Everyone’s heard “Not your keys, not your coins.” Unchained head of research Joe Burnett explains how investors can protect their Bitcoin.
Bitcoin and its price are centerstage in the mainstream media again, and with prices trading near $100,000, the attention paid to the world’s first cryptocurrency is likely to intensify.
Beyond investors’ day-to-day obsession with Bitcoin and the potential for President-elect Donald Trump to push for a strategic BTC reserve, a more serious concern should be evaluating whether or not one’s operational security is up to par.
Single point of failure leaves Bitcoiners at risk
While crypto hard wallets are a much better option than keeping Bitcoin on exchanges or in software wallets, there is still the risk of the assets being compromised if a person is able to take possession of the seed address.
Burnett suggests a multisignature setup as a way of eliminating this single point of failure since multiple signatures would be required to generate a transaction.
“You’ve heard about hardware wallets, software wallets. You can buy your ledger, your ColdCard, your Trezor, which are individual hardware wallets. But still, at the end of the day, when you buy one of those devices, and you set up a default single signature address, your Bitcoin is controlled or protected by one key that’s stored on that one device. And you may write down your seed phrase that is effectively your key to your Bitcoin. Then that key becomes a single point of failure.”
Are multisigs the future?
Burnett explained that with collaborative custody options similar to Unchained, Bitcoin holders create a three-key multisignature vault where the investor retains two keys and Unchained holds one as a backup.
“Unchained holds one key as a backup if you have both of your keys and one of your keys gets lost, damaged, or stolen, then you actually don’t lose your Bitcoin because Unchained has another key as a backup. And so it kind of is the best of both worlds when it comes to having some trusted institution there with you to help you make sure you don’t lose your Bitcoin and then also maintaining complete sovereign control over your Bitcoin.”
In this setup, where two keys are required to move your Bitcoin, Unchained only holds one of the three keys, Burnett said, which ultimately renders Unchained unable to move clients’ Bitcoin.
To hear more from Burnett’s conversation with Decentralize — including Burnett’s future vision for Bitcoin price
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