Onramp Webinar Series E004: The Evolution of Bitcoin Custody
Sep 18, 2024
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Join Jesse Myers, Brian Cubellis, Cam Stromme, and Jackson Mikalic as they dive into the fascinating world of bitcoin custody. They discuss the evolution of custody solutions, emphasizing the Multi-Institution Custody model to mitigate single points of failure. Highlighting the challenges of self-custody and the pitfalls of centralized approaches, the experts explore the need for enhanced security measures. They also touch on innovative onboarding processes and client experiences, making complex concepts accessible for all bitcoin enthusiasts.
Bitcoin's unique attributes position it as a superior store of value, making effective custody crucial for its future appreciation.
The Multi-Institution Custody model minimizes risks associated with traditional custody methods by redistributing key management among multiple trusted entities.
Recent advancements in custody solutions emphasize accessibility and insurance to enhance user trust and promote broader adoption of Bitcoin investments.
Deep dives
The Significance of Bitcoin as an Asset
Bitcoin is recognized as a crucial asset of the 21st century, with its properties positioning it as a superior store of value compared to traditional assets. The concept of Bitcoin as 'digital gold' emphasizes its unique attributes, such as digital scarcity and the decreasing supply due to the halving events occurring every four years. The talk outlines perspectives, including projections that suggest Bitcoin could reach a value of $13 million per coin in the next two decades, reflecting a 200-fold appreciation from current levels. This underlines the importance of treating Bitcoin's custody with utmost seriousness, akin to safeguarding an asset expected to appreciate significantly over time.
Challenges and Evolution of Bitcoin Custody
The history of Bitcoin custody reveals a cautionary tale, as right custody is imperative for realizing Bitcoin's value. The evolution of custody solutions has exposed vulnerabilities; those keeping Bitcoin on exchanges risk losing their assets if those platforms face hacks or mismanagement. Similarly, those opting for self-custody carry the burden of managing their private keys, which can lead to potential loss if mishandled. The challenges necessitate a thoughtful examination of custody strategies to ensure that Bitcoin holders will benefit from their investments in the future.
Multi-Institution Custody: A Safer Option
Multi-institution custody is proposed as an innovative solution to traditional custodial problems, minimizing risks inherent in other models such as solo self-custody and traditional exchanges. This method distributes private keys among multiple trusted entities, ensuring that no single party has unilateral control over the Bitcoin, which drastically reduces the risk of loss due to collusion or individual error. The introduction of a multi-signature (multi-sig) approach allows users to maintain control while relying on professionals for key management, providing peace of mind through security. This layered approach enhances both accountability and safety, making it a compelling alternative for investors.
Addressing Physical and Technical Risks
Custody solutions must account for both physical security and technical vulnerabilities, especially as Bitcoin ownership potentially increases in value. The risk of physical attack or social engineering scams, like phishing, significantly impacts individuals holding substantial amounts of Bitcoin through self-custody options. Multi-institution custody systems reduce personal attack surfaces by redistributing the custody responsibility across multiple entities, enabling individuals to enjoy better protection. This model also promotes ease of use by abstracting the complexities often associated with managing Bitcoin, making it accessible for all types of investors.
The Future of Bitcoin Custody – Insurance and Accessibility
With the evolution of custody solutions comes an increasing focus on integrating accessibility and insurance into custody offerings, which enhances trust in the system. The discussion highlights that recent advancements will include insurance solutions for customers, covering various risks, such as deep fakes, and increasing the overall security framework of the custody service. The projection that as Bitcoin continues to gain mainstream traction, the demand for user-friendly yet secure custody solutions will rise, underlines a significant trend. By offering affordable pricing combined with robust security features, multi-institution custody aims to facilitate broader user adoption and alleviate fears surrounding Bitcoin custody.
The Onramp Webinar Series is a dedicated forum for investors to learn about the fundamental merits of the bitcoin thesis, the asset's custodial considerations, & more.
In this session, recorded on September 17th, 2024, Onramp's Jesse Myers, Brian Cubellis, Cam Stromme, and Jackson Mikalic discuss Onramp's recent report "The Evolution of Bitcoin Custody" (download here).
This webinar explores Onramp's Multi-Institution Custody model, which aims to eliminate single points of failure and enhance security. The conversation also covers the challenges of self-custody, pitfalls of centralized custody solutions, as well as the onboarding and client experience for Onramp clients. The session concludes with a Q&A segment with the audience.
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