Topic: The benefits of self-custody outweigh the risk of exchanges - page 2. (Read 453 times)

I agree and I believe most of the stories about losing Bitcoins in wallets and login details are mostly from the days when BTC wasn't taken that seriously because it had less monetary value then but I strongly believe that this might not be the case with anyone hodling their Bitcoin in any form of Hard Wallet now as we all understand how important that is and storing your BTC in hardware wallet while keeping your PKs is still the best. 

If you aren't careful with your self-custody wallet, you will lose access to your Bitcoins forever. It's better to have more than one offline backup source in storing your private keys, seed phrases, etc., rather than sticking to one only. If possible, try to buy some metal bars that would let you engrave your details which are fire and water resistant.

Treat it like it's worth millions in value in which you'll do whatever it takes to secure them at all costs even in various situations like typhoon, fire in the house, etc.

It is thanks to heroes like James Howells and other poor fellows who lost their bitcoins that we understand the importance of our own responsibility to store our seed phrases. These stories thundered around the world, and I am sure that after them, anyone who knew about this and has even a small amount of bitcoins learned how to properly store and not be careless about passwords and everything else that can be valuable.
Trusting your assets to the exchange is tantamount to trusting any person who can die at any moment to betray, in short, unpredictable in their actions. Understanding who and how much will be to blame for the loss is much easier when you yourself are responsible than shifting your blame to others.

But you like to pretend like you have half a brain, and try anyway.  



More like Dummy Alert, each bank in the US is required by law to have FDIC insurance,

meaning even if the bank goes belly up, you still received your funds up to a specified $ amount, currently $250000 per account per bank.
Credit Unions are under The National Credit Union Administration (NCUA) which also insures $250000 per account per credit union.
Only people storing over that amount per account in a single bank would lose anything.
Stock trading Companies in the US are part of Securities Investor Protection Corporation (“SIPC”),
which protects securities customers of its members up to $500000 (including $250000 for claims for cash).

Just because you live in a Banana republic , other people live in countries with laws and regulations.
If Crypto exchanges were required to insure their accounts up to $100000 , then alot of the exchange concerns would disappear for the majority,
and anyone over that amount store at other exchanges or at home.

FYI:
Once the US / Canada / Europe all ban Proof of Waste coins, you'll wish you had diversify.
When all of your wealth shoots up in 1 shot, it can also fall down twice as fast, diversity makes sure you don't starve when it does.  

Would you rather prefer someone or some organisation to be in charge of your coin or money?
I guess not, I wouldn't do that. In most scenarios, third parties are not usually of the best interest to be in control or management of that which isn't there's. Most especially, when they've got nothing to get from it.

That's what I like having your coins stored away on an exchange when you've got a wallet that puts you at liberty to decide safety and the fate of your coin at any point.

Exchanges might have there advantages at giving the leverage to trade them but, it comes at greater risks. What might be best is that, you go about it with the what you can afford to lose and at other times, just deposit and withdraw.
Your better in charge than any third party.

To me it sounds like the opposite. The exchange and its owner legally owe money to users, and there's some chance that the users will get at least some portion of their money if the government will manage to seize anything. But with self-custody if you lost your keys, it's not likely you'll see them again.

But typically in both cases the worst case is losing your coins forever, and it seems to also be the most common outcome when something go wrong.

Self-custody is better than custodians because when it's done right, the chances of losing your coins are significantly lower. And it's not rocket science, people need to just use their brains and create multiple backups, instead of writing down the seed, putting it in a cabinet, then accidentally throwing it away with garbage during cleaning.

Yes this is what I was going to say as I was reading down the thread. At this stage in Bitcoin's
life and it's FIAT value there is no chance you would be discarding any hardware. So self
custody is always #1.

There are those out there who would be reluctant to spend $100 on a hardware Waller but
willing to risk their coins by handing over control to exchanges.

These people should look into using tamper-evident bags. Makes it obvious asap if someone tried to touch them, and they will know exactly if their security has been breached or not.

Thats why ideally, you should have a backup in more than one location when possible. Also you can use materials that gives you a higher chance of surviving a fire.

There are hardware wallets that will reset to factory settings after a few failed pin code attempts. Also you can set them so, that the passphrase(if used) needs to be typed in manually after each unlock. Which makes theft pointless. By that time you will have enough time to move your coins to a new wallet that is safe.

Multiple locations.

Youre not storing anything on that exchange. Youre giving ownership over the coins to that exchange and they owe you the same amount back. This doesnt mean your coins are just sitting there and being kept safe for you. Theyre not your coins anymore. They can now do what they want with it. Theyre not letting them sit still. They give out more fake paper coins than they actually have in their reserves. Manipulating the prices and the supply on that exchange. Theres no way to verify the balance sheet of a company for any of us and not even proof of reserves will change that. And when they go bankrupt trough this scam, youll have to fight to get anything back. Leaving you with nothing.

Coins on an exchange are not yours, your transactions can be censored, your wealth can be confiscated, you wont have any privacy and everything is archived, the supply gets inflated, the price manipulated and the reserves looted and forged. This is the complete opposite of what Bitcoin was invented for. Its was made to prevent these things.

And the only way to prevent this is trough self-custody. There is no way around it. Theres not a single situation where exchange custody benefits you more and is safer than self-custody, when you take the other aspects into account. It is not hard or complicated to keep backups of 12-24 words safe. Write down potential threats and find a security model that works. Theres no reason or justification to voluntarily give custodians this kind of power. It is literally against your own interest. Self-custody is the only way to protect your own interest/ rights and helps your investment succeed.

You dont try to drive a car trough the ocean and then wonder why you get rekt and it doesnt work anymore. And in the same way it makes zero sense to try to use Bitcoin in an custodial way. Learn how to self-custody safely(easy) and you will be fine and Bitcoin will be fine.

Bitcoin can be used as a unit of account without a problem. Also markets always exist, no matter if scam exchanges go bankrupt or not. P2P and adoption are more important, but then again youre a shitcoiner that doesnt understand money. Its pointless discussing with you.

Spoiler alert, money in a bank isnt safe regardless of current regulation. Diversifying into different kinds of the same trash is also not really safe.

Each with its disadvantages but one definitely outweighs the other, when you have your bitcoin on an exchange, is just like putting all your eggs on a plain surface knowing fully that it is not safe to keep them there but if you provide a crate for them, they will stand firmly, even if something that tends to shake them, they wouldn't break nor move. That is one of the ways centralized custody differs from self-custody.

I don't think there is much risk associated with self-custody if you do your things with due diligence, the case of that guy not finding his hard drive was a bit of negligence, he didn't do proper backup nor inscribe his passphrase on a metal piece or safe place, it would have been easier to gain access to his bitcoin, self custody is the future of bitcoin and I love how everyone has woke up to the reality of not your keys, not your coins.

Actually it depends,

1. Are you technically literate.
    * So you know how to sync data, & secure your device from hackers. *
  
2. Do you backup your data offsite.
    * Do you backup your data using encryption.*
    * Do you take that data offsite. *

3. How many coins , are you trading.
   * Multiple blockchains require multiple sync times.*

4. Taking time to send coins to the exchanges, could cost the traders extra time and money.
    * Fast trading times can sometimes make the difference, between earning a profit or a loss.

5. Faster conversion to fiat if needed.


Yes, if an exchange crashes you were better off storing at home,
but if your House caught fire , or your device stolen, or earthquake or floods,
then you would have been better off storing on an exchange.

So while there are advantages & disadvantages to both,
the user needs to decide which concerns are more important to them and their own desires.

Their is no one decision that fits every user.
So while self custody might be suitable for some, thinking everyone feels the same is naive.

 

FYI:
One little thing , if every single person pulled all coins off the exchanges,
all exchanges immediately become insolvent,  
then the Trading Volume collapses and all of your coin value collapses without constant fiat exchange.
No fiat exchange, and your crypto coins become pet rocks, that no one wants.  
*No Crypto Markets , No Fiat Value.*
Be careful what you wish for.

FYI2:
A more prudent thought for many , might be to use multiple exchanges or keep crypto as a % of one wealth, not as the entirely of one's wealth.
IE: Don't keep all of your eggs in one basket.

* Until Crypto exchanges are forced to enact their own version of FDIC, which insures a value is available for withdrawal even after an exchange collapse,
then you are in the wild west of crypto, just the same as banking was before the FDIC was enacted for banks.*
FDIC: The FDIC is a United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks

Risk is our own responsibility because we have to be able to control it even if we keep it in an exchange or non-custodial wallet if the risk of own custody is not paid attention to then we will likely lose it too but the hardest thing in my opinion is to keep it on the exchange even if we keep it assets there our control of the coin will have problems and this is happening on the FTX exchange, which we have a large value but in reality it is zero because of the effects of the exchange controlling it.

So don't be careless like James Howells even though he keeps looking for lost bitcoins in the hard drive it won't be found no matter how small the loss, try if we store 12 or 24 word seeds safely in a better place we won't suffer with it.

Avoid exchange storage, and we should be able to keep private keys safe.

Yeah self custody could come with is own risk like Demantia and probably the death of the person could lead to the loss of it entirely. But this are natural risk associated with life even outside cryptocurrency.


But not withstanding nothing beats you been held responsible for your own failure except maybe lazy people that love to put their responsibilities on others.

My advice to people that have large funds on wallets should just drop hint of its location(where the seed phrase or hardware wallets is hidden) either on their will or Safe in the banks. This although comes with its own risk but could minimise it

Currently it is not safe to store anything in an exchange wallet. We got the proof. Exchange accounts like FTX have been hacked and a lot of money has been stolen from them. We can use hardware wallet, trust wallet, Trezor wallet, Ledger wallet etc as our secure wallet. They are fairly safe. And if you keep the key here very safe then your wallet will be more security complete and safe.

its not very hard to hide the 12 words. i can pick up the most uninteresting 2002 salesmanship book in my shelf and just write the few words in the 10th page and another on the page 20.  the worrisome is how can someone in my family knows its there.

i couldn't really blame some people find it easy to trust exchanges. but sure self custody is much safer, its what many have learned in the forum as a culture in crypto.

All of us need to weigh just how much liquidity we need for our coins.

This will vary quite a bit.

I have multiple wallets and multiple exchanges for multiple reasons.

I am subject to USA law.

This means paying taxes and reporting things to the government.

But it also means FDIC insurance for cash $usd in banks and in coinbase.

SO if I want liquidity and use coinbase I can keep up to $250,000.00 USA cash and it is insured by the Feds.

but if I have 1 btc and coinbase fails tough luck.

Yes I can put a coin in coinbase and convert to usd and the wealth is now safe.

But if I use USD to buy on coinbase I now have a coin that is not safe. So I can pull it off the exchange to a wallet.

Does all of the above sound convoluted and confusing?  Fuck yeah and it is convoluted and confusing.

One simple example I mine say Doge on a pool.  When it is 1000 doge I move it to coinbase. it was not safe on the pool. it was not safe in coinbase .  I make it safe and change it to cash say 85 usd. I decide I want to do a monthly dca to btc for 200 a month. So I buy 200 btc a month from those sales. I then secure the btc in my own wallet

I do this 1 time a week. I create 52 entries when I move the coins to coinbase. I create 52 entries when i turn them to cash. I create 12 entries buying the monthly btc and I create 12 entries when I move the btc to a safe wallet.

AT the end of the year. 85 x 52 = 4420 gross income from doge mining which ends up as 2400 in btc and 2020 in cash  will mean 52+52+12+12 = 128 entries on tax forms.

or just mine and keep all the coins on the pool till late december. then move to coinbase buy some btc and hold the cash which is 4 entries on the tax form.

Really long and complicated example but it is why people let shit sit on an exchange they do not want to do all of the above to keep a mere 4 or 5 grand safe.

you are not going solo
things like key seeds means you literally just have to make a few copies of 12 words

The real truth is that there are very few methods that are 100% safe. Both methods have their pros and cons. It all comes down to risk. The risk of self-custody is that you are going solo. You are the only person capable of protecting your money and coins from being lost or stolen, and that could be a daunting task. But at the same time, if you manage them correctly, it can also be quite secure. In the end, it will be up to you to weigh the pros and cons of each method and see which one looks like a better fit for your needs. But whatever you do, don't trust any third-party service too much. So, to reiterate: keep your coins out of online services as much as possible.

The risk of exchange is higher than that of private custody because with an exchange you are not in control of your coins and not only the exchange but even hackers also have access to your coins on an exchange. But if you have your assets stored on a cold wallet without it being connected until you need it only you will have access to your assets, as long as you have the private security keys to the wallet you can have it stored on multiple forms.

Such could happen as a result of privacy negligence; downloading untrusted programs, visiting unsecured sites and apps etc. And the outcome won't be extremely bad like a collapsed exchange. It's a number game and the lesser the affected people the better. Exchanges have a wide variety of loopholes from third parties like staffs who have access to secret files that can lead hackers to the exchange. Ideally, it's just one address that store the whole money deposited by millions of people. Unlike the self custody that the virus will have to work on one victim per time. Unless, it permeates a viral software used by multiple people.

Nobody said that self custody was 100% risk free, but sometimes it is better to put your fate of safety in your hands than depend on someone that you will be unable to know exactly when they have been compromised. James Howells is one of the very many cases of carelessness, but it is also a reminder that it is also a possibility and something that can happen to anyone. As we are all considering self custody this sort of reminders that come through stories that loss is still possible is very important to make us aware that there are still risks involved.