Self custody is not reliable

[Somegory]

ETFs are far more reliable than you holding Bitcoin yourself.
Self custody is not reliable, let crypto exchanges do the holding for you.

Instead of trusting some Bitcoin wallet that promised self custody it's better to trust JP Morgan.
It's better to have trust in BlackRock so that you can sleep well in the night.

You can't wake up and see your Bitcoin moved into another person's wallet address.
Never ever trust Self Custody.

This is the message that's been indirectly passed by what happened with ColdCard hardware wallet, and it's why my friends believe that this attack was planned to make people have doubts about self custody.

Come to think about it, who benefited the most out of this attack?, exactly...
This message might look too early but I'm sure that what's going to be pushed from now on is people needs to trust centralised platforms more.

People needs to trust Blackrock, fidelity, and others than self custody, but nothing beats self custody even after what happened, this attack will be an eye opener to why you and I should be picky when it comes to self custody.

Self Custody is still Superior to centralised options, with multi signature setups and 100 Dice rolls your wallet will be more stronger than ever

[Charles-Tim]

When Bybit was hacked, people were moving their coins from exchanges to noncustodial wallet. When a noncustodial wallet was hacked, people were moving their money from noncustodial wallet to exchanges.

So that is what people are. Most people do not have the right knowledge to know what exactly to do.

There is nothing better than open source noncustodial wallets, but do things right. Use passphrase to extend your seed phrase with an impossible to guess and impossible to brute force passphrase of go for multisig wallet.

[Emjay24]

Self Custody is still Superior to centralised options, with multi signature setups and 100 Dice rolls your wallet will be more stronger than ever

Ouch! You got me really aggressive and in attack mode with the first three sentences. I already drafted my response before I saw this

NOT YOUR KEYS, NOT YOUR COINS. Exchanges are never the best options, there have been series of serious hacks in history like FTX, MTGOX, BYBIT, etc and the fact that exchanges breeds centralization and trusting a third party which is still the same thing Bitcoin came to eliminate. Exchanges are tools of the government and can seize your funds upon request and deprive you of the right to use your money whenever you want.

Self-custody is the best. People should be more inclined to using open-source non-custodial wallets like Electrum, Blue wallet, Sparrow e.t.c with strong RNG and make it a custom to extend the security of their funds with a passphrase. If we observe very well, the only wallets that has great chance of surviving the ColdCard attack were those that used a passphrase.

[EarnOnVictor]

I was surprised while reading the upper part of your posts; however, on a second thought, nothing is perfect, and as we look at the better side of self-custody for enhanced privacy and security, the ETF safety and compensation can't be underestimated in situations like this, for Coinkite will give nothing back, despite being their fault.

About the deliberate trap caused by coldcard incident that you claimed, I don't think so. What happened is just the issue limited to coldcard itself, it's their firmware flaw, a software bug, which can't be used to condemn other self-custody hardwallets. It's just a reminder that we should be sure of the gadgets we are entrusting our money to.

[Livingleged]

When Bybit was hacked, people were moving their coins from exchanges to noncustodial wallet. When a noncustodial wallet was hacked, people were moving their money from noncustodial wallet to exchanges.

So that is what people are. Most people do not have the right knowledge to know what exactly to do.

There is nothing better than open source noncustodial wallets, but do things right. Use passphrase to extend your seed phrase with an impossible to guess and impossible to brute force passphrase of go for multisig wallet.

I agree with you, people just lack knowledge and that’s why they follow the crowd and don’t really know exactly what they should do when it comes to keeping their holdings safe. Op claims self custody isn’t reliable, I can’t blame him for saying that. maybe he had a bad experience with a self custody wallet. My friend and I usually thought trust wallet was the reliable in the past because it’s a self custody wallet, and we had our seed phrase, unknown to us that it was a closed source wallet, and the code could have a bug or even be compromised my the company without our knowledge. And we started hearing how people lost their fund they kept on the trust wallet.
Then I made research on the possibility and how people lost coin through self custody wallet and I realised that you don’t only go for self custody wallet, but an open source self custody wallet that the code could be seen and reviewed by everyone using it.

[JangoUnchained]

I will never take anyone but myself serious in this space.

  it's not even long that Bitmart died, BitMex? Or. ascendEX?
C'mon now, it makes no sense.

Centralised exchanges have died more than hardware wallet having this incident.
The final answer is clear....it's complete parroting to me.

People just talk and talk.

Some exchanges got hacked and money was lost.
Some Cex manipulated the market in the past and people died.

It's been a norm for Centralised exchanges and platforms to have problems, but not hardware wallets.
Now just one weak entropy problem and all hell broke loose? 😆😆

Completed parroting, nothing else.

[_act_]

About the deliberate trap caused by coldcard incident that you claimed, I don't think so. What happened is just the issue limited to coldcard itself, it's their firmware flaw, a software bug, which can't be used to condemn other self-custody hardwallets. It's just a reminder that we should be sure of the gadgets we are entrusting our money to.

Another thing is that some wallets today are doing things as if they are open source, but they are not open source. Many people on this forum even thought Coldcard is an open source hardware wallet, but that is not true. It is one of the worst wallet that I have ever know. A wallet that is reproducible but not open source are as worst as a close source wallet because they are not open source also.

[Zaguru12]

When Bybit was hacked, people were moving their coins from exchanges to noncustodial wallet. When a noncustodial wallet was hacked, people were moving their money from noncustodial wallet to exchanges.

So that is what people are. Most people do not have the right knowledge to know what exactly to do.

I have said this before, it’s just the heat of time we usually use to see this, if exchanges get hacked you see people moving to non custodial wallet and vice versa, personally I wouldn’t be surprised with the anger of the victims of cold card because most might have lost everything, and until today I still blame the hardware wallets developers for been aware of this vulnerability and yet didn’t take any action over the years.

This has come and go and I doubt maybe there will never be any recovery, the victims might be non knowledgeable person but I think the lesson is on those not affected and still do not take action, it’s absurd that one can have as high as 1BTC and to go and simply seek for knowledge of where to store those funds is a lot to them, I will find excuse for the victims now, but anyone still relying upon other trust is definitely careless. Bitcoin is built to be trustless

Be your own self custody but be aware of the non custodial wallet, don’t just follow the crowd

Op claims self custody isn’t reliable, I can’t blame him for saying that. maybe he had a bad experience with a self custody wallet.

You didn’t understand what OP was on about, the underline post above was simply the motion currently spread by custodial maxis and not OP. OP was actually debunking trusting custodial wallets

[standardnepo]

As someone new to Bitcoin, one of the first things I learned was that self-custody is essential. That’s why I ordered my first cold wallet, which is open-source.

However, after hearing about the recent Coldcard incident, I’ve started seeing more people say that self-custody may not be as safe or reliable as we think. Honestly, this is a little upsetting and confusing because it seems to contradict much of what I’ve been reading and learning for a long time.

[decodx]

To me, this wasn't a failure of self-custody. Of course Wall Street and centralized exchanges will use this to push the "trust us instead" narrative. They love stuff like this.

But ditching self-custody over one company’s screw-up is like quitting driving forever because a specific car model got recalled. Just think of all the centralized exchanges and services that have been hacked or rug-pulled over the years. You’re right about multisig and rolling your own dice. Self-custody is still the way - this just proves that we have to be way pickier about how we do it.

[EL MOHA]

As someone new to Bitcoin, one of the first things I learned was that self-custody is essential. That’s why I ordered my first cold wallet, which is open-source.

This is where your knowledge is first put to test to know what exactly you’re doing, you ordered an hardware wallet not a cold wallet, although hardware wallet are still cold wallet but there are some cold wallets that are made off from software wallets.

Now the question is what criteria was used to order that hardware wallet or your choice for it, how did you generate your seed phrase and is there extension and also how you back up your seed phrase and pass phrase all contributes to the safet of your coin

However, after hearing about the recent Coldcard incident, I’ve started seeing more people say that self-custody may not be as safe or reliable as we think. Honestly, this is a little upsetting and confusing because it seems to contradict much of what I’ve been reading and learning for a long time.

I would say If you still have this doubts then you haven’t really understand why self custody was actually your pick and probably you’re just following the crowd. This might be harsh but you need to understand the reason for self custody and sincerely if you do I don’t think this current cold card wallet saga will make you doubt your choice

[hugeblack]

Come to think about it, who benefited the most out of this attack?, exactly...
This message might look too early but I'm sure that what's going to be pushed from now on is people needs to trust centralised platforms more.

What did you expect? The best way to promote your services is when your competitors have a problem. Therefore, it is natural for BlackRock to exploit this event to promote its products. For example, when Binance withdrew because of MiCA^[1], the first thing they did was promote the Self-Customized Wallet.

[1] Binance CEO: 70% of EU User Withdrawals Moved to Self-Custodied Wallets After MiCA Exit

According to a report citing Binance CEO Richard Teng, approximately 70% of the funds that EU users withdrew after the exchange suspended services moved into self-custodied wallets. Only 30% ended up on MiCA-compliant platforms. For a regulatory regime built on the premise that licensing leads to consumer protection, that number is a quiet indictment of how detached the official playbook is from user behavior.

[Ruttoshi]

Human isn't 100% perfect which is why you saw that vulnerability in coldcard wallet but it's good to be your own bank and don't forget that being your own back comes with a big responsibility to keep your wallet safe and the kind of wallet to use.

Simple mistakes can make your wallet get compromised which is the reason why you need to stay on the safe side by adding passphrase to your seed phrase. Exchanges are the worse to keep your coins because it isn't yours anymore until you withdraw it. Exchange and noncustodial wallet aren't 100% free from hackers.

[Curious T]

They can only fool those they can fool with things like this. I also saw a post of CZ telling people to use Binance or Trust Wallet if they want security. I've been on this forum long enough to know the risks of self custody. I've never seen anybody say it was a piece of cake. You are responsible for your own coins. People have been losing access to their bitcoin for ages, so it's not a new thing. Everybody knows the risk of self custody. What they should now answer is if it's worth it.

I saw a post on Facebook that was trying to talk down on self custody by showing how much has been lost from those exchanges and how much has been lost through self custody.
https://web.facebook.com/helloluis/posts/insane-statistic-as-of-today-more-bitcoin-has-been-lost-or-stolen-from-self-cust/10165868364566518/?_rdc=1&_rdr#
The screenshot said 1.57 million Bitcoin has been lost from self custody, while 1.51 million Bitcoin has been lost from exchanges. So he was implying that "not your keys, not your coins" doesn't hold much water anymore. But he did not mention the fact that those coins did not get lost because their private keys failed them. Those are lost coins because of lost seed phrases, hardware, passwords, or making themselves vulnerable to hackers by what they did with their device or wallets.

Reading further, I think they even included Satoshi's 1.1 million Bitcoins as lost Bitcoins. I'm not sure about this, but every website I read always includes that as part of the lost Bitcoins. If they do, it does show a clear picture.

Among all respondents, 60% held crypto in a mobile wallet app (self-custody) and 55% on an exchange (custodial).

If exchanges with all their resources and security have only lost 5% less than normal people who hold their bitcoin in their wallets, then that is not a convincing statistic to prove that self custody is not worth it.
https://www.oobit.com/lost-or-locked-out

[Dave1]

Yes, I did ask this from another thread. Self-custody could at the dilemma right now because of the Coldcard incident. Maybe the best thing for now is to look for ways to create our own private key and not really to hardware device that supposed to have 128 entropy.

So maybe we can go back to the discussions like coin-flip or dice roll. Gonna be interesting on what the community will have to say. But one thing is for sure, there is no really a perfect system for us. And perhaps we should also talk about the lessons that we have learn from this attack.

[Y3shot]

This is why people need to first consider reputation when choosing a wallet, because security is not always perfect. The issue with Coldcard doesn't mean self-custody has failed. Self-custodial is reliable; when hardware is faulty, it doesn't mean self-custody has failed.

Exchanges or ETFs can't replace self-custody; they still have very high risks. Remember, self-custody simply means you have control over your keys, and this is what you can't find in an exchange.

[tabas]

ETFs are far more reliable than you holding Bitcoin yourself.
Self custody is not reliable, let crypto exchanges do the holding for you.

In ETFs, you buy a piece of their stock so if that gives you more confidence in how you invest, there's no debate on that. But owning a piece of a very limited supply of bitcoin in my hands is way better than these stocks that could be printed more by whichever financial company or etf you invest with. There's really the pros and cons for each of these investments that we like and I think that we're all agreeing to disagree that each of them has its own beauty, advantages and disadvantages but all of them carries the same risk.

[hmbdofficial]

~snip

This is true anyway, the COLDCARD incident didn’t prove anything like self custody is bad. It just showed that self custody also requires you to know and understand what you’re using.
I will not also say that the attack was planned to make people trust Blackrock, fidelity, or exchanges without evidence, the fact that they met benefit doesn’t mean they were behind it.

The real lesson should be that owning your bitcoin yourself comes with responsibility. Hardware wallet, seed generation, backup and security practices can all have weaknesses.
Thats why multisig and proper generated backup can help reduce the risk involved. But that doesn’t make it completely safe.
Bitcoin itself wasn’t broken this was rather a wallet security issue

[BluebloodCXVI]

No matter what anybody says, i still strongly believe that self custody is superior and it is reliable if done correctly.

It’s obvious that the Cold Card incident was a serious failure on the part of Coinkite in their implementation of the Coldcard firmware seed generation code, but this is not proof that self custody itself is unreliable or that people should start handing their keys over to BlackRock, JP Morgan, Fidelity or some exchanges.

Yes, some people will try to use this incident as leverage to argue that ordinary people should stop holding their own keys and instead start relying on ETFs, banks, or exchanges, but in reality they are saying all that because the narrative benefits them(i’m talking about the the large custodians and institutions) and so they prefer Bitcoin to remain concentrated under regulated entities but they are not saying the whole truth.

These centralized custodians also have their own long history of failures too.
We’ve seen a couple of exchange hacks in the past, bankruptcies like Mt. Gox and FTX, insider fraud, regulatory actions, and accounts being frozen.
If this is not proof enough that the principle of “not your keys, not your coins” still exists for a reason, then I don’t know what it is.

I can only say as much i can.
But if someone thinks that they will feel more comfortable trusting BlackRock or JP Morgan with their Bitcoin, then fine, go on, knock yourself out, it’s your choice.
But it doesn’t still change the fact that they’re just simply exchanging one set of risks for another and it isn’t automatically the safer option for them in every situation, especially for those people who value censorship resistance, protection from seizure, and the freedom to move their funds to and fro without needing anyone’s permission first.

[SilverCryptoBullet]

NOT YOUR KEYS, NOT YOUR COINS. Exchanges are never the best options, there have been series of serious hacks in history like FTX, MTGOX, BYBIT, etc and the fact that exchanges breeds centralization and trusting a third party which is still the same thing Bitcoin came to eliminate. Exchanges are tools of the government and can seize your funds upon request and deprive you of the right to use your money whenever you want.

Risks from centralized exchanges as a fund storage are truly existing and big too but if people don't know how to create and secure their wallets, backups and funds properly, they can choose biggest and most trusted centralized exchanges to use for trading and fund storage. Of course, it's only temporary solution and they must learn to become self custodians properly.

Events made you scare about custodial wallets, centralized exchanges.

Self-custody is the best. People should be more inclined to using open-source non-custodial wallets like Electrum, Blue wallet, Sparrow e.t.c with strong RNG and make it a custom to extend the security of their funds with a passphrase. If we observe very well, the only wallets that has great chance of surviving the ColdCard attack were those that used a passphrase.

Only best if you know which self custodial wallets are good ones to use, and know how to use those wallets rightly. Best practice includes many steps from the start till the end, as in security if you make any security hole in the middle of process, hackers can exploit and steal your fund.

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