[outdated] Not your keys not your coins \ stacker news ~bitcoin

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1032 sats \ 12 comments \ @tolot 31 Dec 2023 bitcoin

Since I found out about Cashu and deeped into the eCash cryptography and technology, I've been thinking about the role of custodial services in Bitcoin.

We're kind of used to see custodial services in Lightning and I see a rising tendency to accept it as an option for newcomers. With regards to eCash implementations, I see a huge potential for stuff like Cashu and Fedimint even though they are custodial services.

Now, ordinals and the onchain shitshow clearly highlighted that onchain fees will eventually rise definitely and blocks will be eventually always full. An environment as such creates the need for L2 protocols, like LN. We have it, we use it, it works, even though may be somehow prohibitive for a newcomer to use it because of its technical structure (to receive you need to have bitcoin already, have a channel etc).

Fair enough, some other solutions are coming. Now I'm asking you:

what do you think will be the role of custodial services in the future of Bitcoin adoption?

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224 sats \ 2 replies \ @kytt 31 Dec 2023

Have you met people? Most are lazy and/or technologically illiterate. Absolutely no question that those people will not be able to self-custody their funds. This is why Fedimint excites me so much. It will fill a lot of the third-party custody gap, plus it's even more private.

0 sats \ 1 reply \ @tolot OP 31 Dec 2023

That's a fairly honest treshold, I'm with you on that.

The question is, is federated bitcoin still bitcoin? Is custodial bitcoin still bitcoin?

0 sats \ 0 replies \ @kytt 31 Dec 2023

Of course it is.

10 sats \ 0 replies \ @jeroldabnercollins5m 31 Dec 2023

Custodial services may play a significant role in facilitating Bitcoin adoption, especially for newcomers.

10 sats \ 1 reply \ @supertestnet 31 Dec 2023

Your title suggests that the phrase "not your keys not your coins" is outdated. I think that's another way of saying it's not true anymore. Is that what you mean?

I think it is still true. If I don't have the keys and someone else does, whoever that is can spend the money without my consent. I have no say. If I don't control the money and don't even have a veto on what happens to it, in what sense are the coins mine? To me, they aren't mine. They belong to whoever can spend them, and that's not me.

Some custodial services let you request that the money be sent somewhere. But "ability to request" is not control. Therefore I think the saying is not outdated, it's still true. If you don't have the keys, they are not your coins.

0 sats \ 0 replies \ @tolot OP 31 Dec 2023

Title is a little misleading (on purpose, I shoud say). I agree on what you said.

Moreover, I'm thinking about the onboarding of new users into a few years: onchain is already prohibitive for some users and use cases, sovraign L2 solutions are ok, but still an onchain settlement and transaction has to take place. L3 solutions are mostly custodial. Will a new user be forced to use bitcoin custodially in the future because no other means are available?

For some situations im third world countries it's allready the case..if I save 30 bucks a month I'm not willing to spend them on fees, am I?

10 sats \ 2 replies \ @patrick1 31 Dec 2023

Until we have validity rollups I think we'll see an increasing number of new users choosing to keep their coins in custodial services (and not even good ones, probably just Coinbase, etc).

0 sats \ 1 reply \ @tolot OP 31 Dec 2023

I'm so ingnorant in that regards, what are validity rollups?

10 sats \ 0 replies \ @patrick1 1 Jan

Also called "zk rollups". @lightcoin_ does a good job of explaining here: https://lightco.in/2023/12/13/lightning-validia-rollups/

10 sats \ 2 replies \ @nerd2ninja 31 Dec 2023

If I'm being realistic, even though it is a risk (counter-party risk) people will use custodians to fill the gap when innovations are lagging behind. What I don't want to see and what I actively fight against, is when the technical solution is developed and ready to use, but the userbase has become complacent with the counter-party risk of custodians and don't care enough to adopt the new innovation.

0 sats \ 1 reply \ @tolot OP 31 Dec 2023

Custodial solutions will have a relevant role but still newcomers have to adopt the self sovraign paradigm, meaning that for long term storage they still need to be sovraign but they can accept some counterparty risk for short time periods.

Am I summarizing correctly what you said?

50 sats \ 0 replies \ @nerd2ninja 31 Dec 2023

This might help clarify. Before the lightning network, people were seriously talking about using custodians to transfer Bitcoin around as a way to scale Bitcoin. Now, the development has caught up a bit and people can just use lightning now.

Before people said lightning was too complicated so they just used custodians, now we have lightning wallets they do all the channel management and charge for inbound liquidity and everything all at taps of buttons.

Now, people say the fees are high even to create lightning channels and so I can't predict the future, but I currently believe we will see timeout trees: Scaling Lightning with Simple Covenants by John Law

Each of these stages further and further kill the custodial use case. They make fees manageable and usability just as easy, but with none of the counter-party risk like rug pulls or bans or closed monetary systems that could arise. All that's left once its been made, is for the users who had the complaints before to swim on over to the new thing. They don't as long as their custodian is comfortable. Thankfully, the pain of using custodians pops up pretty quickly in Bitcoin land.