Survivor's Guilt
icymi Coldcard, an OG bitcoin hardware wallet, had a fatal entropy-generation bug
The story unfolds on social media:
- tragedy - unjust and widespread losses
- farce - bricked devices following emergency firmware updates, making the medicine worse than the disease
- black comedy - hubris and schadenfreude due to founder's toxic online persona
- outrage + gaslighty responses - users receive notifications on addresses which were supposed to have been deleted; get told no we hang on to email addresses actually
- conspiracy theories - a theoretical "retirement attack" raised by the company account several years ago
There, but for the grace of God, go I.
Since I'm watching the whole thing from the sidelines, I'm grappling with survivor's guilt as well as seeking to draw lessons from other people's (very unfortunate) tuition.
My learnings
- most of the facts and advice are noise
- starting point is to assume vendor will be revealed to have been infiltrated
- inasmuch as you maintain exposure to any single entity, you've already lost
- maybe you can reduce your chance of future exposure, by going with Trezor (gold standard, has had many eyes on it) or a no-name unpopular provider (less of a target, but also less scrutiny)
- or, spend a few days with AI, to understand enough to be end-to-end responsible on disposable hardware. Skip the theater and bells-and-whistles
Self-custodial, portable, transferrable wealth
- base case is sewing gold, diamonds, rubies, pearls, and blocks of paper money into your clothing
- expect 10-50% haircut, and high risk of being robbed or swindled
- inasmuch as govt asset seizure is a very remote risk, paying a custodian seems valid:
- expect 0.1~1% haircut on way out
- BlackRock ETF is simple enough that edge cases are limited
- meanwhile, every CEX is so complex that edge cases abound, including commingling of exposures
- standalone custodian might be worst of all worlds: lightly resourced, rug risk, solvency/existential risk, lighter audit demands, SPOF. It probably only offers features that are commercially useful to offer, rather than "loss leader" style features that an asset manager can offer
- multi-vendor multisig doesn't feel like a final solution. Since it's unlikely that you'll be able to set-it-and-forget-it, it feels more like the tooling that a quality custodial provider should be using in the present, while they actively evolve best practices
Preservation of buying power
Setting aside portability for a moment, if you want your asset base (including human capital!) to maintain your wealth level in the future, you can take two paths. Probably should do a bit of both, rather than picking just one:
- hold something that cannot be inflated: gold, precious stones/metals, digital gold (bitcoin and various improvements)
The main issue is that you have to pay the market premium in order to protect against inflation. If you happen to over-pay, then you are more likely to lose money. And vice versa.
A secondary issue is that you likely could be buying snake oil, and the asset will not be worth as much in the future. Since nobody has a crystal ball, one must use judgement, as well as consider the costs and benefits of diversification.
"That's not a real diamond" could mean you got tricked when you bought it, or that you are currently being tricked by the purchaser, or both. Maybe you need a laser-engraved GIA number on the diamond's girdle, as well as a buyer able and willing to confirm its veracity.
- hold something that grows nominally faster than inflation
As humanity enters a possible accelerated growth phase due to AI, a safe fastest-horse strategy probably looks something like: 80% in a broad US-based equity index and 20% in an index of the Chinese stock market. Sorry Europoors, there is some chance the IKEA of AI will emerge from Europe (maybe ASML?), but almost zero chance the continent as a whole will be the dominant global winner of AI, as it is in luxury (LVMH).
Unhinged outcomes
Now coming back to portability. If I held my wealth in US equities and had to flee, I might find a willing buyer of those equities at a reasonable exchange rate in the mountains of Switzerland. Or, some other appealing remote place where a secure society already has wealth, like Hawaii (protected by US Navy), Australia (protected by snakes and spiders), Uruguay (protected by culture and rule-of-law), or Albania (protected by double-headed eagles).
Maybe in some of those places, you could find Chinese nationals to buy Chinese equities at some discount, better than what they'd be willing to pay for alternative stores of value. Pay close attention to where Chinese billionaires and hundred-millionaires choose to diversify their family wealth. Maybe it's Canada (protected by beavers and the need to export Beebs and Drake songs to the world).