FTX imploding has been taking up the headlines this week. A fascinating story, but nothing surprising to Bitcoiners. Bitcoiners have been right about these kinds of things because similar instances have occurred at different scales. Chances are many Bitcoiners got burned in the past from similar situations.
Why are Bitcoiners taking a victory lap?
We’ve been stressing to avoid counter-parties at all costs by taking custody of your Bitcoin. Many didn’t care to listen because they were blinded my “muh crypto yield” or made it seem like self-custody is too complicated.
Owning Bitcoin is like owning insurance against FIAT and its malevolent policies. However, truly owning Bitcoin means possessing your private key. If you don’t hold your keys, all you have is a paper claim to Bitcoin.
“Not your keys, not your coin.”
This thread by Coinbits are receipts from Bitcoiners warning people about the deceit created by the “crypto industry”. Again, nothing new to Bitcoiners sounding the alarm for years.
“Don’t buy house insurance once your house is on fire.”
Bitcoin is exciting, revolutionary, and empowering to the individual. However, before you listen to hours of podcasts, shitpost on Twitter, or even watch Simply Bitcoin, you need to get your house in order. Slow down and learn the basics. The self-custody rabbit hole is deep on its own.
It’s best to be prepared and practice the motions of self-custody before you’re in a situation of panic. It takes a ton of discipline and responsibility to wield the power of wealth in the form of a private key. The goal is to level up your setup until you feel at peace.
“With great power comes great responsibility.”
Let’s Get to Work
Understanding the process of creating your keys and securing them is information asymmetry that gives you a leg up on the systems of the past.
It may be confusing at first, but with practice you’ll feel more comfortable.
Start off by:
- Downloading a non-custodial wallet (like BlueWallet)
- Writing down the 12 word seed phrase on paper
- Sending a small amount from your exchange account
From there, mess around with hardware wallets and more advanced setups like passphrases or multisig. This Citadel21 article by WizardofAus is a great step-by-step breakdown for first time self-custody.
Once you’ve experienced withdrawing funds from an exchange, there are some self-custody concepts we recommend further looking into:
Bitcoin Improvement Proposal 39 (BIP 39)
Passphrases (the 25th word, as some call it)
Hot Wallets vs Cold Storage
Hardware Wallets AKA Signing Devices
Writing seed phrases in metal
XPUB
The list goes on and on…
Many are working on improvements to onboard the masses to self-custody. From signing devices to steel plates, there are entire businesses built around these ideas. Interacting with Bitcoin in this matter is extremely important to it’s decentralized nature.
Be Prepared
For those already holding their keys, there are greater scenarios to consider. Start thinking about situations where your funds may need to be accessed.
Are you content with the locations of where your seed phrases are stored?
Is your setup putting you at risk from losing your coins?
If there was a fire or flood, would your seed phrase survive?
Do loved ones have a way to recover if something happens to you?
Do you think it’s important to memorize your seed phrase?
Will you be able to flee your jurisdiction with your keys?
Do you have a different setup for when you’re under duress?
These are things you need to figure out. Level up your security to prepare for the worst. Get your house in order.
Many don’t realize it, but Bitcoin will be the most desired asset in the world. Even the most powerful forces will try to capture your Bitcoin.
So please, get your coins off exchanges, play with different hardware wallets, and find the best setup for your current situation.
The FTX situation was a tough lesson to some, but Bitcoiners felt at peace knowing their coins were completely offline and nowhere near a custodian.
Hold your keys, but make sure you’re not at risk from losing Bitcoin due to your own setup.
Stack hard plebs.
Great Resources on Self-Custody
https://armantheparman.com/private-key-info/
https://www.citadel21.com/not-your-keys-not-your-bitcoin
https://bitcoiner.guide/
https://bitcoin-intro.com/en/backup
