Cypherpunks in the 1990’s like Adam Back, Hal Finney, Eric Hughes and possibly even a young Satoshi were all well aware of the possibility that future technology, like the internet, would greatly empower individual freedoms. This boom of computer and internet technology could provide the means to start insulating the individual from the control of the traditional financial system. Freedom from governments abusing debt and monetary spending, censorship resistance, resistance to religious or other discrimination, and equality for all users with no special rights to anyone.

If you do not own the private key to the wallet your coins are stored on, then you do not own your coins.

Hardware wallets, PINs, and 24 word passphrases

You must take responsibility of your private keys and self-custody your Bitcoin to have financial sovereignty.

We cannot expect governments, corporations, or other large, faceless organizations to grant us privacy out of their beneficence. It is to their advantage to speak of us, and we should expect that they will speak. To try to prevent their speech is to fight against the realities of information. Information does not just want to be free, it longs to be free. Information expands to fill the available storage space. Information is Rumor’s younger, stronger cousin; Information is fleeter of foot, has more eyes, knows more, and understands less than Rumor.

We must defend our own privacy if we expect to have any. We must come together and create systems which allow anonymous transactions to take place. People have been defending their own privacy for centuries with whispers, darkness, envelopes, closed doors, secret handshakes, and couriers. The technologies of the past did not allow for strong privacy, but electronic technologies do.

We the Cypherpunks are dedicated to building anonymous systems. We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money.

Eric Hughes a Cypherpunk’s Manifesto

Cryptography is the computed coded foundation to Bitcoin’s privacy and security.

Adam Back’s “hashcash” took this thinking a step forward in binding finance and cryptography together with energy stored in computer code by creating the “proof of work” algorithm that uses SHA-1 or SHA-256. Proof of work creates difficult pieces of code or “blocks” that with Bitcoin have been “mined” by computers, graphics cards, and eventually ASICs (application specific integrated components) to compute the complex cryptographic algorithms. Each unique block acts as the foundation to the blockchain which users can interact with, clear transactions through, and confirm everything on a public ledger based off of. Every block has a “block reward” which pays out Bitcoin for a reward to all miners who participated in solving that block.

Hashpower from miners binds the blockchain with computing power and energy.

Each block that is mined contains the previous block’s hash functions and the chain continues forward.

Users of the Bitcoin network interact and validate transactions using the tokens built on top of the energy and computing power stored by miners hashing the decentralized and authentic computer code chain of math which is Bitcoin core.

Pure authenticity and trustless finance, genuinely and constantly verified, for millions and millions of peer to peer users to operate with over the Bitcoin network.

Every block solved generates Bitcoins which are uniquely genuine and validated by a trustless, global, decentralized peer-to-peer network. This is the start of each coin entering the world based in pure cryptography and open honesty. It is an important store of energy and computing power through math to ensure future users that this specific digital token, it’s use and all transactions with, are real and not fake.

Not your keys, not your coins!

Bitcoins are stored in an encrypted digital wallet. Each wallet uses SHA-256 cryptography to generate a unique private key. The private key grants control over the wallet and all operations.

“If you do not own your private keys, your Bitcoin are susceptible to all the liabilities of man: failing governments, corruption, human error, thieves, scammers, and hackers.”

We’ve seen exchanges go insolvent and lose everything..

Exchanges and other custodian platforms should be used to purchase and sell Bitcoin, never for holding long-term. Custodian solutions are a welcome support to the Bitcoin ecosystem and serve an excellent purpose for onboarding new users, buying and selling for fiat dollars, and giving more regulatory clarity to the asset. But, we have seen the Mt. Gox come and go, no coins are ever safe on large, digital exchanges. Things happen, people can be corrupted, and failures occur. Only load onto exchanges what you are willing to lose.

What is a private key?

A randomly, cryptographically generated passphrase or 51 character identification string that represents the root password for your wallet.dat.

-> Most hardware wallets utilize 24 word passphrases created by the user at time the wallet is created

-> Previously it was often a randomly generated 51 character private key that secured many crypto wallets

-> SHA-256 encryption is used to secure and generate public and private keys

-> Private keys interact with public keys for transactions and validations of coins

Your private key is the “root key” to your Bitcoin holdings.

Protecting your wallet key is everything!

If anyone STEALS your passphrase -> they now have access and control over your coins.

-> Never store on your mobile phone, laptop, computer, tablet, or other online device that hackers, malware, or other nefarious actors could access

-> Never share your private key with any person, company, or other

-> Hardware wallets provide your random generate key on startup they will NEVER ask for your key again unless you are restoring

-> Careful of email frauds, fake software updates, and fake apps as phishing methods for your keys

-> Once transactions start flowing there is a history of your wallet.dat on the blockchain, you are somewhat anonymous but all of your transaction paths are clear for all to see on the public ledger

Bitcoin was created to grant financial sovereignty to the individual.

You are exposing your Bitcoin to hackers, scammers, Government control, corrupt employees, exit scams, bankruptcy, and whatever else you can be a financial victim of when you leave your coins on an exchange or another 3rd party service.

If you are not holding your own Bitcoin then you do not have responsibility for your wealth and control over your private keys. Self-custody is extremely important to the entire philosophy behind Bitcoin’s ability to be censorship and corruption resistant.

For many American investors this didn’t seem necessary as they slept and ignored growing economic issues around them. But for many unfortunate citizens in other countries, who are not allowed to access a bank, this has been a barrier to education, higher earnings, and a better life. This is a new onramp for them to participate in global finance, protect wealth they earn, and take control over their financial future.

The COVID-19 crisis has opened many American eyes to the fact our Government is not only building debt at an insane rate – but printing and spending money at an exponential rate.

Every day Americans are taking note that Bitcoin is an intelligent hedge against censorship and inflation.

The unbanked can self-custody Bitcoin anywhere in the world.

-> Store of Value – excellent savings mechanism to protect fiat wealth earned today in satoshis for long term hedge against government corruption, inflation, and asset theft

-> Equality and access for all – no barriers to entry or decriminalized individuals for any reason

-> Global – anyone can purchase and store value in Bitcoin with basic internet access and a mobile phone

-> Trustless and transparent – an open public ledger with millions of peers protecting, verifying, and validating the network against fraud and scams

Bitcoin is freedom and financial empowerment for the unbanked who have never had access to basic traditional financial banking infrastructure. If you have basic internet and a device as simple as a Raspberry Pi – you can access Bitcoin networks online. It doesn’t even take a cell phone, as numerous studies have shown Bitcoin transactions can be sent and confirmed over something as simple as radio waves!

Many countries have struggled battling against the tides of traditional finance and central banking as a 3rd world country. Bitcoin is starting to empower those individuals and businesses to skip past the legacy system with all of its hurdles.

Self-custody is core to our values.

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