Excerpt
I talk about how to manage bitcoin funds wisely, especially when it comes to small amounts and high fees. I explain how to safely transfer your bitcoin from your Green wallet to a BitBox02 for long-term storage while keeping transaction fees low. Furthermore, I discuss the differences between hot and cold wallets and cover why it’s important to use a new address for each transaction to protect your privacy. Learn more in the video.
Transcript
At the moment, I thought the great thing about Bitcoin is that it’s possible for anyone to use it, but it’s not feasible to send $20 in bitcoin right now because the fees are so high, sometimes even higher than $20. So, what to do? The next question is. Hello, Anita. I installed the Green wallet and bought my first bitcoin with it, a value of €20. Now I would like to transfer it to my hardware wallet, the BitBox02. Is it possible to transfer them without paying transaction fees? Thanks and regards. Okay, so let’s start with the Green wallet and what it is. The Green wallet is a hot wallet, and as a mobile wallet, it is connected to the Internet and your keys, your seed could therefore maybe be accessed by someone else. Whereas the BitBox02 is a cold storage device, meaning the seed cannot be exposed to the Internet, which makes a hardware wallet much more secure than a mobile or a desktop wallet. So you are on a great way to longtime secure storage of your bitcoin already if you’re using a hardware wallet. And a Bitcoin wallet is not like a bank account. You don’t have a single account number that you can use over and over. A Bitcoin wallet creates thousands of Bitcoin addresses for you. And you should always use an address only once, and that is for privacy reasons. Otherwise, someone can go and look up your address and see the total balance that you’ve accumulated on this same address by reusing it. And that’s not good, because then they know how much bitcoin you own, and you could be a target. So what is a Bitcoin address? A Bitcoin address is a location on the Blockchain that is associated with your private keys from your wallet. Then we need to define another thing. A UTXO. What is this? It is an unspent transaction output, which is basically a chunk of bitcoin, an amount of bitcoin that you have received on your Bitcoin address, on one of your Bitcoin addresses. So, since you received the bitcoin on the Green wallet, this one UTXO, this one chunk of bitcoin, the €20, at the moment value, is sitting on an address that is controlled by the private keys of the Green wallet. I’m sure you have written down the seed phrase of the Green wallet on a sheet of paper and have it in a secure place. When you have set up the BitBox02, it showed you its own set of private keys in form of the seed, or some people call it recovery phrase or backup phrase. So I’m sure you now have two seed phrases and you have stored the seed phrase for the BitBox02 even more securely because it’s your long term saving. And now you might have heard, and that’s maybe where your question comes from, that you can import a seed phrase into another wallet which gives you access to the same Bitcoin addresses and to the money that is stored there. In theory, you can take the seed phrase from the Green wallet and import it into your BitBox02, but then it’s not a cold storage anymore, because you imported the seed phrase from the hot wallet into the hardware wallet, then the hardware wallet is hot storage. The same is true if you were to take the seed of the hardware wallet and import it into the Green wallet. Now you made your cold storage seed into a hot wallet. This would be the only way, if you imported it, to not pay a transaction fee, as you would not need to send a transaction. And since importing the seed is reducing the security of your storage immensely, it’s much better and I advise you to do that, to send the bitcoin from the Green wallet to the BitBox02. And yes, you then have to spend on fees. So maybe you wait until the fees go down again. They are now at $3-4 per transaction. So I assume also that you have installed the Green wallet on your mobile. The idea of mobile wallets is that you only have as much on yourself, on your mobile phone as you would have euros, for instance, in your purse, in cash. A mobile wallet is for daily spending, and so ideally you wait until the transaction fees go lower and then spend the €20 or something. Or you move it via a swap service called boltz.exchange into Lightning or Liquid, because a small amount like this might be stuck one day on the blockchain because the transaction fees will be higher than the €20 sitting on your address in the future. We saw this recently with the ordinals and inscriptions pump and dumps where the fees went up to €40 per transaction. I would say, and this is only a guess because I can’t foresee this future too, I’d say around 1 million satoshis, which is at the moment €400. That should be at least what is stored on a UTXO, in one Bitcoin address. So I recommend the next time you buy bitcoin, buy some more and send it directly to your BitBox02 for long term savings and do not reuse addresses. Let’s say you want to accumulate bitcoin in smaller chunks, don’t send bitcoin to the same address again and again because as I said before, it damages your privacy. So if your goal is to accumulate small amounts, then it’s better to start with a Lightning wallet and use an exchange that offers Lightning to buy bitcoin there or ask people at your local bitcoin meetup to exchange euros to Lightning bitcoin for you. So then you can accumulate in Lightning and when you’ve reached, let’s say that 1 million satoshis, then you can swap it onto the Bitcoin blockchain for long term storage. I have to admit, in recent years I often said you can start small with $25 or euros also on-chain. And with the recent developments, I’m readjusting my recommendation sooner than I thought as times have changed and it’s clear that we will reach much higher fees than this rather sooner than I thought or later. Rather sooner than later. So it’s absolutely not recommended anymore to store small amounts on-chain. But you can still afford bitcoin. You still don’t need to buy one bitcoin or 1 million bitcoin, satoshis, 1 million satoshis, of course, in one move, because you can still buy or obtain smaller amounts, accumulate them. But I would do that on Lightning or Liquid.
