Not your keys, not your coins: Claiming better ownership of your stack with Bitcoin privacy

The tools to be a better sovereign Bitcoin user are at your disposal – and recent developments suggest you should use them

When significant consolidations happen in the cryptocurrency market, Bitcoiners have a habit of sounding the alarm, reminding folks to remove their hard-earned Satoshis from exchanges and brokerages. It’s sound advice both from a price perspective (loaded exchanges signal selling pressure) and a control perspective.

The general mantra is “not your keys, not your coins”. The practical reasons are simple: you cannot 100% rely on exchanges to ensure liquidity, withdrawals often take time (think Celsius), and you just never know when a genuine shock, hack, or government seizure (think Canadian trucker convoy) could put your Bitcoin at risk. 

That’s why self-custody is one of the most important principles for Bitcoiners.

There are some exchanges and brokerages that publish info on their cold storage and proof of reserves, and they should be commended for that.

But the point of having Bitcoin as digital money or a store of value is truly “having” it, safe on your own wallet encrypted by your seed phrase and passwords. Otherwise, it might as well be a paper bill stamped with an IOU.

While this is an important lesson to repeat, there is also another principle that will be just as important once broader Bitcoin adoption — or scrutiny — takes hold. And that is Bitcoin privacy.

On-chain transactions are public for all to see, and copied onto the blockchain tens of thousands of times by the many Bitcoin nodes worldwide. If we assume Bitcoin will have generational staying power, that transaction history is permanent. 

Much like you wouldn’t want the entire world to know each one of your bank or cash transactions, you want to keep some of your Bitcoin spend/earn history private.

When you buy Bitcoin with fiat money on a regulated exchange, Know Your Customer (KYC) and Anti-Money Laundering (AML) rules apply, meaning that these services know who you are and the path your Bitcoin will take once you withdraw.

If a court, tax agency, or government entity wants to know where said Bitcoin has gone, they can petition the exchange to find out, and they’ll be forced to comply. It wouldn’t take much to follow the trail from the exchange to your hardware wallet. Blockchain analysis and surveillance firms, now worth in the millions with funding from venture capital, are making this easier every day.

Herein, we’ll outline the practical steps you can use to enhance the privacy of your Bitcoin treasury. I am by no means an expert, but rather a happy consumer of many of these projects and products.

Read more on the Fix the Money substack page.