Part 1 - Introduction and Risks

What is the BTC Standard?

The Bitcoin Standard is a wealth management method that prioritizes BTC’s potential growth, maximizes losses to pay month-to-month bills now, and saving your biggest gains for a year or more to avoid higher short-term gain taxes. 

This article is a summary of all that I know about living on a BTC standard. For myself, I found it a challenge to find a bigger guide that answered questions like:

What services should I use to pay my bills? 
How do I manage my cost basis? 
What about taxes? 

While I will share how I do things, note that I am not a financial or tax expert or advisor. None of this is financial advice. Seriously. I write fantasy fiction and I’m into mythology, philosophy, religion, and hermetic arts like astrology and alchemy. I live with my head in the clouds, but I also love BTC and the principles it stands for. 

This article is intended to be a high level, yet long and informative opinion and educational article that I hope provides you with a basic understanding of Bitcoin and why people choose to live on it.

Be aware that some of the links I provide are affiliate links, which means I earn a small commission if you purchase through the link that I provide. Think of it as a thank-you tip to me for writing this article and keeping it up to date. I spent a lot of time writing it, not to mention the research and testing to see what works for me, so be gentle.

For those of you familiar with Bitcoin and wanting to skip the warnings and fundamentals, you can scroll down and see the wallets and services I use. Everyone else should start with an understanding of the risks.

Risks

For anyone new to BTC, you should do many hours of research before you decide to implement the Bitcoin standard. 

If you aren’t in this for the long term, retirement or at least five years, then this probably isn’t the wealth management method for you. Even if you are BTC-Savvy, how I live on the Bitcoin standard is probably not the way that you should. 

When you go all in on BTC, you must understand the basics of the financial system that you are hedging all your bets on. Understand that there is always a risk, however improbably small, that the Bitcoin network could go down. Satoshi Nakamoto could come back from the dead and sell all his coins and the market could tank for years. The governments of the world could ban its use (even though recent events suggest increasing adoption by governments and even a ban couldn’t stop the people from using it). 

Anyone contemplating this should do their own research. Hearing the opinions of others is an important part of making an informed decision, but I would recommend that you follow your own instinct over anyone else’s.

If you’re contemplating adopting the BTC standard, you need to understand the difference between soft and hard money and the fundamentals of the Bitcoin network. I recommend you read the book The Bitcoin Standard, but at least understand that this is a huge risk and that you are embarking on a journey where only you are responsible for your financial wellbeing if you get burned.

There are also counterarguments against the Bitcoin network that would be rash to forget about. The system is highly dependable, autonomous, and secure, but it isn’t perfect. At the cost of security and decentralization is its scalability or transaction speed. Visa has an average of 1,700 TPS, and Mastercard is reported to handle around 5,000 TPS. But what about BTC?

A sluggish 7 transactions per second was a common estimate for pre-segwit addresses (legacy). Post-segwit, the theoretical maximum can be estimated to around 27 per second, but there is also the layer-2  Lightning Network, which offers near instant transactions, but that is a topic of its own. 

We’ll have to see how the Bitcoin network improves in the future, but with the risks out of the way, let’s get into why anyone would want to live this way.

Part 2 - The Basics

Why Bitcoin > Fiat

To summarize some key points of the Bitcoin Standard, this section will give you the quick version of why I think that wealth in BTC is better for me. 

Government-issued currency is inflationary, meaning that the amount of money in circulation is always growing. Economic theory suggests that as something becomes more plentiful, its value decreases because it’s easier to come by. This causes prices of goods to naturally rise as the value of the dollar decreases.Even stocks are extensions of fiat. Companies are based in the native currency of their country, and by default involve exposure to that currency. The point is to get away from soft, inflationary fiat and to a harder, more stable money that will actually grow wealth over time.

Gold is the OG hard money, in that its supply is very hard to increase. As demand for gold outgrows the supply of gold coming into the market, and the value of fiat currency decreases and requires more dollars to buy x amount of gold, the value of gold increases over time. History shows that the periods of time when currency was backed by gold showed the most stable growth for the people of that era. But it’s not a perfect solution as it’s not easy to transact with. It’s heavy in large quantities and it’s not easily divisible into smaller fragments on the go for every-day transactions. 

Enter BTC. 

There will only ever be 21 million bitcoins in total. It has pre-programmed scarcity and is arguably deflationary as people lose their wallets or small balances are left behind (called dust). While decentralized miners all over the world get paid in new bitcoin to run the network, the supply is drastically smaller than the demand with 19 million coins already mined and the rewards for mining halving every four years. This decentralization distributes power and responsibilities away from central authorities or governments and gives them to the individuals. 

Unlike gold, BTC is highly divisible. 1 bitcoin can be broken down into 0.00000001, or one Satoshi (sat for short). Many people actually prefer to go by sats rather than decimals of a BTC. For example, why say you have zero-point-zero-zero-zero-zero-one--zero -two-three bitcoin when one thousand and twenty three sats can suffice?

Also unlike gold, your bitcoin can never be seized by the state or stolen by a thief without your consent or naivety, so long as you self-custody your bitcoin in a secure way. Your bitcoin can’t be frozen like a traditional bank account if you’re wrongly suspected of a crime by some three letter agency trying to enforce Civil Asset Forfeiture. 

Your security must be on the forefront of your mind, and that starts with choosing a wallet.

Wallets - The Harder the Better (amiright?)

Unlike your traditional bank account that can help you recover lost funds, Bitcoin ownership places the responsibility of managing your funds on your shoulders alone. If you lose your bitcoin wallet or it's stolen, you may be out of luck if you haven’t taken the necessary steps to protect yourself.

Custodial wallets are user-friendly, but you relinquish some control over your funds. You’re also dependent on the provider or host of your wallet to keep your wallet safe from hackers or from going belly-up. This is a serious risk because it’s happened time and time again. Non-custodial wallets offer the ultimate solution for ownership, control, and security, but require greater responsibility. While it’s okay to start off with custodial wallets until you get the hang of things, you’re going to want to get your own wallet if you’re going to live on the standard.

This is where the concept of hard wallets and hot wallets come into play. Hot wallets are typically a mobile application or browser extension. They are always connected to the internet, making sending/receiving simple and easy, but this convenience also comes with the trade off increased vulnerability to hacking and theft. Hard wallets are physical devices solely designed to hold your bitcoin offline. This greatly increases your security.

A crucial element of any wallet is the seed phrase - a list of words generated when you first create your wallet. This phrase acts as a master key to your bitcoin. If you ever lose your hard wallet or your phone, you’ll need to restore your access to your funds using this phrase. It is the single most important piece of your wallet and you cannot take it lightly. Store this phrase securely offline, preferably in a fireproof container inside a safe or safe deposit box, if you have one.

Two hard wallets I would suggest are the Trezor Safe 3 and the Ledger Flex. While I own both, I would recommend the Safe over the Flex for four reasons: 

Shamir Secret Sharing
Hidden Wallets
It’s open source
It’s cheaper

Shamir Secret Sharing is so important. Imagine you have one seed phrase to your hard wallet and someone invades your home and puts a gun to your head. Your life > your bitcoin, and you give up your seed phrase knowing that your bitcoin is now out of your hands forever.

But it doesn’t have to be that way. Shamir Secret Sharing is a method of splitting up your seed phrase into pieces like it's a financial horacrux. You choose how many shards to generate and how many are needed to restore the wallet (⅔, ⅘, 5/7, 6/10, whatever). Keep one in your safe, one in a safety deposit box, and another in a family member’s safe across town and now you can afford to lose a seed phrase without harm, be it a burglar, a fire, or a flood.

Hidden Wallets are another feature of the Trezor Safe 3. You open the Trezor Suite app, plug in your device, enter your pin, and all your funds are there. In the burglar situation, he knows you have money on the device and forces you to unlock it, but by using Hidden Wallets protected by any password or passphrase imaginable you have plausible deniability that that’s all the bitcoin you have. Now, it’s important you don’t lose that password because it's essentially an extension of your seed phrase. Don’t lose or forget it.

The code for the Safe 3 is also open source, meaning that anyone can look into the programming and find errors or security vulnerabilities, and the device is quite affordable at only $79. Bonus feature: ‘Self-destruct’ is an option on the Vault 3 as well.

So, you’re one step closer to financial freedom, but how do you begin?

Preparation

If you’re going to adopt the Bitcoin standard, it would probably be a good idea to ensure your financial situation can withstand some turmoil. It requires a different mindset about money and a strong stomach for volatility. If all of your savings were cut in half overnight, could you survive?

Take a hard look at your finances and lower your bills. Do you really need subscriptions to three different streaming services? You can only watch one at a time. Do you really need that new game or book when you have so many yet to be finished? 

Reducing your expenses will protect you from being forced to sell more Bitcoin during market downturns and allow you to better ride the wave and potentially benefit from future price increases. Building an emergency fund will provide a safety net during price swings and every sat you can save and hold contributes to your long-term resilience. 

Read about minimalism. It’s not just decluttering your physical space; it’s about prioritizing what truly matters in your life, cutting out the excess, and focusing on experiences over material possessions. This philosophy can be incredibly beneficial when adopting the Bitcoin standard. 

By simplifying your lifestyle and reducing your reliance on consumerism, you’re freeing up resources that can be allocated towards acquiring and holding more Bitcoin. Minimalism can help you cultivate a greater appreciation for the things you own and reduce your desire for unnecessary spending. 

Speaking of stacking sats, there is another method worth mentioning…

Hodl or Trade?

Some people grow their stack by day trading; timing the ups and downs of the markets to increase the amount of bitcoin they have over time without fronting more cash, but this isn’t a cost-free method to get more bitcoin. Not only are any gains you make going to be subject to short term tax rates according to your income tax bracket (more on that later), but the time and stress of day trading will add chaos to your life. 

Trading requires you to keep track of the market, and unless you have generous free time and can function on a lack of sleep (because I would bet that when actively trading crypto you’re going to wake up in the middle of the night to check prices), I don’t recommend it but you do you.

Consider if it would be best for your mental health if you are constantly plugged into the market, especially if you’re living the bitcoin standard and all of your finances are saved in Bitcoin. You’re going to stress yourself out when you end up inevitably down at some point, especially if you’re thinking short-term. 

Fear will seriously impact your ability to make decisions in a volatile market and all the stress is truly unnecessary when you’re thinking long term, as you should on the bitcoin standard. This is why I’m a hodlr, or buy-and-holder. I don’t worry about price and buy every week, or dollar-cost-average as it's called.

I prioritize saving more BTC over everything else, especially because…

Tax Withholding – No more interest-free loans to the government.

At the beginning of the year, I go exempt with my employer and keep the income taxes normally taken out of my paycheck and convert this money into BTC, too. I do this because I believe I should profit from my own money rather than give it to the government before it’s due and allow them to make money off it throughout the year or squander it. 

I cannot advise this to anyone. It is extremely high risk. Do not do this unless you have multiple times over your expected annual tax bill put aside so that you can survive a market crash of 70% and still pay your taxes when the time comes. Even then, you still shouldn’t do this.

The only reason I justify doing this myself is because I own my vehicle outright, have a cheap 350 sqft apartment, the only debt I have is student loans, and I have months of income saved up. 

I set myself up so that I can survive market swings on the Bitcoin standard. But how do I do that, exactly?

Part 3 - How I Live the Standard

Buying BTC

Every week on the morning of payday, I check my balance and jump onto an exchange. Typically I use Kraken or Coinbase, and I’ll use the deposit cash function to move money from my bank rather than using my debit card to make the purchase and invoking additional fees. 

The down side to using this method vs the debit card is that when you deposit cash via ACH (standard bank transfer), most exchanges have a waiting period before you can withdraw your crypto to your own wallet in an effort to combat fraud and wait for the money to clear. This is a week on Kraken, or five days on Coinbase.

There are alternatives to these exchanges, such as Bisq for peer to peer buying, but you’ll need to do your own research on those.

I use the cash deposited to purchase all the bitcoin I can. I don’t worry about the price. I just buy. I also try to make this the only time of the week that I look at the price. I’m a minimalist, in that I try to cut out all that I don’t need and focus on what’s important to me, including cutting what stress I can because, frankly, my brain does a good enough job finding things to worry about. The fact is I don’t know the future, but I believe in Bitcoin. Come what may. 

Once the purchase is made I’ll input the details of the transaction into my cost-basis-tracking Excel sheet. This includes the date, the exchange, asset, usd spent, asset amount I got, the market price, fees, and the cost basis. 

I’ll come back to this sheet once I move the coins out of the exchange, but first we need to address something else that’s quite important to living on the Bitcoin standard. 

HIFO, not FIFO

In a bull market, where the market price has been growing, every time you go to convert some BTC into fiat to pay bills is a taxable event (for now…). You’ve gained value on your Bitcoin, and Uncle Sam wants his cut of your profit. 

I briefly hinted at this in the introduction, but let’s dive into this a bit more. FIFO stands for ‘first in first out’. It’s a standard for securities. Let’s say you spend an entire year slowly building a position in Apple. When you start closing your position the first share you bought is the first you sell by default. 

In traditional long-term investing, you sell in FIFO order to try to avoid short-term capital gains taxes. For individuals, this is the tax rate for your income for the year. To break it down in an example:

It’s been less than a year since you purchased the security
You’re making profit
You make over 50k a year and your income tax bracket peaks at 22%
Your short term capital gains tax rate is 22%. 
If you hold a security longer than a year, it’s only taxed at 10%. 

But FIFO isn’t the best approach to tax management with the Bitcoin standard, in my opinion. Even if your earliest Bitcoin purchase took place over a year ago, thereby lowering your capital gains tax to the long-term rate of 10%, wouldn’t it be better for your taxes next year if you could show a loss and reduce your taxable income?

But why would I want to exit a position and lose money? 

Is that really a better alternative to just paying more in taxes?

Let’s do a hypothetical here. Let’s say you make 1k a week and use it to buy bitcoin. The year is 2020 and year over year there’s a 300% increase in bitcoin and your 1k paycheck is now 3k. You sell that bitcoin to cover your bills and have earned 2k. 

If it’s been less than a year and your short term rate is 22%, your tax bill went up by 440. At long term tax rates, your tax bill still increased by 200 dollars. Rinse and repeat all year long and the implications are serious. Not to mention, when it comes time to pay your taxes, you’ll have to sell Bitcoin to foot the bill, which is another taxable event. 

That’s where HIFO shines. Highest in, first out. The IRS allows you to claim up to $3,000 of losses to deduct from your taxable wages. If you have more losses than that in one year, you can roll it over into the years to come. If you’re living on the Bitcoin standard during a bull run, you want to minimize your tax implications by harvesting losses as much as possible.

Remember, we’re saving for the long term. 5 years or more. We want to save our bitcoin that we bought when it was cheap until it’s time to retire. Who knows, maybe by that time Uncle Sam will recognize BTC as a currency and not an asset, making it no longer subject to gains tax at all (let me dream, damn it).

Long story short, HIFO is the way to go, but we need a secure place to store our Bitcoin until selling time comes.

Withdrawing and Storing BTC

So, I’ve deposited cash, bought BTC, and written down the purchase details on my spreadsheet. Now, if I bought some Bitcoin on this exchange last week, that five or seven day waiting period is now over and I can withdraw last week’s bitcoin purchase out of the exchange and onto one of my hardware wallets. 

I have two: a Ledger Flex, which I use as more of a hot wallet, and a Trezor Safe 3 which is, unsurprisingly, my vault. For more information on why I use this set up you can read my wallet section above if you haven’t already. 

So, In accordance with my HIFO method, I compare my cost basis for the Bitcoin I can now move out of the exchange to the cost basis of past purchased Bitcoin already on my wallets. 

My Ledger is where I keep all of my highest cost-basis coins. AKA, my spending and bill money. My Trezor is where I keep a majority of my funds that are in the money (profitable) because its more secure there. The cost basis of these coins, and my likelihood of needing it within the next month or so, determines what wallet I send my Bitcoin to. 

Here’s a tip: One paycheck = one address. Not only is keeping your coins divided up in different addresses help with privacy, but it also helps to keep the accounting as simple as possible. 

When withdrawing BTC, I generate a new address and only pull what I purchased at that specific price to that address. I’ll add that address to the same row as the purchase on my spreadsheet, the device its on, the date I pulled it out of the exchange, and how much is left on the address after fees.

And there the sats wait… until the fated day of sale.

Spending Money

My primary method of spending money is with Gemini’s credit card, be it revolving subscriptions, day to day expenses, or fun money. This card offers 4% back on gas (up to 200/mo), 3% on restaurants, 2% on certain grocery stores, and 1% on everything else. Best thing, you can get your rewards in Bitcoin, or altcoins if you want exposure without spending your own money on them. 

Mileage may vary, but this card starts off with a small available balance and one big annoyance: you can only spend that max available amount a month even if you pay off balances early. You have to wait a month for it to reset, which can be good for encouraging saving money, but sometimes I need more cash available than the 2k a month they started me with. (Gemini also states they are not considering allowing credit limit increase requests at this time)

Another mentionable service is Bitrefill, which allows you to purchase gift cards directly with your Bitcoin. I typically don’t spend my BTC in this manner because I like to keep my transactions as simple as possible: One Paycheck = One Address = One Sale. Besides, this next app I’m going to tell you about sells gift cards, too.

Paying Bills

Fold is an app that blends a custodial Bitcoin wallet with a traditional bank account and has become an integral part of my financial life. Each month, I review my budget and my bills for the upcoming month, then move some of my highest cost-basis Bitcoin into an address generated within Fold. Their “push to card” feature instantly converts Bitcoin into dollars, which I can spend immediately.

Using the account and routing number provided, I can use my Fold account to pay bills like car insurance, student loans, and pay off my Gemini credit card that gets pulled via traditional ACH transfers. They also claim to support bill pay through PayPal, though I haven’t personally tried that yet. Additionally, there is a debit card I keep on hand as a financial backup in the event I don’t have enough cash left for the month on my Gemini credit card. 

Another great feature is earning sats back on ACH bills and gift card purchases directly in the app. It’s almost the perfect bridge between Bitcoin and fiat… Almost.

The debit card is prepaid, meaning that it can’t be used for spontaneous crypto purchases or purchases that require 3D Secure protection. 

They also have a daily roulette wheel where you can win a few sats, but the odds of winning anything more than 25 sats is astronomically low. They used to offer a bonus spin for every $10 spent on top of the flat percentage back, but that’s been done away with. They also tease the possibility of winning a full Bitcoin as a reason (of many) to buy their Fold+ subscription, but you literally have a better chance of winning the Powerball.

Despite these gripes I have with Fold, I’ll continue to use them because of the simplicity they offer as an instant off ramp back into fiat. It’s much easier than sending coins back to an exchange, selling, and waiting for the cash to deposit back into a bank account. 

There are also other services out there like Bitpay that can scour about and find your credit cards and mortgages and allow you to pay them directly with your bitcoin. The reason I don’t use this service is because it doesn’t work with every bill, loan, or financial institution, but I’ve heard good things about it.

Regardless of how you convert your bitcoin back into cash, you’ve now invoked the taxable event.

Taxes

For me, I have to add the details of my sale to my spreadsheet. I’ll note the date that I sold, what I sold it for, and my spreadsheet will calculate how much I profited or lost from the sale. 

Like I said before, I try to only do this once a month for multiple reasons. It keeps me from constantly watching the price and wasting time and encourages me to budget and spend less. 

There are other tools you can use to track your profits and losses than a custom excel sheet, though. I simply do it myself because I can save money. However, there is the cost of your time and perhaps the stress and worry if you’re doing it right. 

If a more automatic tracking is the method for you, and you don’t mind a company (and possibly the IRS by extension) knowing your entire net worth,  I’d recommend you use Koinly.io to track your Bitcoin. You can connect Koinly to your exchanges, add your addresses, and voila! You have a portfolio tracker. 

And don’t forget about the methods I spoke about earlier. Utilize HIFO to harvest losses or even donate appreciated Bitcoin to lower your overall tax bill.

Final Thoughts

Living on a Bitcoin standard is a journey of financial freedom and personal growth that enforces your desire to save for the future. It requires you to shift your perspective to one with a willingness to embrace responsibility and a commitment to long-term thinking.

While daunting at first, the potential for financial sovereignty, reduced reliance on a flawed, corrupt, manipulative, and inflationary system, and taking part in a truly innovative monetary network are well worth the effort. 

This guide is a glimpse into my personal approach to living on the Bitcoin Standard. Remember, this is not financial advice and your journey may look different. The key is to educate yourself and understand the risks as you design a strategy that works for you. 

The Bitcoin standard is not only about accumulating wealth (but I do like that too), but also about aligning yourself with a system that promotes transparency, encourages individual empowerment, and sound money principles. Whether you are a seasoned coiner or just starting your journey, I hope this article has given you valuable insights and inspired you to take control of your own financial wellbeing.

If you have any corrections, questions, or suggestions, feel free to share them with me.