As long as Bitcoin exists, it is independent – the ability to trade and hold your own wealth without the need for third-party intermediaries like banks and other financial institutions, was central to the offer.
For some, self-custody is a firmly held belief in the right to “be your own bank.” For others, it is a practical step taken to protect valuable assets that can be possible and lost to exchange hacks, mismanagement, or FTX style collapse. If you have a run at a “bank”, it’s a bit like maintaining safe cash at home. Coins are immune to them.
And while the “ways” of self-custody have changed shape throughout Bitcoin history, today’s de facto industry standard (seed phrases) for recovery becomes a (sometimes a huge) loss when things go wrong.
Distinguishable distinction
In the early days of Bitcoin, there was only self-custody. At the risk of going too far, self-management means managing your secret key materials. This is a string of 64 random characters that gave people access to the underlying Bitcoin. There were quite a few tools to manage private keys. Remember them or write them down and store them in a safe place. But let one character out of place and oh my, the keys don’t work. Even if you do everything right, there is still a very real possibility of theft, accident, or loss of disaster.
Seedphrases are intended to make private keys easier to manage. Instead of securing a long string of random characters, Bitcoin Improvement Proposal-39 (BIP-39) can essentially withstand a handful of simple words inherently withstand private keys. As long as you have the correct sequence of words, you will always get the same private key and have access to your funds.
It’s definitely easier to deal with some common words than a long series of characters, but the risk of loss due to human error, theft, or disaster is essentially the same in seed phrases, just like private keys. It’s a distinction that makes no difference for those who lose their backup while they really need it. When it’s gone, it’s gone and it won’t be regained.
Moves beyond the Stone Age Security of Space Age Assets
Somewhere along the way, the overall idea of independence has become synonymous with the phrase of the seed in the minds of many people. However, self-management is not the goal. It’s ability. Seed phrases are far more responsible than abilities.
Certainly, using seed phrases allows you to play keys or move funds to another wallet easily, but anyone who sees it can do that easily. This is a nuclear option. Anyone with access to the entire payload will grant it. That’s why most people who use them are forced to rely on rather old-fashioned security measures to protect them. Fill them, use book ciphers, distribute copies, fill them, engrave them, and more heat-resistant alloys.
But the idea that high security in digital caches could be closer to filling coffee at the perimeter of your backyard is absurd. It is Stone Age security of space age assets. And the idea that most people’s only recovery tool is something they themselves can lose fairly easily, if you can easily lose it, is it even a recovery tool at all?
Managing seed phrases may be better than dealing with secret key materials, but that’s not good yet. Not for security or security, not for the user experience, and ultimately not for the growth and widespread adoption of Bitcoin.
The future of money should work like the future of money
Bitcoin itself is intended to start as e-cash. Ultimately it is software and is intended to be run for use. For too many people, ensuring it is a source of great anxiety and practical difficulties. There is a better way.
The future of money should work on your preference, and ultimately secured, like the future of money, rather than the past. It opens up new abilities, inspires confidence, is intuitive and even fun to use. And you won’t lose access to coins just because you make typos or lose paper.
Even hardcore, even self-sovereign bitcoiners admit: seed phrases are pain. They were clunky stopgaps and were not intended to be the final game of the overt digital currency. We should stop treating them as they are the crucial features of self-custody.
This is a guest post by Max Guise. The opinions expressed are entirely unique and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
