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17 sats \ 1 reply \ @Scoresby OP 1 Aug \ parent \ on: How do you hedge self-custody? bitcoin
I don't remember where I heard it. Maybe I said it to myself.
Yes. This is why I was thinking it might be good to have two different processes. For instance, Make a multisig in core, distribute keys with copies of the descriptor. Okay. That's good. But maybe also have a BIp39 wallet with a proportionately smaller emergency stash. I always have this lurking fear in the back of my mind that maybe I did something wrong and the next time I do a test spend it won't work...
Great correction of my point. I agree that the major risk is loss of purchasing power. I remember my folks commenting once that they're retirement was more or less flat between the peak of the dot-com bubble and sometime in the 20-teens.
The question I'm trying to get at is how to think about the calculus of self-custody. It's often pitched on moral grounds, and I'm less interested in that. It is very true that the biggest risk to my bitcoin stack is my own ignorance and stupidity. Yet, I want to benefit from bitcoin and the abilities holding it affords me.
Do you think it's at most 20% of people who hold coins or 20% of coins? (clearly all coins are always held in self-custody, but the behavior of an economic node that is holding coins on behalf of others might be fundamentally different than that of an economic node that holds coins for itself).
It seems to me that the person who is likely to get fished is likely to get fished whether they have a seed phrase or a xpriv or almost any other backup scheme. Bryan Bishop replied to Udi asking: how do you design a solution for the most stupid person imaginable?
So: is it the case that we simply don't need to have an answer to Udi's observation (because stupid people shouldn't self-custody and if they lose their bitcoin that's evolution doing its thing)
Or: is it the case that we need to develop better tools (this is what I hear most often in the bitcoin community)
Or: is it the case that bitcoin better tooling is not possible and custodians are going to continue to be a major part of bitcoin forever?
two different processes
Since you are the SPOF in both of them you're not solving anything by having two, better to go all-in on a process that is bulletproof. If you have two processes they're compromising with one another.
Not to say you shouldn't have tiers as @DarthCoin rightly suggests, like cold, cache, and hot. I'm referring to the most important tier, your BIP39 tier example I would rationalize as cache and that's perfectly reasonable.
20% of people who hold coins or 20% of coins
People (that should self-custody)
Political security is just as important to Bitcoin as the technical, even if Bitcoiners hate to admit it. Security is layered, and the technical layer is an enforcement arm of the political layer, but only if the technical layer is sufficiently distributed.
Political security is the only thing that prevents Google, Blackrock, Microsoft, Apple, the NSA, GCHQ, and god knows what other entities from stealing millions of coins... they have no purely technical blockers and having the majority of supply doesn't immunize them from the political fallout (and the technical resistance that could be brought with it.)
how do you design a solution for the most stupid person imaginable?
I think that's a fools errand, and that believing you can do so is hubris. Udi is right on this one, the best solution for 80% of people is either an ETF, Collaborative, equity in sats-flow, or a Family Office setup.
Everything I do with Lightning.Pub is part of a Family Office / Small Org vision of the future that keeps trust distributed to the edge and sats-flow as the gateway drug to that distribution.
Better tooling can get us from the 1-3% we should be at today to the ~20% I estimate is the (realistic) goal.
Even with better tooling custodians are going to be a major part of Bitcoin forever, the goal of such tooling shouldn't be to eliminate them but to keep them in a Mexican standoff by expanding the array of options people have.
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