The Case for Self Custody Bitcoin
The adage in the Bitcoin community, "Not your keys, not your Bitcoin," underscores a fundamental tenet of the Bitcoin ecosystem: self-custody. As a Bitcoin investor, you understand the significance of holding the keys to your financial future, especially when that future is built on Bitcoin. In our previous article, we touched on the concept of Bitcoin custody. Today, we delve deeper into the importance of self-custody and explore why we at The Bitcoin Adviser recommend collaborative custody as the optimal method for storing your Bitcoin.
The Perils of Trusting Exchanges
Traditional finance conditions us to trust intermediaries with our assets. In Bitcoin, these intermediaries often take the form of exchanges. However, as history shows, leaving your wealth on an exchange can be precarious. Bitcoin exchanges, while a crucial part of the Bitcoin ecosystem, are susceptible to security breaches, with consumers often shouldering the impact. Regulatory compliance may also lead exchanges to freeze customer accounts under government directives, posing a threat to the accessibility and control over your funds.
At The Bitcoin Adviser, we actively collaborate with numerous Bitcoin exchanges and can vouch for their essential role in the Bitcoin economy. These platforms are staffed by individuals as passionate about Bitcoin as we are, advocating for the very same principles we uphold, including the importance of self-custody. It's worth noting that exchanges themselves recommend self-custody, recognising the potential risks associated with maintaining customer funds on their platforms. From their perspective, holding customer funds is not just a significant responsibility but also a liability.
The reality is that both The Bitcoin Adviser and our exchange partners have a common goal - to create a safe, secure, and transparent Bitcoin ecosystem where individuals can trade, invest, and hold their Bitcoins with confidence and peace of mind. Our shared advocacy for self-custody is rooted in this mutual objective. It is not a case of distrusting exchanges but of promoting and ensuring the optimal security of your Bitcoin assets.
Lessons from History: Financial Censorship and Seizure
Our financial history is replete with instances of financial censorship and seizures. Notable examples include Executive Order 6102 in the US, leading to a government seizure of citizens' gold, or more recently, the Cyprus Bail-Ins in 2013 and the Lebanon Debt Crisis of 2019. These events underscore the vulnerabilities inherent in a centralised financial system and drive home the need for self-custody.
The Price Impact of Neglecting Self-Custody
While not immediate, there is an indirect impact on the price of Bitcoin if investors leave their coins with custodians or exchanges. Without transparent auditing mechanisms, exchanges could potentially issue more IOUs to customers than actual Bitcoins they hold. This creates a potential for "runs on the exchanges," destabilising the market and indirectly affecting Bitcoin's price.
Bitcoin: The Freedom-Centric Money
Bitcoin offers an unparalleled form of private property right, resistant to seizure or censorship. It's a digital asset that facilitates wealth preservation, allowing refugees to take their assets while fleeing oppressive regimes or families to pass down wealth across generations, free from fear of interference. It's the power of this freedom-centric money that accentuates the importance of self-custody.
Embracing Collaborative Custody with The Bitcoin Adviser
While self-custody is a robust solution, it may not be accessible to everyone due to its technical nature. That's where collaborative custody comes in. Collaborative custody allows you to maintain control over your Bitcoin while leaning on the expertise and infrastructure of a trusted partner, like The Bitcoin Adviser.
In our collaborative custody model, security is paramount. We use multisignature wallets—requiring multiple keys to authorise a transaction, enhancing the security of your Bitcoins. At the same time, we provide you with comprehensive guidance to help you understand and navigate the Bitcoin ecosystem with confidence.
Self-custody will become increasingly significant, embracing collaborative custody is a balanced, secure way for sophisticated investors to enter the world of Bitcoin. At The Bitcoin Adviser, we're here to support you on this journey, providing the knowledge, tools, and security mechanisms needed to protect and grow your Bitcoin investment.