A Beginner’s Guide to Bitcoin There are many people smarter than me who educate others on Bitcoin, but their explanations are often long, technical, and not intuitive for beginners. I’d like to offer a short-form option for those who want to learn. This guide is something you can share when someone asks, "What is Bitcoin?"—because, at the end of the day, this is where we need to bring the most awareness. Through my learning, I noticed that the people who understood Bitcoin the fastest had backgrounds in technology, investing, or engineering. I hope this primer helps democratize the understanding of Bitcoin from a non-technical perspective and meets people where they are at. This is not intended as a full, in-depth guide but to pique interest and form a basis for self-exploration on these ideas. Understanding the Market – COVID as an Example During COVID, the entire economy shut down, yet while in lockdown, we saw a huge rise in asset prices. Why? Because governments printed money. This highlights a key reality: the financial world is different from the real world. The financial world is denominated in dollars. The real world is denominated in people. This is why financial markets can be high even when people are struggling. Before 1971, when we moved off the gold standard, good and bad financial performance generally correlated with the rise and fall of living standards. But when currency is weak, these two things no longer align. Think of Argentina—its stock market (Merval Index) has been skyrocketing, yet people are living in an economic depression. Why? Because the currency is losing value. Everyday people understand this in countries with weak currencies, but since most of the Western world hasn’t experienced it in their lifetimes, they recognize it elsewhere but fail to see it happening to them. The easiest way to grasp this is to think "as if" you live in an emerging market country prone to this type of value loss. I say "as if" because, while the U.S. dollar is the world's reserve currency, this just delays and slows down the eventual outcome—it doesn’t prevent it. What Is Money? Money is a concept created by humans out of ingenuity to avoid bartering—so we wouldn’t have to trade tomatoes for cucumbers or store goods we don’t need. It is one of the most foundational and long-standing ideas in human civilization. Originally, money was no different from a store of value. You worked, added value, and in return, received money—a store of value. The separation between money and its role as a store of value happened when we transitioned to infinitely debasable currency. At that point, money—specifically fiat currency—became merely a medium of exchange rather than a store of value. I start with this because before dismissing Bitcoin as "made up," it’s important to recognize that the very concept of money—something we use every day and that drives the entire global economy—is also made up. The Real Problem – When Money Loses Value, It No Longer Serves People So, how do we better align the financial world with the real world? Benjamin Franklin had the saying "time is money"—but what does that really mean? We all, in one way or another, trade time for money—whether through labor, mental work, or other means. Henry Ford believed money should be tied to energy. So, what’s the point? The point is that 1 unit of energy spent working should equal 1 unit of money created, and that energy needs to remain as equal as possible. This ensures an ethical basis for money, so that all participants—whether miners or buyers—have the opportunity to acquire money with the same order of magnitude, risk-adjusted. What Is an Ideal Store of Value? A store of value should allow us to exchange 1 hour of work for something that maintains the worth of that hour over time. Fiat money, backed by nothing, means that over time, every hour worked is worth less and less—until, eventually, the cost of the paper itself is more valuable than the money printed on it. That’s exactly what has happened in Zimbabwe and other countries—forcing them to switch currencies. How Bitcoin Fixes This Bitcoin isn’t printed out of thin air or based on arbitrary timing—it must be mined using energy. The current average cost of mining a Bitcoin is around $84,000 (as of March 15, 2025), but more importantly, it is created through energy expenditure. Put simply: The energy you use for labor is equally represented on the other side. No corruption. No printing. An ethical foundation for money and a store of value that will grow over time. Bitcoin is also capped at 21 million coins, with the last coin expected to be mined around 2140. Mining rewards will also halve every four years—just as our time becomes more scarce, so do mining rewards. But What About Bitcoin’s Volatility? There are three key components to this: We've never seen a hard money emerge in real-time. Bitcoin is simultaneously forming as money and following a network adoption curve. Over time, Bitcoin transfers from speculators to long-term users. If you chart bear market bottoms, adoption continues to rise exponentially. If you chart bull market tops, you can see the speculative premiums. Speculative premiums come from two sources: Speculators and long-term holders. In high-inflation countries (50-100% per year), any Bitcoin price is better than waiting. Bitcoin should be seen as a superior digital gold rather than just a currency (for now). "Digital gold" is just an analogy—it’s actually bottled-up time and energy, as scarce as our own time. Many people confuse a lack of infrastructure for a flaw in Bitcoin itself. Think back to when email was invented. It was described as "digital mail" simply because there was no better way to explain it. People asked, "Why use email when there are only 20 computers in the world?"—they were confusing the technology for its adoption phase. The same applies to Bitcoin. Just as email evolved beyond simple messages, Bitcoin is evolving beyond "digital gold." What About Gold? Gold isn’t ideal money, but it’s still better than cash in the long run. The properties that make good money are: Divisibility Recognizability Portability Security Scarcity Gold isn’t the rarest metal, but our ancestors chose it because it was the best balance of these properties. Gold became money not because it was ordained, but because humans found it useful. However, it’s still flawed—the same way the U.S. dollar is the best of the worst. If you ask wealthy investors about gold, they’ll tell you it’s an insurance policy—not a growth asset. Unlike Bitcoin, gold isn’t tied to energy. It’s just the best of the worst tied to a relative proxy of these features. Investors today who would otherwise buy real estate or stocks are now buying Bitcoin—its market opportunity is much larger than gold. Will Our Currencies Disappear? No. As long as we have nation-states, they will issue some form of currency. Bitcoin can act as a store of value while you still use fiat for daily transactions. Bitcoin doesn’t need to become a transaction currency—but it can in the future. What About Other Cryptos? The word "crypto" simply means "cryptography." There are many use cases, both current and future, but they don’t compete with Bitcoin. How Should a Beginner Buy Bitcoin? It’s simple: DCA (Dollar Cost Average)—Have a consistent plan. If Bitcoin falls below mining cost, add more if you want. If Bitcoin is 2-3x above mining cost, just HODL—unless your local currency is inflating 20%+ per year. Following these principles ensures you accumulate Bitcoin while understanding when speculation is in the price. Only add Bitcoin with money that’s meant for savings/investment—money you don’t need for at least three years. When you buy Bitcoin at or below the average mining cost plus local inflation, you are storing your energy risk-off. When you buy Bitcoin above that, you are taking a risk-on approach—betting that speculation and adoption will increase at a faster rate and that mining hash rate will lag upwards. To be clear, buying below or above is not about intrinsic value—it’s about knowing the market equilibrium price. There are good reasons to buy at any time, but this framework helps you think about it holistically. Final Thought #Bitcoin aligns work, money, and value. It’s not about hype—it’s about fixing broken incentives.