Look back as recently as last year and hardware wallets were held up as the recommended way to do self-custody all over.
Whenever I brought up the issue of losing coins due to hacks or bugs, I was told that hardware wallets had solved this problem.
Nothing in this world tends to be "the solution", everything has tradeoffs.
Say you want to do self-custody, what is then the best option? "Don't do self-custody" obviously isn't the solution, as the core use case here is self-custody, so what in your opinion is a better way, than hardware wallets?
If there is nothing better today than hardware wallets, then for now, they are "one of the better solutions" for how to do self-custody, even with the current tradeoffs. But again, I'm eager to hear what the alternatives are.
From a bird's-eye perspective, 3 things are needed: Create a key, derive an address from the key, store the key.
Creating a key safely is possible with dice. You would probably create a seed phrase instead of a key directly, but for this discussion it is the same.
Deriving an address from the key is hard and I have not yet seen a good protocol on how to do it. I have read through a bunch of descriptions of how people do it and they are all weak and brittle. The most popular seems to be "I order a hardware wallet and follow the instructions that come with it". But even people who put a lot of thought into it come up with weak and brittle approaches. I would think there is a way to do it safely. But I have never seen a description of one yet. It might involve multiple computers, multiple software implementations and a hell of a lot of work to create a multisig that is not prone to a single attack vector.
Storing the key is probably the hardest. The most popular way seems to be to store it in a drawer or a safe. So now those coins are just as safe as a piece of gold would be. Or they use a multisig and store the keys in multiple locations. Quite painful. As you have the ongoing problem of keeping those locations accessible and safe at the same time.
You're feeling pretty proud of yourself, your coins are super safe.
Then it turns out the RNG in the coldcard mk2 was badly/maliciously implemented and is completely insecure. You need to move your coins right now.
You can probably see the issue
I am still pro crypto and fascinated by the technology but we have to admit the original cypherpunk vision was unfortunately never going to work, we're going to end up with something else
Again, "best solution we have available" for self-custody is hardware wallets, so we're back to square one.
Imagine if I tried to discuss and argue about things like this on a TypeScript submission? "No, this won't actually solve the problems of TS" I say, "What is the solution then?" someone asks me and I reply "There is no real solutions to those problems, just use Clojure, problems avoided!", completely missing the point.
Actually 2FA, hardware biometrics, behaviour based fraud prevention and personal confirmation of suspicious transactions. If you’re using credit they can refund fraudulent transactions, and there is the chargeback mechanism. This is probably banking system dependent, but in AUS there is a refund mechanism for mistaken/fraudulent traditional bank transactions.
BTC has effectively none of the safety net, and humans are fallible. We need the safety net. It’s the hugest barrier to adoption. Exchanges do a far better job of managing the risks than trusting your wealth to a hardware wallet.
In systems with a basis in technology, final means final. If the North Koreans take your money, your money is taken.
This piece from Patrick mcKenzie explains this well https://www.complexsystemspodcast.com/episodes/the-900m-wire...
So if I pay cash for something, I can get it back if a judge orders the counterparty to do so.
Why is cryptocurrency not the same? Can I not go to a court and get an order, exactly the same?
Of course I may not know the counterparty's identity or they may be in a hostile jurisdiction, but how is that different to cash that has escaped my jurisdiction?
If you wire your money to North Korea, forget about it for a week, and then ask a court to intervene you aren’t getting your funds back.
This seems obviously not true. If someone in New York steals your money then courts in New York can order them to give it back even if it's Bitcoin. If they don't comply then they get held in contempt until they do or the police seize their computer with the keys on it etc.
If the person who stole it is in North Korea then the courts with jurisdiction would be the ones in North Korea, which may not be to your advantage, but how is it any different from what happens after the money was transferred to a bank in North Korea? Or, for that matter, what happens if someone in North Korea has the stolen money deposited into a US account and then spends it before you get around to reversing the transaction?
The problem isn't what kind of technology you use, it's that someone can transfer stolen assets into a jurisdiction that won't help you get them back. Regardless of what payment system you use, they can get the same effect by using the stolen money to buy gold bullion or similar and have it shipped to them in their jurisdiction, and once it crosses the border they're not giving it back.
I have yet to see a single one, not one, that had a system of custody that did not allow any one of hundreds of people, most not even employees, to walk away with all of the funds.
There are no standards for security that apply to crypto custodians and the mostly fail to do the bare minimums.
If you use even a top ten custodian, operate under the assumption that the funds are in multi billion dollar plaintext wallets sitting on AWS servers the whole team has ssh access to from the same laptops they "npm install" random shit to all day.
Honestly if you do not feel confident custodying crypto yourself, you should probably not own any.
Even if you are not hacked, or otherwise lose access to the funds, they are not unlikely to become worthless simply due to the system with the stable coins collapsing.
The liquidity can easily disappear, much more so than with Fiat currency or other assets linked to real economies.
You cannot protect yourself from being scammed in that way, even if you do hold on to your keys.
Basically, he was now just a safe cracker. He is a a locksmith, but 100% of his full time hours are cracking safes. He didn’t even carry around the stuff in his van to repin a lock. He gave me mates rates but the shop had to do it.
This man was attending multiple callouts, per day, to crack into a safe. Because of, you guessed it, human fallibility.
In a city with with millions of people, basically a hundreds of people needed a single locksmiths service because they had locked themselves out of there own “personal store of wealth”.
I’ve heard zero such examples through traditional banking, with the exception of stolen cards.
An ordinary MacBook does not have that issue. If you are a high-value target, you can further decrease your risk profile by buying it from a random physical store, further preventing targeted attacks.
In retrospect @gigachad’s summary is worth as much as both articles combined, but for the Clauded technical source (with pictures!) that Ledger’s Claude-release refers to: https://www.tibane.net/research/ledger-nano-x-implant
The ones with hidden eSIMs aren't!
If there was one, someone would write down the steps necessary and put them on the internet. But I have never seen a sound description of how to self-custody Bitcoin in a safe way.
The hardest part seems to not even be the one that currently creates all those problems - the hardware and software used. The hardest part is storing the key (for example a seed phrase). If anyone says they know a way to safely store Bitcoin, my first question is: How do you store the key?
With bitcoin nothing is reversible so every step of the process is a huge security risk where you can fall off a cliff and experience financial permadeath of "your" crypto, assuming a sufficiently motivated attacker.
The wipe the device, use any non-debian other linux (or BSD) to generated the 2-of-2 wallet key.
What do you use to access your bank account online? I use my laptop, or my phone.
For inter-bank transactions involving a scam that causes the customer to “voluntarily” send money it depends on the rail. But US ACH rules cover reversals due to fraud and have pretty substantial rules about it.
I almost fell for a strange scam a while ago. A Steam user by the same name as one of my existing steam friends added me. I assumed it was his second account and accepted. A few days later, he messages me, asking me to participate in a DOTA2 tournament. I had previously played DOTA2 with this person, he spoke to me in our shared native language which is not English and everything seemed in order. I said I haven't played DOTA2 in years so I'm beyond rusty, he said I don't have to play, they just need me to register so they have a full team for the signups and then they'll find someone else to play before the tournament starts. Sent me a link to a website requiring a signup and I can't remember what it was now but there was something about the signup that irked me. Maybe it was just creating a account, maybe it required a credit card or something I can't remember but I ended up looking at my steam friends list and noticed both the accounts were online. So I sent a message to the other account asking if this is them, he said no and then I noticed the same scammer had added another mutual friend so I messaged them too warning them about it.
That's the closest I've been to getting scammed that I can recall. I'm not sure what the scammer would gain from my signing up but I'm sure they had some kind of profit angle.
Seriously, that's why we have banks, still.
Next is a hold on your suspicious transaction, request additional documents for your own money, basically a lot of AML and KYC before you can use what’s yours.
I understand the reason why they do this but it feels to me you are no longer in control of your money/property and somehow they fail to catch people loading billions from shady sources so I would rather not keep my money in a bank (at least not a retail bank) if I had a sensible option.
Most people don’t care about this until they get trapped just like most people are /were OK with Paypal and other junk services.
The actual reason to discount this is that account shutdowns are flashy rare events that reliably summon HN outrage, and so the kind of person who posts here overweights how likely they are, at least for people not on the margins of society. (If that weren't the case, the system wouldn't work and normal people wouldn't use it.)
Ironically the failure rate when I use the American Visa or MasterCard is maybe 5%.