If you lose your hardware wallet, you lose your computer, you don't have the advisor anymore, can you recover your Bitcoin?Bitcoin is the only asset you can truly own.If you memorize your seed phrase, you can own your Bitcoin in your head.
I can flee my country tomorrow.I can hop on a plane and take my entire Bitcoin stack with me.I can't take a house with me.I can't take South African stocks with me or bonds.I can't take a kilogram of gold.
When you trust an exchange to hold your Bitcoin, it's not yours. History is full of breaches of that trust.Bitcoin is freedom money and freedom money comes with responsibility.
And I think that there's nothing more you can do than just put in the hours to understand what you're doing.The more Bitcoin you have, the higher security level you need.
Secure your Bitcoin in the best way before you get hilariously rich.
Secure your Bitcoin as if it were worth 10x the current value.You don't wanna make your Bitcoin setup too complex because you're gonna lose Bitcoin to user error rather than an attacker.
You need to definitely understand what you're doing yourself because even if somebody does advise you through it all and you don't really know what you're doing, it's not a good idea.Bitbox, Coldcard, Trezor are all pretty battle-tested.
The more UTXOs you have, the more expensive your Bitcoin transactions are.The solution is to combine your UTXOs together to create larger UTXOs and have fewer of them.
It's really important today that we talk about self-custody.As I mentioned before, if everything goes according to plan, I think a lot of new people will join within the next 12 to 18 months.
And I see a big risk actually in people coming into the space and saying, okay, I want Bitcoin.I see the value of Bitcoin.They maybe even study a lot of like, Oh, why Bitcoin?Why it's important.
But then they go ahead and like, Oh, yeah, I downloaded this Bitcoin exchange, and I have it there.And that's it, like, now I'm part of Bitcoin, or even worse, they have some new bank app where they cannot even withdraw their Bitcoin.
I saw that in Austria with like, already some friends of mine, who said like, Oh, yeah, I bought Bitcoin.And then I was like, Oh, where do you have it?And then like, Oh, this bank, and I was like, Really?You cannot even withdraw the Bitcoin?
You don't even have the option to self-custody there?So maybe to start off with, what is your personal motivation?Why are you doing the hustle of studying about self-custody and the hustle of self-custody itself?
Yeah.Well, I think Bitcoin is the only asset you can truly own.If you memorize your seed phrase, you can own your Bitcoin in your head.I can flee my country tomorrow.I could hop on a plane and take my entire Bitcoin stack with me.
I can't take a house with me.I can't take South African stocks with me or bonds, or I can't take a kilogram of gold.But my Bitcoin is very transportable and easy to take.So Bitcoin is the only asset you can truly own.There's a quote from
Was it from 1984, where it says, the only thing you truly own is the square inches in your brain, something like that, along those lines.And to me, that's like Bitcoin.You can own it in your head, and you can go anywhere with it.
So I think self-custody is important because if you're not self-custodying your Bitcoin, you don't have that property of Bitcoin.You can't escape with it.
If it's locked up in some South African exchange or wherever you live, I'm in South Africa, and you flee the country, things go bad, and perhaps they don't allow you to withdraw anymore.
Perhaps you can't convert that to whatever you may need, and they stop you from withdrawing Bitcoin.So mainly because Bitcoin is the only asset you truly own is why I'm so big on self-custody.
I love that reason.I just want to play a little bit that was advocated here because I think a lot of people, maybe not everywhere in the world, but in privileged countries like myself in Austria, or maybe also in America.
I mean, a lot of Bitcoiners, like really hardcore Bitcoiners don't trust the government.But there are a lot of Bitcoiners out there that are not in the Bitcoin Twitter, Bitcoin podcast bubble.
but they still have Bitcoin and they trust their government, they trust in institutional things, and they often don't trust in themselves.And they trust more in like a big exchange who has a big, big name.
If someone is in a country where everything goes according to plan and for them it's not a reason to be like the government is corrupt or there's something really going wrong in a country and they have to flee like within the worst scenario, what other reasons are there to buy self-custody?
It's easier to steal in exchanges and stuff like that.Do you have other motivations why people should do that?
Yeah, so one of the most famous Satoshi quotes is that history is full of breaches of that trust.And I think he's referring to banks inflating the currency supply.And I think that applies to Bitcoin as well.
When you trust a custodian with your Bitcoin, they hold your coins for you.It's not truly your Bitcoin.It's an IOU.And you're trusting them, but history, again, is full of breaches of that trust.
When you're trusting a centralized party to do anything for you, they tend to breach that trust, and Bitcoin is a good example of that.So there's been lots of examples of exchanges going bankrupt and running away with Bitcoin.
FTX is probably the biggest example.I think there was $8 billion lost on FTX.And yeah, people trusted FTX.It was a huge name.They had the stadiums.They had the huge marketing spend.
It was very trusted, and yeah, history is full of breaches of that trust, and the Fiat DX went bankrupt, and everyone's Bitcoin was essentially gone overnight.
Another good example is there was this exchange, QuadrigaX, a Canadian exchange, and the founder of that exchange, or the person who held the keys that accessed that Bitcoin for that exchange, just also mysteriously died.I believe he was in India.
One day he vanished.One of his family members said he died.And he was the only one who could spend that Bitcoin.And I think a few million dollars in Bitcoin was lost just because that guy vanished.So when you trust an exchange,
to hold your Bitcoin, it's not yours.And another big problem is that these exchanges are huge honeypots.They hold lots of Bitcoin.
So an attacker or a sophisticated attacker would rather attack an exchange to get thousands of coins than an individual to get maybe 0.5 Bitcoin.They're huge honeypots.
And yeah, that's one of the big reasons as well is exchanges cannot really be trusted. Are there other reasons?Yes.
If you trust an exchange with your Bitcoin, they might be selling paper Bitcoin and therefore increasing the supply of Bitcoin, selling coins that don't exist.
So if you're a strong proponent for Bitcoin, perhaps you would want to self-custody a coin so exchanges aren't selling coins that don't exist. using your coins and lending out your coins to other people and increasing the supply in turn.Absolutely.
I mean, that's the whole point of Bitcoin.
I feel like and I hope that the more people own Bitcoin, the more they also go down the education path and then they at some point realize, oh yeah, I have to own Bitcoin myself and I have to take it off exchange.
I was a weird case where I bought my Ledger back then, like I think over four years ago now, actually on the first day where I got my Bitcoin, like I bought my Bitcoin and ordered the Ledger out of curiosity, not of knowing that it's important, but out of curiosity because I saw a video like, oh, how to do self-custody.
I was like, what is self-custody? What do you mean this is like, I just ordered this custard out of curiosity and have my Bitcoin ever since, since the first day in self custody, which has been an amazing experience.
And so far, I also never lost anything, but it was 2020.But I think a lot of people are actually scared of losing their Bitcoin because you have so many prominent stories.
Granted they're all from, not all, but the more prominent ones are from like further down the line in the history.It's like gets less and less that people lose their Bitcoin.But how do we take away this?Like people are scared to lose the Bitcoin.
They don't trust in their own capabilities.They feel like they have to study that like for five years and then only they can maybe self custody that.
Well, I think Bitcoin is freedom money and freedom money comes with responsibility.And I think that there's nothing more you can do than just put in the hours to understand what you're doing.Bitcoin wallets have become a lot easier over the years.
We've just got all you have to do nowadays is back up a 12 or 24 word seed phrase.You know, in the early days, it was very different.We had raw private keys, and we couldn't just back up one of those keys, we had to back up each one individually.
So wallets are becoming easier, but I think because of the nature of Bitcoin, because it's self-responsibility and freedom, you have to put in a few hours to understand self-custody, to understand how all the different wallets work or how your wallet works, what is a seed phrase, why you need to back it up.
And, you know, once you've mastered the basics, you can fairly confidently self-custody Bitcoin.The wallets these days make it so simple Again, just know how to secure your seed, any other parts you may need.
Some people use a passphrase or multisig, but if you're just getting started, don't even think about that quite yet. And yeah, hours, I think that's all.And you don't need to put five years into this, right?
You can do, I don't know how many hours it requires, maybe, not five years, definitely, maybe one or two months of not really consistent work, but one or two months of curiosity and experimenting and trying new things, all you really need.
What role does the amount in Bitcoin you hold play in what security solution and how you secure your Bitcoin play?
Yeah, definitely.The more Bitcoin you have, definitely the higher security level you need.And I think more security always comes with increased complexity.
So if you do happen to have a lot of Bitcoin, I think, and you want to increase the security of your setup, it requires a bit more time studying and learning what exactly you're using.
For example, if you're looking into multi-sig, multi-sig will require a bit more experimenting and studying than something like single-sig.So the more Bitcoin you have, the more security you need, definitely.
But that more security comes with increased complexity and therefore you might need to spend a few more hours studying or get assistance from somebody who knows what they're doing.
When does multisig make sense?Is there like an amount you have in your head like, okay, if you have about that many Bitcoin right now, you should definitely do a multisig?
Yeah, I'm not sure about amounts.I think what's very important about multisig is that the point is to geographically distribute your Bitcoin.
So if you're using multisig because you're high net worth, but all three seed phrases are in your house, it's kind of defeating the purpose of multisig.Maybe you need a passphrase in that case.
So I think if you can geographically distribute coins, or you're a company or you're a business with multiple key individuals, then you look into multisig.If you've got 100 Bitcoin, you probably have a few places to put your coins.
Maybe you've got vaults, bank vaults in different locations.Then yeah, multisig is for you.I'm not sure about a Bitcoin amount, maybe 10 Bitcoin?I'm not really sure.I think it depends more on your circumstances and the amount of Bitcoin you have.
Both need to work together.
Even if you have 10 Bitcoin, right, but you only keep three seed phrases in your house, you're still defeating the purpose of that multi-sig.
It's super interesting when we think about multi-signature and then you can actually go ahead and even if someone, like if someone comes to the house and like said like, Oh, give me a Bitcoin.You can like, Oh yeah, here is my good.
Please, please have it. But you have like five other keys or something like that.But there's a lot of, I mean, I think the risk of that is hopefully low for Bitcoiners.But it's definitely something.
Just to make sure we have everyone in the boat, what is multi-sig and what is single-sig?Like, what is that in the first place?
Yeah, so we'll start with single signature.And single signature means you only need one single signature to spend your Bitcoin.So you only need one seed phrase to authorize a transaction.
If you've got your 12 or 24 words, you can spend any Bitcoin within that wallet. Multi-sig requires multiple seed phrases to sign off on transactions.
So first when you create your wallet, firstly you'll decide how many seeds exist in this wallet, and secondly you'll decide how many seeds are required to spend Bitcoin. For example, a very common multi-sig setup is two of three.
And that means there's three seed phrases in that wallet, but you require two signatures.So two of those seeds will be needed to spend Bitcoin.So it kind of depends.The way we classify it is how many seeds are required to spend.
Single sig requires a single seed, a single signature.Multi-sig requires multiple signatures or multiple seeds.
What's your thoughts on collaborative multi-signature where you have one entity in this, I don't know, three or five or whatever, how many keys you have, is a company in the end of the day?
Yeah, I think generally it's a good idea to do that if you want multi-sig.You just need to ensure that it's done in a trustless way.You should not be trusting that third party.They should only ever have one C phrase.
They should never have the right to spend your coins. So for example, most of them are, you set it up with them, it's two of three seed phrases are required to spend.They only generate one seed phrase.
So you're not trusting, you don't really trust them with your Bitcoin.You trust them to hold one seed in case you lose one of your two, but they don't have access to your coins.And that's key in my opinion.
Otherwise, I think it's generally a good idea if you want to distribute your coins and you don't have different multiple locations to geographically distribute them, it's not a bad idea to do that.
One thing I will say actually, though, is if you're dealing with a small amount of Bitcoin, you have to think, is it worth it to do that?Because they do charge the monthly or the yearly fee.
So if you're not dealing with a lot of Bitcoin, perhaps the fee doesn't justify how many coins you have.
Absolutely.I mean, I mean, it's an interesting discussion in Bitcoin, because you also have to think about the future of value of it.And who said that?I think Rick said it on my podcast, the one who lost 25 bitcoins.
I don't know if you, if you know the story, but yeah, he, he had had it in self custody and he lost 25 Bitcoin.And he said something very interesting in the end of the podcast, secure your Bitcoin in the best way before you get hilariously rich.
That was something interesting to think about.
Do it in calmness before your Bitcoin 2Xs or 5Xs and maybe like, okay, think about your Bitcoin stack and like, okay, what if this 5X is now, would I take different care of those Bitcoin because it might as well does.
Yeah, secure your Bitcoin as if it were worth 10X the current value.
I think I've heard NVK say that quite a lot.I'm not sure who came up with it, but I've definitely seen that make the rounds on Twitter.
It makes sense because it's like 10x, it will not happen probably not overnight, but you should think about the future and especially as Bitcoin as we have this low time preference, definitely.What should people stay away from?
You already said, collaborate with multisignature where you only have the minority of the keys. is one thing.
Is there self-custody solutions where you're like, okay, that's something you should be aware of, that's something you should avoid in any situation?
Yeah, I think one of the key things is to Avoid complexity.You don't want to make your Bitcoin setup too complex because you're going to lose Bitcoin to user error rather than an attacker.
So I do like one-on-one help sessions with people and I had a great example of a lady, she didn't really quite understand what she was doing, but she had a multisig setup But each of her seed phrases had an additional passphrase on top.
And she had no clue what she was doing.And she thought she lost her entire Bitcoin stack.Thankfully, she had her seeds and her passphrases backed up.And we spent a few hours testing it all.And eventually, we got her Bitcoin.
So like I said earlier, you need to balance security with complexity. You need to keep it simple.This is a famous rule in Bitcoin.It's keep it simple, stupid, or keep it stupid, simple, something like that.
And too much complexity means you're going to shoot yourself in the foot, especially if you do not know what you're doing.That is something very important I think a lot of people tend to overlook.
They'll hear multisig is the best way to secure your Bitcoin, and they'll just do it without knowing really what's going on.And I think multisig isn't for everyone, and increasing complexity isn't for everyone.
I love that a lot.Really cool.In terms of doing it yourself versus doing it with a partner, how do you look at that?
Like, are you recommending people actually go ahead and study it deeply or like, okay, no, like have a, because there are so many different, There's like the service providers, I would say, with like Unchained and Casa and that kind of a thing.
Then there's like advisors, like the Bitcoin way, the Bitcoin advisory yourself, you can book a session with you.
And then there's like the hardcore way of like, you look everything up yourself and you do it the way you, how do you look at those kinds of options?
Yeah, I think you need a bit of both, right?You need to definitely understand what you're doing yourself, because even if somebody does advise you through it all and you don't really know what you're doing, it's not a good idea.
Bitcoin is your responsibility at the end of the day, it's not somebody else's responsibility, so you must understand the structure of your setup, what's required to access your coins, what you need to secure, what needs to be backed up.
But definitely working with people who've done this for years is a good idea, because they know the best practices.They know exactly what you need to do to secure the coins.But you can't just rely on them to do it for you.
You need to understand exactly what you've done.And hopefully all these advisories are explaining to you exactly what your setup is, how it works,
if they aren't there to help you tomorrow, what you need to do to spend your coins or what you need to do to back them up and secure them.So there's a bit of both advisories.
I think it's great for somebody to give you a helping hand, but you do need to understand what you're being helped with and what exactly you've done.
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If you watch or listen to my podcast on a regular basis, I'll guess you already bought some Bitcoin. And now the most important step is to keep the Bitcoin.Keep them secure in a hardware wallet.
My personal recommendation for hardware wallet is the Bitbox.It's super secure.It's simple to set up.It's also a perfect gift for a friend who has still the Bitcoin on an exchange.And you can get a 5% discount with the code Robin at the checkout.
Visit bitbox.swiss slash Robin to get your Bitbox. And the next step is to really level up your sovereignty as an individual.You have to have the most secure self-custody setup.You have to secure your own devices.You have to protect your privacy.
You have to set up an inheritance plan.And depending on where you live, you even want to have a plan B, a citizenship where you can move in case something goes really, really wrong.
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Yeah, I think a great question that everyone should ask themselves if they work with someone else is like, I mean, it's a great question.
Even if you do it yourself, like what happens if that advisory is tomorrow not there and you want to recover your your Bitcoin, what do you do?Do you have actual control over everything?And do you know it well enough without calling them?
Because they might not dare.So I think that's a really important step that people really overlook sometimes.
Yeah, yeah.The best question is, if you lose your hardware wallet, you lose your computer, you don't have the advisor anymore, can you recover your Bitcoin via the seed phrase or whatever backups you have?
And yeah, if you can't, then there might be a problem and you should do a bit more studying.
I love this.Like, you lose your computer, your hardware wallet, and you don't have access to the advisor.You still have access to a Bitcoin, yes or no?Like that kind of question. I love it a lot.Really cool.Let's look at Bitcoin hardware.
Well, it's obviously full disclosure.I mean, everyone knows that Bitbox is one of my sponsors on the podcast as also the Bitcoin way is.So I'm not entirely objective.
Hopefully you are more than me, but I like Bitbox because it's really easy to find your way into the self-custody game.
And then for me, the Bitcoin way is a good way of like, okay, how do I go really deep into the topic and really think about something way more secure than just one hardware wallet? But in terms of hardware wallets, what do you generally look at?
I know there's like air-gapped and not air-gapped, there's different kinds of hardware wallets with like touchscreens, there's hardware wallets with buttons, there's hardware wallets with all kinds of different designs.
How do you generally judge a hardware wallet, if you like it or not, and for what situation also?
Yeah, I think one of the most important things is whether the source code is viewable or open source or not.
So we all know famously that Ledger is closed source and not many people trust Ledger because you can't tell what exactly they're doing behind the scenes.You don't know what your Ledger device, what the code is doing.
So that's the first starting point, I think, is your device open source or not?I know Bitbox is open source and Coldcard is source viewable.There's a lot of debate over Coldcard's open source status.
I believe they say they're open source or they say they're source viewable.So you can see the code, but you cannot replicate or use that code for your own
What is the difference there?Like if I can see the code, why can I not use it?
Yeah, so coldcards license, I don't know the exact details, but from my understanding is that you can view the code, but you cannot actually use that code for your own business ventures, or you can't duplicate it. you know, use it yourself.
And one of the key arguments there is that if somebody else can't use your code, they have no incentive to review it and upgrade it if need be.
Where if you can use, let's say, a Bitbox's code and you have an incentive to review it because maybe you'll use it, you'll check it for any bugs or anything like that.And if you identify a bug, you'll probably notify Bitbox and they'll fix that bug.
So that is the key difference, is that you can't copy the code.
So it's a legal difference?
Yeah.And what are the good things for a hardware wallet? I think track record's a good thing.You don't really want to be using a hardware wallet that dropped two months ago.And it doesn't have a long history of working well.
It hasn't been battle tested.For example, the Trezor is the first hardware wallet.The Trezor is the most battle tested hardware wallet. And we know that it's pretty secure.
There was a issue with the old Trezors where you could extract the seed phrase if you were very sophisticated and you had the physical device.Now Trezors introduced a secure element chip, so you can't actually do that anymore.
But battle-tested is a very good thing.Bitbox, cold card, Trezor are all pretty battle-tested.Another one I like, AirGap.
But I know there is an argument that AirGap doesn't really make a difference, because at the end of the day, you're still communicating via SD card with your computer.I know when you plug in something, you're still communicating data.
Some people will argue that via SD card, you can tell what that data is.But when you plug it in, it's more blind.You can't exactly tell what data is being communicated.So I like AirGap.Some people argue that it doesn't really make a difference.
And another one is altcoin support.If you're Bitcoin-only, people tend to like a Bitcoin-only device because the developers hyper-focus on securing Bitcoin.They don't have this noise of just securing a thousand random shitcoins.
So that is another one, another thing I look for in a hardware wallet.
For this AirGab, AirGab means there is no cable between your hardware wallet and your computer, but you still have to communicate and the communication is then an SD card.
Yeah.SD card or QR code or I believe NFC as well.
I mean, I'm not technically enough for that actually.And AirGap was always one topic where I was like a little bit like, why do we need AirGap?
Like if there's like a communication in the computer, like does it even matter like what communication line it is?And for people it's really easy, especially for newcomers, like just like, take your cable and plug it in the computer.
That's how they used to do it.But what's the argument for like using an air-gapped hardware wallet?
Yeah.So the argument is that if you plug something directly into your computer, you're plugging it into an internet connected device.And that has a direct link between your hardware that's securing your seed phrase and the computer.
And you can't really tell what information is being transmitted between the two. So for example, if you're plugging in a ledger into your computer, you can't read the code of that.Perhaps the computer can access your seed phrase.Who knows?
The argument with AirGap is that because it's never even plugged into a internet connected device, that's just not possible. because it never touches an internet-connected device.You use it fully air-gapped.But there is still some communication.
You still need to use your computer to build Bitcoin transactions.You take your SD card or your QR code, you plug it into the air-gapped device, and you sign that transaction, and the SD card goes back into the computer.
There is communication there, but it's more easy to audit.You can see exactly what the call card's written to the SD, and you can see what your computer's written to the SD card.
Where if you're just plugging it in a ledger, you can't really tell what's being transmitted between the two.
So there is not one hardware wallet that is completely actually air-gapped, that has absolutely no communication outside of that hardware wallet because you always have to communicate somehow.
Yeah, well, AirGap is per definition, it just means it doesn't connect directly to the computer.So the cold card can be used fully AirGapped, but you still do need to communicate somehow.And it is AirGapped, right, but
That just means you're not plugging it directly into the computer.You still communicate via SD.
Maybe a question that is stupid, but like, why not making a hardware wallet where you can do everything on there and you don't need a computer, don't need a communication computer directly?
Is it possible to build the computer inside of the hardware wallet to do it all there?
The thing is you need to actually broadcast your Bitcoin transaction to the network.So there does need to be some sort of connection to the internet.
And if you had a hardware device that did connect to the internet, you would be defeating the purpose of the hardware device. The the point is to be completely offline.
So even building your your Bitcoin transaction That needs to be done connected to the internet so that you can fetch your transaction history You can fetch your Bitcoin balance and you can build that transaction you know, with all that information.
Absolutely.That's a really good point.Like if you build everything you need into the hardware wallet, then it's kind of like no longer offline.It's an online device.And then it's like a hot wallet. in that moment, then moving forward.
Yeah, really good.It's basically then a phone.If you have a wallet on your phone, it's kind of that, even though like different, but it's kind of that.
And you have a pinned tweet as well, also interesting and fitting in that topic with how secure is your backup phrase.And I actually got the question, I think like,
I think a month ago or something like that, from a person that was kind of into Bitcoin.And he was asking me, okay, how Bitcoin?He's already, why Bitcoin?But he's like, no, how Bitcoin?And he asked me, oh, the 24 words.
And then I was like, then he was asking, where are those words coming from?I was explaining to him, like, oh, it's a set of words.And then I can guess it, right?Then I can just run it through a computer program and guess anyone's codes.
I also remember one funny tweet, where someone was like, Oh, I guess someone's someone's hardware wallet.But there's no Bitcoin on there.So I guess someone's backup seed phrase, but there's no Bitcoin on there.No, you just created a new wallet.
But talk to me like, why this is nonsense.And what else are you covered in that short video that you pinned to your profile?
Yeah, so that video is very fascinating.My pinned tweet on Twitter, it's a 24 word seed phrase is 256 bits.So it's 256 ones or zeros.
And your seed phrase is just essentially a random number, a whole bunch of ones and zeros until you reach 256 characters.
And because of the power of exponentials, it's actually very difficult for the human mind to comprehend how large that number is and how statistically impossible it is to recreate that number.
And in that video, I explained that guessing one 24-word seed phrase is equivalent.I can't remember exactly the video I filmed quite a while ago, but it's equivalent to guessing something like a star in the random universe.If you get that right,
you need to guess a grain of sand on earth.If you get that right, you need to guess a human cell in the body.And if you get that right, there was one more thing you had to guess some ridiculous thing.And that's equivalent to cracking a seed phrase.
So just because of the power of exponentials and huge numbers, replicating a seed phrase is just impossible.
And then if you have a lot of Bitcoin, you should also have it in multisig.And this makes it on top of impossible, double impossible, I guess.
Yeah, yeah.With multisig as well, you need, let's say you have two of three multisig.This will be quite complex.But if you have two of three multisig, you you can't only guess two seeds.If you guess two seeds, you still can't spend the Bitcoin.
You actually need to guess three seeds, even though you only need two to spend, because you need three public keys.You need the public key for each seed phrase, and then you can use the two, whichever two you pick.
So it's already impossible to crack a 24 seed phrase.Cracking three of them, triple impossible.Impossible times three, yeah.
Impossible times, times three.I love that a lot.Yeah.But it's, it's, I guess, a beginner question that comes up a lot.I still see it.Yeah.I was like, Oh, yeah, then I can just guess.Go to a math class.
One more topic that I wanted to discuss with the Bitcoin hardware thing, and I hope we kind of covered the beginnings of everything a little bit.So like people have like an overview of that and then can go deeper in some topics.
UTXO management, I think it's something that is overlooked a lot, even with people that have hardware wallets and even though you have a little bit of an understanding how to secure the Bitcoin.
I made a whole one hour video with Wicked on UTXO management.Maybe I think about it when I publish the video and link it or you can just like search Wicked on my YouTube channel. It will also pop up.
But what is the importance of UTXO management when thinking about self-custody and why should someone even begin to research what is UTXO management?
Yeah, so the best way to think about it is, this is the example I like to give people.You have a wallet, just a normal wallet in real life with your notes and your coins in.
Would you rather have $100 in that wallet or would you rather have $101 coins? I don't know what coins they use in the States, but I'm sure there's a dollar coin.So would you rather have a hundred dollar note or a hundred single coins?
Of course, you'd rather have the $100 note.And Bitcoin wallets are similar.You don't want a whole bunch of small little Bitcoin amounts in your wallet.You'd rather have larger amounts.
And the reason for this is, by the way, let's first explain what a UTXO is.Every time you receive Bitcoin, you receive a new UTXO. Every transaction is a new UTXO.And if you have, let's say you've received Bitcoin 10 times, you'll have 10 UTXOs.
If they're all small amounts, that's like receiving 10 $1 coins instead of $10. And when it comes to Bitcoin transactions, they're priced dependent on how much space you take on the blockchain.
There's this misconception that if you spend, like in the fiat system, they'll charge you a transaction fee based on the amount, where in Bitcoin it charges you based on how much space you take on the blockchain.
So if I need to spend 10 UTXOs or 10 $1 coins, that's going to take a lot of space and effort to spend.Where if I have just a $10 note, it's equivalent to 1 UTXO, it's a lot more efficient and therefore you pay less in fees.
The more UTXOs have, the more expensive your Bitcoin transactions are.The solution is to combine your UTXOs together to create larger UTXOs and have fewer of them.
It's equivalent to taking your dollar coins, going to the bank, giving them 10 and getting them a $10 note back.
And when you spend coins, instead of spending 10 ones, you spend a $10, you're taking less space, less fees, and you're going to save a lot of money. One of the key problems is people are like DCAing Bitcoin every week.
They buy $100 and it's draw to self-custody.If you've got $1,000, you've got 10 UTXOs.It's better to build a balance first, then withdraw.So you have one large UTXO instead of 10 small ones.Spending becomes a lot cheaper.
I love that idea. And there's like two things.First of all, you have a wallet already and you want to combine them.That's basically making one transaction to the same wallet to combine all this UTXOs.
And then it's also like your UTXO plan of, okay, you accumulate Bitcoin on an exchange and then you have your self-custody solution.How do you go ahead and transfer it?
I always hear the amount of 1 million Satoshis you have to gather, then transfer it.Is 1 million Satoshis enough?
What should people do that where like 1 million Satoshis is like a lot of money already, like it's like a half a year of stack or something like that.Yeah.What do you, how do you think about that?
Yeah.Firstly, one thing I will say is when I'm explaining UTXOs, it's a bit hard to explain it without a visual representation.
So I've got a YouTube video on UTXO management where I actually run through it in Sparrow, and I compare the fees, and it's a bit easier to explain when you've got a wallet open.So if that was a bit confusing, I would recommend watching that.
And then regarding minimum UTXO size, I think it really depends on your stack size and what you do with your Bitcoin.Because if you're spending Bitcoin, you're going to treat your UTXOs very differently to a long-term hodler.
If you're strictly long-term holding, I would say a million SATs is a good amount.If you're spending Bitcoin every day, you don't need to have a million SAT UTXO.You can get away with having 100 SATs if you're spending Bitcoin.
So I have two wallets, two main types of wallets.I've got a long-term HODL stack and a spending stack.For your long-term HODL stack, 0.01 Bitcoin or a million sats is a good minimum, I would say.Is that a million?
Yeah, 0.01 is a million sats, I think.
Yeah, that's a good amount, yeah.For your short term stack, you can get away with having a smaller amount, maybe 100,000 sats.But it also depends on how much Bitcoin you have.If you have 10 coins, do you really want a 0.01?
Maybe you want a 1 Bitcoin as your minimum.So it depends on two things, your stack size and what you do with your coins.Is it short to medium term or is it long term?But 0.01, generally speaking, is a good minimum.
Absolutely cool.And also one thing that I only learned actually, I think like 10 months ago or something like that, when you have multi-sig, obviously, then it comes, you need a little bit more if you want to have the same security.
So like with single-sig and multi-sig, there's a small difference where you need a little bit more of satoshis to be safe.I guess if you have the same image.
Yes, yeah.Well, yeah, the thing is with multi-sig is like I was explaining earlier, Bitcoin is price dependent on how much space you take on the blockchain.
Because multi-sig requires multiple signatures, you're actually leaving more data and you're taking up more space on-chain because there's simply more signatures involved.So, exactly.
I think 0.01 could be okay for multi-sig, just understand that when you spend that, the fee will be higher for multi-sig than it will be for single-sig.
Absolutely.Yeah.When someone go up to a layer two, like what is the amount of Bitcoin where you say like, all right, that is like you're getting, you're spending so much on fees on the layer one already.
It makes sense to have like a stack just on a lightning layer two, for example.
Yeah, again, I think this depends on what you're doing with your Bitcoin.Here in South Africa, we've got a lot of places to spend Bitcoin and a lot of my friends are orange-pilled.
So because I'm capable of using Lightning daily if I want to, and because I am my friends and I transact over Lightning, it makes sense for me to have a fair amount of Bitcoin in Lightning. What is 100,000 sats?
The price is too volatile to know, but 200,000 sats maybe in Lightning for me.
But if you're somewhere where you can't actually use Lightning, you're not using it, you don't have somewhere to spend it, you don't have friends you can transact with, I don't really know if you even need Lightning in the first place.
For larger amounts, I just always do on-chain.
100,000 Satoshis are currently 72 US dollars.Because one million Satoshis you get now for 721 US dollars, obviously the current price then it will fracture.
Because yeah, and then 10 million, 7,000, and then like a hundred million, because a hundred million Satoshis is one Bitcoin, 72,100 currently.So we, we, I think we, did we, did we hit yesterday the all time high?
We did.Yeah, we didn't. I've been watching actually.I've had the chart open with the all-time high marked and no, we didn't quite surpass it.
It's so frustrating.We were so close.I think we were just like a few hundred dollars or like a thousand dollars or something away from it.
Yeah.Yeah.Like a thousand.Yeah.A thousand dollars. Frustrating.Frustrating.Yeah.
Very cool.Perfect.Before we come to the end routine and then closing this up, is there anything that you want to add to this episode?
Anything that you feel like is missing in that discussion where like, okay, let's, let's, let's add that thing also here.
Yeah, I will say a lot of the when people ask how much Bitcoin should have in Lightning or what should my minimum UTXO be, it's very difficult to answer without knowing what exactly you do with Bitcoin and how much you have.
These are the difficult questions to just give estimates for because if you have 0.1 Bitcoin and you have 10 Bitcoin, your UTXO management is very different.You should treat it very differently.
If you have 0.1 Bitcoin, perhaps you have a 0.07 Bitcoin and a 0.03 for maybe shorter term to medium term spending.I don't know.If you have 10 Bitcoin, maybe you don't want any UTXOs under one coin and your long term hodling.
So it's very tough to answer these questions and it really depends on your size.And I think you need to understand UTXOs, how the fees work, and then come up with your own plan
But generally, if you are a long-term hodler, you've got a decent amount of Bitcoin, 0.01 is a good amount to have as a minimum.
Another thing is, I spoke about earlier is, again, I'll bring this up again, is the complexity, balancing complexity and security.It is perfectly fine to start slow, especially if you're dealing with smaller amounts.If you've just got into Bitcoin,
Use a hot wallet.People tend to disagree with this.They say never use a hot wallet, always have cold storage.I store Bitcoin in hot wallets.I have a decent amount of in-hot wallets and I use that for medium to short-term spending.
And I've never had a problem.Hot wallets are a lot more secure than people actually think.So it's okay to start with a hot wallet, understand seed phrases, understand how to receive and send Bitcoin.
And once you've been stacking for a few months, you've got a decent amount of Bitcoin, get your first hardware wallet. And, you know, work from there.You've got a hardware wallet, understand how it works.
You can sign Bitcoin transactions offline and get familiar with that tech.Then look into maybe increasing complexity.If you have a lot more Bitcoin, consider a passphrase or consider a multi-sig.
So I'm a firm believer, a big believer in that your setup should evolve over time.You shouldn't get Bitcoin and jump into multi-sig.It should be a step-by-step process.
Absolutely.I love that a lot.Really cool.Perfect.Then let's come to the end routine or not the end routine.A question that I ask every one of my guests is what can we learn from you besides all things Bitcoin?
What can you learn from me?I'm not sure. about my whole life has been Bitcoin.I don't know.I'm only 21 years old and basically everything I've done with my life is Bitcoin.So I love to train.I love to train boxing, MMA, go to the gym.
So if you want to do pads, that's what you can learn from me, I guess.
Really cool.I love that a lot with training.Right now, actually, I think like a few days ago on Monday, I switched from gym to calisthenics now because I wanted to try something new out.And it's really challenging for me because I'm so tall.
I'm two meters and gym is way easier if you're two meters.Calisthenics is really It's something challenging for me, but I always like to do that really cool.
And you are boxing and that's your main training thing, or do you also train more something else?
Yeah, I train some form of martial arts, Muay Thai or boxing twice a week.And then I also have a gym membership.So I'll go there about three or four days a week.
Really cool.Thank you so much.We have an end routine in the podcast where the previous guest is actually asking a question for the next guest without knowing who the next guest actually will be.
And the question for you is from the previous guest, will Bitcoin become a world reserve currency in our lifetime?
Yes, I would say so.In my lifetime, yes.Perfect.
So within the next like 80 to 90 years or maybe 100 years, depending on life expectancy.
Yeah, unless something tragic happens.Yeah.
Absolutely.Really cool.Thank you so much.Before I let you go, where can people find you, ask you questions, DM you, watch your videos?
Yeah, so on YouTube, I'm SouthernBitcoiner.On Twitter, it's ColTU.And then I have a website, SouthernBitcoiner.com.And I help people one-on-one with Bitcoin at SecuSats.com.SecureSats was taken, so it's just SecuSats.com.
Oh, probably also SecureBitcoin was taken already.
Yeah, well, I like the S's.I like that the SecureSats or SecureBitcoin wasn't quite as smooth.But I should consider that, actually.Yeah.
Really cool.Thank you so much, Nicole, for being on.Also, thank you so much for everyone that is watching and listening.As always, I'll be back tomorrow with another episode.Bye-bye.
Cool.Cheers.Bye-bye, everyone.
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