Stacking Sats is a phrase used by Bitcoiners to describe the steady accumulation of small amounts of bitcoin. A sat is an abbreviation for a satoshi, the smallest denomination of the most popular cryptocurrency, named after its pseudonymous creator, Satoshi Nakamoto. Stacking sats is at the core of Bitcoin culture, so it's important to understand why that is, before looking at the practical ways you can slowly grow your own stack of bitcoin, or any other cryptocurrency.
Stacking Sats, hodling & the Low Time preference mindset
Stacking sats is as much a mindset as it as a crypto savings strategy. You might compare it to saving pennies in a jar, or rounding up purchases on your banking App, but there is one key difference between saving fiat, and cryptocurrencies like bitcoin. Volatility.
Crypto markets are led by narrative more than fundamentals, which when amplified by a risk-taking mentality among traders, produces short-term volatility with huge daily swings in price.
Sentiment also has a tendency to become embedded into longer-term cyclical trends of both appreciating prices, known as Bull Markets, and long-term decline, known as Bear Markets, which can last months or even years.
This can make investing in crypto a challenging experience for newcomers. Pay too much attention to the daily price gyrations and you can twist yourself in mental knots thinking you should be cashing in when the price is rising or bailing out when it falls.
When you zoom out to the broader picture your conviction will be tested by so-called Crypto Winters of seemingly endless negativity, while the euphoria of prolonged periods of positivity can seduce you into thinking price can only ever go up, encouraging risky behaviour.
Holding crypto’s bluechips - Bitcoin and Ethereum - over the long term has, so far, proved a successful strategy, but the simple truth is that the road to crypto riches isn’t straight or certain. This is best summed up by the hodling meme.
Hodl is a misspelling of the world hold, immortalised by a poster on the Bitcointalk forum, set up by Satoshi Nakamoto, who was complaining about his poor investment decisions.
Hodling has since become a mantra for how investors should deal with crypto’s volatility; adopting a mindset that can screen out the noise and doubt, just focusing on the fundamentals, and patiently stack those sats.
Hodling is the crypto community’s interpretation of what economists call having a Low Time Preference for investing.
Having a low time preference attitude to money means that you prioritise investments that will provide benefits in the future, against the short time enjoyment from spending it right now.
Low time preference requires discipline, patience and a belief in the fundamental value of your investment that can only come from research and education.
Combining a low-time preference mindset with a belief in the fundamentals of any cryptocurrencies you invest in will help you ignore the dips and the critical voices (often described as FUD - Fear, Uncertainty and Denial), as well as control the urge to invest simply from fear of missing out (FOMO) on those days when all the charts are green.
You can think of adopting a low-time preference mindset and stacking sats as finding your crypto Zen.
Different approaches to stacking sats
If you can embrace a low-time preference for crypto investing then there are a range of approaches to building that stack of sats that can match your available time and resources.
If you have a discretionary income, which means money left over after all other essential costs like food and rent are accounted for, the best approach to stacking sats is called Dollar Cost Averaging - DCA for short.
Cost Averaging simply means making regular, recurring purchases of equal value evenly spread over time, instead of one lump sum investment. This allows you to average out the volatility, and if your overall premise is correct, build a net-positive investment over time. The emphasis is on ‘if’. Though DCA is a prudent approach to stacking, it doesn’t guarantee success.
The benefits of Cost Averaging
It’s simple to set up, most exchanges offer it with a few clicks
It removes the stress & uncertainty of timing purchases
Has so far proven successful in the long run for Bitcoin & Ethereum
Allows you time to learn as your investment grows
Doesn’t require an initial lump sum
The downside of Cost Averaging
Works best when pursued through a Bear Market and into a Bull Market
Recurring purchases will incur more transaction/trading fees
Requires patience & discipline as takes time to build a meaningful position
It does not guarantee success
Cost Averaging isn’t a magic bullet for successful stacking, but it is the most sensible approach for someone without experience and with modest discretionary income. It is a really good idea to build a Cost Averaging tracker - in excel or google sheets - to both give you a clear picture of your profit and loss, as well as keep you grounded.
You can easily visualise your growing stack as there are some neat tricks in Google Sheets/Excel that allow you to pull in live crypto price feeds.
Growing your Stack through passive income
Cost Averaging is now directly catered for by most cryptocurrency exchanges with just a few clicks, but that shouldn’t be the end of the story. Centralised exchanges are vulnerable to hacks while leaving your funds there can leave you open to the temptation to trade on impulse.
The NGRAVE Academy has a separate article that can walk you through the process for moving funds from an exchange hot wallet to what is known as cold storage, using a hardware wallet like the NGRAVE ZERO. Just be aware that exchanges charge fixed fees for withdrawals so depending on the size of your regular purchases you might want to do it in batches.
Another alternative to leaving your stack on an exchange is putting it to work gaining a passive income for which there is a growing range of opportunities, though naturally, they come with a certain amount of risk.
Growing your stack through CEFI
CEFI stands for Centralised Finance, which is where cryptocurrency and traditional financial services overlap. There are a growing number of providers that pay interest on your crypto, with rates that dwarf what your traditional fiat savings account might be paying.
The standard rates come without any fixed term, but if you are prepared to lock funds you can earn even higher rates. There are also incentives based around using the CEFI provider’s native token, but at that point, you are really moving a lot further up the risk curve.
Using a CEFI service doesn’t expose you to any greater volatility, but you are taking on what is known as counterparty risk. You have to trust a third-party provider to fulfil their end of the deal with your funds, which runs counter to some of the core principles of truly decentralised crypto.
You have to weigh up the benefits of growing your stack through an attractive APR against the potential loss of all your funds if the CEFI provider goes belly up, or your account is compromised, as unlike your bank account your funds won’t be insured through any government scheme.
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One of the most popular CEFI services that is suited to stacking sats is the crypto cashback card. In simple terms, you get a prepaid cash card or credit card that works across Visa or Mastercard networks where you can spend fiat money and earn cashback in cryptocurrency.
The beauty of crypto cashback is that you are stacking sats on spending you would be doing regardless. Of course, there are a few conditions. Most schemes require some initial stake in a native token that is locked up for a fixed term, which is subject to volatility. Should that decline, it will negate any rewards; on the other hand, if the token value goes up, you win twice.
There are a variety of cashback card services, each with slightly different approaches and ranges of incentives. Do plenty of research, ideally via forums where real users talk about their experiences, rather than from promotional material.
If you do take the CEFI route and have a good experience they tend to run generous referral schemes so you tell friends and add a few more sats to your stack.
Stacking through staking
The passive income opportunities available to grow your stack aren’t limited to crypto versions of traditional finance. You can directly participate in the process that blockchains use to maintain consensus on the accurate state of transactions.
One of the common Consensus Mechanisms is called Proof of Stake (PoS). If you’re interested in a deep dive on PoS, head over to the NGRAVE Academy, but the TLDR is that PoS blockchains reward Validators for verifying and adding new blocks of transactions.
To be a Validator you need to run dedicated software on your computer and stake a significant amount of the blockchain’s native token, which acts as a bond against bad behaviour. In return, Validators earn the fees from transactions.
Acting as a Validator requires a level of financial and technical commitment beyond someone just starting out investing in crypto. You can however still participate by staking your funds into a pool or delegating directly to a Validator. Both are relatively easy processes offering a fixed return to grow your stack. So what’s the catch?
Staking isn’t risk-free, remember there is no such thing as a free lunch. If you join a pool there is counterparty risk, and likewise by delegating to a specific Validator.
Staking can also be quite rigid in terms of access, requiring funds to be locked up (known as bonding) for significant periods of time, while withdrawal isn’t straightforward. To access your stake you have to go through an ‘unbonding’ process where your funds can be held for up to a month, during which time you neither have nor are you earning any return.
Building a Stack from Scratch
You might be reading this and feeling a bit frustrated that all of the suggested strategies for stacking sats require you to start with a source of fiat money to invest. You should certainly never take on debt to build a crypto portfolio, so what are the options for building a stack from scratch without available financial resources? If you have time, then crypto services want your attention and skills.
Believe it or not, in the very early days of Bitcoin you could earn 5 BTC - equivalent today to almost €200,000 - just from clicking a simple on-screen Captcha. This was one attempt by early advocates to act as unofficial marketers generating interest in Bitcoin by putting it directly in new users' hands through a Bitcoin Faucet.
Bitcoin Faucets still exist today, but sorry to disappoint you, they don’t dispense 5 BTC. The sums involved are tiny and there is a subtle trade-off that is far from free.
You generally have to provide personal information and commit your time to watch videos or ads while you’ll often be encouraged to gamble your earnings.
The reality of modern faucets is that it can take months or years to even generate enough ‘free’ crypto to even meet withdrawal criteria and they can expose you to unwarranted risks. Luckily there are some other options for stacking Sats from a standing start:
Over time you can build a tidy stack, but as ever there are a few catches. You have to pass KYC, which means sharing personal information, access to Learn & Earn isn’t immediate and there are qualifying criteria, such as your country of origin.
Micro tasking - There are plenty of services that offer crypto in return for the completion of small tasks, such as surveys or completing minor tasks. Subreddits like Beermoney are a useful resource for hunting out the most reputable and avoiding the inevitable scams.
Working in Crypto - If you really want a consistent and meaningful way to stack sats there are a growing number of businesses that now pay in crypto. Developers are the most in-demand skill, but given the importance to crypto brands of connecting to Communities like Discord and Telegram, working experience of either is sought after, as is the ability to explain complex blockchain topics in simple words, images or memes. Search online, or better still approach projects directly laying out your skills and passion.
Protecting your stack as it grows
One of the golden rules about investment is to take risks to accumulate wealth, and then focus on strategies that preserve it. So if you build your crypto stack to a meaningful level, the measure of which will differ from person to person, you should think about how best to preserve and protect what you’ve built.
Nothing is safer than storing your crypto in a hardware wallet, like the NGRAVE Zero. Buying a hardware wallet will eat into some of your stack, but not only is it one of the best ways to preserve the wealth you’ve worked so hard to build, but it is also the ultimate compliment to a low-time preference mindset.