5 key terms related to ‘self-custody’ that you must know | Posted by SatoshiLabs | March 2024

The recently launched Bitcoin ETF is doing well, the Bitcoin price is hitting new all-time highs, and the much-anticipated Bitcoin halving (what is that? – this could help you) is right around the corner. It has arrived. Easter dinner conversations will inevitably be peppered with talk about Bitcoin’s latest moves.

For relatives and friends who introduced you to Bitcoin last year (assuming market sentiment remains bullish), their gratitude might come in the form of an extra dessert. And is it for the skeptics and naysayers? Well, let’s say it’s not too late to fold them. In either case, now is the perfect time to advance the market conversation toward strengthening Bitcoin and cryptocurrency ownership. Let’s explore the world of self-care!

Here are five terms to help you have a conversation:

The easiest way to think of self-custodianship is to think of it as your own bank, with full control over your digital currency. With self-custody, you don’t have to rely on third-party services like exchanges or custodial wallets. You have complete control over your digital assets.

Here is a handy infographic that explains the concept:

Remember to have self-custody.

• you are Direct control over assetsReduces risks associated with hacking or third-party failures.
• you can Keep your information privateThis is because there is no need to disclose personal information to third parties.
• you Enjoy decentralization In its truest sense, it is personal financial sovereignty.

So what is the best way to practice self-care? Get a hardware wallet. What is that?

A hardware wallet acts as a key manager. These wallets securely generate and store private keys offline, use these private keys to enable cryptocurrency transactions, and generate public keys for receiving cryptocurrencies. Most importantly, your private keys never leave your device. This means your private keys are not exposed to the internet or potential hackers.

Here’s what follows:

Want to know more? Check out our 2-minute guide to hardware wallets.

Public and private keys play an important role in protecting your cryptocurrency assets when using a hardware wallet.

Public acts as a digital address that can be shared with others to receive cryptocurrency transactions. Public keys do not reveal any sensitive information and can be safely shared with others. You can think of it as an email address.

On the other hand, you can think of your private key as the password to your email address. This is a unique, secret alphanumeric code that grants access to your cryptocurrency assets. It serves as a digital signature when authorizing a transaction, proving ownership of the asset. As the saying goes, “It’s not the keys, it’s the coins”, it is important to keep your private keys confidential. If someone accesses it, they can take control of your cryptocurrency assets.

Note: The Trezor hardware wallet stores your private keys offline, protecting them from potential hacking or unauthorized access. Keeping your keys in a secure offline environment minimizes the risk of losing your funds.

Consider this one of the cornerstones of hardware wallet security. During the Trezor wallet setup process, you will be asked to record your recovery seed. A list of words that serves as a backup for your private key.

Some call this a master access key. The recovery seed is a ‘plain English’ representation of the random number from which all keys and addresses are mathematically derived. This is an ordered sequence of 12 or 24 words selected from a list of 2048 words.

Having a secure backup of your recovery seed allows you to recover your Bitcoin in case of hardware failure or loss of your device.

Do not share your recovery seed with anyone. Also, when recovering, do not enter the recovery seed anywhere except on your Trezor device. Under no circumstances will Trezor representatives seek recovery seeds through email, customer support, website, or any other form of communication.

Think of this as an additional layer of security for your digital assets. In its most basic form, a passphrase functions like an additional word added to the recovery seed.

Here’s how it works:

Recovery seed (+ no passphrase) = standard wallet

Recovery Seed + Passphrase = Hidden Wallet

Effectively, just using a recovery seed gives you access to a standard wallet. Each unique combination of ‘Recovery Seed + Passphrase’ grants access to its own unique hidden wallet.

Remember: your password is used to create and control access to your own hidden wallet without the need for a second hardware wallet or recovery seed. This means that your funds are safe even if your recovery seed is compromised. Just know that if you forget your passphrase, you won’t be able to recover your hidden wallet.

Well, here it is. Are you ready to have a self-custody discussion at the dinner table? Remember, with self-management, you own 100% of your coins.

Finally, here’s something to get you to the front of the table. How about telling us about Shamir Backup, a security feature that protects your Bitcoin by protecting your recovery seed from theft and loss?

Do you have any thoughts? Here are more details about this: