Custodial Duties

A great benefit of bitcoin, and most subsequent cryptocurrencies, is the ability to remove intermediaries from financial transactions. One such role is that of the custodian, which holds assets in order to minimize the risk of theft or loss.

While the technology is revolutionary in allowing us to trust strangers, it hasn’t (yet) allowed us to trust ourselves. It is much too easy to misplace private keys or wallet seeds, or to make them potentially available to third parties. The alternative is to go back to trusting third parties - the exchanges - but this has hardly proven to minimize the risk of loss. This is likely because they are not established and reputable firms; even the oldest exchanges are young in the broader scheme of things.

There are three things to keep in mind when you’re in charge of being your own custodian, in order of importance:

1. Security: protect your assets against theft
2. Durability: make sure you’ll be able to access your cryptocurrencies a year from now (and even a decade from now). Said another way, protect your assets against yourself
3. Availability: your crypto assets should be readily accessible when you need them

With that in mind, I’ve decided that the following is a good checklist to review on an ongoing basis (currently trying to keep doing it weekly). With the goals above in mind, I recommend keeping everything in cold storage (I use a Ledger Nano S), or on desktop wallets for projects not yet on cold storage:

Cold Storage:

• Check for firmware updates
• Check for software updates

Desktop Wallets:

• Check for software updates (the platform’s website or github are good sources)
• Make sure the wallets are fully synced (more of an issue than I expected at first)

Backups:

• Electronic backups: make sure they are updated and that the hardware functions appropriately
• Physical paper backups: check that ink is still legible and recreate if necessary (this can be done less frequently depending on storage conditions)

Hopefully, this will all soon be unnecessary as the relevant technology continues to develop. In the meantime, I’ll be sticking to the list above - if anybody has suggestions to add to it, that would be much appreciated.