Bitcoin investors have noticed that their wealth accumulates by several orders of magnitude over the past decade, but the appreciation of value is not enough. Security plays a major role in preserving the wealth of crypto assets and the most productive practices in this area have evolved particularly over the years. .
As a security expert, I have helped many wealthy Americans protect their Bitcoin and buy their wealth for generations to come. It’s not unusual for me to advise someone who has held Bitcoin for years and is still employing a setup that I can only protect. loads or thousands of dollars instead of securing millions of dollars. If a significant portion of your net worth is held in Bitcoin, you deserve to be much more considerate about how you buy it, as a bachelor mistake can be catastrophic.
No Bitcoin on exchanges
Bitcoin is a bearer asset, just like valuable metals or collectibles. Anyone who owns the personal keys to a Bitcoin front can spend with that front at any time.
Because most people get their Bitcoin on an exchange, it’s quite convenient to leave them there, but if you leave your Bitcoin on an exchange, the exchange holds the keys, exposing your assets to counterparty threats and external threats. it can also be hacked, confiscated, or for various reasons, the exchange may not even have Bitcoin.
These threats would possibly seem theoretical, but they have been a recurring theme in Bitcoin’s history. In 2014, Bitcoin exchange MTGOX revealed that 850,000 Bitcoin had disappeared and were likely stolen. The exchange filed for bankruptcy, resulting in a legal mess that persists to this day. . MTGOX dealt with bitcoin’s maximum transactions at the time, and early Bitcoin investors don’t forget the momentum of lost budget too well. Since 2014, we have noticed that dozens of other exchanges suffer catastrophic losses due to internal and external attacks.
Unique failure issues, such as swaps, are the explanation for why it’s vital to keep your own keys.
Don’t take risks
There is a saying in monetary circles: he only wants to get rich once. When investors accumulate significant wealth that adjusts their lives, their threat tolerance adjustments and have a tendency to replace their mindset from accumulating wealth to preserving it.
This is especially true for investors who have large holdings of Bitcoin, unless they understand the threat differently than their contemporaries. Trading and lending disclose your Bitcoin to the counterparty threat, and the rewards don’t deserve the danger. For more than a few years, the prospect of earning a single-digit annual interest on an asset that can appreciate so much on a day without getting married might not be the threat of a hundred percent loss.
With today’s appreciation of value, it has become increasingly complicated to update bitcoin that has been lost. Stay with your coins. Everything else carries an additional risk. If you’re not satisfied with a compound annual expansion rate of around 200%, will you feel particularly better at around 205%?
Consider all threats
Humans have cognitive biases and those biases make us over-prepare for safe threats while neglecting the most likely threats. Because Bitcoin is digital, investors are well aware of the threat of non-public hacking. leave your coins on an exchange as it is protected by security professionals, however, those exchange wallets are more in danger of being attacked by attackers as they are known to have cash for many people.
In reality, Bitcoin investors are much more likely to lose their budget due to user error. Hacking a hardware wallet is difficult. Losing a hardware wallet is easy, but this risk can be mitigated through redundancy, backups, and inheritance planning.
Some wealthy owners are so afraid of making mistakes that they move their budget to the garage premises that they literally buy the keys in the internal underground bunkers, but in doing so, they do not protect themselves from all the threats, they simply entrust the dangers to someone else to solve.
If an abundant amount of your net worth is in Bitcoin, you need to be protected from all the threats you can design, and the ones you can’t!Review your protection and emergency plans from any and every angle imaginable, adding your own mismanagement. .
Keep it simple
Once someone understands all the potential threats to their Bitcoin, they are tempted to adopt an elaborate security plan, but this line of thinking is another trap. Complexity is the enemy of security: it can give a false sense of security (although it only provides darkness) while expanding fragility to act on the procedures necessary to regain access or move property.
For example, a paranoid investor could split their Bitcoin into 10 unique keys with other hardware wallet models hosted in many jurisdictions. This type of diversification lessens the threat of a catastrophic occasion erasing all your assets, but greatly increases the threat. of wasting some of your assets at some point.
Healthy cash deserves custody
Self-sovereignty is about maintaining your property. It’s not about making your assets more unlikely to succeed: a perfectly insured asset is an unusable asset. Secure self-custody is how you take possession of your crypto assets. Implement a plan if you don’t have one and review it from time to time. This way, if your investment is going to the moon, you can be sure that you will make the moon landing.
Jameson Lopp is the CTO and co-founder of Casa, a bitcoin garage company, a Cypherpunk whose purpose is to build a generation that empowers people, built
Jameson Lopp is the CTO and co-founder of Casa, a bitcoin garage company. A Cypherpunk whose purpose is to create a generation that empowers people, he has been creating multi-signature bitcoin wallets since 2015. BitGo Engineer, founder of Mensa’s Bitcoin Special Interest Group, Blockchain Triangle Meeting.