How The Rich Store Their Bitcoin

Bitcoin investors have seen wealth grow by an order of magnitude over the last decade, but soaring prices alone is not a perfect story. Security plays an important role in protecting crypto assets, and best practices in this area have evolved significantly over the years.

As a security professional, I have helped many wealthy people protect Bitcoin and preserve wealth for future generations. For those who have held Bitcoin for years and are still using the setup, I think it would be more appropriate to allocate hundreds or thousands of dollars instead of allocating millions of dollars in value. Tips are very general. When most of your net worth is held in Bitcoin, failure can be catastrophic and you need to think more about how to store it.

Don’t leave bitcoins on the exchange

Bitcoin is a bearer asset that is very similar to precious metals and collectibles. Anyone with the private key on a Bitcoin address can use it from that address at any time.

Most people get Bitcoin on an exchange, so it’s very convenient to leave it as is, however, if you leave Bitcoin on an exchange, the exchange holds the key and exposes your assets to counterparty risk and various external threats. Exchanges can be hacked, confiscated, or there may be no bitcoins on the exchange for a variety of reasons.

This threat, which may sound theoretical, is a recurring theme in Bitcoin history. In 2014, bitcoin exchange MTGOX revealed that 850,000 bitcoins were lost and possibly stolen. Stock exchanges declared bankruptcy and legal unrest continues to this day. MTGOX did most of the Bitcoin transactions at the time, and early Bitcoin investors realized the puncture wound of missing money. Since 2014, dozens of other exchanges have suffered heavy losses from both internal and external attacks.

The only point of failure like sharing is why managing your keys is important.

Don’t take unnecessary risks

There is a saying in the financial world that you only have to get rich once. As investors accumulate significant and life-changing wealth, their risk tolerance changes and their thinking tends to shift from wealth accumulation to wealth protection.

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This is especially true for investors who own large amounts of bitcoins. However, he sees the risks differently than modern investors. Transactions and loans put Bitcoin at risk by the counterparty, and the rewards are not always dangerous. For example, if you hold Bitcoin for more than a few years, the prospect of hitting a single-digit annual rate on an asset that could be worth this high per day may not be worth the 100% risk of loss.

With today’s price hikes, it’s getting harder and harder to replace lost bitcoins. If you oppress Bitcoin as a viable storefront, or even view it as a simple inflation hedge, the only way to win this prize is to keep the coins. .. Others carry additional risks. If you are not satisfied with the compound annual growth rate of ~200%, do you feel much better at ~205%?

Think about all the threats

People have a cognitive bias that can be overly prepared for certain threats by ignoring more likely threats. Because Bitcoin is digital, investors are aware of the risks of personal hacking. The risks are covered by security experts and may encourage you to leave your coins on the exchange, but these exchange wallets are known to hold money for many. This increases the risk of being targeted by attackers.

In fact, Bitcoin investors are much more likely to lose money due to consumer error. Hacking hardware wallets is tough. It’s easy to mix up hardware portfolios, but truncation, archiving, and inheritance planning can mitigate this threat.

Some wealthy owners are afraid to make a mistake and transfer their money to a warehouse service that actually stores keys in underground bunkers. But it doesn’t really protect them from all threats – they just pass the risk to someone else and manage it.

When Bitcoin owns the bulk of its net worth, you want to be protected from every threat you can imagine – and from threats you can’t! Review your safety and contingency plans from every possible angle, including your own mismanagement.

Don’t make it complicated

Once someone understands all the potential threats to Bitcoin, they often want to come up with a complex security plan, but this idea is another pitfall. Complexity is the enemy of security – a false sense of security (only through ambiguity) while at the same time increasing the vulnerability to taking the necessary steps to restore access or transfer ownership. He can give.

For example, a very paranoid investor may choose to split Bitcoin into 10 unique keys and use different hardware wallet models in many countries. This type of diversification reduces the risk of a catastrophic event in which all farms are removed, but significantly increases the risk of losing some farms at some point.

Good governance deserves healthy money

Confidence controls your property. This doesn’t mean that you can’t reach your property – completely safe properties are useless. Secure self-government is one way to take ownership of crypto assets. If you don’t have a plan, stick to it and check it from time to time. That way, when your investment goes to the moon, you can be sure that you will survive the landing.