The Case for Self-Custody

Disagreements amongst Bitcoiners abound, but perhaps no topic is more contentious than that of proper Bitcoin custody.

“How should you secure your bitcoin?”

It’s a fantastic and entirely reasonable question, and one that we at The Bitcoin Way answer often without mincing our words. However, we recognize that rather than seek to convert the uninitiated to an abstract philosophical doctrine of “100% self-custody,” the discussion must be quite practical. This article seeks to clearly explain the position we take and provide some nuance that we hope is helpful for those seeking answers.

Bitcoin is Freedom Money

First, we have to level-set on what precisely Bitcoin is. Is it an asset? An investment vehicle, something like a Nasdaq stock? Is it “digital gold” or “digital capital?” Is it a currency?

To some degree, we’ll concede that you can use Bitcoin how you like. It can be an asset, such as you might own a rental property, or it can serve as an investment vehicle that could generate long-term, dollar-denominated returns.

It certainly looks something like a digital version of gold, the oldest form of sound money known to humanity. In many places, you can already buy your morning coffee or rent a place to stay with bitcoin so it’s safe to say that it’s also a currency.

But the best way to summarize Bitcoin in all its manifestations is simpler than all of that: it is money.

Specifically, Bitcoin is a secure, scarce, digital commodity money without a central issuer that requires no counterparties to be used or secured. The implications of these descriptors may be lost on many but suffice it to say, it is a big deal that Bitcoin exists as a monetary network that you can voluntarily opt into for the purposes of sending value across space and time without fear of censorship or debasement.

If we were to append one additional adjective to round out a definition of Bitcoin, it is freedom money.

Freedom to use or not.

Freedom to send without counterparties.

Freedom to engage with privately or with your identity known.

Freedom to transact globally at any hour of any day.

Freedom to secure without trusting a third party.

But Bitcoin is only truly freedom money if it is used as a such.

The Great Custody Debate

So, Bitcoin was designed to be freedom money. But not all means of using and securing bitcoin are the same, and so the amount of “freedom” you have varies by the custodial path you choose.

Bitcoin kept on an exchange is objectively not freedom money; it is an IOU from a third party that may or may not be able to deliver when you go to collect.

Bitcoin whose keys are entrusted to multiple institutions (and not held yourself) for the sake of security is not freedom money; it is also an IOU to be delivered contingent upon the smooth operation of the companies being trusted.

Bitcoin in a collaborative custody arrangement is not freedom money; doing so requires trusting a third party to know who you are, the amount of Bitcoin you hold, and how, precisely, you secure it.

Bitcoin in self-custody is freedom money; nobody needs to know who you are, how much bitcoin you have, how exactly you’ve chosen to secure and backup your wallet, or anything else about your arrangement.

In 100% self-custody, nobody else must know when you transact, nor can they – under coercion from government or based on other bias or political motivations – restrict your ability to send and receive it bitcoin.

Now that is powerful.

What is 100% Self-Custody?

Part of the confusion over a universal definition of “self-custody” is that many in the industry are wildly flexible as to how they define the world “self.”

“As long as you hold two of the three keys to move your bitcoin,” is a common narrative, but neglects the fact that one of those two keys is often held in a third party’s proprietary app or could exist on a closed source hardware wallet with legitimately serious security concerns. It also ignores that fact that you alone are not solely knowledgeable as to the amount of bitcoin you hold or when you choose to transact.

“As long as you control when your bitcoin moves,” is another, more recent industry talking point. In other words, some believe that even if you hold none of your own keys, so long as you can verify your identity to trusted third parties, it is still in “self” custody. This particular take seems a legitimate bastardization of the concept of “self-custody” because you must rely 100% on third parties to do the right thing or, at the very least, not fall prey to government intervention. That latter scenario is completely beyond their control, of course.

Our definition of Bitcoin in self-custody is… less loose. We believe that 100% self-custody means that you alone hold the keys or keys to access and send your bitcoin, that you are beholden to no proprietary app or solution to transact at your discretion, and that there are no counterparties involve in your custodial setup.

Even more specifically we believe that beyond this, a true self-custody setup relies exclusively on Bitcoin-only, air-gapped, and open-source hardware and software.

Why We Preach 100% Self-Custody

If we view “freedom” as a spectrum, Bitcoin in 100% self-custody is far and away the most liberating path:

1. ‍Privacy. You can readily purchase bitcoin that is untethered from your identity and move it to a wallet to which you alone hold the keys. Nobody ever needs to know it exists. Additionally, you level up your privacy when you run your own node.
2. Counterparty-free. In 100% self-custody done properly, there is no counterparty upon which you must rely for anything. Open-source hardware wallets and software wallets mean that the only requirement is an Internet connection to send and transact without risk of censorship or interference from others.
3. Permissionless. While in some alternative custody arrangements, such as collaborative custody, you technically hold enough keys to transact without permission, many require use of their app or proprietary tools… which could theoretically be shut down or its use limited under external pressure. There is no app that can be turned off for maintenance or at the behest of regulators that might restrict your ability to transact when you are set up in 100% self-custody.
4. Trustless. Another major failure of many alternative arrangements is the more general trust it requires. Most will refuse to share how they protect your “backup key” in the interest of security; you have to trust that they are doing a good job. Even fewer, we suspect, would provide the results of a third-party security audit indicating sound practices more generally. Keep in mind, your KYC information (e.g., name, address, government ID, etc.) is crucial for third parties to secure because it could be used to track you down – digitally or physically – to try taking your bitcoin. Clients of The Bitcoin Way don’t have to trust us with this type of information because we don’t collect it. Anything you share with us is voluntary and the less we know, the better.

To many, we seem to draw an incredibly hard line in the sand when it comes to the “right” way to secure your bitcoin. And to a large degree, this is correct. But there’s more to the story.

Where We Stand on Self-Custody

When it comes to protecting your bitcoin, we firmly believe three things to be true:

1. Everybody that holds bitcoin should have some amount secured in 100% self-custody using only the best tools and with zero counterparties involved
2. Everybody that holds bitcoin should acquire the skills required to hold their bitcoin in self-custody, even if they don’t secure all of it in this manner
3. Everybody should be able to sleep at night, comfortable with the path they’ve taken to secure their bitcoin

Point #3 is the real kicker. You see, at The Bitcoin Way we are very principled in our belief that full, uncompromising self-custody is both the best option and achievable for nearly anybody. We don’t offer solutions that compromise on privacy or hardware or anything else. We train clients on 100% self-custody only.

And we are adamant that everybody – and we mean everybody – should have a stack of bitcoin that is true freedom money and is secured independent of any third parties or other unnecessary risks.

But… we also understand that for some people, keeping the entirety of their bitcoin stack in 100% self-custody might not allow them to sleep in peace at night. To those folks, our message is simple:

We understand. Do yourself a favor and start with 100% self-custody. Learn the skills required to own real freedom money. And always hold a meaningful portion of your bitcoin in this manner.

And then, if your bitcoin holdings grow or the value of what you have reaches a point that makes you uncomfortable being sole custodian… consider adding another solution for part of your stack that puts your mind at ease. But be sure that you fully understand the trade-offs you are making and ignore the marketing and hype so often peddled in the industry.

So, start with 100% self-custody and always secure some in this manner.

Final Thoughts

You are perfectly capable of holding bitcoin in 100% self-custody. The notion of doing so may seem daunting at first, but that is precisely why The Bitcoin Way exists: to equip individuals with the skills needed to hold and secure bitcoin as freedom money with confidence.

Because Bitcoin is only, truly freedom money when the risks of confiscation, regulation, and property right violations are eliminated.

Let us help you build a foundation of financial self-sovereignty without compromise. We believe you’ll be surprised at the feeling of peace you’ll achieve when you alone hold the keys to your future.