Today, most of the estimated 175 million global bitcoin owners don't hold their bitcoin keys. Instead, they rely on custodians to hold their keys, who can decide if, how, and when the users can access their money.
When a custodial wallet holds your bitcoin keys, they ultimately can decide when you can access your money, how your money is kept secure, and whether you can even access their services in the first place.
I believe people should be able to take control of their bitcoin using a self-custody wallet, and I want to make it easier for everyone to do this.
Self-custody means the wallet owner can always access their funds while ensuring unauthorised people cannot. Thus, security and safety features in self-custody wallets need to balance between striving for robust protection and accepting that accidents will happen because people, often—inadvertently, of course—lose things and deviate from security procedures.
We need a way to help people easily recover access to their wallets, and we need these recovery experiences to accommodate people's lives and help them get back on their feet without too much trouble.
Traditionally, self-custody has been too technical for the wide majority of people, and the need to remember long passwords (or seed phrases) is a burden for many.
Although today, there are tools that make self-custody more accessible, easier, and safer, most of the hot or cold self-custody wallets available are difficult to use.
Many times, it requires extensive technical knowledge, setup time, and complexity that can leave even the most detail-oriented bitcoin owners in an unsafe state where they might lose their bitcoin or have it stolen.
These challenges are part of why the majority of people who hold bitcoins on custodial platforms are hesitant to move to self-custody wallets, not because they doubt the security of self-custody solutions, but because they are afraid they might make mistakes, especially with remembering the 12- or 24-word long ‘seed phrases’ (or passwords) associated with crypto wallets.
People are terrible at securing and remembering passwords, especially ones that are complex enough to be secure.
Some of these challenges can be addressed with collaborative self-custody and by having multi-key authorisation for wallets, removing the need for the customer to remember long seed phrases or have a high technical knowledge to set up their accounts.
With multi-signature capability built into the bitcoin protocol, one can specify a group of keys that can authorise transactions and the minimum number of keys that must be used.
Imagine having one key stored offline in a hardware wallet, another in a mobile device, and a third one on a server—and two of those three keys are needed to make any transaction.
Using an offline device to store one of the keys helps secure the wallet against online attackers versus a wallet only connected to the internet with no offline component.
This is because keys stored on an ‘always-on’ internet-connected platform can be more easily compromised and misused to steal funds. Offline platforms, on the other hand, help keep the keys out of reach and give the user complete control over when the keys are used.
Additionally, the advantage of having a third key held by another party (or server-side key) is that it can help people regain access to their funds in the unlikely but possible event that they lose either or both the phone and the hardware wallet.
Bitcoin users, existing and new, will have to decide who they would rather have as custodians of their keys—third parties or themselves.
If they opt for self-custody, they will need to choose a wallet to protect their funds with based on their technical know-how and level of comfort with complex operational processes.
With easy and safe self-custody solutions, bitcoin owners can have full control over their private keys and secret phrases so that no one can access their funds without their permission.
You can choose great convenience or robust security, or with some products, both.
Max Guise is the Bitcoin Products Lead of Proto team at Block Inc.
Edited by Suman Singh
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
