Everyone's always chatting about the nuts and bolts of self custody, but nobody really dives into the mental and emotional baggage that comes with it. As someone who's into bitcoin investing, I think it's a pretty crucial topic to cover.
When you hold bitcoin in self custody, you're taking on responsibilities that banks usually take care of for you. Think about it: security, backups, recovery plans, preventing theft, planning for inheritance. It’s a lot of weight on your shoulders, and honestly, many folks don’t realize how much stress this can cause.
For instance:
1. The Anxiety of Losing Access.
A bunch of holders are constantly worrying and running through scenarios in their heads. They ask themselves things like: What if I misplace my seed phrase? What if my house goes up in flames? What if someone gets their hands on my backup? What if I forget where I put it?
Some newbies get super anxious and end up checking their wallets ten times a day. Some even shift their bitcoin from wallet to wallet for no good reason, making it easier to mess things up.
2. The Weight of Responsibility.
With traditional banking, they let you fix your mistakes. Forget your password? Just reset it. Lost your card? Get a new one. Saw an unauthorized transaction? Call customer support.
But with bitcoin self custody, it's a whole different ball game. One wrong move and it's game over. This kind of responsibility can really overwhelm some people.
3. The Inheritance Dilemma No One Talks About.
Imagine if someone has a massive pile of bitcoin and then suddenly passes away. If nobody knows where the person stashed their assets...
Ownership itself is a serious responsibility.
People often dream of getting rich but only a few of them actually has an idea what it takes to stay rich. Getting rich is not as hard as many people think but staying rich is way harder because now you have to defend your wealth against the wolves out there.
Self custody is a similar responsibility. Unless you are ready for it, don't do it. Trust the banks instead.
From the title it topic I can tell you for sure that its not a hidden stuff, everyone knows which is the reason you see people prefer paper bitcoin over real bitcoin because in the paper bitcoin the companies have full control over the coin and give them interest and numbers writing on paper as proof of ownership. ETF and all that stuff came as a result of this issues of people refusing to take ownership or responsibility of their money, in-fact it comes from a place or irresponsible position and shifting blames. When they shift blames it gives them satisfaction.
Thats the trade-off, you wil be reposible for any damage but you still have to do something wrong isnt it? You cannot just wake up someday and boom!! you can't access your anymore without any serious underlying mistake.
Wrrnch attack is the only exception but there are still ways to manage it without lossing your BTC, nothing is usually safe from wrench attacks BTW.
What if I lose my seed phrase? - Keep it safe by all means
What if my house catches fire? - Have multiple diffent forms of backups in multiple locations. That way there zero worries on a backup getting damaged, it cab be easily replaced.
What if someone steals my backup? -Add passphrase and create a decoy wallet, it can help you some day.
What if I forget where I stored it? - Reason multiple locations is advisable( not overdoing it though , three safe place is enough) , you cannot forget all at once unless it's related to health.
If you trully want "self-custody", you need to do everything that pertains to "self-custody".
It wont be easy but its required.
On paper these practical ideas of yours are really very strong and effective. For example taking metal backup, hiding them in separate places, using passphrases and decoy wallets are really very effective method. But no matter how much you try to convince those who are weak minded that mental load or worry will not completely disappear from their brain. I have seen many investor still spend their day with a latent panic in their mind. This is exactly why many old and experienced holder who are still in the market keep a part of their asset in custody of regulated company for peace of mind. Many also go for strict multi sig setup with trusted partners.
You wrote very well and still ended up making people more scared and thinking more, because the questions that will be going through someones head after reading your write up is what happens if I have a health issue of a memory loss?
The fact still remains that the Psychological Burden of Self-Custody can never be over emphasized even though some people pretend not to see it as something serious and worthy of discussion.
Nothing comes with a cost or sacrifice
You can't eat your cake and still have it.
Bitcoin isn't for everyone
If you want to be in charge of your funds and also not plagued by the gradual drop in Fiat.
Not everyone care about being their bank
They don't even trust themselves and believe a third party would do better.
Hmm, I'd rather lose my coins by my own mistake instead of terrible management, dishonesty and negligence from a centralised exchange. Atleast, with my coins in my custody the responsibility is mine and I can minimise the risk of losing these coins by backups, adequate education and good security practices but handing over your coins to centralised exchanges can make you lose your coins in more diverse ways, e.g: hacks, insolvency, regulatory seizures, withdrawal freezes, insider fraud, account restrictions, and even simple technical failures.
Personally, I don't consider avoiding self custody to be the solution here, rather we need promote and educate fellow bitcoiners on the importance good security practices while practicing self custody.
No, they don't even care about security privileges, they're not fans of cypherpunk ideology, they're not tech enthusiasts, and none of what you wrote ever crossed their minds in the first place. All they're interested in is volatility, although some of them adopt self-custody practices, driven by what they've read and heard in the beginning.
Eventually, they'll revert to the "3rd-party custody" standard, which always sounds superior in offering convenience features and extra benefits, and it's also become the standard financial psychology of the average person worldwide, and it's hard to change.
This is where maturity and discipline come to play a major role because one thing is to own a valuable asset, another thing is to protect it.
If you have something precious, such as Bitcoin, you don't need anyone to tell you to secure it because there will be people willing to take it from you. So there should be no room for fear.
You call them problems, but I do not see them as problems. Aside from taking full responsibility for safeguarding your asset that requires self-security practice, inheritance and responsibility aren't a problem. It is easy to set inheritance for your heir, and also it is easy to take responsibility for the Bitcoin.
Other than the inheritance problem as contained in the OP, Ive never really had any of these psychological problems as the OP has termed it.
I see self custody is a must and actually a hold on power to be very much in control of how everything is done about my Bitcoin or cryptocurrency finances. I wouldnt have opted for it any other way. I remain confident in my private key security measures to always keep me in place and safe.
The inheritance issue, of course the multisig remains an option to exploit but, thats of the most concerns since, Bitcoin and privacy is key to safety in this space.
Well about that, you just have to figure it out yourself. Getting memory loss means you're pretty fcked up with absolutely no way to recall any property or assets and it's beyond only Bitcoin.
Setting up a way to pass your Bitcoin to your kids is also a way to avoid losing access forever because of memory loss. All they would need to access your BTC after memory loss is to simply wait for the time you set for the transfer, and they can successfully withdraw it.
See......theres always a solution, you just have to figure it out.
The most efficient solution may be DIY cold storage in which you create the address and private key and have the private key covered by a hologram so it's not exposed and would require peeling to sweep it; therefore, it would be evident if tampered with. This could be done on many types of mediums, ex. a paper or coin/token. This would take the seed phrase out the equation and make the redemption/sweeping process streamlined, simpler, and easier for your heirs.
When someone hold his/her Bitcoins investment in Self custody somehow and to some extent is a good idea because one of the key and valid point of it is that you cant just hand over your life time investment as some people do invest all their life Time saving in Bitcoins to someone you don't know or cannot Physically get access to when ever issues or problems arises so to me all this listed above is not a problem that should make someone handover his/her bitcoin to someone unless if it is the person that can be held on physically if anything happens, like the traditional banks as the case maybe. To think of it what if something happened to the person that you give your Bitcoin to like maybe the person lost his life what should be the case of such incident it as good as loosing all your Bitcoin so I rather keep it myself and find a very secret place to hide all my vital documents like the recovery phase and other things than risk it giving it to someone else to keep for me
To become their own banks with non custodial wallets, people must do something as prerequisites like knowing the risk of storing money in online accounts such as on centralized exchanges, online platforms, banks. They must do their research on such methods, the risks and they will naturally feel fearful with such methods, then figure out ways of storing their money safer.
Then they will possibly find Bitcoin, and most important Bitcoin non custodial wallets as a safe method for storing their bitcoins, having their own bitcoin banks.
It's how they psychologically prepared for moving away from banks, centralized exchanges, and using non custodial wallets. By this flow of learning, and practicing, they will be very well prepared psychologically with their own bitcoin banks and non custodial wallets.
Reminder: do not keep your money in online accounts.
Events made you scare about custodial wallets, centralized exchanges.
How the SEC Nearly Destroyed my Retirement Account.
How to manage bitcoin like a whale?
1. Fear of losing access will be eliminated if you add redundancy and disciplined enough to check on your seed phrase every once in a while.
2. You won't need forget password feature if you can backup your seed phrases into multiple place.
3. Write your seed phrases down to a paper or a metal sheet, store it somewhere you can secure and leave out an emergency note that contains the location to your descendant if something come up.
I dont think anyone on this forum should have this problem. There are more than enough resources available teaching the best ways to secure ones seed phrase. You just have to do your research, in my opinion, multiple backups (paper & metal) in different locations is most reliable.
The problem here is not bitcoin, its the investor. These sort of people suffer from paranoia and fear of losing money, they probably do the same with every other prized possession in their custody.
It is this unwillingness to take responsibility for their own coins that makes people store their bitcoins in centralised exchanges, and then moan about it when their money is seized or lost. Im surprised how much self custody scares people, they rather trust third parties with their money.
Sleepless nights never helped anybody. If they use half the time they spent worrying about their bitcoins to do a little bit of research, they would find these threads:
Death & Bitcoin: How I Prepared My Familys Digital Inheritance
[DISCUSSION] Bitcoin Inheritance Planning
Saving Bitcoins for your Children.
Using Locktime for inheritance planning, backups or gifts
Inherit coins to my family after passed away
How can i pass on my bitcoins in case i die?
OP, first of all, I would like to say that the problem of suddenly passing away and leaving a seed phrase (inheritance) to your loved ones has already been discussed several times on the forum.
But I would change the word "burden" to "responsibility." If someone is very burdened with keeping it, then the best thing for them is to stop being the owner of Bitcoin, since being their own bank is the very condition when interacting with Bitcoin.
In the same way, it is worth understanding and accepting that everything we are afraid of and invent, for the most part, does not tend to happen. Imagining various misfortunes, we turn into neurotics, and this naturally affects our health. Therefore, calm and competent storage will bring you more benefits than changing passwords, various transfers of funds to other wallets, or paranoid storage of seed phrases.
I like the simplicity of that idea. For heirs who aren't familiar with Bitcoin, a single private key protected by a hologram is probably much easier to understand than dealing with seed phrases and wallet recovery.
Institutional players often refer to Bitcoin as a digital asset. However, they completely ignore the fact that it is a completely independent type of financial asset. Bitcoin is completely unlike any other financial asset people have encountered before. 🤷
Self-custody is one of the most important properties of this financial asset. And this is both an advantage and a disadvantage of Bitcoin. Why is it a disadvantage? Because most people are psychologically unprepared for this level of responsibility. We live in a disciplinary society. Kindergarten, school, the army, work: at all these stages of life, people are taught to be obedient and completely reliant on the support of social institutions. Therefore, the very idea of having a financial asset but no social institutions to help you protect it terrifies many people...
It is precisely this psychological characteristic of most people that people like Michael Saylor exploit. He accumulates Bitcoin, which is centralized in Coinbase's cold storage, and instead gives people his stocks and bonds. He claims these assets are better than real Bitcoin (which is a blatant lie).
Yes, storing Bitcoin yourself is very difficult. I think an analogy can be drawn here... You lived in civilization, and then found yourself in the jungle, where large predatory animals roam. Most people, unfortunately, will never choose this path. In doing so, they deprive themselves of the opportunity to grow up (to turn from children into adults).🧖