Technology

How To Safely Self-Custody Your Bitcoin

Bitcoin gives one sovereignty, but the responsibility of safe storage is the cost of continuing to enjoy such sovereignty. The promise of permissionless money that is tamper-proof and sensor-proof is only realistic if the Bitcoin is held in self custody. There are risks to storing one’s Bitcoin on a centralized exchange, including counterparty risk, the risk that the exchange would be hacked and your Bitcoin would be stolen, and the risk of rehypothecation. To mitigate these risks, Bitcoin owners may choose to self-custody all or a portion of their Bitcoin holdings. When one owns Bitcoin, they own a public key that is similar to a mailing address. To get paid in Bitcoin, they share the public key. To spend their Bitcoin, they use a private key. The private key is any 256-bit number from 0x1 to 0xFFFF FFFF FFFF FFFF FFFF FFFF FFFF FFFE. If another person has access to your private keys, they can spend the Bitcoin in your wallet. To protect your Bitcoin, you have to make sure that no other person can access your private keys, except in the case of inheritance.

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