It is at the very core and philosophy of what it means to be a Bitcoiner to take self-custody of your Bitcoin. In fact, Bitcoin was created for precisely this reason. It is probably a saying you have heard before, “not your keys, not your coins.” But, have you ever considered why we say it and what it really means? There are more reasons than the first thing that springs to mind. The power of Bitcoin self-custody can change the world for the better.
You must first understand the original philosophy or purpose of Bitcoin before you understand why self-custody is so important. The biggest use case for Bitcoin is as a hedge against fiat monetary systems. It is a way out of the current financial system. Often, this world doesn’t play by the rules, doesn’t care about the average person, and will do whatever it takes to profit. Regardless of the consequences. They devalue currencies without thinking about the future. There really is no better money than Bitcoin; a currency that is deflationary and is getting stronger over time. Bitcoin rewards you for saving, unlike fiat. With libertarian ideals at heart, it gives everyone the power to become their own bank. Has your bank ever refused to process a transaction? Possibly they had questioned why you needed such a large sum of money. That problem is solved with Bitcoin. Money can be owned by you, you can be your own bank, and you can send it to whoever you like; anytime you want. Markets are never closed. It is necessary to have self-custody of your Bitcoins in order to maintain this freedom. Here’s why.
The majority of cryptocurrency projects are still operated with fiat currencies. In the event that they became insolvent, it is highly likely that you would not be able to withdraw or recover your Bitcoins. And it is not guaranteed that they are holding your Bitcoins, either. The cryptocurrency market is also plagued by hacking attacks that can take the coins; something that takes place far too often. You don’t know whether the company will disappear one day, and your funds will be gone with it. Self-custody is essential due to the extensive list of risks involved. That is the only way to fully protect yourself from societal and company failures.
What is self-custody?
Custody has traditionally been defined as the ability to hold, move, and protect assets. Since time immemorial, people have given their money to custodians like banks and relied on them to keep it safe. In contrast, Bitcoin is stored on a blockchain made up of many independently operated nodes. A person cannot access your funds unless they have access to your private key.
Being the only holder of a private key is what self-custody means. It gives you complete control over your Bitcoins. It also makes you solely responsible for them.
To participate in the world economy, it was previously necessary to keep funds with a third party. As a result, you would be left in the rain if you were unbanked. Bitcoin has revolutionized the world. Now, anyone with internet access and a smartphone can act as their own bank.
What are keys?
Two kinds of keys exist: public and private. It is safe to share your public key with anyone since it only allows money to be deposited into your account. A private key, on the other hand, is extremely valuable and shouldn’t be shared with anyone. Using this key, you can access your Bitcoins and withdraw or transfer them. Private keys are referred to in the famous phrase; “not your keys, not your coins”.
If you have Bitcoin on an exchange, lend it out to services like BlockFi or Celsius, or use a custodial 3rd party wallet, that then means you don’t have full ownership. All of these examples also fall into the “not your keys, not your coins” category. You’re at their mercy, if you don’t self-custody your Bitcoins.
Why you should self-custody
Bitcoin is one of the most scarce and valuable assets in the world, and it is rapidly becoming one of the most valuable as well. Because of this, you need to be cautious and treat it accordingly. A huge amount of BTC has been lost due to thefts, exchange hacks, and wallet hacks. It is sometimes enough to imagine what it would feel like if every coin you have worked so hard to accumulate disappeared overnight.
Therefore, it is essential that you be proactive with your cryptocurrency. However, even without the safety of your coins, it is comparable to the current financial system to have Bitcoins on an exchange. You are entirely at the mercy of the exchange, and it decides whether you can withdraw, transfer, or cash out of your position, as well as how much you can cash out each day. Your account may even be frozen if they want to censor you in some way. It is the same for lending out your Bitcoin on lending platforms. You are very likely to lose most of your funds if the company goes bankrupt. Bitcoin and self-custody wallets were designed to prevent these types of scenarios. By taking self-custody, these rules and risks can be avoided.
There are still risks
There is speculation that millions of Bitcoin have already been lost due to people not properly taking self-custody of their coins. This is due to a variety of factors, including forgetting seed phrases, being locked out of wallets, tossing away hardware, and unforeseen disasters like fires and floods. These are just some of the risks that come along with taking self-custody of your Bitcoin.
CoinFundIt.com can help
Nevertheless, we believe anyone can achieve self-custody, and they should with our non-custodial hot wallet. It’s important to know your limits and to keep your savings where they’re the safest. We advise new users to only consider self-custody once they have gained experience with cryptocurrencies and as the value of their holdings increases. With self-custody, there are risks, just as with using a 3rd party. However, there is also a greater benefit. Ownership and control are both yours.