I'm not as sanguine as Szabo about Coinbase holding a huge pile of Bitcoin, but he makes an interesting point about the difference in self-custody cost between an institution and an individual.
Bitcoin is, currently, a little bit less expensive than physical gold for individuals to self-custody (custody costs and risks) and far less expensive and quicker to transfer (validation/assay costs and risks and global settlement).
Bitcoin is so far neither considerably cheaper nor more expensive than gold for institutions to hold, because of the trust/control issues involved in institutional custody.
Technology can make Bitcoin considerably cheaper to self-custody, both for individuals and institutions, but that is a set of technologies that are slow to mature, not widely understood, and require very different kinds of institutional trust/control support that are even less well understood, as well as otherwise overcoming the long institutional habits of Wall Street and banks to centralize custody.
There's considerably less room to improve self-custody and validation costs for the 6,000 year old technology of gold -- not impossible, just less room for improvement.
This means that the current emabarassing centralization of Bitcoin at mega-custodian Coinbase is a temporary phase in Bitcoin's bumpy path to maturirty, whereas centralization of gold in bank vaults is unlikely to change much.
A little? Is he serious? Either he's assuming very low risk on the gold side or the cost of bitcoin hardware which is not required to secure bitcoin.
Maybe he's just being lazy in this summary but this seems way off to me. The cost of securing my bitcoin is low vs gold.
What am I missing?
I suspect "and risks" is doing a lot of work there. Maybe he's thinking that wrench attacks are on the rise and therefore self-custody risks are higher.
this is odd to me though. I'd guess the only reason wrench attacks for gold aren't a meme is that people assume gold holding isn't very widespread (although it must be more widespread than bitcoin holding).
Yes I think he also means risks of people losing their coins from fucking up their self-custody which happens ALLL the time.
That is a fair comparison for sure. People screw up things and its not hard to do.
I suspect they may be somewhat comparable. Owning $100k in 1 oz gold coins is only about 20 coins. Pretty easy to move around and to keep secure. Not obvious that it's harder to secure than bitcoin. Bitcoin has a digital attack surface that gold doesn't. Depending on how you secure your keys, Bitcoin may or may not have a similar physical attack surface to gold.
On the other hand, it's much easier to move and secure a truly large amount of bitcoin than it is to move and secure a truly large amount of gold. But for individual households, bitcoin may actually be more risky.
I think where bitcoin does have an advantage is in how easy it is to verify and transact. Gold would be hard to transact with, because your trading partner needs to verify the gold content and you have to physically be present.
This is a good point in bitcoin's favor. The value of the UTXOs does not make it any harder to custody or secure.
That said, its always trade-offs. I really don't like it when bitcoiners slam gold. Gold is pretty awesome. Don't get me wrong.
If people bragged about their self-custody gold... believe me. There would be wrench attacks. The thing is... people don't self custody gold. Not at high rates IMO. I used to assume all these gold bugs had a horde of gold but the more I have listened to them most do not self custody any significant amount. Its all in ETFs or custody services. Sure, people have coins but its not like bitcoin.
Its totally doable to custody it but you better be armed, trained, and smart about it. Same goes for bitcoin but I can hide bitcoin MUCH easier and cheaper.
This is my assumption too.
I believe the assumption is incorrect. Not life changing numbers I mean. I'm sure plenty have maybe 5 figures in their safe. But beyond that... nah.
I'm surprised we haven't seen a large institutional holder completely bungle their keys, yet.
Prime Trust managed to lose their keys. I am sure there are other cases. If we've learned anything from how exchanges that got hacked handle it, the playbook is don't tell anyone and try to paper it over.
I missed that one. It was before my time.
It would be interesting to what would happen if Coinbase got hacked. Would institutions simply give up on Bitcoin or would they learn the hard lesson and start taking responsibility themselves.
not "if coinbase got hacked".
When coinbase gets hacked.
The volatility In Bitcoin is learning it, then understanding it, then appreciation of it
Then realising no-one gets it yet
This is my stance. We are still early in the discovery phase. People are aware of it. I'd say most that have bought some are a long way from understanding it. Even fewer appreciate it. Why? Mostly because the key problems it solves are ones they aren't thinking about yet. It solves the inflation issue but the others most people don't care about yet.
We are the odd balls. Most bitcoiners seem to be unaware of this or I denial about it.
Not your keys, your tokens
Why isn't Szabo on nostr?
https://twiiit.com/NickSzabo4/status/2021414960266608675