The Hidden Psychological Burden of Self-Custody.

[bitbollo]

You are living in the era of self-custody. I would say you're living in an era where "self-made" has become essential!
You can't cope without. You had to take part on it.

Self-custody with bitcoin is essential. I have seen this as the first lesson you can get (including there is no customer service).
absolutely isn't difficult. maybe its boring. maybe requires attention. But in any case, the advantages are too big and numerious...

[Die_empty]

These problems sounds like a problem that has been solved by anyone doing self custody by going extra miles to secure their stuff.
To counter, this what about these problems that you frequently encounter with custodial service?

• Custodial service black swan e.g FTX collapse.
• Bank freezes your account because not key not your coin.
• The billions lost due to difficulty in asset discovery and lost accounts. US government hold around $70b unclaimed property because of this.

I find the self custody problem to be less severe.

No single system is perfect. Custodial and non-custodial services have their merits and demerits. FTX collapsed, but the majority of FTX creditors and customers were fortunate enough to recover their funds. I guess many people's funds have never been frozen by banks. Those who are not psychologically prepared to be their own bank still have the option to use centralized platforms. But they should also be prepared to accept the consequences of their actions. Being your own bank is the best but it also comes with risks and responsibilities.

[m2017]

Do you think most people are psychologically prepared to be their own bank?

I think that most people are not ready to be their own bank (because most are irresponsible, unable to properly organize their financial lives, not ready to prevent potential problems in advance and solve them when they arise) and it is easier for them to use the services of intermediaries (banks, custodial wallets, exchanges), shifting responsibility (fears and worries) to others (even overpaying for their services).

2. The Responsibility Problem.

I would not call this a problem, but a transfer of the solution to emerging problems from the owner to the financial services provider. For some users, this is the best solution.

But bitcoin self custody is totally different
A single mistake can be irreversible.
This level of responsibility may be overwhelming for some people.

Double-check any actions before confirming and make backups.

I agree, because owning bitcoin means more than just clicking a button to send a transaction; it involves a complex set of actions that ensure ownership, storage, and security.

[Livingleged]

1. [The Fear of Losing Access.[/b]

A lot of holders always worry and think about a lot of things and they keep asking questions like
What if I lose my seed phrase?
What if my house catches fire?
What if someone steals my backup?
What if I forget where I stored it?

While all this questions are possible don't you think it also applies to the banks also? What if the banks catches fire? What if one of the staff in the institution comprises your wallet and be stealing from it? What if there is database formatting leading to losing of  costumers records? If I can not trust my self with all this questions then I can’t trust someone else’s

2. The Responsibility Problem.
Traditional banking allows and can help you correct some mistakes.
For example if you forget password you can Reset it.
Lost card can be replaced.
Unauthorized transaction? Call support.

The conversation should be bitcoin, it is decentralised and do not need card or call support system, you sign your transaction your self and that the best of ownership. While it’s still possible for you to still make mistakes why using the traditional banking system and you won’t be able to recover your money of instance sendings money to a wrong account number the bank has no right to debit the receiver.

But bitcoin self custody is totally different
A single mistake can be irreversible.
This level of responsibility may be overwhelming for some people.

You're now making it sound as it it’s a problem to do things accordingly, transactional with the self custody is just a p2p transaction it won’t take anything from you to check properly before confirming every transaction. If you really want to be part of the bitcoin then you’ll be ready to take responsibility.

3. The Inheritance Problem Nobody Talks About Enough.

Let’s just imagine that someone accumulated a very huge amount of bitcoin and then suddenly he or she dies.
If nobody knows where the person’s seed phrase is stored or kept, those bitcoins are lost forever.
A lot of Bitcoin holders prepare for theft but ignore inheritance planning.

This is the most challenging part of self custody and it has always being on my mind how you plan your inheritance while using self custody, I just think it need a level of trust cope with this it will be very foolish of person to have his holding in a self custody wallet and not have a plan of how his immediate family cant get to the asset in the case of death or even serious illness, having a trusted spouse can actually work with documents seal legally.

Do you think most people are psychologically prepared to be their own bank?
Let’s discuss.

I don’t know about others but I’m psychologically prepared for managing my own wealth. i like to take responsibilities  and not blame anyone or being in and had I known situation.

[purple_sparkles]

The arguments made by the author of the topic are definitely valid and they really make every bitcoin holder think. But in reality, we are not fully protected from anything in this world. Even the options that seem the most reliable to us can eventually fail. The same applies to banks.We are living in a time when everything can change very quickly and dramatically. Wars are starting, and no one knows whether they will continue or whether global peace and agreement will come sooner. There is also a major shift in world power happening right now, and it directly affects all institutions. That is why we cannot be completely confident in any investment. It is better to diversify risks, because in that case we will always have a backup plan if something goes wrong. As for the concern that our relatives may not be able to access bitcoin savings after someone’s death because they do not know the seed phrase, the seed phrase can be passed on somehow, but this is something that should be planned in advance. And the same situation can happen with bank accounts. If relatives do not know that a person has an account in a certain bank, there is also a chance that they may never find out about it after the person’s death.

[Danica22]

The arguments made by the author of the topic are definitely valid and they really make every bitcoin holder think. But in reality, we are not fully protected from anything in this world. Even the options that seem the most reliable to us can eventually fail. The same applies to banks.

In crypto world everyone just simply say not your keys, not your coin. However actual fear and panic that come with taking on this huge responsibility is ignored. The constant fear of losing those seed phrase, the tension of crashing your hardware wallet or how your family will access your fund in your absence! These impose huge psychological pain. But for fiat money bank usually handle all of those worries

I personally have been through this hectic feeling in the crypto market. Sometimes waking up in the middle of the night and wondering, What if I make a tiny mistake and my entire fortune is gone? I don't know if there is a way to escape this worry, maybe those who have more money also have more worries.

[Otaibayomi]

A lot of people talk about the technical aspect of self custody but little attention is given to the mental and emotional side of it, but as someone who is into bitcoin investment I know it’s important to talk about.
When someone holds Bitcoin in self custody they immediately become responsible for things banks normally handle for example Security, Backup systems, Recovery plans, Theft prevention, Inheritance planning.
And this creates a kind of pressure on bitcoin holders that a lot of people underestimate.
For example:

1. The Fear of Losing Access.

A lot of holders always worry and think about a lot of things and they keep asking questions like
What if I lose my seed phrase?
What if my house catches fire?
What if someone steals my backup?
What if I forget where I stored it?

Some people becomes so anxious especially newbies that they check their wallet regularly like 10 times a day some even end up moving their bitcoin from one wallet to another unnecessarily, their by increasing the chance of making mistakes.

2. The Responsibility Problem.

Traditional banking allows and can help you correct some mistakes.
For example if you forget password you can Reset it.
Lost card can be replaced.
Unauthorized transaction? Call support.

But bitcoin self custody is totally different
A single mistake can be irreversible.
This level of responsibility may be overwhelming for some people.

3. The Inheritance Problem Nobody Talks About Enough.

Let’s just imagine that someone accumulated a very huge amount of bitcoin and then suddenly he or she dies.
If nobody knows where the person’s seed phrase is stored or kept, those bitcoins are lost forever.
A lot of Bitcoin holders prepare for theft but ignore inheritance planning.
Now the question that gives some people sleepless night is how can they remain sovereign while also ensuring their family can recover their Bitcoin if something happens to them for example if they die?


Do you think most people are psychologically prepared to be their own bank?

Let’s discuss.

I love and appreciate your post about the fears of self custody and the challenges. It points to the facts that nothing good comes easy. It also points to the facts that there is need for intentionality in what we do as people. Self custody is good, but on has to prepare consciously for it. Just like the bank keeps the cash. My question thus would be that, what should newbie in the world of bitcoin do differently to make sure that even if you are doing self custody, you know exactly what you are doing and not fall pre of all the pitfalls there is?

[PrivacyG]

There is no hidden psychological burden.  Or, there should be at least no difference at all between the stress you have from Self Custody and the stress you should have with any other valuable Asset you have.

People simply got too comfortable with others keeping count for them, helping them every time they need help et cetera.  They got so comfortable they never stress out at all about things they SHOULD stress out about.  Such as,

What if the Bank is gone tomorrow?
What if their Safe is broken into?
What if someone stole your Credit Card information?
What if the Fiat Life Savings you put in your Bank account become almost nothing in the near future?

What if I lose my seed phrase?
What if my house catches fire?
What if someone steals my backup?
What if I forget where I stored it?

The responsibility should continue to be there.  Self Custody or not.  The 'burden' people are feeling when doing Self Custody is what they would feel if tomorrow their Fiat Currency or Bank fails.  It should be normal NOT to be this comfortable and NOT having the answer to every thing right in front of your face or unknown because 'others do it for you'.  You do the best for your self.  What others do for you, particularly behind your back is NEVER guaranteed.

[Rustam Meraj]

In crypto world everyone just simply say not your keys, not your coin. However actual fear and panic that come with taking on this huge responsibility is ignored. The constant fear of losing those seed phrase, the tension of crashing your hardware wallet or how your family will access your fund in your absence! These impose huge psychological pain. But for fiat money bank usually handle all of those worries

I personally have been through this hectic feeling in the crypto market. Sometimes waking up in the middle of the night and wondering, What if I make a tiny mistake and my entire fortune is gone? I don't know if there is a way to escape this worry, maybe those who have more money also have more worries.

If you choose to get rid of the bank you need to run your own security system. Nor is it too scary to wake up in the middle of the night and focus on that little mistake and feel so panicked and worried. I think that is the size of wallet of course the pressure goes up, and that more money definitely does add to more worries here. But I feel like only way to stop this constant worry is to end the habits of doing everything on our own. Do not take entire stress on your own, and consider multi signature wallets, or split backups with trusted family.

[Cryptoprincess101]

Some people becomes so anxious especially newbies that they check their wallet regularly like 10 times a day some even end up moving their bitcoin from one wallet to another unnecessarily, their by increasing the chance of making mistakes.

Anyways, since you said that most newbies have the habit of accessing their wallets daily, i can agree with you on that but an experienced investor who is holding for a long term won't see the need to be checking their wallets everyday just because they are afraid of losing their bitcoins. Why would anyone be moving their bitcoin from one wallet to another, that's stressful and will cause losses resulting from transaction fees. In order to be at ease with your investment, just don't store all your bitcoins in a single wallet so that if one of the wallets get compromised you will have other wallets to fall back to. I know that sometimes people can be careless with their private keys or seed phrase but if you have different wallets, it will help you when there is a compromise.

2. The Responsibility Problem.

Traditional banking allows and can help you correct some mistakes.
For example if you forget password you can Reset it.
Lost card can be replaced.
Unauthorized transaction? Call support.

But bitcoin self custody is totally different
A single mistake can be irreversible.
This level of responsibility may be overwhelming for some people.

It is better if you lose money that is in your custody out of your own mistakes or carelessness than to keep it in the custody of traditional banking systems that acts as third parties. Though sometimes i do think about the dangers of losing one's bitcoin if there is a mistake but it has helped me to be very conscious whenever am making a transaction so that i don't make costly mistakes.

[SilverCryptoBullet]

It is better if you lose money that is in your custody out of your own mistakes or carelessness than to keep it in the custody of traditional banking systems that acts as third parties. Though sometimes i do think about the dangers of losing one's bitcoin if there is a mistake but it has helped me to be very conscious whenever am making a transaction so that i don't make costly mistakes.

Controlling my bitcoins by myself in non custodial wallets is the best for me, even I know risk of losing my bitcoins if I make mistakes with my wallets, devices and don't have proper security for practice. However, these risks are not reasons why I am fearful of being self-custodian and ignoring non custodial wallets, then use custodial wallets on centralized exchanges for storing my bitcoins.

If hack happens with either exchanges or my non custodial wallets, I assume the same consequence: losing my bitcoins. While without hacks, my bitcoin is only safe in my non custodial wallet and I am sure about it, while with centralized exchanges I know there are more reasons to lose my coins.

Events made you scare about custodial wallets, centralized exchanges.

[TypoTonic]

When someone holds Bitcoin in self custody they immediately become responsible for things banks normally handle for example Security, Backup systems, Recovery plans, Theft prevention, Inheritance planning.
And this creates a kind of pressure on bitcoin holders that a lot of people underestimate.

Securing your assets is something that you should be doing, regardless of whether you own bitcoin or not. If anyone thinks it's a burden, then they're simply not yet ready to be their own bank.

People simply got too comfortable with others keeping count for them, helping them every time they need help et cetera.  They got so comfortable they never stress out at all about things they SHOULD stress out about.

That's the thing, they don't care enough to actually even think about their own money. Maybe they've heard about the famous saying: "Not my keys, not my problem"

[Alex077]

everyone knows which is the reason you see people prefer paper bitcoin over real bitcoin because in the paper bitcoin the companies have full control over the coin and give them interest and numbers writing on paper as proof of ownership. ETF and all that stuff came as a result of this issues of people refusing to take ownership or responsibility of their money, in-fact it comes from a place or irresponsible position and shifting blames. When they shift blames it gives them satisfaction.

You have totally captured the actual reason why Bitcoin ETFs have become so popular at such a rocket speed since they came to the market. Many weak-hearted investors want to pocket the benefits or profits of the price fluctuations of Bitcoin. But they do not want to take on the burden of the risky responsibility of keeping their coin or keys in their custody. For those who pay a higher price for a peaceful night sleep than their sovereignty, for them, the trade-off or bet of this ETF is logical.

Actually if the assets is small then full self custody is like a piece of cake. But when the story moves to a life changing or crore dollar fund then incidents like robbery also happen. In such case instead of relying on yourself setting up a multi sig setup and arranging the inheritance table through professional legal method will be the healthiest way

[julz]

Another unfortunate problem is the burden of safely keeping associated records.
This may be a non-issue for people in some jurisdictions - but if you're intending them to be inherited by someone,
they may still be required to produce reams of unreasonable evidence about initial source of funds, otherwise they're limited to selling them on the grey-market.
'My uncle died and I inherited them' is surely evidence you're a criminal to those running the compliance racket here.

If you do need the coins to be eventually sold in a horrible jurisdiction (most countries I'd guess), then having metal-imprinted backups of your keys isn't necessarily enough.
How to safely keep the stacks of digital/paper evidence required.  ugh :/