Letter #76: Buying Into A Bitcoin Dividend?
Read now to learn how Bitcoin corporate dividends may soon replace cash, stock, and all other dividends paid by companies on stock markets around the world.
When we were young, many of us had the opportunity to learn the basics of money. Start a good job or business. Don’t spend more than you make. Save your extra pennies. Even better, invest your extra money in stocks and bonds. Or at least we were told those were the basics of money…
The truth is that money is a lot harder than it should be. Most people spend their whole lives working for their money, but struggle to get their money to work for them. Want to grow your money without a lot of risk? Good luck when interest rates in real terms are low. Just want to keep the money you already have? Not likely thanks to the ever-pressing reality of inflation.
Regardless, we do our best with what we’re given. Trillions of dollars sit in bank accounts. And even more trillions are put into stock markets around the globe, since most of us have been taught that the best way to grow a nest egg is by investing in company stocks. If you’re lucky, the value of your stock holdings will go up. But at a minimum, a lot of people will get income through the payment of corporate dividends.
It’s All About The Dividends Baby
Most dividends historically have been paid in cash or stocks. But history is about to be made. A publicly-traded company on the NASDAQ stock exchange in the United States announced last week that it will be the first company in the world to offer investors the chance to receive their latest dividend directly in Bitcoin. The company, BTCS Inc., is a cryptocurrency miner that operates on several blockchains. In other words, it’s not too surprising that BTCS would be well-suited to offer some of the Bitcoin it mines directly to investors.
Perhaps you’re undecided as to whether a Bitcoin dividend is actually useful or desirable. But I believe there are several reasons why a Bitcoin dividend is worth far more than a cash or stock dividend and why we should hope that more companies choose the path of “Bividends” in the future:
Bitcoin is Anti-Dilutionary
The value of both cash and stocks are susceptible to being diluted without investors having any ability to limit the resulting impact to their wealth. The value of cash is primarily diluted through inflation, and fiat currencies around the world have lost most of their value to inflation over the past several decades. Stocks on the other hand are diluted when companies issue stock certificates that didn’t exist before so that they can sell them on the open market.
The value of Bitcoin cannot be diluted. There is no central government or corporation sitting at the center of the Bitcoin blockchain dictating how many Bitcoin will exist and when they’ll come into existence. As a result, if you receive a dividend in Bitcoin rather than cash or stocks, you can rest easy knowing that the value of your Bitcoin will never be diluted.
Bitcoin can be Easily Self-Custodied
Many of you will jump in immediately to remind me how easy it is to keep cash in your wallet or in your bank account. But putting your money in the bank is not self-custody in any sense of the word. Additionally, most people are unlikely to keep large amounts of cash lying around their home, meaning that it’s unlikely that any but the smallest of cash dividends will ever end up in our physical wallets.
Stocks are a whole other story. Have you ever seen your stock certificates? For most of us, the answer to that question is a resounding “No”. Stock certificates usually aren’t even printed anymore and, whether they’re physical or digital copies, they’re almost always held by a stock brokerage or other intermediary that facilitates settlement of stock trades.
It’s easy to take possession of your Bitcoin. Creating a Bitcoin wallet that only you control can be accomplished in minutes using any number of software or hardware setups that are available. And since Bitcoin is completely digital, you can receive any number of satoshis (i.e., fractions of a Bitcoin) without worrying about whether there’s space in your wallet.
Bitcoin is Uncensorable
One of the main powers enjoyed by governments around the world is complete control over their currencies and their economies. If you do something that the government doesn’t like, it can tell your bank and your stock brokerage to freeze your assets and your grocery store and landlord not to sell to you.
Bitcoin cannot be censored because the blockchain’s software doesn’t care who you are or what you do. It only cares that you abide by the rules set in code. As long as you follow those rules, transactions you send over the network will always go through and the network will always be available to you.
Bitcoin is Available 24/7
What would you do if your car broke down in the middle of the night and you needed several thousand dollars to get it fixed so you could return to the safety of your home? With cash or stocks, you’d simply be out of luck. Banks are only open during business hours and they limit the amount of cash you can withdraw at one time from an ATM, if there’s even one nearby. Stocks on the other hand are even more restrictive since they only trade when the market is open and take several days to actually settle.
The Bitcoin blockchain on the other hand is available worldwide, year-round, twenty-four hours a day, seven days a week. If you want to pay directly in Bitcoin, your transaction will go through at any time. Or if you prefer to pay in fiat, Bitcoin markets are always open for trading peer-to-peer or on cryptocurrency exchanges.
Long Live the Bividend
Bitcoin represents a paradigm shift in so many different facets of finance and money. Complete sovereignty over one’s wealth is once again possible after having been limited for centuries by governments and financial institutions. It is for the reasons above and many others that investors around the world would be lucky to receive dividends in the form of Bitcoin rather than in cash, stocks, or anything else.
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This is not financial advice. This newsletter and related content are for informational purposes only. Cryptocurrencies and digital assets can be risky. Always do your own research before making any sort of investment.