Crypto News

Coming To Terms With The Economic Reality Of Scaling

Published

12 months ago

September 18, 2023

The blocksize war marked a pivotal chapter in Bitcoin’s nascent history, illuminating the ability of node operators to withstand systemic changes that could undermine the network’s foundational principles of decentralization and censorship resistance. At the crux of the controversy was the issue of scaling Bitcoin to accommodate growing transaction volumes. While one camp advocated sacrificing a degree of decentralization through a block size increase, their opponents maintained that the cost to Bitcoin’s core ethos was untenable. The ensuing deadlock culminated in a contentious change, Segregated Witness (SegWit). By restructuring how transactions are stored, SegWit offered a moderate capacity increase while also fixing the transaction malleability issue that had hindered advanced functionality. SegWit underscores the resilience of Bitcoin’s governance model in upholding its core values amidst internal strife. The deliberations remain highly relevant as the debate continues on how to scale Bitcoin while respecting the decentralization and censorship resistance properties that empower its users.

“Malleability is a problem for developers and users who want to reference a previous transaction in a new spending transaction before the previous transaction has been confirmed on the blockchain. This problem arises because, in order to spend bitcoin created by a previous transaction, the spending transaction must reference the txid of the previous transaction. If this txid can change, the reference will fail, and the spending transaction will be rendered invalid.

Specifically, transaction malleability was a problem preventing the adoption of the Lightning Network, which relies on the exchange of unconfirmed Bitcoin transactions.”

The activation of SegWit was a pivotal precursor to the development of the Lightning Network, a layered protocol solution that enables rapid Bitcoin payments. By settling transactions off-chain and only broadcasting opening/closing balances to the Bitcoin base layer, the Lightning Network aims to bolster Bitcoin’s scalability and transaction capacity without compromising its core security model. Since its inception, Lightning has witnessed remarkable growth as a payment rail, allowing for instant micropayments that highlight Bitcoin’s viability as an efficient medium of exchange. As Lightning continues to mature, it provides a real-world test case for layered scaling solutions that may shape Bitcoin’s technological roadmap in reconciling its goals of censorship resistance, decentralized security, and mainstream payment utility.

A key lesson that emerged from Bitcoin’s early scaling debates is the understanding that “Bitcoin scales in layers.” This design philosophy recognizes that Bitcoin’s base layer serves as a secure, decentralized foundation for supporting higher-layer protocols that expand functionality and transaction capacity. By leveraging the base layer as a trust anchor, innovative solutions can be developed to improve Bitcoin’s scalability and usage without compromising its core values of decentralization and censorship resistance. As Bitcoin matures, the layered scaling model aims to satisfy the goals of mainstream utility and payment efficiency while respecting the consensus-driven governance and security assurances afforded by its permissionless architecture. With continued technical progress, layer-two innovations may provide a pathway for Bitcoin to reach a global scale while upholding its foundational principles.

While the “Bitcoin scales in layers” paradigm was a constructive conceptual step, some have interpreted it dogmatically as an excuse for the total ossification of Bitcoin’s base layer. Driven by an overzealous desire to minimize risk and preserve Bitcoin as a pristine store of value, they argue that no changes should ever again be made to the underlying protocol. However, this extreme position overlooks nuances and unintended consequences. Strictly confining functionality expansions to higher layers may eventually undermine Bitcoin’s self-sovereignty and censorship resistance – qualities deeply valued by its users today. As transaction fees and congestion on the base layer increase over time, only wealthier entities may be able to afford directly interfacing with the base layer, centralizing everyday users onto custodial solutions. While caution and conservative progress are prudent, mindlessly rejecting any base layer enhancement out of paranoia risks inadvertently centralizing Bitcoin over the long term and disempowering regular users. Tradeoffs exist between scaling ambition and technical stability, but reflexive ossification fails to engage in nuanced cost-benefit analysis of proposals that may judiciously improve user experience without sacrificing decentralization.

Bitcoin’s core value proposition stems from its ability to offer users true self-sovereignty and censorship resistance. By design, Bitcoin empowers users with independent control of their funds, eliminating reliance on external third parties like banks or governments for transaction validation or custodianship. Users can truly own their bitcoin, holding private keys that make payments irreversible and impervious to interference. This establishes Bitcoin as the first permissionless and politically neutral monetary system, upholding financial autonomy regardless of nationality or institutional status. In contrast to traditional finance, no centralized authority can easily freeze, seize, or block payments on the Bitcoin network. These interlinked attributes foster decentralization and mitigate systemic risks, as Bitcoin has no single point of failure and is resilient even in adversarial environments. No longer must users place absolute trust in external institutions to engage in finance – Bitcoin enables direct peer-to-peer electronic cash on a global scale. The oft-cited refrain “Not your keys, not your coins” neatly encapsulates Bitcoin’s provision of self-sovereignty, censorship resistance, and escape from permissioned systems.

As Bitcoin gains wider adoption, there arises economic constraints around scaling capacity to meet increasing transactional demand. Bitcoin’s block space is inherently limited, greater usage creates more competition for this scarce resource. Basic supply-demand dynamics indicate that fees would unpredictably appreciate as global utilization grows, pricing out smaller transactions. While initially absorbable, sustained fee growth has externality effects that impact Bitcoin’s accessibility and ethos. Exorbitant fees make on-chain transactions unviable for regular users, forcing migration to custodial services contrary to Bitcoin’s premise of self-sovereignty.

To quote Anthony Towns in his piece: PUTTING THE B IN BTC

“the headroom there isn’t unlimited — expect it to show up as fee pressure and backlogs and less ability to quickly resolve transaction storms. And that will in turn make it hard and expensive for people with small stacks to continue to do self-custody on the main chain. At that point, acquiring new high value users means pricing out existing low value users.”

To quote James O’Beirne in his piece: Thoughts on scaling and consensus changes

“The quiet part out loud here is that by the time 1 billion people want to use bitcoin, the main chain is very expensive to transact on. Note that I say “very expensive” and not “impossibly expensive,” because if users lose the ability to take some form of layer 1 physical custody, bitcoin is just gold with less friction: a paper market will develop and all the nice properties of bitcoin will diminish”

Lastly, the immortal Hal Finney said this back in 2010

“Actually there is a very good reason for Bitcoin-backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins. Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases.

Bitcoin backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others.

George Selgin has worked out the theory of competitive free banking in detail, and he argues that such a system would be stable, inflation resistant and self-regulating.

I believe this will be the ultimate fate of Bitcoin, to be the “high-powered money” that serves as a reserve currency for banks that issue their own digital cash. Most Bitcoin transactions will occur between banks, to settle net transfers. Bitcoin transactions by private individuals will be as rare as… well, as Bitcoin based purchases are today.”

The resolution of this pressing economic dilemma remains shrouded in uncertainty. While we may unearth innovative technical engineering solutions, it is equally plausible that this predicament is rooted in a foundational and inescapable economic constraint—a veritable constant that necessitates acknowledgment and adaptation at all echelons. It is imperative to brace ourselves for the prospect that certain economic trade-offs and limitations are inherently woven into the fabric of our established system. If we are to embrace custodianship as an inevitability, our foremost duty is to diligently impose stringent constraints upon custodians, effectively curbing risks while nurturing an ecosystem ripe with positive free-market economic incentives. Furthermore, they must fortify themselves against the encroachment of state authority, preserving their autonomy to ensure unfettered participation in an unbridled free market.

Irrespective of one’s stance on the scalability of self-custody or the inevitability of custodianship, it is paramount to ardently oppose the phenomenon of ossification for as protracted a period as possible. The paramount lesson gleaned from the crucible of the blocksize war is that the expansion of Bitcoin necessitates enhancements at its foundational level. The advent of the Lightning Network, a transformative development, would have remained a pipe dream had it not been for the vital upgrade to Segregated Witness (SegWit). This underscores a crucial correlation: the efficacy of secondary layers is inextricably tied to the efficacy of the bedrock base layer protocol. Bitcoin’s evolution must persist if we aspire to achieve the scalability of self-custody and the imposition of constraints upon custodians, with a steadfast commitment to free-market incentives and the fortitude to withstand state coercion through robust censorship resistance.

Allow me to clarify that my stance does not advocate for the endorsement of reckless behavior nor the indiscriminate implementation of every proposed change. Rather, we should adopt a stance of utmost caution, rigorously examining each proposal with meticulous scrutiny. Our overarching mindset should revolve around the question of how to modify elements that we may be hesitant to alter but recognize as imperative. The linchpin of this approach lies in fostering an environment of candid and constructive discourse within our community. Unfortunately, the presence of actors with ill intentions, accompanied by their deceptive marketing strategies, poses a substantial hindrance to our development endeavors. They not only consume our valuable time but also divert the attention of those genuinely seeking knowledge. It is incumbent upon us to actively contribute to the creation of authentic spaces where meaningful discussions can unfold, and individuals can engage in continuous learning.

It’s possible that my argument for the necessity of change in Bitcoin has not yet persuaded you. You may hold the belief that the current state of affairs is satisfactory and that any challenges encountered during the scaling process are outweighed by the potential risks associated with unknown uncertainties. Your perspective is valid, for if a critical mass shares your viewpoint, we may indeed have already arrived at a point of protocol ossification, and we must adapt to this reality accordingly.

The ongoing narrative of Bitcoin remains an unfolding tale. As this groundbreaking economic innovation continues to mature, its precise trajectory remains an enigma, shaped by a multitude of unpredictable and diverse influences. While Bitcoin’s decentralized structure precludes any single entity from wielding absolute control, the individuals operating nodes wield significant sway over its course. Their values, philosophies, and visions for Bitcoin’s future will inevitably leave their mark on the protocols and systems they choose to embrace. What lies ahead for Bitcoin is a narrative yet to be written, and only time will reveal the direction it ultimately takes.

Scaling Bitcoin isn’t as simple as waiving a magic wand, and there are inescapable economic realities to grapple with in order to succeed.

Crypto News

Trump Election Victory Could Send Bitcoin to $125,000, Says Standard Chartered Analyst

Published

14 hours ago

September 12, 2024

According to Geoff Kendrick, Head of Crypto Research at Standard Chartered bank, a Donald Trump victory in the 2024 U.S. presidential election could drive Bitcoin to $125,000. However, Kendrick notes that new all-time highs (ATHs) for Bitcoin are likely no matter who wins the election, with Bitcoin still expected to hit $75,000 if Vice President Kamala Harris secures the presidency.

JUST IN: A Trump victory could send #Bitcoin to $125,000, but new ATHs are likely no matter who wins election, says Standard Chartered bank 🚀 pic.twitter.com/SfGoRSyKwn

— Bitcoin Magazine (@BitcoinMagazine) September 12, 2024

In the new report, Kendrick explained that while the outcome of the election will impact the Bitcoin industry, the risks of a Harris presidency may be overstated. “BTC will end 2024 at fresh all-time highs under either election outcome – [circa] $125,000 level under Trump or c.$75,000 level under Harris,” Kendrick wrote. While a Harris win could initially result in a price decline, he emphasized that “dips would be bought as the market recognizes that progress on the regulatory front will still be forthcoming.”

Despite concerns within the industry that Harris may adopt a more hostile stance toward Bitcoin, Kendrick believes that her administration would be “much less negative” for digital assets than a second Biden administration. Furthermore, Standard Chartered maintains its bullish outlook, forecasting that Bitcoin will hit $200,000 by the end of 2025, regardless of who wins this year’s election.

The 2024 election has drawn attention to the differing approaches to Bitcoin regulation by the two candidates. Trump has become an ally to the Bitcoin industry, speaking at the Bitcoin 2024 conference in Nashville this summer, where he expressed support for Bitcoin. The Republican National Committee has also included Bitcoin in its platform, pledging to defend the right to mine Bitcoin and protect self-custody.

In contrast, Vice President Kamala Harris has remained silent on the issue, opting not to attend the Bitcoin conference. The Democratic Party’s platform makes no mention of Bitcoin or cryptocurrency, which has led to concerns within the industry about the potential regulatory environment under a Harris administration. Although Harris has not publicly shown hostility to crypto, some fear a continuation of the stricter regulatory policies seen during President Joe Biden’s term, notably shaped by figures like Senator Elizabeth Warren and SEC Chair Gary Gensler.

A Trump win could fuel a Bitcoin rally, though new all-time highs are expected regardless of the 2024 election outcome.

Crypto News

Revolutionizing Bitcoin Mining: The Power of Three-Phase Systems

Published

17 hours ago

September 12, 2024

Bitcoin mining has seen exponential growth since the first ASIC miner was shipped in 2013, improving hardware efficiency from 1,200 J/TH to just 15 J/TH. While these advancements were driven by better chip technology, we’re now reaching the limits of silicon-based semiconductors. As further efficiency gains plateau, the focus must shift to optimizing other aspects of mining operations—particularly the power setup.

Three-phase power has emerged as a superior alternative to single-phase power in bitcoin mining. With more ASICs being designed for three-phase voltage input, future mining infrastructure should consider adopting a uniform 480v three-phase system, especially given its abundance and scalability across North America.

Understanding Single-Phase and Three-Phase Power

To comprehend the significance of three-phase power in bitcoin mining, it’s essential first to understand the basics of single-phase and three-phase power systems.

Single-phase power is the most common type of power supply used in residential settings. It consists of two wires: one live wire and one neutral wire. The voltage in a single-phase system oscillates sinusoidally, providing power that reaches a peak and then drops to zero twice during each cycle.

Imagine you are pushing a person on a swing. With each push, the swing moves forward and then comes back, reaching a peak height and then descending back to the lowest point before you push again.

Just like the swing, a single-phase power system has periods of maximum and zero power delivery. This can lead to inefficiencies, especially when consistent power is required, although this inefficiency is negligible in residential applications. However, it becomes significant in high-demand, industrial-scale operations like bitcoin mining.

Three-phase power, on the other hand, is commonly used in industrial and commercial settings. It consists of three live wires, providing a more constant and reliable power flow.

In the same swing analogy, imagine you have three people pushing the swing, but each person is pushing at different intervals. One person pushes the swing just as it starts to slow down from the first push, another pushes it a third of the way through the cycle, and the third person pushes it two-thirds of the way through. The result is a swing that moves much more smoothly and consistently because it’s being pushed continuously from different angles, maintaining a constant motion.

Similarly, a three-phase power system ensures a constant and balanced power flow, resulting in higher efficiency and reliability, particularly beneficial for high-demand applications like bitcoin mining.

The Evolution of Bitcoin Mining Power Requirements

Bitcoin mining has come a long way since its inception, with significant changes in power requirements over the years.

Before 2013, miners relied on CPUs and GPUs to mine bitcoins. The real game-changer came with the development of ASIC (Application-Specific Integrated Circuit) miners as the bitcoin network grew and competition increased. These devices are specifically designed for the purpose of mining bitcoins, offering unparalleled efficiency and performance. However, the increased power requirements of these machines necessitated advancements in power supply systems.

In 2016, a top-of-the-line miner was capable of computing 13 TH/s with a power consumption of approximately 1,300 watts (W). While considered highly inefficient by today’s standards, mining with this rig was profitable due to the low network competition at that time. However, to generate meaningful profits in today’s competitive landscape, institutional miners now rely on rigs that demand around 3,510 W.

The limitations of single-phase power systems has come to the fore as the power requirements of ASIC and the efficiency demands of high-performance mining operations grows. The transition to three-phase power became a logical step to support the growing energy needs of the industry.

480v Three-Phase in Bitcoin Mining

Efficiency First

480v three-phase power has long been the standard in industrial settings across North America, South America, and other regions. This widespread adoption is due to its numerous benefits in terms of efficiency, cost savings, and scalability. The consistency and reliability of 480v three-phase power make it ideal for operations that demand greater operational uptime and fleet efficiency, especially in a post-halving world.

One of the primary benefits of three-phase power is its ability to deliver higher power density, which reduces energy losses and ensures that mining equipment operates at optimal performance levels.

Additionally, implementing a three-phase power system can lead to significant savings in electrical infrastructure costs. Fewer transformers, smaller wiring, and reduced need for voltage stabilization equipment contribute to lower installation and maintenance expenses.

For example, a load requiring 17.3 kilowatts of power at 208v three-phase would need a current of 48 amps. However, if the same load is supplied by a 480v source, the current requirement drops to just 24 amps. This halving of the current not only reduces power loss but also minimizes the need for thicker, more expensive wiring.

Scalability

As mining operations expand, the ability to easily add more capacity without major overhauls to the power infrastructure is crucial. The high availability of systems and components designed for 480v three-phase power makes it easier for miners to scale their operations efficiently.

As the bitcoin mining industry evolves, there is a clear trend towards the development of more three-phase compliant ASICs. Designing mining facilities with a 480v three-phase configuration not only addresses current inefficiencies but also future-proofs the infrastructure. This allows miners to seamlessly integrate newer technologies that are likely to be designed with three-phase power compatibility in mind.

As shown in the table below, the immersion-cooling and hydro-cooling techniques are superior methods in scaling up bitcoin mining operations in terms of reaching higher hashrate output. But to support such a much higher computation capacity, the configuration of three-phase power becomes necessary for maintaining a similar level of power efficiency. In short, this will lead to a higher operational profit with the same profit margin percentage.

Implementing Three-Phase Power in Bitcoin Mining Operations

Transitioning to a three-phase power system requires careful planning and execution. Here are the key steps involved in implementing three-phase power in bitcoin mining operations.

Assessing Power Requirements

The first step in implementing a three-phase power system is to assess the power requirements of the mining operation. This involves calculating the total power consumption of all mining equipment and determining the appropriate capacity for the power system.

Upgrading Electrical Infrastructure

Upgrading the electrical infrastructure to support a three-phase power system may involve installing new transformers, wiring, and circuit breakers. It’s essential to work with qualified electrical engineers to ensure that the installation meets safety and regulatory standards.

Configuring ASIC Miners for Three-Phase Power

Many modern ASIC miners are designed to operate on three-phase power. However, older models may require modifications or the use of power conversion equipment. Configuring the miners to run on three-phase power is a critical step in maximizing efficiency.

Implementing Redundancy and Backup Systems

To ensure uninterrupted mining operations, it’s essential to implement redundancy and backup systems. This includes installing backup generators, uninterruptible power supplies, and redundant power circuits to protect against power outages and equipment failures.

Monitoring and Maintenance

Once the three-phase power system is operational, continuous monitoring and maintenance are crucial to ensure optimal performance. Regular inspections, load balancing, and proactive maintenance can help identify and address potential issues before they impact operations.

Conclusion

The future of bitcoin mining lies in the efficient utilization of power resources. As advancements in chip processing technologies reach their limits, focusing on power setup becomes increasingly critical. Three-phase power, particularly a 480v system, offers numerous advantages that can revolutionize bitcoin mining operations.

By providing higher power density, improved efficiency, reduced infrastructure costs, and scalability, three-phase power systems can support the growing demands of the mining industry. Implementing such a system requires careful planning and execution, but the benefits far outweigh the challenges.

As the bitcoin mining industry continues to evolve, embracing three-phase power can pave the way for more sustainable and profitable operations. With the right infrastructure in place, miners can harness the full potential of their equipment and stay ahead in the competitive world of bitcoin mining.

This is a guest post by Christian Lucas, Strategy at Bitdeer. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Why Three-Phase electrical systems can offer a competitive advantage to miners with ASIC efficiency gains tapering off.

Crypto News

Bitcoin Vaults and the Future of Bitcoin Custody

Published

1 day ago

September 11, 2024

Bitcoin, the original cryptocurrency, has come a long way from its informal past. From an experimental digital currency that occupied cypherpunk niches on the internet, it has grown to a trillion-dollar market cap asset valued at over $66,900 per coin as of this writing.

While investing in Bitcoin is still considered a wild ride, the asset is quickly maturing. Financial institutions are closing in and creating hybrid vehicles to invest in cryptocurrency. The ecosystem reached a new milestone with the advent of Bitcoin ETFs, making people realize the immensity of Bitcoin’s potential in traditional markets and spurring new demand.

As more people and institutions invest in Bitcoin, Bitcoin vaults become more crucial. Here, we examine the features and importance of Bitcoin vaults and how they contribute to ensuring a reliable infrastructure that promotes sustained value and investability.

We explore their role in professionalized and institutional custody. Secure custodians are vital to protecting digital assets from theft and loss. This article also tracks the fast-advancing technology of Bitcoin vaults and how it relates to future developments in the custody space.

What are Bitcoin vaults, and how do they work?

Bitcoin vaults are offline digital asset storage solutions offering enhanced protection against online threats. This protection is created through multiple security layers.

As the Bitcoin investment sphere grows, new products are being created. Bitcoin vaults are a critical component of these new financial products. While hot wallets and exchange accounts offer easy transaction access, they are vulnerable to hacks.

Bitcoin vaults are fortified digital safes. They protect your Bitcoin by taking it offline and shielding it from the constant openness to online attacks. Their multiple layers of security include withdrawal delays, multi-signature or multisig authentication, and cold storage solutions.

One highly secure approach to Bitcoin or crypto vaults is called air-gapping. Air-gapped storage offers robust protection against malware attacks, phishing scams, and unauthorized access.

Many Bitcoin vaults integrate advanced encryption techniques. They typically require multiple authorizations for transactions to proceed. Advanced encryption and the need for layered authorization steps bolster security posture.

As a Bitcoin investor, ensuring that your coins are kept in air-gapped and layered security vaults protects your investment and helps you hold it long-term.

Vaults: Vital Components of Bitcoin Custody

Bitcoin vaults are a component of Bitcoin custody solutions. Bitcoin custody is the entire process of holding and securing BTC.

Because Bitcoin is a digital asset, it requires unique storage solutions to protect it from theft and loss. As BTC’s value rises, so does the interest from cybercriminals and hackers. Therefore, secure custody solutions are essential for protecting these digital assets.

The Advanced Technology Behind Bitcoin Vaults

The following advanced technologies combine to create the security behind Bitcoin vaults. Understanding them helps you understand, evaluate, and appreciate their robustness.

Cold Storage

Cold storage is a security method that keeps Bitcoin offline or away from internet-connected devices. Being offline reduces the risk of cyberattacks. Bitcoin cold storage is often used with multi-sig technology to provide maximum security.

Multi-Signature Technology

Multi-signature or multisig technology requires multiple private keys to authorize a Bitcoin transaction. This method implies that even as one key is compromised, the Bitcoin in the wallet cannot be transferred. The transaction still requires the other keys to be approved.

Multisig technology enhances security by distributing ownership and control over Bitcoin. It makes it very challenging for a single entity to access or steal the assets.

Hardware Security Modules (HSMs)

Hardware Security Modules (HSMs) are tamper-resistant and hardened devices that secure cryptographic processes. They generate, protect, and manage keys used for data encryption and decryption, as well as digital certificates and signatures.

These specialized devices, in other words, are designed to protect and manage your digital keys. They provide a secure environment for cryptographic key generation, storage, and usage, ensuring that the private keys are never exposed to potential threats. HSMs are often used in Bitcoin vaults to enhance the security of the stored assets.

HSMs are recommended for those with significant BTC holdings. They are also ideal for businesses handling Bitcoin and other crypto. While integration can be complex and require continued maintenance, the security benefits far outweigh the cost for those with high-value holdings.

Furthermore, HSMS are tested, validated, and certified to the highest standards. They enable organizations to meet and exceed emerging and established regulatory requirements for cybersecurity.

Companies Offering BTC Custody Solutions

As Bitcoin and its related financial products gain popularity, so does the need for reliable custody. Companies that offer this service are called Bitcoin or crypto custodians and are a critical component of the digital asset industry.

These companies or platforms offer secure BTC and crypto storage and provide services such as private key management, online security solutions, and transaction processing.

Crypto custodians are gaining prominence as the cryptocurrency market grows. They are essential in ensuring that assets are stored and managed securely. Moreover, they protect investors’ funds by providing layers of security beyond what public wallets or exchanges offer.

However, it must be noted that exchanges, trading desks, and investment platforms run their own custody solutions. In addition, some exchanges are also the most noted custody providers. Examples of top custody providers, most of which offer investment access, include Swan Bitcoin, BitGo, Coinbase Custody, Anchorage, Gemini Custody, Bakkt, and Bitcoin Suisse.

How To Choose Among BTC Custody Providers

Several companies are competing in the crypto custody market. If you are a regular BTC trader or investor, you might be curious about how to choose what works for you.

Photo by Traxer on Unsplash

Platforms should enable users to buy and store Bitcoin easily. While popular exchanges like Binance and Kraken offer a wide range of services, including retail buying and selling of crypto, they have downsides. They may not provide the best storage options for your crypto, and they may be more vulnerable and open to various hacks.

Long-term BTC investors usually shun day trading and prefer the buy-and-hold strategy. Swan Bitcoin is a low-fee platform specializing in BTC-specific investments. It offers a full suite of BTC financial services, including Swan Vault, simplifying BTC storage for users. If you’re curious how it compares to large global exchanges, check out the Kraken review on Swan Bitcoin’s site.

The best Bitcoin vaults give you complete control over your coins, with user-friendly and straightforward features for setup, deposits, and withdrawals. They use the most reliable hardware to provide users with the most robust security. An example of such hardware is the Blockstream Jade signing device, a hardware wallet used by Swan Bitcoin to ensure BTC owners’ full access to keys offline.

You need signing devices that store two private keys to unlock a Swan Vault. Swan manages a third key called the Cloud Key, which is recommended for use as a second key to prevent bringing both hardware signing devices to the same location.

Bitcoin vaults must have sound recovery strategies for BTC theft or loss, as 72-hour holds for Cloud Key withdrawals. Moreover, these vaults need to offer comprehensive support services, including secure storage of spare keys to assist you in moving funds and customer support manned by trained specialists.

When Investing in BTC, Choose a Reliable Custodian

Bitcoin vaults are becoming increasingly important as more people and institutions invest in Bitcoin. As digital assets gain legitimacy through legalized financial products, security custody solutions become increasingly vital to protect them from theft and loss.

By leveraging advanced technologies such as multi-signature authentication, cold storage, and Hardware Security Modules, Bitcoin vaults provide a robust security solution for digital assets. In addition, multi-layered features ensure secure storage of private keys and means of recovery in case keys are lost or stolen.

Bitcoin vaults are not just meant to store BTC securely. They form the bedrock of the asset’s long-term viability as an investment vehicle.

It is not enough to leave the knowledge to technical experts or institutions. By understanding the importance of secure Bitcoin storage and the advancements in custody solutions, investors can make better-informed decisions about safeguarding their digital assets.

This is a guest post by Ivan Serrano. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

As Bitcoin grows in value and popularity, custody solutions become more critical. Learn about Bitcoin vaults and their importance in the custody space.