What is the BTC Standard?

The Bitcoin Standard is a wealth management method that prioritizes BTC’s potential growth by saving in a hard deflationary asset (BTC) over a soft inflationary one (fiat).

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:

  1. What services should I use to pay my bills?
  2. How do I manage my cost basis?
  3. 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 love BTC for 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 it 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 how 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.

Research

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 other arguments that are important to consider. The system is highly dependable, autonomous, and secure, but it isn’t perfect. At the cost of its security and decentralization is its scalability or transaction speed. Visa has an average of 1,700 transactions per second, 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.

Some argue that this transaction speed limit is what stands in BTC's way to mass adoption, but we’ll have to see how the Bitcoin network improves in the future.

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 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 pull Civil Asset Forfeiture.

Your security must be on the forefront of your mind, and that starts with choosing a wallet. We'll get into those in the next blog post, so be sure to subscribe so you don't miss it!