We are aware that not everyone understands how Bitcoins work yet, and it’s reasonable why some might be skeptical about it. However, we believe that as more people learn about it–since it’s much younger compared to traditional currencies, the more they will understand its value and see it as a superior form of currency.

But how do Bitcoins or other digital currencies actually derive their value?

Well, this is a complex interaction between technological, economic, and social factors. However, understanding the workings of fiat currency markets isn’t common knowledge, and most don’t know why dollars or euros are valuable, for example. 

What we need to keep in mind is that cryptocurrencies display the same characteristics as the fiat currency system, except they are improved upon in the case of Bitcoin. These attributes, which we’ll analyze below, are what make any type of new currency valuable. 

What Makes Bitcoin Valuable

The perceived value of Bitcoin, similar to any asset, is determined by a collective consensus influenced by the forces of supply and demand. 

However, there is a segment of people who are skeptical about attributing value to digital assets. This skepticism stems from a hesitance to acknowledge that digital items can possess intrinsic value, leading them to view Bitcoin as valueless. 

In contrast, those with a deeper understanding of the Bitcoin system as an engineering marvel on the order of importance of the printing press, and similar to something like the internet itself, will recognize and affirm its value.

So Bitcoin, specifically, is uniquely valuable as a result of its design, 15-year history of near-perfect uptime, and broad acceptance as the largest and most widely used digital currency. 

Unlike all other stores of value humans have used in our 5000-year economic history since adopting gold as the first widely used money, Bitcoin was designed to fit perfectly the qualities of the ideal money. 

This accomplishment was not possible until today’s world, which is based on interconnected computer and software systems. 

The path Bitcoin has taken over its lifespan is as important as the initial design. The sequence of events viewed holistically leads us to believe it is the most valuable asset ever created and the first true money that the world has ever seen. 

Let us analyze this further by exploring the following 7 core characteristics.

Durability

Bitcoin’s resilience is unparalleled. It exists as long as the blockchain is maintained on even a single computer. Bitcoin’s digital information nature ensures its longevity, as it can persist indefinitely on any computer running the protocol with a full record, of which there are millions of copies of the entire financial ledger active at any given time.

Portability

Bitcoin redefines financial mobility. Transactions can occur anywhere with internet access, or even short-band radio, offering near-instantaneous transfers with final settlement typically within an hour. 

The unique aspect of Bitcoin is the ability for users to carry their assets by simply memorizing their private keys. This empowers individuals to take their wealth with them in a permissionless way, facilitating seamless global transactions without the need for intermediaries like banks or money transmitters.

Divisibility 

The flexibility of Bitcoin is evident in its divisibility. Each bitcoin is composed of 100 million smaller units called satoshis. 

As of late 2023, 1 U.S. dollar equates to approximately 2500 satoshis. This granularity makes transactions with Bitcoin efficient. Even if the value of Bitcoin goes up, it can be further subdivided via a soft fork without altering the core protocol or changing the supply.

Fungibility

Every Bitcoin holds equal value, ensuring no single coin is more valuable than another. This uniformity, backed by the impossibility of counterfeiting–due to Bitcoin’s software verification, sets it apart from traditional assets. 

The process of mining Bitcoin in accordance with protocol rules naturally incentivizes network participants to maintain this integrity.

Scarcity

Bitcoin is the first object in the known universe with verifiable scarcity. The total supply is capped at 21 million Bitcoins, a limit embedded in the protocol’s code and upheld by network consensus. 

The declining supply of coins yet to be mined bolsters demand as Bitcoin gains broader acceptance. This scarcity principle makes people want Bitcoin more, and it is a cornerstone of its value proposition. Additionally, this scarcity is immune to unilateral changes without network-wide agreement.

Uniformity

Bitcoin’s uniformity is secured through software verification, eliminating the possibility of counterfeiting. Unlike physical currencies, Bitcoins have no physical form, and any attempt to counterfeit them would be more costly than mining them legitimately. This inherent network design encourages positive behavior among all participants, reinforcing Bitcoin’s reliability and trustworthiness.

Acceptability

The adoption of digital currencies is on the rise, with the number of global cryptocurrency owners worldwide increasing by 34% during 2023. According to the same report, this rise applies to Bitcoin as well, with a growth of 33%, meaning there were 296 million owners worldwide by the end of 2023 (51% of global crypto owners). 

As knowledge and accessibility of Bitcoin increase, so does its acceptance, both by individuals in countries with unstable financial systems and businesses globally.

“Bitcoin has gained acceptance as a store of value, and over time, it’s being recognized as a unit of account. So, even if grandpa doesn’t “get it,” Bitcoin is indeed considered a form of money.” 

Final Thoughts

Throughout its existence spanning more than 15 years, Bitcoin has consistently demonstrated its decentralized nature and resilience to censorship. The principles governing Bitcoin have remained robust and effective over time. 

We shouldn’t forget that Bitcoin is unreplicable. While the underlying code of Bitcoin is openly accessible for anyone to view and utilize, just like HTTP, TCP/IP, and other open protocol standards, the characteristics of its network extend beyond mere code. Even if anybody can copy the code, nobody can copy its history or the network of builders and entrepreneurs that have flocked to put their energy toward Bitcoin only. 

Additionally, Bitcoin’s value is something that has been consistent throughout its existence, even though the USD-denominated price can be volatile and change often. This value reveals itself in layers and stages through time, and the world is slowly, but more and more every day, recognizing what that value is and why it is so important today. 

While some financial professionals may focus on price targets and trading levels, spending time staring at screens all day, intelligent Bitcoin investors set themselves apart by exploring its true long-term value, opening their minds to the end game, and the far-reaching consequences of Bitcoin’s inherent properties.

If you understand the core principle of supply and demand behind what gives Bitcoin value, appreciate this value, and know what you own, you are poised to make better financial decisions. This also applies when the emotions of large price swings take away from other investors’ reasoning faculties, both to the upside and down. 

Although there are some opportunistic times in life to sell, especially when a life-changing amount of money can improve your quality of life, we believe the ideal holding period for Bitcoin is FOREVER. Selling too much too early will be the sour regret of many would-be wealthy investors who allowed short-term thinking to make them sell a long-term asset too early in the adoption curve.

Are you ready to embrace this lasting investment and explore what this exciting journey holds? OX Block Mines is here to support you as you navigate the fascinating world of Bitcoin and Bitcoin mining.

Let’s discuss more!

The post Why Is Bitcoin Valuable? appeared first on OX Block Mines.

But how can you access and transfer these intangible digital assets securely?

There are two different options available: custodial and non-custodial (self-custody) wallets. Their main difference comes from who controls the cryptocurrency. So, in a non-custodial wallet, the user has complete control and not a third party, as we see in a custodial service. 

Wondering which option is best for Bitcoin? Let us share some information. 

Bitcoin is useful and valuable because of its robust security characteristics and ability to transfer value from peer to peer in a sovereign way. Unfortunately, the greatest losses to consumers have occurred when they give up these security characteristics in favor of the convenience offered by large exchanges, in which you buy crypto and they custody it for you. 

The largest public losses, like those incurred by the FTX collapse, Celsius, BlockFi, MT.Gox and many others were so disastrous because they lost or absconded with customer funds through mismanagement, negligence, or outright malice.

In the Bitcoin space, these losses (including the examples shared above) are entirely preventable because Bitcoin is so easy to self-custody. Unlike gold, stocks, or real estate, you can easily own, store, move, and transfer your assets without the need for a third-party custodian or asset manager. 

So in this article, we’ll explore the ways you can choose to self custody your Bitcoin.

How Do Bitcoin Wallets Work 

When creating a Bitcoin wallet, you receive two essential keys: a public key and a private key. 

The public key is utilized for encrypting data and forming your wallet address, while the private key enables you to decrypt this data or access your Bitcoin holdings. Protecting and securely storing your private key is crucial.

The blockchain is the record-keeper for your Bitcoin. It reliably records, stores, validates, and secures your Bitcoin ownership through encryption. To this day, no cryptocurrency has been compromised via blockchain data alteration, owing to the robust encryption techniques employed by proof of work blockchains. 

It would actually require several hundred years, or even thousands of years (given the current state of technology), to successfully breach a blockchain through brute-force hacking.

So, to store these private keys and secure your funds, there are a variety of methods available for you to choose from. Let’s review the most common ones.

Types of Bitcoin Wallets

Software Wallets/Phone Apps

Apps like the Coinbase Wallet or Muun Wallet are great software-based solutions to store your Bitcoin. While they are not perfect as far as security, they have reliable backup methods that allow you some redundancy in case you misplace your seed phrase–the 12 words that generate your wallet when you first set it up. 

These wallets are great for smaller amounts that need to be accessed and moved with some frequency. For large amounts, it is recommended to use a hardware wallet or some version of multi-signature custody (explore more below).

Paper Wallets

Because a “wallet” is really just an address generated by a private key, which can be generated by 12 random words from a list, access to your money is really just a matter of accessing information. 

In other words, you can own Bitcoin without ever interacting with an electronic device, and in fact, your security is greatly improved by doing so, and devices connected to the internet pose the greatest security risks.

By simply writing 12 words on a piece of paper or stamping them on stainless steel as a more durable option, you can take custody of Bitcoin and receive it to your address without ever setting it up via an online interface. This can be a very secure option as long as you properly store your seed phrase.

Hardware Wallets/Signing Devices

Hardware wallets store your private key on a physical device and allow you to access your money for spending through a physical interface that is needed to validate any transaction you initiate. 

Hardware wallets are (usually) essentially software wallets that do not have a built-in private key stored. So, while the experience of interacting with your hardware wallet interface is very similar to a software wallet, the actual validation of the transaction depends on a physical device to authenticate. 

This provides an added layer of security and keeps your private key from being on a physical device with internet access. These devices often have multiple secure elements. This means that the private key is safer and cannot be read from the device at a distance, similar to how credit card information can be lifted from your wallet.

Hardware wallets, especially combined together in a multi-signature format, are the gold standard for keeping your assets safe. Companies like Ledger, Trezor, and CoinKite are well-known in the space and have their own individual setup processes and security features.

Multi-Signature Software Wallets

We discussed private keys being the ultimate access to your funds, and if your key is lost or stolen, unfortunately, you are out of luck UNLESS you have your assets in a multi-signature setup. 

Software wallet providers like Sparrow Wallet are built to accommodate multi-signature setups. 

In a multi-signature custody configuration, you essentially split your private key into multiple pieces, with a 2 of 3 signature being the most common. 

The scenarios for collaborative multi-signature custody are endless, and there is no limit to how many keys you can have or what set of rules you apply.

Suffice it to say that if you lose one key but have access to the other 2, your funds are safe. If someone gains access to one of your keys but cannot get a second, your funds are safe.

If, unfortunately, you lose one key or pass away suddenly (leaving heirs and a treasure trove of Bitcoin), but your two trusted backups are intact, your funds are safe and can be transferred to your heirs according to your individual wishes. 

Multi-signature custody creates redundancy security as, by nature, it requires several types of permission. So it forces upon you as a saver the good behavior of HODLING your coins for longer due to the challenge of moving them around on a whim.

Collaborative Custody Solutions

The field of Bitcoin custody solutions is huge and ever-expanding. Companies like Unchained Capital, Fedimint, and The Bitcoin Adviser all offer various types of collaborative custody for individuals and institutions to achieve a wide variety of aims. 

The possibilities and permutations of structures are infinite, and one size does not fit all. If you find yourself handling a small fortune of Bitcoin, and you want to be sure it is protected, it is highly advisable to start considering collaborative custody setups. This will allow you to minimize the risk of loss and can help you feel secure about your ownership of the most valuable asset in the world.

That’s all for today!

We shared with you an in-depth exploration of crypto and bitcoin wallets and how you can use them in each circumstance. 

Last Words

Ultimately, taking self-custody is NOT DIFFICULT; it is just not widely understood or taught. Finding the best option can sometimes be challenging, especially when you’re just starting out, but with the right resources and advice, you can choose the right method. 

At OX Block Mines, we are on a mission to make sure you never lose your coins to a scammer or mismanager and that you have the confidence and competence to take ownership of your future. We want you to sleep easy, knowing that something like FTX can never happen to you as long as you take self-custody!

If you have more questions or need any advice, you can always reach out, and our team of experts will be here to cover all your Bitcoin needs.

The post How To Safely Store Bitcoins: Exploring Your Options appeared first on OX Block Mines.

1. A Hedge Against Inflation

While the allure of traditional currencies, especially the dollar, remains strong, they aren’t without their issues. Chief among them? Inflation. Over time, as the purchasing power of these currencies diminishes, assets held in them lose value. Saylor’s perspective hinges on Bitcoin’s finite supply offering a robust counter to this monetary dilemma. It’s a modern solution to a longstanding problem.

2. The Digital Gold Thesis

Throughout history, we’ve leaned on gold as a dependable store of value. But in an age where digital interactions dominate, Saylor presents Bitcoin as the new gold — a digital asset that retains value without the physical constraints.

3. Superior to Gold

However, Saylor doesn’t merely view Bitcoin as an analogue to gold; he sees it as an improvement. Its decentralized framework, combined with a hard-capped supply, makes Bitcoin an attractive and potentially more stable store of value in his eyes.

4. The Long Game

While the financial world is often accused of chasing quick returns, Saylor is playing chess, not checkers. His vision is long-term, viewing Bitcoin as an enduring store of value, poised to grow and mature over decades, not just years.

5. The Network Effect

Ever noticed how platforms like Facebook or Instagram become more valuable as more people use them? This principle, known as the network effect, applies to Bitcoin too. Saylor posits that as more institutions and individuals adopt Bitcoin, its inherent value and utility will only amplify.

6. Leading the Financial Revolution

This isn’t just about hopping onto a trend. By investing so heavily in Bitcoin, Saylor is positioning MicroStrategy as a pioneer in what many believe is a seismic shift in the financial world.

7. Educating the Masses

Saylor isn’t just a proponent; he’s an educator. Through seminars, webcasts, and interviews, he’s taking on the mantle of helping the corporate world, and the general public, grasp Bitcoin’s transformative potential.

8. Conviction in Action

It’s easy to endorse an asset during its highs, but Saylor’s commitment shines brightest when the going gets tough. Through market highs and lows, MicroStrategy’s consistent investment in Bitcoin underscores their unwavering belief in its overarching promise.

To sum it up, to Michael Saylor and MicroStrategy, Bitcoin isn’t merely a digital asset. It’s a groundbreaking shift, a testament to the future of finance, and a beacon of what modern financial strategy can look like. As we navigate these uncharted waters, Saylor’s insights serve as both a map and a compass, offering a unique perspective on where the tides of finance might take us next.

The post Michael Saylor’s Vision: Why MicroStrategy Adopted Bitcoin as a Treasury Reserve appeared first on OX Block Mines.

This is where the beauty of Bitcoin self-custody comes into play, a feature that allows for comprehensive ownership, freedom, and security that is unparalleled in the world of finance. 

The technology that Bitcoin operates on ingeniously leverages the benefits of decentralization, cryptography, and mathematical odds to offer a level of security that cannot be matched by another other security network, and fosters independence among its users.

Let’s start with the concept of Bitcoin self-custody. What makes it unique? Why does it matter? 

At its core, self-custody is the act of being your own bank. 

Instead of entrusting your assets to a financial institution that retains full control, you become the master of your wealth, thus preserving your financial sovereignty. This approach stands at the center of the Bitcoin philosophy, rooted in the libertarian principles of financial autonomy and personal responsibility.

The intricacy and elegance of Bitcoin’s architecture allow for this level of control. Key to this framework is the notion of the private key – a complex string of characters that authorizes transactions on the Bitcoin network. This key can be stored in multiple ways, each offering varying degrees of convenience and security.

Consider this: you own a hardware wallet, a physical device that provides a secure and user-friendly interface for managing your Bitcoin transactions. This is how many people choose to store their keys in a way that allows them to spend their coins conveniently without the security tradeoffs of software wallets that are continuously connected to the internet. 

However, in this case, concerns arise over the potential of a compromised software update, maybe an unconsented feature upgrade (looking at you, Ledger). 

Here’s where Bitcoin’s brilliance shines through. Even if the hardware device is compromised, your assets aren’t trapped.

You can bypass the device and use your seed phrase, a list of 12 or 24 words that represent your private key, to access your Bitcoin from a trusted software wallet. 

The hardware device and seed phrase are redundant custodians of your private key, reinforcing the fail-safe nature of Bitcoin’s security design. When properly custodied, Bitcoin is a perfectly secure bearer asset. You don’t need a bank or an exchange to hold it, spend it, or move it.

But the elegance of Bitcoin’s security features extends even further. For long-term holdings, you may opt to go entirely hardware-free. A seed phrase alone can generate a Bitcoin address to which you can send your funds. 

The wallet associated with this address is completely offline, having never interacted with an electronic device, hence reducing the attack surface to a bare minimum. This wallet, shrouded in anonymity, is secured by mathematical odds that border on impossibility.

Add to this the concept of a multisig (multiple signatures) setup where your private key is split into separate parts, each stored independently. In this setup, to authorize a transaction, you would need a majority of the parts of the key, creating an additional layer of security. This means that even in the event of a highly improbable hack, your funds remain secure unless multiple parts of the key are compromised simultaneously. It also means you have to LOSE multiple keys in order to lose access to your Bitcoin, making a multi signature setup the best tradeoff mix of any form of long term self custody.

In essence, Bitcoin self-custody represents a radical departure from traditional banking models, offering unparalleled security, privacy, and control over one’s wealth. 

While it demands a higher degree of personal responsibility, it also shields you from the systemic risks inherent in centralized financial institutions. I myself narrowly avoided hundreds of thousands of dollars worth in lost Bitcoin from custodians like Celsius, one of many “trusted third parties” to take all of their customer’s money.

Whether it’s managing short-term transactions or safeguarding long-term holdings, Bitcoin’s robust security features provide the tools needed to retain complete control over your assets. By opting for self-custody, you’re not just participating in a novel financial system; you’re reclaiming power over your wealth, affirming your financial autonomy, and embracing a future where the individual, not the institution, holds the keys.

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