Sovereignty

Be a Sovereign over your own Savings

Unlike physical custody of assets, saving in Bitcoin means storing information, a key or seed phrase, and to store it in such a way that no one else would ever be able to know it.

For example, consider the following seed phrase,

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Because this seed phrase has been revealed, anyone can generate private keys from this seed, which will access any Bitcoin at any of the derived addresses (from this seed).

What if you had to secure this seed phrase?

In other words, how would you secure this phrase such that,

1. The seed phrase is accessible to those you trust (family members and the like), and
2. No one else could ever know the seed phrase

Knowing how to fulfill the above is at the heart of how to save in Bitcoin.

Self Custody

To self custody means you personally secure your seed phrase and manage your own keys. This is the recommended approach and it is also the only way to properly secure your Bitcoin.

With self custody you could decide that you'd rather die than give up your Bitcoin; that it will go to your children or else to no one. This may sound silly and rather extreme, but Bitcoin is the only asset in the history of the world where you can meaningfully accomplish this level of ownership. And you can accomplish this without lawyers or politicians. In fact, you can accomplish this even in opposition to lawyers and politicians (as well as churches or nation states).

Can you say the same about stocks, bonds, real-estate, or any modern financial instrument?

The closest you might get is a physical possession, a bearer asset such as gold bullion.

But there is an important difference: with the use of force anyone can take possession of gold bullion (as has happened over-and-over throughout history), incentivizing the use of force to seize wealth. But with Bitcoin, use of force is far less effective. You can transfer your Bitcoin anywhere in the world. And in the extreme, you can take your Bitcoin to the grave.

This subtle difference shifts the balance of power, aligning incentives with voluntary cooperation and not with force or fiat. With Bitcoin, you truly can be a sovereign over your own savings.

Who owns your Bitcoin?

If you trust an institution to custody your Bitcoin, then it's not your Bitcoin, it's their Bitcoin. And no matter how secure their custody system, it will never be as secure as your own self custody.

Not your Bitcoin

An institution that holds "your" Bitcoin can use "your" Bitcoin as collateral for "their" loan. If they're particularly clever they can buy more Bitcoin with that loan, and if they're devious they'll create fractional reserve schemes. And if they go bankrupt do you really think you'll get "your" Bitcoin back?

An institution with "your" Bitcoin can lock you out of your account. The governments in whichever countries the institution resides can freeze and even seize your funds. Perhaps your name was too similar to someone on a sanctions list, or perhaps your government is in a dispute with another government and they suspend your account.

A hacker who learned your mother's maiden name may be able to withdraw "your" Bitcoin. Perhaps one of the many data breaches resulted in your personal information leaking out, putting "your" Bitcoin at risk, through the fault of the very institutions trusted to secure your information.

It's Easy

There's a common misconception that Bitcoin self custody is hard.

In practice, saving in Bitcoin is as easy as changing a light-bulb, and it is vastly easier than online banking, not to mention far more secure. Bitcoin is as secure as you want it to be, from trivial to nuclear-launch-code level of security.

Bitcoin is hard? Compared to what?!

Let's look at the security setup for accessing a typical online banking service, and determine how easy and secure things really are.

Typical Online Banking

The bank requires a "strong password", the kind recommended by security experts.

You use a Password Manager to generate "strong passwords", and your online banking password is something like CH"sgK9'?f<WZWYS.

The bank requires multi-factor authentication (MFA), and you've been told by security experts not to rely on SMS text messages for MFA, so you install an IdP app, which requires its own password with optional biometric verification.

You generate another "strong password" for your IdP app, this one is DVqt*\Hax2$YD5vK.

The bank asks for your email address and asks you to verify it. You realize your email can be used to reset passwords, and fortunately you've already enabled MFA for your email service and used a "strong password", which is c9~%C8UMNp+ung9=.

The bank also requires AML/KYC, so you provide them copies of your passport and you upload an image of yourself holding your passport along with a piece of paper that has your written signature and today's date. You feel stupid sending your bank a selfie, but you do it anyway.

The bank also asks you to select and answer three "security questions", and you go with your high-school mascot, name of your first pet, and the city you met your significant other (Cherokees, Rex, Hoboken).

The password manager also requires its own "strong password" and in case you forget that one, they provide you a "secret key" that they recommend you print out and keep someplace safe. This "secret key" they tell you, can be used to recover all of your passwords, so you have to keep it very safe.

You write down the following on a piece of paper,

6QRDjV7MmznW63yjZWM5c8ngC5rxQhZxAPXrzfuYbg8CZuLT

and you put that paper in a fire-proof lockbox.

We could keep going with this all-too-common tale of security theater (and you've no doubt already experienced much of this), but let's pause here and analyze how easy and how secure this system really is --

Security Review

In practice, your personal information has certainly been leaked out to the dark web multiple times (through any one of the high-profile data breaches that you read about in the news). Tying your wealth to personal information is generally a bad idea, but impossible to avoid with institutional custody.

A fire-proof lockbox would not preserve a piece of paper through a house fire.

Regardless, there's a much bigger problem -- a barely competent hacker could call your bank and impersonate you. With a quick glance at your social media, they could answer the security questions (Cherokees, Rex, Hoboken), then they reset the password, change the security questions, liquidate the account, and finally they close the account.

If this happens, you'll find yourself locked out of your own account, and after weeks of calling the bank and getting a lawyer involved you will eventually learn what happened. Your account was liquidated. The bank assumes no responsibility, and they give you the number for the FBI. They blame the whole ordeal on your weak security questions and point to the terms and services that you signed (but never read).

In case it's not obvious, online banking is vastly more complicated than anything you'll encounter with Bitcoin. And you'll find all the same cryptographic concepts, such as private keys and recovery seeds, but the bank and apps will apply them in comically useless ways that add no real security and still manage to leave you vulnerable.

No reasonable person would conclude that the current state of online security is easy. Securing your identity across disparate technology and banking providers is not easy. And worse, it is getting harder and harder by the day.

But is Bitcoin really as easy as changing a light-bulb?

Yes, and definitely easier than the security theater of online banking.

Bitcoin is new and can seem complicated. But imagine asking a person from the middle ages to change a light bulb. They'd be confused and without explicit instructions they would probably electrocute themselves.

Bitcoin is no different. Future generations may laugh at us for being so hopelessly ignorant of what will seem obvious and intuitive to them.

Really, It's Easy

Securing your assets in the traditional fiat banking system requires a Rube-Goldberg-Machine of security-theater where telling a call-center operator in the Philipines your mother's maiden name somehow constitutes security.

Bitcoin self custody offers real security. And thus the risk of losing your funds in traditional banking is far higher than any reasonable self custody solution.

Sounds like banking. Why would I want to be a bank?

You don't, and that's the point.

Bitcoin allows superior custody services that no bank or institution will ever be able to match. You secure your own wealth by securing a seed phrase. There's no bullion to protect, only information. A custody service must protect that same information while also allowing you access to it, which simply shifts the burden back onto you, adding unecessary complexity and vulnerability.

Bitcoin self custody is exactly as hard as learning about the Internet in the 1990s. It's new, it's different, and it confuses those who haven't realized just how disruptive this kind of technology truly is.

The claims that it's too difficult are patronizing and wrong. Managing your keys is easier than driving a car, buying a house, or any of the myriad of tasks we expect fully grown adults to manage.

I heard it requires 'persistent competence', is that true?

That's online banking you're thinking about.

A redneck with a gun and a coldcard can protect their Bitcoin with more security than any bank in the history of the world. And besides, if you're competent enough to have wealth, you should be competent enough to preserve wealth.