Starting Point - #101
Making Bitcoin more accessible.
Dear reader,
Around September of 2021, I embarked on my own journey to living on a Bitcoin standard for one year.
I started off by saving and “investing” in Bitcoin in 2020. When I got to a position where I felt comfortable, I started to make small test purchases online. Then I moved to buying groceries and clothing. Gradually, I added bill payments until eventually all of our expenses were being paid in Bitcoin. In December 2020, I decided to take 100% of my net pay in Bitcoin and now use it as my primary currency.
One of the first challenges that I experienced when stepping into the experiment was the lack of info with regards to using Bitcoin in your day to day.
There’s a sea of podcasts, blogs, books and video content surrounding the technical aspects and economic theory behind Bitcoin, but there’s rarely anything out there showing you how to practically use Bitcoin, hence, I felt it might be helpful to share my experiences.
I’m not a software engineer, cyber security or financial expert. Just a person who runs a small business, has a small family, and trying to do my best daily.
People don’t like change.
Change is hard.
Adjusting habits and the current way of doing things is difficult.
It’s difficult because of a lack of knowledge.
My intent is to make living on Bitcoin accessible to the everyman in the most approachable way possible.
There’s plenty of technical resources out there and I’ll leave that stuff up to the experts.
We’re just keeping it simple.
Bitcoin is too precious to use.
The majority of content available to people revolves around the idea of Bitcoin as a savings device, an investment vehicle and sound money. But what you don’t find is on using it as currency. Bitcoin is all of the above. You can earn, save and spend in Bitcoin.
Gresham’s Law — a monetary principal that bad money drives out good — is often the go to argument. If that is the case, then fiat will continue to circulate thus diluting or defeating the idea of using a superior form of money and currency.
But what if good money drove out bad?
If Laszlo Hanyecz, the man to spend 10,000 BTC on two pizzas1, had never spent his bitcoin, he’d be incredibly wealthy now. However, until Laszlo’s transaction, no price had ever been associated to Bitcoin. If he never spent, would Bitcoin have a price today?
Case in point: In 2010, Laszlo’s 10,000 BTC was worth 40 USD. Over the years, as people continued to transact with Bitcoin, today’s pizza costs just 0.002 BTC.
Good quality money, over time, reduces the cost of goods and services.
Can’t make omelets without breaking eggs.
I had questions going into the experiment…
Would my purchasing power, even with tax liabilities, increase over time?
Would I end up with more Bitcoin come year end?
Is it even possible to live on Bitcoin?
Is it sustainable?
TL;DR - Mostly yes.
Would my purchasing power, even with tax liabilities, increase over time?
I’d heard that living on a Bitcoin standard would help you increase your purchasing power, even with having to pay capital gain taxes. “Don’t trust, verify” came to mind and I ran some simple numbers myself to see if this was in fact the case.
What I did was take the average annual salary2 of someone working in the US, their average annual expenses3, tracked their income on a bi-weekly basis and applied the closing spot price of Bitcoin for that pay cycle.
The next thing I did was to take how much Bitcoin the individual had left and played around with different fiat price points. But supposing they didn’t have any Bitcoin to start off with, now they do.
Every pay cycle, the individual was essentially dollar cost averaging (DCA) by default, so the amount of Bitcoin and their purchasing power would fluctuate on average, both to the up and down side, between .5 to 1% weekly.
(Maybe some financial expert will look deeper into these figures…)
The fluctuation promotes the idea of paying off expenses immediately, ergo helping to build savings over time. Compound this with fiat capital losses, helps to reduce tax liabilities (up to 3K USD annually) thereby providing discounts when making regular transactions.
These results were what lead me to move ahead with the experiment.
Note: Obviously, the findings were during a fiat bull market period. I’m currently tracking how it all pans out during the current economic environment.
Would I end up with more Bitcoin come year end?
While DCA’ing is a good “investment strategy” during fiat bear markets; if you’re living on Bitcoin, the DCA method actually reduces the amount of Bitcoin available to you due to fees, transaction costs (mining fees) and the exchanges’ spread. But we’re not “investing” here. We are opting out of fiat.
A better tactic, that’s worked for me, is to exchange or convert in lump sums, getting paid directly or via direct deposit. The low to no fees helps in providing you with more Bitcoin.
With your native currency being Bitcoin, and working with in a budget, you end up saving more in Bitcoin by year end.
Is it even possible to live on Bitcoin?
Absolutely.
There are many methods. From simply exchanging Bitcoin for fiat, using services to pay bills, rent and/or mortgage, to doing business directly in Bitcoin.
I’ll share my experiences and lessons learned, through trial and error, within these articles.
Where to start?
If you’ve never been to a gym before, you wouldn’t expect to push or pull 300 pounds on your first attempt. Same applies to being on a Bitcoin standard.
Start small by saving first. Set a goal. Once you’ve reached your goal, and you feel comfortable with your “permanent” stack, try making small transactions. Then gradually increase your activity over time.
Slow and steady.
More on this in future posts.
Is it sustainable?
Possibly.
There’s a lot of Bitcoin OG’s in the world that have been doing it for years. I’ve just started, but I think so.
We’re living in a time when just about anything can happen; speculating on the future isn’t practical.
The best way to plan for the future is to build the one you want. One day at a time.
Thanks for reading.
Cheers,
-svn
https://www.census.gov/library/publications/2021/demo/p60-273.html
https://www.fool.com/the-ascent/research/average-monthly-expenses/