Mark Maraia is an entrepreneur, author of “Rainmaking Made Simple,” and Bitcoiner. Casey Carrillo is an associate editor at Bitcoin Magazine. The following is an opinion piece written by Mark Maraia and Casey Carrillo.
The fact that we are able to retain custody of our private keys is just one of the many aspects of bitcoin that contributes to its status as a fantastic asset. This capability is so innovative and ground-breaking that the Law Commission of England and Wales has penned a report that is 500 pages long suggesting a new form of property right for digital goods.
As I was thinking about how long it took me to get a hold of my private keys, I had the realization that it could possibly serve as some sort of lesson for other people. It took me a few months before I felt like I was confident enough to take custody of my private keys. I’m a baby boomer, and I’m not the least bit tech knowledgeable or motivated. My line of reasoning, which I have a feeling is shared by a great number of other people, was that I trusted a third-party exchange, which is nothing more than an IOU for bitcoin, more than I trusted myself. I assume that this line of reasoning is shared by a great number of people. In March of 2020, I made the first purchase of my adventure, which was a modest sum of four different sorts of digital assets, one of which being bitcoin. I purchased that bitcoin through a centralized exchange, and at the time, I did not have sufficient knowledge to understand the concept of private keys.
As COVID-19 wore on and the printing of money by central banks continued at abnormal levels into 2020, I started to wonder and worry about the purchasing power of the dollars in my U.S. bank account and began to question whether or not they would be worth as much in the future. Therefore, I made the decision to purchase additional bitcoin in November of 2020. When I finally reached that point, the famous “rabbit hole,” and started focusing my education only on bitcoin, I realized how important it is to keep your private keys in your possession.
Because there were so many different options and so many different ways to get it wrong, I decided to go about it carefully because I found the whole thing to be quite complex and daunting. There was a bewildering selection of hardware wallets and software wallets available to pick from back then, just as there is now; everyone has their own opinion regarding which is the superior option. In addition, in order to back up the wallet or restore it, I needed to be familiar with derivation pathways and seed words. It was all completely foreign to me, and I might as well have been reading Greek for all I knew. I had come to the conclusion that I would not hasten the transition to holding private keys until such time as I felt comfortable doing so. As a result, I decided to save the bitcoin that I had acquired through two separate exchanges until 2021.
It wasn’t until March of 2021 that I finally arrived there. Even back then, I got assistance from a young intern named Kevin who worked with me for three months. Kevin was also enthusiastic in bitcoin, and at the time, he was actually writing his master’s thesis on the risk factors associated with include bitcoin on a company’s balance sheet. Instead of going via a middleman, I placed my purchase for a hardware wallet straight with one of the most reputable providers. After that, in March, that friend assisted me in moving some of my bitcoin holdings to a new address. He demonstrated the process to both me and one of my grown offspring. Because of operational security concerns, the ideal technique to back up the device is something that is never discussed in fine detail. That is covered in a completely different post.
Okay, so far, so good. Due to the fact that having all of my bitcoin stored on a single device implied a single point of failure, I never felt entirely at ease with the arrangement and instead proceeded to educate myself on multisig solutions. After conducting additional research and reading, I was able to identify two organizations that deal exclusively in bitcoin and offer multisig or vault services. Both Casa and Unchained Capital are available. I didn’t finally feel ready to take the trigger and choose one of them to hold the rest of my bitcoin in a multisig configuration until September of 2021. At that time, I was in the midst of a financial crisis. It had been 18 months since I had purchased my first bitcoin at that point.
What I think some of the more technically competent and tech-inclined people in this arena forget is just how scary it can be to acquire that level of ownership in a business or organization. The steep learning curve required to gain custody of one’s bitcoin keys is something that many Bitcoin users who have been using the cryptocurrency for a long time fail to appreciate. People who are more knowledgeable about technology tend to view it as a mere molehill, whereas those who are either less interested in furthering their education or have less time to devote to it view it as akin to climbing Mount Everest. Additionally, it is unlike anything that has been done in the past in that it entails taking responsibility for one’s own financial situation. And there are certain people who will never be prepared for this degree of responsibility.
My adventure in gaining control of my private keys led to an engaging discussion with Casey Carrillo about the matter at hand, and he has his own trip to share with us as well.
Being a young person who is interested in technology, the fact that Bitcoin is a digital construct from its inception came as no surprise to me at all. In the same vein as Mark Maraia, I had a friend hand-hold my entrance into Bitcoin; however, in contrast to Maraia, he was there from the very moment I was “orange-pilled,” and as a result, he promptly made sure that I came into possession of my private keys. I don’t believe that my custody story is particularly unusual.
This was, of course, in the form of a hot wallet that was stored on my phone at the time. I do remember having the thought that the method through which my riches would be stored — essentially in 24 words — was precarious. My friend informed me that if I were to record the seed phrase on a digital device, which was something I was accustomed to doing with important information before, the security of the seed phrase would be compromised. At the time, I was unaware of the correct procedures for securing even the most basic of passwords, let alone my seed phrase. Consequently, the knowledge that this would only exist in the physical domain, and would therefore be vulnerable to the myriad of physical perils that exist in the world, such as a forgetful mind or fire, caused me to feel apprehensive.
It was relatively simple for me to understand the distinction between a custodial exchange and taking possession of my private keys because, at the time, I was completely immersed in the “wallet” metaphor. I compared the two events to the process of acquiring cash and then attempting to keep it in my physical wallet. At the time, I believed that I was sending my bitcoin to a separate location, one that the entity from which I had purchased the bitcoins would not be able to access or influence in any way. I now realize the intricacies of my hot wallet not necessarily being a “destination” as much as a signer, but at the moment, the metaphor suited its purpose well enough to not require further explanation. Even though it misrepresents the actual nature of what we currently refer to as bitcoin wallets, I continue to be of the opinion that the wallet metaphor is an effective way of describing who has access to cash in your wallet as opposed to money in your bank account. It is a difficult task to describe the difference between the two in a manner that is as effective as the analogy does; however, I continue to be of the opinion that the metaphor is effective.
Putting that to the side, it took me a few more months before I switched from using a hot wallet to a cold storage wallet. During that time period, I had gained an understanding of the distinctions between the two, as well as the reasons why it would be essential to conduct the process of seed creation on a device that was not connected to the internet. The only way to have come to these conclusions was through a deeper grasp of the Bitcoin protocol in general. Knowledge Bitcoin is similar to developing an understanding of custody.
I would like to believe that, with the exception of high-net-worth individuals who typically engage in increased research on the storage of their wealth regardless, the amount of money invested (and, consequently, the amount of money that could be lost if a seed phrase was forgotten, etc.) correlates highly with knowledge of Bitcoin. This is something that I would like to believe. On the other hand, anecdotally, I’ve observed very no link between the two phenomena: some people go to great lengths to preserve very small amounts of bitcoin, while some people have millions of dollars’ worth of bitcoin on a single exchange. This is most likely just a byproduct of early adoption and will shift as more individuals gain an understanding of the value of bitcoin.
In general, I believe that a lot of people may connect to the idea of having some kind of assistance while initially learning about the many sorts of bitcoin custody. According to my point of view, this demonstrates how crucial it is for Bitcoin users who are aware of this to educate others and to continue attempting to find ways to better express why self-custody is necessary.
As a last thought, we hope that you have found our experiences to be illuminating, and we encourage you to send an email to Austin@btcmedia.org with a concept for an article about your own personal path toward gaining financial sovereignty and acquiring custody of your private keys. How long did it take you? Please tell us your tale, and we will try to work with the contributions that our editors believe are the most instructional and enlightening, as well as those that fit our editorial guidelines.