Custodying Your Bitcoin: Combating Institutional Control Over Your Finances

This article takes a deep dive into custodying your bitcoin. Don’t leave it in the hands of third parties, as it removes one of Bitcoin’s primary advantages – its sovereign nature.

“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”

Money is a social construct, where one party accepts it as payment under the assumption that other parties will also accept it as a payment going forward. Thus, money, and more specifically, fiat money, is built entirely on trust.

-Satoshi Nakamoto

You would be hard-pressed to find a financial system that doesn’t rely on its users’ trust in the powers that control it. This is because trust in money allows economies to work in a coherent manner, as agreeing parties are able to trade amongst each other, banks are able to lend customers money, and companies are able to attract investors to help grow their businesses, for example. 

So, what happens when the controlling parties (i.e. central banks) violate the trust their system is built on?  

To provide some insight, we can look as far back as Ancient Rome, where emperors continuously debased the silver content of the denarius to fund their lavish lifestyles and war campaigns. As expected, the buying power of the denarius decreased over time, resulting in the eventual deterioration of trade networks and rampant hyperinflation.

For a more modern example, we can look at what happened in Zimbabwe in the early 2000s. Former president, Robert Mugabe, printed trillions of Zimbabwean dollars to fund expensive military ventures and pay salaries to an inflated public sector (himself included, of course). 

Mugabe’s poor fiscal policy led to astronomical inflation rates — estimated to be running as high as 98% per day [1]. Needless to say, the hyperinflation had devastating impacts on the people of Zimbabwe, as their life savings became worthless in mere hours. To get a better idea of what this means, imagine your bank account losing half of its buying power every hour for weeks on end. It wouldn’t take long for all of your cash to become completely worthless. The inevitable result of this irresponsible policy was a drastic increase in poverty and unemployment rates, bringing the Zimbabwean economy to a full stop.

Red Flags Everywhere?

Former UK Prime Minister Winston Churchill is often quoted as saying “Those that fail to learn from history are doomed to repeat it.” If we take Churchill’s advice and study history and the impacts different leaders’ decisions have had on their people, we see a common theme: those who make the money make the rules.

In neither one of the above scenarios did the common person ask for their hard-earned money to be debased. The debasement occurred because of their leaders’ greed and corruption – a direct abuse of trust. 

Unfortunately, this abuse of trust still occurs in today’s financial landscape, with one of the most recent examples being the FTX collapse. As one of the largest crypto firms in the world, FTX was once valued at over $40 billion. In November 2022, it was reported that up to $10 billion in customer funds were transferred by FTX CEO Sam Bankman-Fried to his trading firm Alameda Research [2].

This report, combined with Binance’s announcement that it was liquidating its stake in FTX, led to a ‘bank run’ by FTX’s customers. In response, FTX halted all withdrawals on their platform, and in their bankruptcy filings they outlined a “severe liquidity crisis”. This meant that customers no longer had any access to whatever funds they had stored on FTX as the company didn’t have the money to pay their customers for the assets they owned. In the end, it was estimated that over $8 billion in customer funds were lost [3]

Just as the average citizen trusts that their rulers will not abuse power, so too did FTX customers trust that Sam Bankman Fried would not rehypothecate their funds. Instead, Bankman-Fried and his associates were corrupt and overcome by greed, leading to one of the largest cases of fraud in recent history.

Self Custody: This Isn’t a “Crypto” Problem

While many critics (deservedly) throw FTX under the bus, if we analyze history, we note that this misallocation of funds is not necessarily unique to crypto but instead more likely indicative of a broader theme of human greed and power. As government entities lack the proper financial incentives to remain in check, they typically abuse their positions of power, resulting in consistently declining trust in institutions. This typically results in additional oversight and lack of individual privacy and freedom, evidenced by enhanced controls over consumers’ personal finances.

One such example is Justin Trudeau’s regime, who, in 2022, ordered banks to freeze the bank accounts of thousands of Canadian citizens who had any connection to the ‘Freedom Convoy’ — a peaceful protest against drastic Covid policies. We also saw European governments act in bad faith after the Great Recession in the late 2000s and early 2010s. Greece, for example, taxed their  citizens at astronomical rates in order to pay off exploitative loans taken from the IMF (see Alex Gladstein’s book “Hidden Repression” for further information regarding the IMF’s lending practices).

Barney Mannerings, co-founder and CEO of Vega Protocol, explains that when governments decide “that you can’t spend [money] a certain way, or that they want to freeze your money, you suddenly discover it’s not really yours. You don’t really have that full control.” [4]

Not only does the current financial system prohibit you from truly controlling your own funds, but it also permits banks to take on excessive risk and make a profit through a mechanism known as fractional reserve banking.

In short, fractional reserve banking is a system that only requires banks to hold a fraction of your deposits on hand. They are free to use the rest of your funds to do a number of things, including but not limited to lending it out or investing it in approved securities. The actual ratio varies from country to country and can change as deemed necessary by regulatory parties. In the US, for example, the Federal Reserve completely eliminated banks’ reserve requirement in response to Covid-19. By lending out more money than they hold on their balance sheet, banks open themselves up to the possibility of a bank run. Therefore, instead of banks keeping your money safe, they are leveraging up in order to maximize profits. This remains the case today where banks show excessively high leverage ratios of up to 26.88.[5]

This system of fractional reserve banking promotes excessive risk taking and can have catastrophic impacts on consumers such as those caught up in the recent Silicon Valley Bank (SVB) collapse. SVB was using their customers’ funds to invest in US Treasury Bonds. When the US Federal Reserve started raising interest rates, however, SVB went upside down on their investment. When customers got word of this, they started to withdraw their funds, leading to a bank run. The problem with this was that SVB didn’t have enough money to fulfill the withdrawals, as most of it was lost in their investments. 

Not only was this detrimental to SVB customers, but it could have also led to a contagion effect. Luckily, the Fed stepped in to help mitigate risk and stop the spread of fear across the nation. While interest rates remain high, however, the risk of a contagion effect still exists.

What history shows us is that an individual’s power over their finances has almost always been granted (or denied) at the discretion of banks, governments, and financial institutions. History also shows us that these same parties continuously put their interests above ours. If we know both of these claims to be true, then it is clear that we cannot trust our current financial system to work with our best interests in mind.

DeFi vs CeFi: A Misalignment of Incentives?

In order to avoid having your personal finances controlled by selfish institutions, it is important to first understand the difference between centralized and decentralized custody.

Currently, if you have your funds on centralized platforms like a traditional bank or Venmo, and they don’t like what you’re doing, they can cut off your access to those funds because they are centralized (CeFi). This means that all transactions must go through a central point: the provider — who has the authority to approve or deny any transaction. Contrastingly, decentralized finance (DeFi) is intended to function without the need for a central agency, as transactions are confirmed by the network itself (see image below).


There are many properties of DeFi, but some of the most prevalent include public verifiability, non-stop market hours, and custody [6].

Public verifiability refers to users having the ability to publicly verify an application’s execution and bytecode on a blockchain. In the Bitcoin community, there is a common saying: “don’t trust, verify.” This phrase reiterates this core property of DeFi, as there is no need to trust the provider if the code is publicly verifiable. 

One of the most obvious differences between CeFi and DeFi is their ‘hours of operation.’ It is almost always the case that CeFi markets have at least some downtime. Look at the NYSE for example: it is only open 9:30 AM – 4:00 PM Monday through Friday. DeFi markets, however, are open 24/7 since blockchains are based on code and code never sleeps.

The main benefit of having non-stop access is that DeFi exchanges are immune to performance outages that occur on CeFi exchanges in times of overwhelming demand. For example, many exchanges halted trading on GME during the GameStop short squeeze in an effort to mitigate liquidity and solvency concerns [7]. This cannot happen in DeFi because no single entity controls it. 

Of the three properties previously mentioned, the one that is most relevant to the scope of this article is custody. Contrary to CeFi, DeFi allows its users to control their assets directly and at any time. This means that users aren’t restricted to a bank’s hours of operations should they wish to manage their digital assets. Traditionally, digital asset custodians (entities responsible for holding and protecting your assets) are regulated by the Securities and Exchange Commission (SEC). But, through historical analysis, we note that during times of financial stress, these entities will put their interests above those of the masses. DeFi gives users complete control over their assets and by having complete power and authority over their own assets, users effectively become financially self-sovereign. Thus, they cannot fall victim to institutional greed and corruption as they are the ones who dictate what happens to their digital assets.

But What Exactly Is ‘Decentralization’?

It is worth mentioning that many projects in the crypto space claim to be DeFi, even though they hardly have any properties associated. In fact, it is extremely rare (if not impossible) to find any project in the space that is completely decentralized. 

Decentralized blockchain networks are made up of computers (commonly referred to as nodes) that interact with each other directly, on a peer-to-peer basis, without the need for third parties. As previously mentioned, no one has to know or trust anyone else in the decentralized network because each member, or node, has a copy of the exact same data in the form of a distributed ledger. Moreover, each participating node operates independently of others, connecting using common rules as opposed to following instructions from a central authority. This allows nodes to maintain their sovereignty and manage their own privacy, keeping the network secure and ensuring relatively democratic governance [8].

Having analyzed the growing list of cryptocurrencies that have been classified as securities, we note the SEC expressly called out the high degree of centralized control associated with the issuer. This issuer manages the network and/or promotes and sells an initial offering of tokens [9]. This directly contradicts the fundamental properties of DeFi and exposes vulnerabilities for developers to exploit code via rug pulls and pump-and-dump schemes

Bitcoin, on the other hand, has a decentralized blockchain designed in such a way that it is extremely unlikely to ever give any one person or entity control. As explained by Satoshi Nakamoto in his Bitcoin whitepaper, “[the nodes in the Bitcoin network] vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them. Any needed rules and incentives can be enforced with this consensus mechanism.” [10] Effectively, Bitcoin is a trustless protocol, completely differing from the fiat system that is in place today.

In addition, the Bitcoin blockchain is immutable, meaning that transactions are irreversible and visible to anyone, further establishing the trustless nature of the protocol. Finally, there is no central issuer – as new coins are issued as rewards for miners. With nodes spread around the world that are operated by individuals and billion-dollar institutions alike, Bitcoin embodies the true meaning of decentralization that is next to impossible to identify in any other “crypto” project.

Cold Storage Enables True Self-Sovereignty

If you are utilizing decentralized assets like bitcoin because of the self-sovereign status it affords you, keeping them on a centralized platform would be contradictory to one’s goal. This is where self-custody comes into play, providing individuals with the ability to always remain in full control of their assets. However, a wallet is required to store your bitcoin.

There are two main types of wallets that can be used for self-custody: hot wallets and cold wallets. Each method has its own pros and cons as they vary in the level of security they provide as well as the ease of use they offer.

Hot wallets, which are connected to the internet, are more efficient than the other types of wallets, allowing users to quickly and easily trade their assets. One of the most well-known examples of a hot wallet is Coinbase Wallet.  

Given their connection to the internet however, these wallets open themselves up to more vulnerabilities, as users’ private keys are always online and thus more directly exposed. As such, hot wallets are significantly more susceptible to hacking, theft, and phishing attacks. If a hot wallet is infected with malware, the private keys, and thus the digital assets within the wallet, could be compromised. In addition, many hot wallets, such as Coinbase Wallet, are managed by third-party providers, which means that users aren’t in complete control over their digital assets [11]

Instead, as Gemini explains, “just like you can withdraw cash from an ATM, you can send more crypto to your hot wallet when the balance gets low.” This allows users to to take advantage of the ease of use and immediacy of access that hot wallets offer, without putting their entire portfolio at risk.

Thus, if your goal is to achieve complete financial sovereignty, hot wallets are not an effective storage method.

Cold wallets, on the other hand, maximize security at the expense of speed. Contrary to hot wallets, private keys are stored offline on a device that is not connected to the internet. Because the private keys are stored completely offline, it means that human involvement is required to sign each transaction on the blockchain. The biggest advantage this provides is that the device is effectively ‘un-hackable’ as it is never in contact with any online systems. The downside is that these wallets are too slow to support frequent trading as waiting periods can take anywhere from 24-48 hours per transaction [12].

By storing your bitcoin on a cold wallet, you are eliminating the possibility of losing your funds due to the errors or greed of third parties. It doesn’t matter if an exchange like FTX pauses withdrawals to avoid a bank run because they were exposed for stealing customer funds – your bitcoin is safe because it is in your hands. You are financially sovereign.

Problems With Cold Storage Today

While being self-sovereign has many advantages, one of the biggest downsides is that the user now absorbs all technical responsibility, unless it is underwritten by an insurance agency. It is vital to understand that if you are truly self-sovereign, but you aren’t completely sure of what you are doing, you could easily lose access to all of your assets, and no one will be able to help recover them. This risk is a common reason users keep their decentralized assets on centralized exchanges.

Another significant reason digital asset owners keep their assets on exchanges is the large amount of education that is necessary to both understand and utilize cold storage; something this article hopes to shed light on.

Bitcoin analyst and Trezor spokesman Josef Tetek helps us to understand how the cold storage industry is addressing the problem of utilization, explaining that “usability is the foundation of all Trezor products.” He states that “in terms of making self-custody easier for newcomers, we are constantly improving the user experience of all processes based on ongoing user research.” For example, Trezor avoids using too many technical terms in the user interface and instead focuses on explaining critical concepts, such as “recovery seeds”, in more natural terms.

When asked about how Trezor works to make the bitcoin buying experience as simple and seamless as possible, Tetek explained that “by working with our sister company, Invity, users can buy, sell or exchange cryptocurrencies directly within the Trezor Suite environment. It’s convenient, fast and secure. In addition, users have the option to set up a DCA savings plan within Trezor Suite, which is made possible by our partners.”

Choosing The Cold Wallet That Fits Your Needs

Securing your bitcoin on cold wallets is a crucial first step in claiming your financial sovereignty, but when there are so many options out there, how do you know what the right choice is? 

Everyone has different needs and thus, a wallet that may be ideal for some may not be the best option for others. Typically, there are several key properties that are important to be aware of when deciding on a cold storage method.

– Open-Source Wallets

Inevitably, many of the core properties of DeFi are also key characteristics that users look for when choosing a cold wallet. Circling back to the phrase “don’t trust, verify”, we can understand the importance of a wallet’s source code being open-source (or at least publicly verifiable). This eliminates the need for users to trust the provider when they say there’s no back door, as users can verify for themselves whether or not they are being honest. 

– Air-Gapped Wallets

Standard hardware wallets, like the Trezor Model T, are isolated from networks most of the time, greatly decreasing their chances of being hacked. They do, however, require connection to another device in order to complete a transaction – meaning they must be connected to a network while the transaction is taking place. Some may consider this to be a severe vulnerability and may instead opt for cold wallets that are air-gapped. 

Air-gapped is a term used to describe devices that have no direct connection to the internet or to any other device that is connected to the internet. An air-gapped device is much more secure than a device that is not, as it is 100% isolated from outside networks. These wallets work by signing transactions in an offline environment and utilizing QR codes or micro-SD cards to exchange information with online devices [13]

While air-gapped devices provide much more protection against attacks from hackers and malware, they are still susceptible to physical threats like theft and physical altercations to the hardware and software. Some air-gapped wallets like the Ellipal Titan Wallet are tamper-proof and programmed to self-destruct if malware is detected, offering a layer of physical protection as well.

– Multisig Wallets

Most hardware wallets utilize single signature setups, which means they only require one set of keys to sign a transaction. For many, this is plenty of protection as Casa co-founder Jameson Lopp has explained that if you are “storing your keys on a dedicated hardware device, then you are probably already in the top 1% in terms of your security model.” [14] However, for businesses and high-net-worth individuals who need to store large amounts of bitcoin, a single key solution may not be enough protection. 

This is where multi-signature (multisig) wallets come into play. These wallets are configured so that multiple signatures from multiple devices are required to complete a transaction. Multisig offers users increased security and protection from both cyber attacks and physical attacks. For example, if someone were to break into your home and access your wallet, they would still need more than one set of keys to actually get access to your bitcoin.

Multisig is also very flexible, as app developers can choose the total number of keys (n) and the number of keys required to sign a transaction (m). The multisig configuration is known as ‘m-of-n’ or ‘quorum’. This setup may be ideal for businesses who want to protect their bitcoin from a single point of failure. For example, if a company were to distribute multisig key access across all five of its shareholders and they had a 3-of-5 configuration, that would mean at least three of the five shareholders would need to sign a transaction in order for it to be confirmed on the blockchain. Generally speaking, the greater the number of both m and n, the more secure your wallet is [15].

– Shamir Backups

Similar to multisig wallets, Shamir Backups (also known as Shamir’s Secret Sharing) allow you to produce as many as 16 different shares of your recovery phrases. Still, a minimum quorum is needed to sign transactions. So, if you were to produce five shares, for example, and you lost one and another got stolen, you could still access your bitcoin by using the other three shares.

The main difference between Shamir Backups and multisig wallets is that Shamir Backups are an off-chain scheme, meaning that there is no on-chain transaction needed or fingerprint left when you are backing up or restoring the wallet [16]. Whereas on a multisig wallet, the rules are enforced via an on-chain script.

Shamir Backups allow users to separate their seed phrases across multiple locations while still requiring only one device to sign transactions. While this offers convenience for users, the tradeoff is a lower security threshold. For example, if a user’s ‘master device’ was compromised in any way, their entire bitcoin balance would also be compromised. Compare this to  a multisig setup, where even if one of the devices were compromised, the user’s bitcoin balance would still remain safe.

– Multi-Party Computation

One of the most recent developments in the wallet infrastructure landscape is Multi-Party Computation (MPC). This technology allows users to split their private keys into multiple encrypted shares that are divided amongst multiple parties. Each of these parties holds a part of the key that when joined with the others, enables transactions to be made with the wallet [17]. MPC therefore enables these parties to evaluate a computation without ever revealing any of the private data held by each party (or any otherwise related secret information) [18]. This ensures that no one user has full knowledge of (and thus access to) the wallet.

While similar in nature to a multisig wallet, a key difference here is that these shares can be dynamic. For example, one of the shares may be a single-use share with a timed expiration. You can think of this like a multi-factor authentication code that is sent to your phone – usually, these expire within a certain amount of time in order to enhance security. 

In addition to increasing security by ensuring no one party has control over the wallet, MPC wallets are also extremely flexible. They can be designed to accommodate any number of signing parties, enabling a wide variety of user roles and permissions.

One of the potential drawbacks to MPC wallets, however, is that the technology is fairly new and complex, and vulnerabilities are still being found to this day. As such, there remain only a few providers who can correctly provision secure MPC wallet infrastructure which can often come at a high cost to those who wish to utilize MPC.

Cold Storage Promotes The Bitcoin Standard

If you’ve made it this far, a couple of things should be clear: 

  1. If you own bitcoin, or any digital asset for that matter, you need to utilize cold storage; 
  1. There are many cold storage options available — understanding the differences is an important part of keeping your bitcoin secure. 

History has repeatedly shown us that those who control the money also make the rules. For example, in the early 20th century, the German mark went from 8 marks per dollar to 4.2 trillion marks per dollar in the span of six years. This was due to the German government’s decision to combat inflation through excessive printing — sound familiar, America? 

Case studies like this help explain the need for a currency that cannot be readily debased by corrupt governments. As an immutable, decentralized blockchain whose supply is limited, Bitcoin is extremely expensive for any one entity to control or manipulate. This gives its users a way out from the corrupt monetary systems that are currently in place. 

Given its decentralized nature though, Bitcoin cannot be stored the same way you would normally store funds. Many financial institutions have attempted to store their customers’ digital assets, but they have also proven that they are not always best suited to protect these assets. In 2014, for example, bitcoin exchange Mt. Gox was hacked and 740,000 of their customers’ bitcoin was stolen. This was possible because Mt. Gox held the private keys for their customers instead of their customers holding their own private keys – leaving their bitcoin vulnerable. In addition, numerous insiders attributed the cause to be traced back to a messy combination of poor management, neglect, and lack of experience [19].

History has shown that users who do not self-custody their bitcoin risk losing it due to greed of others (FTX), and/or incompetency (Mt. Gox). This makes a hardware wallet the most applicable solution. As Josef Tetek explains, “Fear of losing bitcoin to an inept exchange operator might be the initial impulse to buy a hardware wallet, but the long-term motivation to keep the coins in cold storage comes from the desire to keep a peace of mind that is gained from the knowledge that no-one can touch the coins secured by your [device].” If you want to be truly financially sovereign (i.e. having complete control over your money), you must utilize cold storage. 

It’s clear that there are advantages and disadvantages to the different types of cold storage that are offered today. For example, a multisig wallet offers some of the best security within the cold storage space, however, it is extremely inconvenient to use in day-to-day transactions. Conversely, a standard open-source hardware wallet offers much more convenience in terms of usability but lacks the security of multisig and air-gapped wallets.

If we are going to move towards a society that utilizes bitcoin in our everyday life, it would be foolish to utilize only one type of cold storage. A similar parallel can be identified in today’s financial space as we have many different types of accounts that serve different purposes. We have checking accounts for money that we use daily, savings accounts for money that we use less often, and trusts for money that we look to pass down to future generations. 

We should apply this same logic when thinking about how we store our bitcoin. For daily transactions, we can use hot wallets like bitcoin lightning addresses. These would be similar to debit cards, as they enable extremely fast transactions. Being hot wallets, these are obviously highly lacking in security, so we wouldn’t want to keep much bitcoin on there — just enough to get through the week, for example. We can utilize open-source or air-gapped wallets for more secure storage that still allows some convenience to add to your lightning address as needed. For long-term storage for bitcoin that rarely, if ever, gets used, ultra-secure cold storage methods like multisig or MPC make the most sense, considering that these accounts will likely have the most bitcoin in them. In short, the more bitcoin that you are storing, the more secure your storage method should be.

However you decide to store your bitcoin, one thing is clear: don’t leave it in the hands of third parties, as it removes one of Bitcoin’s primary advantages – its sovereign nature. To have complete control over your money, you must have complete control over its storage. As such, the case for cold storage is clear: if you want to avoid the impacts that the greed and incompetence of governments and financial institutions create — keep your bitcoin in cold storage.

Sources and Citations:







[7]. Ibid.













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Against War? Buy Bitcoin

Hamas’ recent attack on Israel and the subsequent declaration of war by Israel’s Prime Minister Benjamin Netanyahu has resulted in over 1,300 deaths between both nations so far. Sadly, this violence and destruction is likely to continue, inevitably resulting in countless more innocent lives being lost. 

War. What is it Good For?

Many are drawing similarities between this war and the war in Ukraine, arguing that the destruction occurring is due to the actions of leaders who have no problem using their citizens as pawns in their deadly war games. 

Unfortunately, this is nothing new, as Major General Smedley Butler pointed out in his 1933 speech on interventionism: “War is just a racket. A racket is best described, I believe, as something that is not what it seems to the majority of people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few at the expense of the masses.”

In 1933, information was much harder to come by. But, with how connected the world is today, we are able to gather and analyze information at a much faster rate, enabling the “masses” to draw conclusions about what benefits “the very few” may be gaining from the wars they orchestrate. 

Since the start of the Russia-Ukraine war, the U.S. has allocated over $110 billion in aid for Ukraine. This is a lot of money, even for a country that controls the world’s reserve currency. In April, 2023, however, U.S. investigative journalist Seymour Hersh alleged that Ukrainian president, Volodymyr Zelenskyy has been embezzling millions from this aid. He reports that “one estimate by analysts from the Central Intelligence Agency put the embezzled funds at $400 million last year.” If Hersh’s findings are true, then this is a prime example of the “racket” MajGen Butler was referring to.

In the Israel-Hamas conflict, things are unfortunately not much different. According to former CIA analyst Larry Johnson, U.S.-supplied weapons, likely obtained through the black market, are being used by Hamas forces. Johnson added that “there are government officials and corporations that also benefit economically from [the black market sales of weapons].” Unsurprisingly, at least 51 U.S. politicians in Congress hold stock positions in companies that directly benefit from war in the Middle East, according to data from Unusual Whales.

Looking at these two examples, it’s not hard to figure out that war is good for one thing: making MajGen Butler’s “very few” very rich.

How Does Inflation Relate to War?

In 2016, the Obama administration signed an agreement to give Israel $38 billion in military aid. The funds have been, and will continue to be, distributed to Israel in annual payments through the end of 2028. This agreement replaced an old memorandum of understanding, in which the U.S. gave Israel $30 billion in aid between 2007 and 2018. 
Add this on to the $75 billion the U.S. has given Ukraine in the past two years, and that’s over $135 billion in aid that the U.S. has given to just two foreign militaries in the past 15 years. For perspective, this is nothing in comparison to the $5.5 trillion the U.S. has spent in 2023 alone.

Where is all of this money coming from? If history is any indicator, these wars are likely being funded through inflation. In simple terms, the government borrows large sums of money to pay for the widespread killing occurring in other parts of the world. Borrowing in large quantities like this significantly increases the money supply, inherently devaluing the dollars in your bank account. To make matters worse, this process has become cyclical, resulting in further depreciation of the dollar.

There is plenty of evidence to support this claim; all you have to do is look at the change in value of the dollar over the past 15 years. For example, $100 in 2007 would be worth $148 in 2023. You could also take a look at the U.S.’s deficit, which nearly reached $2 trillion in 2023, to see how wars can be funded through inflation.

Despite the historic deficit, Treasury Secretary Janet Yellen has claimed that the U.S. can “certainly” afford to support both Ukraine and Israel. This statement makes it clear that the U.S. has no signs to slow down its war spending any time soon. 

According to Earl J. Hamilton, the late economic historian from the University of Chicago, “wars and revolutions without taxation to cover the costs have been the principal causes of hyperinflation in industrial countries in the last two centuries.” After the U.S. Civil War, which was mainly financed by inflation, the Union saw prices increase about 120%. From 1913 to 1920 (World War I) prices increased 120% in the United States, 145% in Canada, 200% in Great Britain, and 400% in France.

Hamilton argues that one of the main reasons inflation is used to fund war is because if they were funded through other means, such as taxation, then the true cost would be revealed to the public and the war would be ended. So instead, governments are complicit in funding war through inflation, which allows them to bypass the need for widespread public approval.

Related reading: Bitcoin Is An Unstoppable Non-Violent Resistance Movement

Bitcoin Makes War Unaffordable

In a perfect world there would be no more war, but as we know, the world is far from perfect. So, we should at least look for better ways to fund these wars. As previously mentioned, one alternative to funding wars through inflation would be funding them through taxation. This poses several problems, however, as taxes can be, and often are, avoided. Moreover, it is much harder to convince the public that a war is beneficial to them when the funding for said war is taken directly out of their pockets.

Another, perhaps more realistic, solution would be funding war with hard money, or money that can’t be printed at will. This is one of Bitcoin’s biggest selling points, as its supply is limited to 21 million.

In a world where bitcoin is the reserve currency, governments would be unable to rob you through inflation. They wouldn’t be able to fund wars that only benefit themselves because they wouldn’t be able to borrow the amount of money needed to do so. The U.S. government’s deficit would actually mean something, as that money would have to be paid back with money that they actually earned; they couldn’t just borrow more money to “settle” their debts. Effectively, if the world were on a bitcoin standard, war would be unaffordable — unless the public decided that it was necessary and worth paying for.

Fixing our monetary system is a huge first step in fixing the world. It is important to understand that money is information, a way of recording how much value you have provided. If someone needs a new roof, they pay you for the service, or value you have provided to them. In turn, you are able to use that money to pay others who provide value to you.

When governments have the ability to create money out of thin air, they are disrupting this system. It gives them the ability to pay others who provide value to them (e.g., weapons manufacturers who produce bombs for use in Gaza), without having provided any value to others in order to earn said money.

Not only does this devalue the money you have actually earned through contributing value, but it also allows governments to act without the need for public approval. 

If we take away the government’s ability to print and borrow money without limitation by switching to bitcoin (aka hard money), then the government will also lose their ability to fund wars that the general public wants no part in.

Related reading:

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Joltz Launches Bitcoin Rewards API to Disrupt Loyalty Rewards Market

Loyalty rewards programs like Starbucks Rewards have changed the way companies do business. According to a CNN report, Starbucks Rewards registered 28.7 million active members in 2022. That’s a lot of coffee, and a lot of money in Starbucks’ pocket.

In total, it is estimated that over $200 billion worth of loyalty rewards exist globally, including airline miles, points, and many other units of loyalty value.

Almost all of these points exist digitally, yet practically none of them utilize public blockchain protocols like Bitcoin. So what would happen if instead of receiving airline miles on eligible purchases, you received bitcoin rewards? Joltz Rewards is on a mission to enable that with the launch of their new API.

The use of the open protocol known as Lightning network the team wants to disrupt the loyalty rewards market with fresh innovation.

Joltz Rewards Makes Loyalty Points Liquid

Most reward programs only let consumers use their points on the very platform they earned them on. For example, you can only use Wendy’s points at a Wendy’s.

Although there are some options, like travel points, which give users flexibility in terms of what purchases they can earn points with, most reward programs are closed systems. Even with airline miles, consumers are still only able to use their rewards points on travel expenses or sell them through inefficient methods. 

Overall, merchants are extremely fond of loyalty programs as they allow them to learn more about their customers’ preferences while also encouraging repeat purchases. Unfortunately for them, consumer sentiment towards these rewards programs are negative. A study from Capgemini Consulting found that nearly 90% of social media sentiment is negative towards loyalty programs, with consumers citing a lack of reward “relevance, flexibility, and value” as key pain points.

Bitcoin Rewards As A Service

Companies like Joltz Rewards are solving these problems. Pioneering what they call “bitcoin rewards as a service,” Joltz is building technology that allows bitcoin rewards to be brought to a variety of existing business environments.

Joltz launched its first product at the start of 2023, and it was the world’s first bitcoin rewards integration for popular e-commerce platforms like Shopify and WooCommerce. Merchants on these platforms can offer custom reward offers to customers for spending a certain amount of money at their store.

The obvious value in this system is that instead of earning points that expire or can only be spent at the same retailer, consumers are able to use their sats however they want, whenever they want.

By utilizing the Lightning network, Joltz also ensures seamless transactions between companies and their customers. Sats can be sent to consumers’ wallets nearly instantly, at little to no cost. 

Now, Joltz is announcing the launch of its Bitcoin Rewards API, which allows any entity to incorporate turnkey bitcoin reward experiences into their app, website, or business.

The API could be used to add sat rewards that incentivize a wide range of user behavior, including referrals, making purchases, completing an onboarding process, engaging in educational content, and more.

In addition to sats rewards, Joltz is incorporating the use of the Taproot Assets protocol to unlock additional Bitcoin loyalty use cases.

For example, loyalty collectibles could unlock exclusive token-gated content or serve as a more private login on a merchant’s website.

Instead of a simple badge on an app, consumers can now have a “badge” that potentially has value outside of the value given by the company who created it.

In a similar way as to how we see fiat currencies being interoperated with Lightning network payment rails, we could also see the network being used to interoperate across different units of loyalty value, creating an “Open Loyalty” paradigm that creates value for consumers and businesses alike. Joltz is launching its Taproot Assets wallet in the coming weeks.

Why Bitcoin as Loyalty Points ?

As Bitcoin continues along its adoption curve, consumers will increasingly value Bitcoin across all facets of their lives. Reward programs will be no different. According to Bakkt, reward programs that offer bitcoin rewards are likely to attract a younger and more successful demographic, as these are the groups that have shown the most interest in digital assets.

Generally speaking, young consumers are often one of the most valuable demographics for companies, especially in a digital age. So, it makes sense for companies to incentivize their customers to utilize their loyalty program by switching to an “Open Loyalty” model like Joltz. 

On top of the fact that Joltz has refused to offer their own token and stick to what’s best for consumers, they are enabling freedom in a historically restricted and heavily regulated space.

This wave of innovation has the power to fundamentally improve the loyalty and rewards systems today. Every business offering bitcoin-based rewards can attract Bitcoiners around the world, likely resulting in hundreds of repeat purchases and other positive of effects on businesses and consumer behavior.

One of the main benefits companies receive from offering loyalty rewards is additional revenue and tying customers closer to a brand or shop. Bitcoiners love to earn and spend sats and when a business offers a reward they deem useful we could see a powerful self-enforcing mechanism which advances overall bitcoin adoption.

With the rewards technologies Joltz is building, a disruption to the loyalty rewards market seems inevitable. 

The post Joltz Launches Bitcoin Rewards API to Disrupt Loyalty Rewards Market appeared first on Bitcoin News.

How to Buy Bitcoin Anonymously on the Internet

While scrolling through the endless rabbit hole that is Twitter, I came across an interesting platform called RoboSats — a Lightning P2P exchange.

I had been meaning to take advantage of the recent dip, and these guys preach everything you want to see from a company in the space: they’re anti-KYC, they’re open source, and they utilize the Lightning Network — needless to say, they pass the “are you the Fed?” test. So, I fired up the old Tor Browser and decided to give it a try. 

Related reading : KYC Is The Illicit Activity

Thinking to myself, “It’s just a completely anonymous platform that utilizes state-of-the-art technology to exchange currencies between strangers from all around the world — how hard could it be?”, I decided to start this venture without any outside resources. Looking back, using something like this guide would have been helpful, but I digress. 

After launching their site, I was prompted to generate a token and was presented with a bot who goes by the name of “MuchHitch469.” This robot was meant to represent me in the transaction and was not tied to my identity in any way, shape, or form (until just now, when I shared it on the internet for everyone to see).

I was then able to enter the marketplace so I could finally get my hands on some more of those cold, hard sats. There were dozens of robots in the marketplace, all with equally ridiculous usernames and all looking to sell or buy various amounts of bitcoin. I honestly felt like I was in the Mos Espa market on Tatooine looking for the next Anakin Skywalker. 

Eventually, I came across an order maker that went by “TastelessNoodle0” (a much cooler name than my bot’s), who was looking to sell anywhere from $50-$600 USD worth of bitcoin. They were looking to receive payment via Strike, but RoboSats also allows payments through several other platforms — including CashApp, Zelle, and Revolut

Related reading : Strike Embraces In-House Bitcoin Custody, Leaving Third-Party Intermediaries Behind

Something interesting about RoboSats is that each transaction has a bond. Essentially, this is collateral that both sides of the transaction put up to ensure fair play. In most cases, each side contributes about 3% of the transaction value for the bond. If the transaction is successful, both sides receive their bonds back.

So, I started the transaction by paying the bond with my Lightning wallet and submitted my invoice to receive sats from the mysterious “TastelessNoodle0.” Once Tasteless paid his bond, we were put into a PGP-encrypted chat room where I was given their Strike username. 

Up until this point, I was still weary about the possibility of getting scammed, as I would be paying on Strike before receiving my bitcoin from our friend Tasteless. I went ahead and paid him anyway because what the hell, it’s just fiat, right? Right?? 

After confirming that I had submitted the Strike payment, I was presented with an option to file a dispute, which did put my mind at ease while I waited for Mr. Noodle to confirm that he had received said payment. About 30 seconds later, the payment was confirmed and those precious sats were sent to my Lightning wallet.

In the end, it was an easy process that went much smoother than I expected and I will likely use the platform again in the future. Although, I can’t imagine being on TastelessNoodle0’s side of the transaction; who would want to sell bitcoin for fiat?

The post How to Buy Bitcoin Anonymously on the Internet appeared first on Bitcoin News.

Bitcoin vs Financial Tyranny

SatoshiLabs, the minds behind the Trezor wallet, announced the launch of the Vexl Foundation at the BTC Prague summit last week. 

In a press release, they shared that the foundation aims to restore financial power to individuals and promote personal and financial freedoms — a cause most Bitcoiners would deem worthwhile. 

The Vexl Foundation also released their Financial Tyranny Index (FTI), a ranking of the most financially restricted countries in the world. 

Indices are calculated through a ranking process made up of six categories:

  1. CBDC status.
  2. crypto legality status.
  3. cash transaction limit.
  4. money supply growth rate.
  5. social security.
  6. personal income tax rate.

According to the Vexl Foundation, the higher a country’s FTI is, the more control the State has over its people’s finances. 

These six categories used to calculate the index are real world examples of problems that bitcoin addresses. 

CBDCs Give Governments Full Control

Central bank digital currencies, or CBDCs, are digital versions of fiat currencies (like the U.S. dollar). Central banks control every aspect of CBDCs: the monetary supply, the price of transaction fees, who can and can’t send/receive payments — the list goes on. 

Read more on the subject : Can Bitcoin win against CBDCs?

Surveillance states can use CBDCs to control their people as well, by using them in conjunction with social credit scores. China, the country with the highest FTI, has already started to implement this into their infrastructure:

Bitcoin Fights Back

Bitcoin and CBDCs are both digital currencies, but that’s about where their list of similarities ends.

Unlike CBDCs, Bitcoin is a decentralized protocol, meaning no banks or government entities can use their power to control your financial life if you use bitcoin, because no one person or entity controls it. Moreover, it is virtually impossible for a market actor to single-handedly control the value of bitcoin given the protocol’s fixed total supply of 21,000,000 coins. 

Read more on the subject : Iranian Parliament Warns Central Bank of Iran: CBDC Project Unlawful and Unconstitutional, Must Be Halted

As such, bitcoin is often viewed as the enemy of any government that ranks high on the FTI list, as the decentralized digital currency is viewed as a beacon of freedom and independence in a world of ever increasing centralization and control.

It is important for the people of these nations to understand that there are alternatives to the policies imposed by their financially tyrannical governments

By adopting bitcoin as their economic unit of account, oppressed individuals can overcome the limitations placed on them by power-hungry politicians, whose immoral actions including currency debasement continue to wreck economic havoc.

Fiat currencies have been manipulated by central banks for far too long; bitcoin puts an end to that.

The post Bitcoin vs Financial Tyranny appeared first on Bitcoin News.

Ledger Recover: Is Your Money At Risk?

On May 16th, Ledger announced the release of its new service: Ledger Recover – a controversial service that is intended to back up users’ recovery phrases. 

The Bitcoin community has been vocal on both sides of the discussion, as financial privacy is not something Bitcoiners take lightly.

Read more on the subject : Ledger Hardware Wallet ‘hacks’ Itself With Latest Update Growing ‘Backdoor’ Concerns

The service works by allowing users to share three fragments of their seed phrases from the Ledger device to three separate entities who are then responsible for their storage.

If you lose your seeds, you are able to recover access to your funds by providing proof of identification to Ledger. 

The obvious benefit of the service is the convenience it provides for enrollees, who will no longer have sole responsibility for the storage and security of their recovery phrases. 

This is huge for users, as the most common way of losing access to funds is simply through losing the seed-phrases
While the service does provide a large benefit to its users, critics argue that it presents vulnerabilities that could allow seed phrases to be extracted by unauthorized outside parties. 

Ledger Recover “is Being Pushed Out to All New Ledger Devices”

In a livestream with Jameson Lopp, Bitcoin expert Andreas Antonopoulos told viewers that “this is being pushed out to all new Ledger devices [via] a firmware update, whether or not you sign up.” Casa co-founder Jameson Lopp reiterated that this only applies to the Nano X as the Nano S is not capable of running this firmware. 

Antonopoulos also explained that “because of KYC requirements… an identifier that connects this shard to your identity must be available to someone.” The problem with this is that users no longer have complete financial privacy – which is one of the most beneficial aspects of Bitcoin. 

In an interview on Peter McCormack’s podcast, Ledger CEO Pascal Gauthier confirmed that if subpoenaed, Ledger could provide seed-phrases to government entities, adding another level of concern to the security of users’ financial privacy

It has long been argued that backdoors and KYC requirements take the decentralization out of Bitcoin and violate users’ rights to financial privacy. This might explain why Éric Larchevêque, Ledger co-founder and ex-CEO, took to Reddit to say that the release of Ledger Recover was a “total PR failure, but not a technical one”.

He placed part of the blame on himself, writing that as a founder, he did a poor job explaining the security model of the company, resulting in the misconception that Ledger has always been a trustless solution. “The hard truth… is that nothing changed”, wrote Larchevêque. “The security model is the same than before you knew Ledger Recover existed.”

Alternative Cold-Storage Solutions to Ledger Recover

Even though it’s true that Ledger has never been a completely trustless solution, many users have started searching for alternatives since the announcement of Ledger Recover.

One of the most commonly recommended solutions has been the Trezor Model T. Unlike the Ledger Nano X, which runs on Ledger Live, the Model T, running on Trezor Suite, is open-source and trustless, providing increased security for users. Trezor also utilizes multi-signature transactions, a feature Ledger does not support. 

Devices such as Coinkites Coldcard and Foundation’s Passport have also snapped market share from Ledger as their products enjoy high levels of trust by the Bitcoin community.

If you don’t want to participate in Ledger Recover, but also don’t want to, or aren’t able to, buy a different cold-storage solution, you still have options. 

For now, you do not have to update your Nano X to the newest firmware. Eventually, however, it is likely that Ledger will stop supporting the older versions of their firmware and you will be required to update.

It is also possible to continue using your Ledger device with Electrum instead of Ledger Live. Unlike Ledger Live, Electrum is capable of multi-sig transactions and also supports using your own node, providing increased security for users. On top of all that, Electrum is open-source, giving users a better sense of security. For iOS users, the only downside is that Electrum is not yet available for your devices.

You Still Need A Cold-Storage Solution

Regardless of whether you decide to switch to other cold-storage hardware wallets like the Trezor Model T, or continue using your Ledger Nano X, it is still clear that cold-storage is the superior method for storing your Bitcoin.

By taking self-custody of your Bitcoin through the use of cold-wallets, you are ensuring that you have sole control of your private keys and thus, control of your Bitcoin. 

Read more on the subject : What is a public key?

If you were to instead keep your Bitcoin on an exchange like Binance via a custodial-wallet, you would not have access to your private keys, meaning that you do not actually possess the Bitcoin you have purchased or earned. 

As we have seen with events like the FTX fallout, this could be detrimental to your Bitcoin account.  As the old saying goes, not your keys, not your Bitcoin. 

The post Ledger Recover: Is Your Money At Risk? appeared first on Bitcoin News.