Self custody is foundational to cryptocurrency, but is it for everyone? The term refers to the holding of cryptocurrency in a wallet controlled only by its owner via private keys, and has often historically been regarded as ideal security. To many, it represents freedom and individual sovereignty, which are founding principles of the original Bitcoin technology itself.
Despite this, widespread use of crypto may not arrive on these principles alone. They will always be important and welcome, yes. But convenience, ease of use, and ability to seamlessly transact are more likely to draw in your grandparents, or buddies from college, to participate. Of course, the significant potential for outsized returns tends to help attract newcomers too.
Thankfully, a number of solutions have emerged through the years that combine the best of both worlds, blending institutional-grade custody services with certain perks of holding your own keys.
A perhaps unforeseen (but useful) side effect of the FTX debacle has been that those left standing have been vindicated as among the most reliable. Among them is BitGo Trust Company, Inc., through which BitcoinIRA stores user assets safely, in cold storage*, as they await your retirement. We’ll discuss more on that later.
For now, let’s explore some of the perceived limits of self-custody, how to move beyond it without abandoning it, and the types of solutions that would ultimately best suit the average person.
Not Everyone Wants to Be Their Own Bank
It may not be obvious to cryptography and privacy advocates, or the particularly liberty-minded, but not all would-be crypto users want to “be their own bank,” a phrase colloquially used to describe self custody. After all, if someone attempts to rob your bank, what physical harm does it bring to you? Typically, none whatsoever. And while there are admittedly myriad tales of user funds being made inaccessible by banks, many rest easy with the idea that the U.S. government, via the FDIC, is insuring most bank accounts for up to $250K in coverage.
Conversely, if you are you are your own bank, and someone tries to rob you, what happens? Well, you may be harmed, and the perpetrator’s success isn’t as difficult to accomplish as people think. The savviest of crypto users sometimes advise memorizing one’s own private keys to transcend all manner of borders, regulations, limitations, and the like. But if your keys are memorized, they are theoretically only one proverbial wrench away from falling into the wrong hands.
Meanwhile, if you choose not to memorize them, you are again trusting something, be it a safe, piece of paper, metal plate, or online cloud storage, to remember your keys. It is up to the individual to decide whether these things are more- or less-reliable than a bank, custodian, or people, but for many, investing with a qualified custodian provides a trusted solution for safeguarding your digital assets. Here are some ways to choose between self custody and a qualified custodian:
- Decide whether you’re comfortable storing your own keys
- Research qualified custodians that offer cold storage, back up keys, and insure funds
- Choose a solution that provides accessibility and practicality
How BitcoinIRA Keeps Crypto Secure & Safe with BitGo
When it comes to saving for retirement, security concerns are arguably amplified. Cryptocurrency is new, but established retirement vehicles are not, and while centralized, they’ve proven their effectiveness. Choosing a secure crypto custodian for retirement, then, requires certain considerations.
Ironically, some of the top capabilities to look for are those that would best improve a self custody setup as well. Custodians that offer cold-storage wallets, top encryption technology, and multi-signature security (meaning two or more keyholders must sign transactions before they’re executed), are preferred, but there’s more to it than that. It’s also critical to secure your crypto with a regulated trust company, required to never comingle customer funds, always back up keys, insure* digital assets, and importantly, be verifiably able to return funds even if the custodian faced bankruptcy.
The good news is, BitcoinIRA’s exclusive partner BitGo satisfies these requirements and more, and as has accurately been pointed out, not all custody is created equal. Notably, none of the major crypto collapses of the past year, be it Terra Luna or FTX, were qualified trusts complying with stringent regulatory standards. Instead, they were unaccountable exchanges, trading platforms, or DeFi run amok (not to be confused to with “true” DeFi, considered by many to be best-served immutably). For more on security and maximizing peace of mind, check out how to secure crypto in your retirement account, or head over to BitGo’s blog and learn why they’re trusted by some of the largest brands in the world.
*Security, storage, wallet providers, and insurance may vary based on asset chosen and custody solution available.