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So you’re saying that to use crypto properly, I have to secure a physical object that grants irrevocable ownership of my wealth? That sounds bad. Is there a wa

So you’re saying that to use crypto properly, I have to secure a physical object that grants irrevocable ownership of my wealth? That sounds bad. Is there a way I can get my crypto held my an institution with SIPC insurance, the way I hold stocks at a brokerage, so I can outsource this issue to someone else who is backed by a government guarantee? (I obviously don’t expect them to guarantee the value of the crypto, just that the broker doesn’t lose it).

s5300 4y ago
No, the only thing you need is an infallible memory.
- panarky 4y ago
  Maybe Luke used LassPass.
  - SyzygistSix 4y ago
    This was my first paranoid thought.
gruez 4y ago
> So you’re saying that to use crypto properly, I have to secure a physical object that grants irrevocable ownership of my wealth? That sounds bad. Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it. Cryptocurrencies improve on this slightly by allowing you set up multisignature schemes, so you can get redundancy in the event of a loss. >Is there a way I can get my crypto held my an institution with SIPC insurance, the way I hold stocks at a brokerage, so I can outsource this issue to someone else who is backed by a government guarantee? If you want government guarantees, crypto might not be right for you.
- fshbbdssbbgdd 4y ago
  > Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it. You can’t steal my house by obtaining the deed. You can’t steal my stock by obtaining the stock certificates. That’s not how it works. The vast majority of wealth in developed countries doesn’t rely on physical security to maintain ownership. We’ve collectively outsourced that function to the government and other institutions, so we don’t have to individually hire bodyguards to prevent criminals from taking possession of our homes and stealing our assets. Most people only hold a relatively small amount of wealth in forms that can by physically stolen (eg. petty cash, electronics). This means that you only need to defend yourself against a $1000 crime (stealing your TV), which is a lot easier than defending against a $1M crime (stealing your house or 401k). If crypto requires holding my wealth in a hardware wallet that can be stolen, that means I’m only going to be willing to invest the amount of wealth I would spend on a TV, not the kind of wealth I am going to allocate to stocks or bonds. Granted, crypto has utility for people who can’t use the government-backed institutions, like criminals. And in some countries where the government will steal your money, it has broader appeal. I won’t argue with that.
  - bbbbb5 4y ago
    You can definitely steal houses though. https://www.bbc.com/news/uk-england-essex-59069662 https://www.bbc.com/news/uk-england-essex-59069662 https://archives.fbi.gov/archives/news/stories/2008/march/housestealing_032508 https://archives.fbi.gov/archives/news/stories/2008/march/ho... https://www.washingtonpost.com/local/public-safety/she-had-no-idea-her-home-could-be-stolen-then-she-read-her-junk-mail/2019/11/27/13569d0c-065a-11ea-ac12-3325d49eacaa_story.html https://www.washingtonpost.com/local/public-safety/she-had-n... You can also steal stocks. https://www.bleepingcomputer.com/news/security/us-charges-hacker-for-breaching-brokerage-accounts-securities-fraud/ https://www.bleepingcomputer.com/news/security/us-charges-ha... > The vast majority of wealth in developed countries doesn’t rely on physical security to maintain ownership Indeed, it relies on far sillier things like hoping that nobody spends $100 on a fake ID and pretends to be you.
    - 4y ago
iancarroll 4y ago
There are brokers with SIPC insurance who will hold crypto, but crypto is not covered by SIPC (AFAIK), so it’s not very useful.
causality0 4y ago
Maybe don't keep "all of your wealth" and "daily spending money" in the same bucket.
- fshbbdssbbgdd 4y ago
  To clarify, the idea is I need to keep my life savings in a fire-proof, theft-proof safe?
  - gnicholas 4y ago
    If you're keeping all your savings in crypto, I don't think a fire is your biggest risk. /s In all seriousness, I completely agree. I'm not in crypto and this is part of the reason. There would be a huge influx of people like me if there weren't such a risk of theft (by individuals or platforms).
  - reedjosh 4y ago
    Multisig your life savings and backup the seed phrases on stainless steal washers. You can have as many signatures as you like and require whatever quorum you like too. Maybe put some in Gold, Silver and Real Estate too. Obviously you should never put everything in one basket. Stock are to me a different class of investment from life savings type of stuff. > To clarify, the idea is I need to keep my life savings in a fire-proof, theft-proof safe? But yeah, you should definitely have a _portion_ of your life savings in a well hidden quality safe. That said, you probably only need to put one key in a safe. Hide the other and give the third to a friend or custodial service like unchained capital. For day to day use, transfer what you need to and from cold storage to hot wallets. The more wealth you have the more security you need, and you should count governmental and institutional actors in you decisions or you will ignore threats from counterparty risk, inflation, confiscation, and taxation.
reedjosh 4y ago
You can also use multisig holdings to ease this issue. > So you’re saying that to use crypto properly, I have to secure a physical object that grants irrevocable ownership of my wealth? That sounds bad. Welcome to reality. You'll laugh now, but if you want to hold something of lasting value, that's kinda how it works. Gold is physical and requires security. Dollars lose their value to dilution. Other securities incur risks too. Multisig BTC looks downright safe in comparison
- fshbbdssbbgdd 4y ago
  This thread is actually about security and custody, not valuation. Those are different issues, but we can talk about valuation. My crypto has lost more value than any of my other investments. Since crypto (unlike stocks and bonds) doesn’t entitle me to any cash flows, and (unlike dollars) doesn’t allow me to repay any debts, why shouldn’t the value keep dropping?
  - reedjosh 4y ago
    Measured using fake dollars. Aka dollars made in other sham Crypto coins and loans. And now the same is happening to the regular markets since higher rates are sucking dollars from the market. My Amazon RSUs are 1/2 of my grant date and falling fast. Shtcoins gonna sht, but BTC hasn't failed in any way, and multisig makes it easier than any other commodity to secure.
    - fshbbdssbbgdd 4y ago
      Can you go into more detail about how multisig helps? I assume one of the signatures is my hardware wallet. Who holds the other signature? Do they have SIPC insurance? What happens if my wallet is lost or destroyed?
      - Thorrez 4y ago
        Let's say I have a 3-of-5 multisig. That means there are 5 hardware wallets. I put a hardware wallet in my safe in my house, one in a bank deposit box, and 3 with 3 friends or relatives. Now a thief needs to steal 3 of these to steal the coins. That's going to be hard for a thief to do. If a fire or natural disaster happens, it needs to destroy 3 wallets before I lose my money.
rewtraw 4y ago
https://en.wikipedia.org/wiki/Bearer_instrument https://en.wikipedia.org/wiki/Bearer_instrument
- fshbbdssbbgdd 4y ago
  Most people don’t use these anymore. Like crypto, the main utility is for crime.
  - dustymcp 4y ago
    I still have yet to use my crypto on crime, i have however bought numerous things with various coins..
    - knorker 4y ago
      Just for fun, or why? I try to use my credit card as much as possible for remote purchases, because if the extra legal protections.
      - TimJRobinson 4y ago
        Most of crypto is used in Decentralized Finance, basically an open source version of the activities done on Wall Street. Very little is used for everyday goods (and you're right, why bother when credit cards give much better rewards) Have you bought options with your credit card? Borrowed money against collateral? Purchased and collected revenue rights to music? Traded oil futures? These are the kinds of things I'm doing frequently on Ethereum.
        knorker 4y ago
        All of those things have better protection in traditional finance. Sure, they don't have credit card consumer protection, but they do have other protections. Unless you're using blockchain financial instruments in order to do more blockchain stuff (the circular use case), the other options are better. Trading oil futures doesn't need cryptocurrencies. And if you use it anyway then you expose yourself to additional risk not in traditional finance. E.g. the difference between FTX shenanigans hurting investors (who are now being victim blamed for "not your keys, not your coin") and anyone financially reliant on Tether shenanigans (which includes all holders of BTC) is that Tether seems to be getting away with it, by so far not being subject to a liquidity check / bank run.
AlexCoventry 4y ago
You can use a pin to secure the device, FWIW. And back the encrypted seed phrase up. It's really not that hard.
ec59cb1659 4y ago
It's not about money, it's about power. If you hold a physical item, you have the maximum power over it as possible. If you want to entrust someone else with it, go ahead, but at the end of the day your access to the item will be subject to their whims and those of the greater political establishment / woke clergy / corrupt and powerful.
- midhhhthrow 4y ago
  Trusting someone else: Well we do this every day with money in the bank, with all the risks that come with it
  - reedjosh 4y ago
    And the guarantee of dilution. The banks are _securely_ creating debt based digital dollars they gain the interest on. Since they're already practically minting their own dollars they don't need to steal yours. And if for some reason the FDIC fails, then they effectively will have stolen your dollars.
- ebiester 4y ago
  And if you entrust it to a safe deposit box, then... ? And if you trust it to a safe in your bedroom, and your house burns down, then... ? Which is more likely?
  - seanhunter 4y ago
    A hardware wallet is a physical device that stores some private keys in a tamper-proof secure element. Those private keys can be regenerated from a recovery phrase[1] which acts as a seed to regenerate the keys in a deterministic way. The hardware device is typically itself secured by means of a pin. Without the pin, the device can’t be unlocked so can’t be used, too many incorrect pin attempts will brick the device. So the answers to your questions are: 1) If you entrust it to a safe deposit box then if someone steals it, it is worthless without the pin. 2) If the safe is itself destroyed and with it the device (this is also the case if you have it in a safe deposit box and the depository is burned down or something) then the private keys (and transitively the funds) can still be recovered using the recovery phrase. So if you have securely stored your recovery phrase and are able to retrieve it even this kind of problem won’t cause the accounts to be lost. So what people tend to recommend is choosing good secure storage for your pin, keeping reasonable physical care of the device, taking the recovery phrase and splitting it into parts and storing those parts separately. If one of the parts is destroyed then you will need to urgently replace the hardware wallet, move the funds and securely store the new recovery phrase because if not you don’t have a fallback if the hardware wallet is destroyed, but otherwise you are good. [1] https://medium.com/coinmonks/mnemonic-generation-bip39-simply-explained-e9ac18db9477 https://medium.com/coinmonks/mnemonic-generation-bip39-simpl...
Galanwe 4y ago
> I have to secure a physical object that grants irrevocable ownership of my wealth That's one way, but not the only one. My preferred mean of storage is through a _vault_ smart contract, such as the "Gnosis safe". It's basically a smart contract that you deploy, and send your assets to. You can then add some of your trusted friends as co-validators and require 2/3 validations for a withdrawal. You can also set a no-validation required threshold at $X/m for the day to day. > I obviously don’t expect them to guarantee the value of the crypto, just that the broker doesn’t lose it For the record, brokers rarely (if ever) store or guarantee client money. Usually you have a custodian to hold your money (who will guarantee deposits, up to some limits), and your broker will unlock a credit line for you based on your collateral posted at the custodian. There are custodians in crypto as well, "Paxos" and "Coinbase Custody" being the most well known. They will store your money on cold wallets with very strict guarantees (shamir split of the wallet keys among anonymous holders, strong entropy guarantees on key generation, proof of reserve, etc) and unlock it upon verifying your identity with real humans. It's costly though.
matrix_overload 4y ago
>I have to secure a physical object that grants irrevocable ownership of my wealth? Not really. Can be a file copied across dozens of public places that is well-encrypted (say AES256+Blowfish) using a key securely derived (say PBKDF2 with many iterations) from a random password you don't use anywhere else. That said, if you do that, have a system that will drill you for that password weekly, or you will just forget it. And make sure this system can't be compromised to record your password as you type it.
- mrtksn 4y ago
  This doesn't help at all, it's still a single point of failure without recourse. You might be subjected to rubber hose cryptography or any of the systems you use might be hacked and your password extracted.
- puffybuf 4y ago
  This is what his colleague recommended. A cold wallet that is only worked with offline. It is on an encrypted file system and can be backed up. (passphrase protected) I remember that Silk Road associated guy that was caught recently with 50000 BTC. I was wondering why he didn’t just encrypt his wallet? There is no way crypto coin will work for society at large with such requirements.
jerryzh 4y ago
Since human beings are in physical forms (at least still in 21 century), physical form has been the most secure since beginning of human civilization. Every top secret NSA holds also relies on physical objects I think.

s5300 4y ago

No, the only thing you need is an infallible memory.

panarky 4y ago
Maybe Luke used LassPass.
- SyzygistSix 4y ago
  This was my first paranoid thought.

gruez 4y ago

> So you’re saying that to use crypto properly, I have to secure a physical object that grants irrevocable ownership of my wealth? That sounds bad. Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it. Cryptocurrencies improve on this slightly by allowing you set up multisignature schemes, so you can get redundancy in the event of a loss. >Is there a way I can get my crypto held my an institution with SIPC insurance, the way I hold stocks at a brokerage, so I can outsource this issue to someone else who is backed by a government guarantee? If you want government guarantees, crypto might not be right for you.

fshbbdssbbgdd 4y ago
> Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it. You can’t steal my house by obtaining the deed. You can’t steal my stock by obtaining the stock certificates. That’s not how it works. The vast majority of wealth in developed countries doesn’t rely on physical security to maintain ownership. We’ve collectively outsourced that function to the government and other institutions, so we don’t have to individually hire bodyguards to prevent criminals from taking possession of our homes and stealing our assets. Most people only hold a relatively small amount of wealth in forms that can by physically stolen (eg. petty cash, electronics). This means that you only need to defend yourself against a $1000 crime (stealing your TV), which is a lot easier than defending against a $1M crime (stealing your house or 401k). If crypto requires holding my wealth in a hardware wallet that can be stolen, that means I’m only going to be willing to invest the amount of wealth I would spend on a TV, not the kind of wealth I am going to allocate to stocks or bonds. Granted, crypto has utility for people who can’t use the government-backed institutions, like criminals. And in some countries where the government will steal your money, it has broader appeal. I won’t argue with that.
- bbbbb5 4y ago
  You can definitely steal houses though. https://www.bbc.com/news/uk-england-essex-59069662 https://www.bbc.com/news/uk-england-essex-59069662 https://archives.fbi.gov/archives/news/stories/2008/march/housestealing_032508 https://archives.fbi.gov/archives/news/stories/2008/march/ho... https://www.washingtonpost.com/local/public-safety/she-had-no-idea-her-home-could-be-stolen-then-she-read-her-junk-mail/2019/11/27/13569d0c-065a-11ea-ac12-3325d49eacaa_story.html https://www.washingtonpost.com/local/public-safety/she-had-n... You can also steal stocks. https://www.bleepingcomputer.com/news/security/us-charges-hacker-for-breaching-brokerage-accounts-securities-fraud/ https://www.bleepingcomputer.com/news/security/us-charges-ha... > The vast majority of wealth in developed countries doesn’t rely on physical security to maintain ownership Indeed, it relies on far sillier things like hoping that nobody spends $100 on a fake ID and pretends to be you.
  - 4y ago

iancarroll 4y ago

There are brokers with SIPC insurance who will hold crypto, but crypto is not covered by SIPC (AFAIK), so it’s not very useful.

causality0 4y ago

Maybe don't keep "all of your wealth" and "daily spending money" in the same bucket.

fshbbdssbbgdd 4y ago
To clarify, the idea is I need to keep my life savings in a fire-proof, theft-proof safe?
- gnicholas 4y ago
  If you're keeping all your savings in crypto, I don't think a fire is your biggest risk. /s In all seriousness, I completely agree. I'm not in crypto and this is part of the reason. There would be a huge influx of people like me if there weren't such a risk of theft (by individuals or platforms).
- reedjosh 4y ago
  Multisig your life savings and backup the seed phrases on stainless steal washers. You can have as many signatures as you like and require whatever quorum you like too. Maybe put some in Gold, Silver and Real Estate too. Obviously you should never put everything in one basket. Stock are to me a different class of investment from life savings type of stuff. > To clarify, the idea is I need to keep my life savings in a fire-proof, theft-proof safe? But yeah, you should definitely have a _portion_ of your life savings in a well hidden quality safe. That said, you probably only need to put one key in a safe. Hide the other and give the third to a friend or custodial service like unchained capital. For day to day use, transfer what you need to and from cold storage to hot wallets. The more wealth you have the more security you need, and you should count governmental and institutional actors in you decisions or you will ignore threats from counterparty risk, inflation, confiscation, and taxation.

reedjosh 4y ago

You can also use multisig holdings to ease this issue. > So you’re saying that to use crypto properly, I have to secure a physical object that grants irrevocable ownership of my wealth? That sounds bad. Welcome to reality. You'll laugh now, but if you want to hold something of lasting value, that's kinda how it works. Gold is physical and requires security. Dollars lose their value to dilution. Other securities incur risks too. Multisig BTC looks downright safe in comparison

fshbbdssbbgdd 4y ago
This thread is actually about security and custody, not valuation. Those are different issues, but we can talk about valuation. My crypto has lost more value than any of my other investments. Since crypto (unlike stocks and bonds) doesn’t entitle me to any cash flows, and (unlike dollars) doesn’t allow me to repay any debts, why shouldn’t the value keep dropping?
- reedjosh 4y ago
  Measured using fake dollars. Aka dollars made in other sham Crypto coins and loans. And now the same is happening to the regular markets since higher rates are sucking dollars from the market. My Amazon RSUs are 1/2 of my grant date and falling fast. Shtcoins gonna sht, but BTC hasn't failed in any way, and multisig makes it easier than any other commodity to secure.
  - fshbbdssbbgdd 4y ago
    Can you go into more detail about how multisig helps? I assume one of the signatures is my hardware wallet. Who holds the other signature? Do they have SIPC insurance? What happens if my wallet is lost or destroyed?
    - Thorrez 4y ago
      Let's say I have a 3-of-5 multisig. That means there are 5 hardware wallets. I put a hardware wallet in my safe in my house, one in a bank deposit box, and 3 with 3 friends or relatives. Now a thief needs to steal 3 of these to steal the coins. That's going to be hard for a thief to do. If a fire or natural disaster happens, it needs to destroy 3 wallets before I lose my money.

rewtraw 4y ago

https://en.wikipedia.org/wiki/Bearer_instrument https://en.wikipedia.org/wiki/Bearer_instrument

fshbbdssbbgdd 4y ago
Most people don’t use these anymore. Like crypto, the main utility is for crime.
- dustymcp 4y ago
  I still have yet to use my crypto on crime, i have however bought numerous things with various coins..
  - knorker 4y ago
    Just for fun, or why? I try to use my credit card as much as possible for remote purchases, because if the extra legal protections.
    - TimJRobinson 4y ago
      Most of crypto is used in Decentralized Finance, basically an open source version of the activities done on Wall Street. Very little is used for everyday goods (and you're right, why bother when credit cards give much better rewards) Have you bought options with your credit card? Borrowed money against collateral? Purchased and collected revenue rights to music? Traded oil futures? These are the kinds of things I'm doing frequently on Ethereum.
      - knorker 4y ago
        All of those things have better protection in traditional finance. Sure, they don't have credit card consumer protection, but they do have other protections. Unless you're using blockchain financial instruments in order to do more blockchain stuff (the circular use case), the other options are better. Trading oil futures doesn't need cryptocurrencies. And if you use it anyway then you expose yourself to additional risk not in traditional finance. E.g. the difference between FTX shenanigans hurting investors (who are now being victim blamed for "not your keys, not your coin") and anyone financially reliant on Tether shenanigans (which includes all holders of BTC) is that Tether seems to be getting away with it, by so far not being subject to a liquidity check / bank run.

AlexCoventry 4y ago

You can use a pin to secure the device, FWIW. And back the encrypted seed phrase up. It's really not that hard.

ec59cb1659 4y ago

It's not about money, it's about power. If you hold a physical item, you have the maximum power over it as possible. If you want to entrust someone else with it, go ahead, but at the end of the day your access to the item will be subject to their whims and those of the greater political establishment / woke clergy / corrupt and powerful.

midhhhthrow 4y ago
Trusting someone else: Well we do this every day with money in the bank, with all the risks that come with it
- reedjosh 4y ago
  And the guarantee of dilution. The banks are _securely_ creating debt based digital dollars they gain the interest on. Since they're already practically minting their own dollars they don't need to steal yours. And if for some reason the FDIC fails, then they effectively will have stolen your dollars.
ebiester 4y ago
And if you entrust it to a safe deposit box, then... ? And if you trust it to a safe in your bedroom, and your house burns down, then... ? Which is more likely?
- seanhunter 4y ago
  A hardware wallet is a physical device that stores some private keys in a tamper-proof secure element. Those private keys can be regenerated from a recovery phrase[1] which acts as a seed to regenerate the keys in a deterministic way. The hardware device is typically itself secured by means of a pin. Without the pin, the device can’t be unlocked so can’t be used, too many incorrect pin attempts will brick the device. So the answers to your questions are: 1) If you entrust it to a safe deposit box then if someone steals it, it is worthless without the pin. 2) If the safe is itself destroyed and with it the device (this is also the case if you have it in a safe deposit box and the depository is burned down or something) then the private keys (and transitively the funds) can still be recovered using the recovery phrase. So if you have securely stored your recovery phrase and are able to retrieve it even this kind of problem won’t cause the accounts to be lost. So what people tend to recommend is choosing good secure storage for your pin, keeping reasonable physical care of the device, taking the recovery phrase and splitting it into parts and storing those parts separately. If one of the parts is destroyed then you will need to urgently replace the hardware wallet, move the funds and securely store the new recovery phrase because if not you don’t have a fallback if the hardware wallet is destroyed, but otherwise you are good. [1] https://medium.com/coinmonks/mnemonic-generation-bip39-simply-explained-e9ac18db9477 https://medium.com/coinmonks/mnemonic-generation-bip39-simpl...

Galanwe 4y ago

> I have to secure a physical object that grants irrevocable ownership of my wealth That's one way, but not the only one. My preferred mean of storage is through a _vault_ smart contract, such as the "Gnosis safe". It's basically a smart contract that you deploy, and send your assets to. You can then add some of your trusted friends as co-validators and require 2/3 validations for a withdrawal. You can also set a no-validation required threshold at $X/m for the day to day. > I obviously don’t expect them to guarantee the value of the crypto, just that the broker doesn’t lose it For the record, brokers rarely (if ever) store or guarantee client money. Usually you have a custodian to hold your money (who will guarantee deposits, up to some limits), and your broker will unlock a credit line for you based on your collateral posted at the custodian. There are custodians in crypto as well, "Paxos" and "Coinbase Custody" being the most well known. They will store your money on cold wallets with very strict guarantees (shamir split of the wallet keys among anonymous holders, strong entropy guarantees on key generation, proof of reserve, etc) and unlock it upon verifying your identity with real humans. It's costly though.

matrix_overload 4y ago

>I have to secure a physical object that grants irrevocable ownership of my wealth? Not really. Can be a file copied across dozens of public places that is well-encrypted (say AES256+Blowfish) using a key securely derived (say PBKDF2 with many iterations) from a random password you don't use anywhere else. That said, if you do that, have a system that will drill you for that password weekly, or you will just forget it. And make sure this system can't be compromised to record your password as you type it.

mrtksn 4y ago
This doesn't help at all, it's still a single point of failure without recourse. You might be subjected to rubber hose cryptography or any of the systems you use might be hacked and your password extracted.
puffybuf 4y ago
This is what his colleague recommended. A cold wallet that is only worked with offline. It is on an encrypted file system and can be backed up. (passphrase protected) I remember that Silk Road associated guy that was caught recently with 50000 BTC. I was wondering why he didn’t just encrypt his wallet? There is no way crypto coin will work for society at large with such requirements.

jerryzh 4y ago

Since human beings are in physical forms (at least still in 21 century), physical form has been the most secure since beginning of human civilization. Every top secret NSA holds also relies on physical objects I think.