Not your keys, not your coins. It may sound harsh, but if you don’t take self-custody of your Bitcoin, you can not be sure that it is truly yours.
This is a paradigm shift in private property rights, and those that understand it and take the time to learn best practices will greatly benefit from not having to trust third parties when it comes to storing their wealth.
Without self-custody, you just have a claim or a “promise” that you can have access to your Bitcoin when desired. Time has told us, through centuries of capital mismanagement and confiscation in the realm of money, that if there is a central point of failure, i.e. a government or bank, then it will eventually be exploited, and people’s money will be taken from them.
At its inception Bitcoin was the idea that a decentralized and digital store of value, with a fixed supply, could bring wealth preservation to the masses. It has been a wild success in that regard. With a market price of zero at its genesis, to today being worth tens of thousands of dollars per Bitcoin, it is safe to say that people all over the world have come to truly value this new form of money.
Taking responsibility for one’s wealth with Bitcoin can give the individual a tool whereby immeasurable benefits can be added to their lives. In turn they may learn to take responsibility for more aspects of their lives and no longer rely so heavily on the paternal state or outside entities for direction. Prosperity and ingenuity emanate from this person who has a moral compass built upon a strong foundation of self sufficiency. Governments are then required to show proof of concept and work before they arbitrarily tax and leech off of citizens. They can’t print more Bitcoin to fund the continuation of a crooked system.
It all starts with people becoming responsible for managing their time and energy, and choosing what it is they are willing to accept in return for it. It is no wonder that many people around the world today are using Bitcoin and it’s incorruptible, sound money properties to lower their time preference and change their lives for the better.
With this revolutionary new asset also comes new concepts, considerations and risks around how to approach owning it. With Bitcoin, the onus is on you to keep it safe and secure. This is a tradeoff you make when opting into this new system.
Much like days of old when one would keep their savings in gold coins, today you can self-custody your Bitcoin. The difference being that gold is clunky, not easily divisible, and costly when trying to verify its purity. If you buy gold and have a third-party hold it for you, you are trusting that they will not mismanage it.
Bitcoin is instantly divisible. It is easy to verify its authenticity on its public ledger, called the blockchain, and it is highly liquid, meaning you can buy and sell in real time, 24 hours a day, 7 days a week.
When you take self custody of your Bitcoin, you are responsible for managing it. Bitcoin transactions are final, and can not be rolled back. There is a risk that you could lose your Bitcoin forever if you lose your hot wallet or cold storage key information, or send your Bitcoin to the wrong address. On the other hand if you decide to leave your Bitcoin on an exchange or choose to outsource custody to a third-party, then you run the risk of the exchange being hacked or having your Bitcoin seized by an oppressive government regime.
Thankfully, many smart individuals have come up with safe and effective risk-management tools over the past decade-plus of Bitcoin’s existence. After buying some Bitcoin, a prudent next step would be to buy a hardware wallet, and once you set it up, practice sending small amounts of Bitcoin to it. There are great resources and informational guides on which products are best and detailed guides on best practices at Jameson Lopp’s website Lopp.net. You can also find YouTube tutorials and blogs about best practices from Ben at BTC Sessions. Always try to verify any information you get from an online source. Ask around with Bitcoin companies and advocates in the space. You are sure to find sound advice if you do your own research diligently.
Collaborative-custody has also become a popular solution to help mitigate risks. In this security set-up, you are working with a third-party company that will help you manage your custody configuration, while you ultimately retain ownership. The high-level concept being that you still have complete control over your Bitcoin, but safe-guards are set in place to help assure that you don’t lose your Bitcoin unintentionally. Unchained Capital and Casa are two great Bitcoin-only companies that offer collaborative-custody solutions.
When considering the risks inherent with Bitcoin it may also be important to think about the risks associated with NOT choosing to invest. Bitcoin’s adoption is rising at a rapid rate. New technologies that rapidly expand their user base tend to follow an s-curve of adoption.
Credit: Ospreyfunds.io
The opportunity cost of not investing in Bitcoin, could mean missing out on owning a piece of the finite supply of the world’s preferred store of value. Imagine if 20 years ago, you were able to invest in the largest internet companies today. Except Bitcoin’s TAM (total addressable market) is all the value currently being stored in bonds, real estate, gold, and collectibles. There is a huge market for a better store of value!
Over the past year, Bitcoin’s price has risen dramatically while other assets have barely kept up with inflation, due to excessive money printing from central banks and governments around the world.
If we zoom out over the past 10 years, nothing has come close to capturing the wealth transfer being generated by widespread Bitcoin adoption.
If you are still skeptical, you can start off slow. As long as you aren’t investing all of your money in Bitcoin at this stage, you can mitigate your risks by ensuring that you have cash leftover to address your regular expenses or any emergency that may arise.
It is worth looking at why some companies only sell Bitcoin and offer Bitcoin-related services. There are approximately 15,000 other cryptocurrencies that have been launched since Bitcoin’s inception and unfortunately, most of them are at best, efforts to hop on a trend. At worst, they are outright scams that will eventually lose all value.
Most of these projects are launched by foundations, with venture capital backing, and marketing teams behind them. They regularly start off with a pre-mine, meaning a certain portion of the supply of the token is given to investors before the broader public has access. Once the tokens or coins are listed on exchanges and the price rises, investors routinely dump their coins/tokens on unsuspecting retail participants. Not a single one of size is sufficiently secure or decentralized in the way that Bitcoin is, nor do they have supply constraints, like Bitcoin’s 21 million cap.
Many of them make claims that they exist for various use cases, yet they are unproven, and most are likely in violation of US Securities law. Exchanges are incentivized to list these tokens/coins and promote them because they make loads of money when people trade in and out of them. Bitcoin did not have a pre-mine. There is no marketing team. It has grown from the ground up.
With most of these other projects, censorship is possible. Founders and developers can alter the code and re-organize the information, changing the history of the transactions. Bitcoin was discovered as a solution to centralized human intervention in the realm of money. Bitcoin is decentralized because voluntary node-operators around the world help to verify that the rules of the code are being enforced and valid transactions are ordered into blocks on the blockchain.
Along with the ethos of taking responsibility for your investment with self-custody, Bitcoin offers the advantage of not having to trust what information and transactions the network and blockchain are broadcasting - you can verify it yourself. You can operate your own node and further participate in securing the network. Check out instructional videos from Ben at BTC Sessions for how-to guides. Arman The Parman also has excellent guides available for free. There are many other great resources available to educate you about how to do this, and it is relatively cheap to spin up a node - $300/400 at most!
All in all, it is important that you also do your own research when it comes to investing in this new world of digitally native value. Learning to take control of your financial freedom with Bitcoin is a process which yields amazing advantages for anyone who ventures to take the leap down the rabbit hole. Before long, the rest of the world will follow suit.
