Read the success stories of crypto entrepreneurs.

Discussions are fun when we are part of a community.
Login Free Registration

Get 10 AltcoinN Points just by registering on this forums.

Poll: why use bitcoin storage...?
You do not have permission to vote in this poll.
share your answers
1 100.00%
in the comments section
0 0%
Total 1 vote(s) 100%
* You voted for this item. [Show Results]

Custodial or Noncustodial Storage?

At that point, the investor will face the choice of using custodial services or creating his own personalized solution. Many bitcoiners will be tempted to choose custodians to hold their coins on their behalf. Being used to bank accounts and centralized platforms to hold their cash and other investments, newcomers to bitcoin will naturally lean toward custodial solutions. 

However, this approach doesn’t respect one of the most famous adages in the Bitcoin world: “Be your own bank.” This expression, no matter how cool and inspirational it sounds, is somewhat difficult to follow. Turns out that being your own bank puts an enormous responsibility in the hands of the owner with regards to the security of their funds and their own personal security.

Some properties of Bitcoin, such as censorship-resistance, privacy and sovereignty, are completely put aside when one chooses to employ custodial solutions. By giving the rights to your keys to a third party, you’re giving over full control of your coins. This is highly undesirable in a context of adversity. 

It also creates an enormous principal-agent problem. The custodian (the agent) overseeing the client’s funds, may be tempted to use the bitcoins in ways that wouldn’t benefit the client (the principal). Since the funds are held in one place, it also creates a big and possibly easier target for malicious actors to attack.

Some companies are proposing in-between solutions, where the company is partly responsible for the user’s security and funds. This can be done with different multisignature schemes, where some of the keys necessary to access the bitcoins will be held by the company and others by the client. This type of security setup leaves more control to the user but still compromises the user privacy and sovereignty.

So Why Use Bitcoin Cold Storage?

Owesome insights

Owesome insights

Possibly Related Threads…
Thread Author Replies Views Last Post
  Best particles of bitcoin cold storage njiahderick 0 817 11-23-2019, 02:27 AM
Last Post: njiahderick
  What Is Cold Storage njiahderick 0 853 11-23-2019, 02:15 AM
Last Post: njiahderick
  holding bitcoin cold storage is worth the extra effort njiahderick 0 693 11-23-2019, 02:10 AM
Last Post: njiahderick