What Bitcoin Did - The Future of Owning Bitcoin | Jonathan Pollock

Episode Date: May 11, 2026

Jonathan Pollock is Product Lead for Bitkey. In this episode, we get into wrench attacks, why physical coercion is a structural weakness of private key ownership, why seed phrases may be creating more risk than they solve, and why most self custody setups rely too heavily on users never making a mistake. We talk about the trade offs between security, privacy, recovery, inheritance, and ease of use, alongside BitKey’s new hardware update and the company’s plans to build time delayed vaults designed to protect users during violent attacks. We also get into collaborative custody, covenants, insurance, ETFs versus self custody and why permissionless money still matters. THANKS TO OUR SPONSORS: ANCHORWATCH BLOCKWARE LEDN BITKEY SWAN CAPE FOLLOW: Danny Knowles: https://x.com/\_DannyKnowles or https://primal.net/danny Bitkey: https://x.com/Bitkey

Everybody has something in their life that's more important than the Bitcoin. As soon as that thing is threatened with coercive violence, all of self-custody breaks down. If you never make a mistake and you set it up perfectly, you have an amazingly secure system. But if you make a mistake, you lose everything. Fixing the wrench attack problem needs to be one of the top priorities of how do you do that. There's been this idea of conflating self-reliance as a virtue to cover the lack of products that do it for you. I need to believe in permissionless money. I need to use permissionless money.

I need to do what I can to make everyone in the world have access to permissionless money. And I think if that takes the form of safer and easier solutions, that's a win all the way around. Have you seen how many people are getting wrench attacked right now? Yes. Yes. Like in France, I think it's something like, this could be wrong. It's like 50 a week or something insane like that that happened this year. No, was it that high? I had no idea. I could be over it. I could be over exaggerating there.

Someone told me a stat recently. It kind of blew my mind. but like the number of attacks are happening for whatever reason france seems to be like the epicenter of this yeah yeah but i have a friend um i won't docks him too much but he was in london recently and he was out with some people he's like a bit of a shit coiner and he was out with some people that are known in like the crypto space yeah and went out for drinks left the bar and got held at knife point oh my god um unlocked his phone he had terrible security set up and so they managed to steal a significant amount of money from him.

That's terrible. At a knife point, along with his watch. And do you know, one of the crazy parts of that story is that some of it was taken from an exchange. Yeah. And he spoke to the exchange, obviously, like, filed police reports, all this sort of stuff. And then followed that, like, follow the transaction. And I believe, don't quote me on this, I don't want to get in trouble. I believe that they found that it went to Binance, and Binance didn't refuse to do anything about it.

Really? Which is, but regardless of that stuff, which is insane in its own way. Like the physical threat on Bitcoin is, feels pretty high right now. Yeah. Like, how do you view that? Yes. Okay. So I think the wrench attack problem is like a structural issue with Bitcoin.

And so, and self-custody in the sense that like, you know, even though the numbers are small. I mean, they're very troubling. You like read these reports and they're like scary. like gruesome sometimes. I think the reason it's so important is that it kind of gets at the core of self-custody, which is if you have full control of your keys, then you can be coerced to do something with them. And so as soon as something more important than Bitcoin is threatened, and everybody has something in their life that's more important than Bitcoin, as soon as that thing is threatened with coercive violence, all of self-custody breaks down. And so,

So that's a really structural problem. And so looking at it less from like, well, how often does it happen and all of this? It's just like from a system's point of view, fixing the wrench attack problem, I think is one of, one needs to be one of the top priorities of how do you do that. And the one thing that I really don't like about the current wrench attack mitigations is they're all based on either deception or coercion. Sorry, deception or... Like avoidance.

So you're talking about things like duress pins on wallets and stuff like that. So like, and I'm with you on that because like they're cool. They're really cool products. Like I like that they exist. But the question always has to be would you actually use it in that situation? Exactly. That's exactly right. Yes.

Using a duress pin or whatever, does that just make the potential attacker more angry? Like what's the like physical threat that you, well, the physical like action they take if you kind of trick them into like basically bricking your hardware wallet. So yeah. So this is this is the this is the thing that I really don't like about duress pins and decoy wallets is that I don't think the like almost the game theory, the mechanics of it play out that well because if you you obviously have a way to get back into your wallet, right? Or you or you burned all your Bitcoin in that moment. But if you have a way to get back into your wallet, you haven't really changed much about the situation. You've just made it harder. So like maybe you've gotten rid of the access in your home, but now

you've got some backup somewhere else. And so the attacker's still there, the attacker still, you know, you haven't ended the attack. And then, but the other version I think is even more scary is if you don't have a decoy wallet, but the attacker thinks you have a decoy wallet,

and like how does that play out? And so like the whole mechanism of decoy wallets feels, like it doesn't really solve the problem. And so like putting self-custody users into the situation of like, am I going to resist the attacker? I'm going to try to trick the attacker.

Like, how am I going to navigate the situation? You know, and some of these solutions are like put your backup key in a bank lockbox because then you have to go there or whatever. But, like, all of these really put a lot of the onus on the self-custody owner in a violent situation. And so I think to really solve the problem, what we need to do kind of as an industry is take on the assumptions of if an attacker has full knowledge of your wallet setup and the victim is fully compliant, can you still protect the Bitcoin?

And if we can develop solutions that meet that test, I think we'll have something that's like actually can mitigate wrench attacks and start to solve the problem. Yeah. Because like if you go through the someone breaks into your house, the different setups you can have with your Bitcoin is either, like from the very basic, you might have Bitcoin on an exchange. Well, that can be taken if they've got you at knife point.

If you have it on a single-sig hardware wallet, they can potentially take that as long as you kind of actually sign the transaction. If you have multi-sig, you can have it with keys distributed. You may not physically be able to move Bitcoin, but the threat is that they can chop off your finger until you do something. Yeah. And then one that's very interesting is like the Anchor Watch model, where they basically say, give them the Bitcoin, that's fine, we've got you insured. And what other solutions do you think there can be in that stack? Yeah, yeah, that's a good question. So this kind of gets into the seedless architecture of Bitki

because I think one of the downsides of seeds, and I don't want to bad seeds too much because seeds have very good uses, but one of their challenges is that they're an instant compromise of the wallet. So as soon as you have the seeds, the wallet is... I mean, that is the Bitcoin. That is the point. And so when you have seed artifacts, What you essentially have are the private keys kind of unprotected somewhere.

And so one way to get the Bitcoin is just take over the keys. When you use a seedless architecture, the way you exit the wallet is not through private key transfer. It's through a transaction. So you take your two keys and you make a transaction, then you send that transaction to a new wallet. What's really nice about using transactions as an escape mechanism, as opposed to seeds as an escape mechanism, is transactions can be restricted in a way that could give you more protection. And so people have talked a lot about this in the covenants realm, which is like, okay, if the blockchain itself had primitives that could restrict how Bitcoin was used,

you could do all sorts of cool stuff. Yeah. We don't have covenants yet. Just for anyone who's not, like, technically on this stuff. So covenants, they basically allow you to almost like whitelist address where you can send Bitcoin to. Yes. Yeah. So they're basically an additional layer.

So it doesn't exist yet. There's a bunch of ideas, there's a bunch of proposals, but the core idea is restricting how the Bitcoin moves, not just who can move it, because that's what keys do. Keys already figure out who can move it, but restricting where it can move, when it can move, is that destination whitelisting, is that time delays, is that, and this is where all the different proposals, but just this idea of having an additional layer of restriction on movement. And so what you can do today is you can take your Bitcoin and encumber it by multiple signatures. One of them that you control, one of them that is controlled by, say, another party. And this starts to get into different collaborative custody models. But you can put restrictions on, hey, there needs to be a time delay and there needs to be a biometric scan, and there needs to be all of these additional restrictions.

And once you enter that world, I think there are a lot of solutions here. And this is actually something that we're working on BitKee. And we're going to, after we announce our new product at Vegas, the next big thing we're working on is the wrench attack problem. And so we actually have some designs that we've been working through that we want to take to the community and get some feedback because it's a really hard problem and there's like a lot of different tradeoffs. But the general shape of it is to restrict the way how Bitcoin moves out of the wallet so that you can add in time delays and biometrics checks and all of these things that could mitigate wrench attacks. Do you wish you could access cash without selling your Bitcoin? Well, Leiden makes that possible. They're the global leader in Bitcoin-backed lending,

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So the big one was obviously the screen, the lack of the screen. There is... I can see that that's fixed. There is a screen, yes. So what are the new features in this? Yeah, so the key thing we wanted to address is we really wanted to address verification writ large. It's bigger. It is bigger.

We, you know, bigger screen or a screen and a battery, it's slightly larger. I don't have the original one on me, but one of the things we wanted to do with the screen is typically hardware wallets verify transactions. Yeah. And because hardware wallets are typically signing devices, they're not full recovery systems and inheritance and all of that stuff. Bitkey is a full system. And so because it has recovery mechanisms, recovery contacts, inheritance, all of these security settings, the screen is used to verify all of that.

And so the screen protects not just your transactions, but where your notifications go, what your email is, what your recovery contacts and your inheritance stuff. And so we really wanted to look at verification writ large, not just transaction signing. So one of the cool things about the bit key I've always thought is that it's like the hardware world that anyone could use. Yes. So like if my mom and dad wanted to set up self custody, this is where I sent them. Does the screen add complexity? It certainly adds more steps.

And that was the point of the screen is really to say make sure that, anything that the app ever asks me to do, I can double check first. Yeah, that's awesome. And so what will happen is in the, when the app wants something from the hardware, whether it's changing a security setting or doing a transaction, the screen will show it, and you have to approve it.

And so it adds that extra step. We did a lot of work to make it as easy as possible. You'll see the screen is really beautiful. It's like easy to read. It's touch and swipe. And I think your parents will be fine with it. They'll be able to use it. They'll be able to use it.

And so let's go through the sort of criticisms of Bitkey, sort of the original Bit Key. Yeah. The screen was obviously one of the big ones. Another one was that you can't export a seed phrase. Is that still the same? Yes, that is. And that's intentional. Yes, absolutely.

So what's the thinking there? Yeah. So the first place where I would start is like what a seed phrase is. Because I think this is, one of the questions we get at the booth a lot is, how is this self-custody if you don't have a seed phrase? And I think that's the right place to start because it is a misunderstanding of what a seed phrase is. So seed phrase, it's a way to regenerate your key. It's not a private key. And so Bitcoin existed for years before seed phrases existed.

Seed phrases were an invention to make managing private keys easier. And so with BitKee, you have private keys. So it's self-guessity. You have two of the private keys fully in your control. You can always move your Bitcoin. You never need block or BitKee or our servers or our apps or anything. And so what we wanted to do is we wanted to look at. when we were thinking about self-custody, we wanted to design not just like a hardware wallet

which generates keys and then does signing. And then what most hardware wallets do is they'll generate a seed phrase and give it to you and say, okay, backups, go figure it out. Inheritants, go figure it out. And so now you're left with a seed phrase and you have to figure out, like, how many copies do I make? Where do I store the copies? Do I need a descriptor? You know, and you have like your own treasure map and all that stuff. And so what we felt was that once you introduce a seed phrase, what you've done is you've said the hardware is now allowed to export its secrets, and then you give the user the challenge of protecting those secrets. And so that's just like a system design decision. And that's a really big thing to put on customers. And

frankly, it's really hard. Like doing it well is hard, keeping it up to date is hard, checking that the backups are still there. Like all of that is hard. And so you've basically given the recovery system as a DIY project to customers. And so that's essentially what seed phrases do. For some people, that's very empowering, and they're very good at it. And so, great, you seed phrases. For most people, it's a product they didn't want. And so what we said is, okay,

what if we started from a different point of view? What if we said the hardware never exports it secret, not as a seed phrase, not as a raw key. What we know then is that there is exactly one copy of your key on one physical piece of hardware gated by your fingerprint. And now let's build a security and recovery system around it. And so we say, well, what happens if you lose your hardware? And we've got a recovery system to solve

solve that. What if you lose your phone? The recovery system to solve that. What if you lose both? We can do that. What if you die? You can do both? And so we went sort of case by case to figure out what it would take to build a self-custody system, not just a hardware signer. So do you think that users, especially the more like technical, hardcore Bitcoin users lose anything from using a bitkey? Like, who is it designed for? Like, is this a mass market product? Or is this a Bitcoin a product? No, it's a Bitcoins a product, for sure. Yeah, and I mean, the people that build it are Bitcoiners. And the idea here is full control and to make it very, to make it very strong. And here's, I think, where maybe our approach differs a little slightly from others and makes it seem like more of a normie product when really we are trying to attack the very core of self-custody, which is, I think most self-custody products, focus on security as like the one dimension to optimize.

And we like to use the word safety instead of security and say that safety has a couple of different dimensions. And so one is security. And security is really protection from like adversaries. There's also recovery, which is protection from loss or natural disaster. Then there's privacy, which is really the first line of defense against wrench attacks. And then there's ease of use, which is like protection from mistakes. And I think this is one that's really undervalued in our products.

Because this is like, everyone always sets up their Bitcoin as if like the state is going to come after them and try and see their Bitcoin. When in reality, I think the biggest threat to your Bitcoin is always you. 100%. And like, yeah, the security model of Bitcoin, of most Bitcoin self-custody products is don't make a mistake. Yeah. And you're fine. And you know, that's true. If you never make a mistake and you set it up perfectly, you have an amazingly secure system.

But if you make a mistake, you lose everything. And so what we did is, we said, okay, well, if we look across those four dimensions and we say, well, what makes a good self-custody product? It's you can't compromise on any of those four. And so, like, how do you build products that raise the bar? And one of the challenges we had is when you go the seed phrase route, there's the issue with it is you've put a burden onto the user to figure out the recovery system, the inheritance system, the, and once they have to do that themselves, the quality of that solution depends on how perfect they are and how well they can not make mistakes and set it up properly. And so what we wanted to do was bundle it all together into a cohesive system. And so if you have the technical know-how and the operational discipline to DIY a system that's better than Bitkey, like, you should, but I think it's an incredibly high bar because it's exactly what like we do internally.

of like how do we how do we raise the bar of the system overall and so uh it is designed for hardcore bitcointers and there's um you know there's all sorts of like advanced things you can do with it like exporting the descriptor and checking it on sparrow if you want to make sure the wallet set up the way you want it to that's cool you can uh take your um the private key material um you can create backups of your app key and like make it decryptible by hardware and store those on your own and other places and like there's all sorts of things you can do to kind of like extend it. But yeah, it's a Bitcoin or product. Can I play devil's advocate and ask you another question that people have always sort of raised about BitKee? Is that like are you reliant on block servers? And what does that mean for like the user?

Yes. So you are not reliant on block servers. And so the core definition of self-custody is the wallet owner can move their money unilaterally and no one can move the money without them. And that is true for BitKee. And so the The way that it works in Bitkey is when you set up your wallet, there is a PDF that's uploaded to your cloud. And that PDF has your one of the keys in it. So Big Key has three keys. It's a two of three multi-sig setup.

One keys on the hardware. One keys on the phone. One key is on the server. So the app key, the one on your phone, is encrypted by the hardware key and then uploaded to your cloud account as a PDF. And we call it the emergency exit kit. And what that allows you to do, you can then download it, make copies, do whatever you want. If your cloud provider, let's say Apple or Google, get access to it or somebody hacks your cloud,

what they have is an encrypted file. They can't use it unless they can decrypt it. And the only way to decrypt it is with your hardware and your thumbprint to unlock the phone. And so they basically haven't compromised any keys just from gaining access to it. You can always take that PDF. You can take your hardware, decrypt the PDF. So now you have two keys. And then with two keys, you can move Bitcoin.

And so it's all open source. So you can write your own software if you don't care, if you really want to go tinfoil hat, to create a transaction, sign it with your two keys and broadcast it to the network. We provide a open, I mean, big keys open source. We provide another piece of software that does exactly that hosted on GitHub that anyone can use. But you don't have to use it. You can write your own. And so with no Bitkey app, no bit key servers, no block company, nothing, you can move your Bitcoin. Cool.

because that like the between the screen and that they're probably the two biggest criticisms I've seen thrown at block so with adding the screen I guess you've removed that um it's very cool thank you and it's interesting to see how like bitcoin security hard or wallets have kind of adapted over the last few years because one of the most interesting things to me is like when I got into bitcoin the path to self custody was really clear like for me like I first bought bitcoin on coinbase and then like if you want to actually have real Bitcoin, the path to move that to self-custody is very simple. It's like literally one transaction to a hardware wallet and you then own your Bitcoin. And that has changed so much in the last few years in the sense that I think if you're coming into Bitcoin now, like where are you getting your Bitcoin? Like there's still a good chance you're using like a river or a swan or a coinbase or whatever. Yeah. But there's now a greater chance that maybe you're buying it through like an ETF in a retirement account or maybe you're going straight to a treasury company. Like how do you see that kind of institutionalization of Bitcoin affecting self-custody?

Yeah, it's a great question. So I think where I would start is that why self-custody is important. And I think there's a couple of different layers to that. The first is just like, why is it important to Bitcoin in general? And I think that like, you know, that's something along the lines of permissionless money is incredibly important and is like a huge unlock for civilization writ large. And in order for permissionless money to work, you need to have decentralization. In order to have decentralization, you need to have decentralized mining and decentralized

ownership. And so self-custody is really that pillar of decentralized ownership. And so you need self-custody for Bitcoin to work. So I think that's kind of point one. But that doesn't quite answer the question, which I'll get to, which is like, okay, I'm getting into Bitcoin, which should I buy? But to kind of like walk it down from sort of first principles. I think the other reason self-custody is still super important is that access to ETA,

and all of these things is not equal. Like, you know, of all the people in the world, very few people have access to these ETFs. And so, you know, very few people even have access to bank accounts or a reliable currency. And so being able to have Bitcoin, if you have internet, you can have Bitcoin, you can have a bank account,

you can have all of these great things. Self-Castity is still tremendously important. But if you then kind of sort of narrow it down to, all right, I have access to both, which one should I buy? When you buy the ETF, you're not buying permissionless money, you're buying price exposure, and even worse than that, you're buying permissioned price exposure. And so what you're giving up when you're doing that is Bitcoin has a lot of utility beyond just price. And that's everything from being able to take out a loan against it as collateral, to spend it, to purchase things.

And so you're sort of giving that up in the ETF world. But even still, to kind of walk it down even more, what if you say, like, look, I really don't care about the utility of Bitcoin. I just care about price exposure. should I do ETF or self-custody? I think even then it's not super clear because in the ETF world, you have all these additional restrictions on your Bitcoin, which is when can you trade it,

you know, well, when the market is open. If you don't like an ETF and you want to move to another ETF, do you have to sell and take a tax gain and then buy in again? Like, you can't just move it from exchange to exchange the way you can with Bitcoin. And same problem with even if you want to sell your ETF, to buy real Bitcoin and move it to a hardware. Well, there's still like gonna be a tax hit at that point.

Yeah, and I think maybe one or two ETFs do like in-kind redemption, but most don't. And that's kind of the point, which is, it depends on the provider. And so like you're definitely in the permissioned world. Yeah. And so I think you're definitely taking on more restrictions. But one of the things about how the question is typically framed,

I think embeds in it like some priors, which I think have been true, but may not be true in any. more, which is like self-custody is harder and self-custody is less safe. And I don't know. Than the ETF. Yeah. And I think that those maybe if they were true, require another look. I think self-custody has come a long way in the past two, three years.

It's probably harder. For people that maybe already have like a brokerage account, they can just buy the ETF on their phone. Like self-custody is harder than that. Yes. But it's like, what's the trade-off? Is it worth the work? Is it worth it?

And I think one of the things that people undervalue is what are the risks of the ETF? And these are like, while they are kind of long-tail, tinfoil-y hat risks, they have all happened before. So the idea of like, maybe the government decides you can't own Bitcoin anymore, so everyone, so you get forced converted back into USD at a semi-unfair price. I mean, like, that happened with gold. Yeah.

Or maybe the exchange is negligible. and can't fulfill it, you know, take a Lehman Brothers, or maybe it's full-on fraud, like more of an Enron or like an FTX. And like there's a small percent that happens, but if you hold Bitcoin over a decade and you stack up kind of all of these catastrophic events, like you're not taking on no risk. It's not zero. And so I think what it comes down to at the end of the day is, would you rather your risk take the form of political, governmental business risk?

So like the people who make the rules, or would you rather your risks take on the private key risks, which is like, can I manage it safely? Is it safe from natural disaster? And so you're either taking on self-custody risks or politician business government risk. And I think that when weighing those two, it's not clear to me that there's, you know, like the ETFs are the obvious answer. No, I know which side of that I fall on. Like, I want to take the risk on myself. Like, I want to be in control of my destiny. Yes, and I think what's been great about self-custody over the last, you know, forever, but like I think a lot in the last few years is that risk has getting smaller and smaller as the tools have been getting better and better.

Like the risk of self-sabotage, I think, has decreased dramatically in the last two years as you start to get these collaborative custody solutions, these seedless solutions, things that make it harder to make a mistake and make it easier for you to have recovery, to have inheritance, to have safe keys without having to deal with all of the details of. setting it up. Do you think there's any argument to say that with the move away from the sort of more hardcore Bitcoin solutions, making things easy, like the seedless idea, does that take a step away from like the core values of Bitcoin in any way? Okay. I don't think so. And I might not be reflective of sort of the most OG hardcore bitcoinsers, but I've been a product manager for a long time, 20 years. And like, really, for me, it all comes down to like, what problem are you solving for who? And I think that one of the places where I think there's been a big gap in the products in the Bitcoin industry is there's been this idea of conflating self-reliance and as a virtue to cover the lack of products that do it for you,

Which is to say, like, hey, take your seed phrase, protect it yourself, you know, put it in metal plates, buried in the ground, distribute it. Like, self-reliance is a virtue in and of itself. You are now practicing, like, this higher form of, you know, Renaissance man. And I kind of look at that and say, like, that's not what people want to do. They want permissionless money they can own easily and safely. And that's like, and this, this using the ideal to cover the gap in good products. has always never has really sat right with me. And so I don't see the ethos personally,

I guess it's more of a personal statement than a statement about the industry, but I don't see the ethos as, as I need to DIY it myself to be a real bit-coiner. I need to believe in permissionless money. I need to use permissionless money. I need to do what I can to make everyone in the world have access to permissionless money.

And I think if that takes the form of safer and easier solutions, That's a win all the way around. Yeah. So if you think, like with the big key, obviously in terms of seed phrases, they're gone. Yeah. It's collaborative. There's two or three where you have a key, one here, one on my phone.

It has inheritance. What's missing? Like, what's the piece that you want to build next? Like, what do you think the hardware market needs? Yes. So. And because we were talking before about wrench tax. Like, how do you look at that?

Do you have something in mind? We do. Yes. Yes. So let me just kind of take the trajectory there, because this is exactly how we develop at Q, which is we sort of looked at the self-question market, so what are the biggest problems to solve? And so the first one was people's recovery systems are really uneven in their effectiveness and their

thoroughness and how well they resist different types of scenarios. Let's build a wallet with a recovery system built in, and that led us down the seedless route. And then when we got there, we said, okay, well, inheritance is the next biggest one. That's one of the hardest things to do because right now inheritance is like treasure maps. Or KYC'd solutions, even if they're self-custody, they're KYC'd. So then we said, okay, let's tackle inheritance. And then we looked at our solution and said, well, because this is collaborative custody, we have one of the keys.

And one of the things we don't like about having the keys is we had visibility into the wallet, because when you have the keys, you can see all the transactions. And so we were very uncomfortable with having that sort of visibility because we don't want that data. So then we invented chain code delegation, which is a bit proposal. And Jervis. Yeah, that's right. Yeah, so the two of them. That's really cool.

And that's something that's just good for Bitcoin as a whole. It is so cool. I love both of them so much. And they're like, I'm a big Jesse Stan. Yeah, yeah, yeah, for sure. Yeah, no, they did such a great job with that. So basically what they did is they invented a way for multisig, which typically every key has both signing ability and visibility of the wallet.

to say, even if the key can sign for the wallet, it cannot see all the transactions of the wallet. Fancy cryptography, and it's applicable to any multi-sig wallet, we implemented it in ours, and so the key that block holds cannot look at the transactions. And that's on by default now, right? Yeah, it's just how the wallet works. Yeah, it's not an option.

It's just, we don't want the data. Like, we don't want it in our systems, and so it's just the way how the wallet works. And so privacy was the next big one. Then the next big one after the, big one after that was verification. And so we say, hey, we have all this infrastructure now to do recovery and inheritance and all of this stuff.

How do you make sure that you can verify everything that's doing all of that stuff is telling the truth? And so we put a screen on the hardware, not only to just do transaction signing, which every hardware screen has done forever, but to validate all of the steps of all of the other components. Was it partially to shut the Bitcoiners up as well? Well, not to shut them up to get them as customers.

I mean, we want to build a product that Bitcoiners love. The thing that keeps me up at night is the idea of a critical error with my Bitcoin cold storage, and this is where Anchor Watch comes in. With Anchor Watch, your Bitcoin is insured

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Get started today at blockwheresolutions.com forward slash WBD and use code WBD for $100 off your first miner. That's blockware solutions.com forward slash WBD. If you already self-custody Bitcoin, you know the deal with hardware wallets. Complex setups, clumsy interfaces and a seed phrase that can be lost, stolen or forgotten. Well, BitKee fixes that. BitKee is a multi-sig hardware wallet built by the team behind Square and Cash App. It packs a cryptographic recovery system and built-in inheritance feature into an intuitive, easy-to-use wallet with no seed phrase to sweat over.

It's simple, secure self-custody without the stress, and time named Bitkey one of the best inventions of 2024. Get 20% off at Bitkey.world when you use the code WBD. That's B-I-T-K-E-Y-W-D and use the code WBD. Okay, so that takes us to sort of where we are right now. So now we think the next big thing to solve is this wrench attack. Yeah. So we do have a solution in mind and it's almost there. And so we'll be publishing this in probably a couple of weeks to sort of solicit feedback from the community

and get people to poke holes in it and do all that. But this is the basic idea, which is you put your Bitcoin into a vault. And the vault has essentially two doors. And both are important, but we'll talk about the first one first, which is the normal door is just, It requires a signature from both you and Bickey and Block. And what Block will do is block will withhold the signature until certain conditions are met. So this becomes like a two of two? It's a two of two.

The first door is a two of two. And the block will say, okay, in order for me to sign, you need to first pass a biometric scan. Second, wait a certain amount of time that's configurable by you. So this could be days, weeks, months. and then third, pass another biometric scan on the other side of it. And so what this is meant to protect against is any sort of smash and grab wrench attack.

Like, because you need to pass that biometrics check at the end of the period, it forces the attacker to force compliance throughout the entire length of that period, and that could be days, weeks, months. And one of the things that we used to frame this was we looked through James Lops' GitHub where he lists out all the wrench attacks,

and there's hundreds of them there. And looking at, If you make the attack last longer than one week, you're already down to 1% of the attacks on that page. If you make it last longer than a month, there's not a single attack on that page that lasted longer than a month. Very few people are going to kidnap you for a month. To get your thing. So that's the first door. So that, I think, mitigates the sort of first problem of rent-or-tax.

The new problem you introduce with that is that it's not self-custody anymore. It's joint custody. And so now what you need to do is put self-custody back into the solution. So this is where the second door comes in. So the second door is controlled entirely by your own keys. But it's time locked to when the vault ends. So when you put it into the vault, you say, hey, I want this vault to last for two years. Over the course of those two years, you can use the first door as much as you want.

That's the normal door. To withdraw Bitcoin, you just go through whatever settings that you've configured. And the vault just works. if for some reason you wake up one day and you're like, I don't trust Block anymore, I don't want to work with them, I don't want them co-signing my transactions, or Block goes out of business, or the BitKie app gets pulled from the App Store, anything that you can imagine,

that second spend path with your own keys can now get the money back out of the vault. And so now you've fixed the self-custody. But how, wait, I don't know if I understand that. So, like, how would the second door of the vault, like, know that Block's gone out of business? So it wouldn't know that Block's gone out of business. the door just becomes usable at a certain time.

Okay, okay, okay. And so you would just... So you still have to wait the two years. You still have to wait, yeah, yeah. So you have self-custody inevitably. And you can unilaterally decide you're not signing anything until the second door opens, then use the second door yourself. Yeah.

And so it's just like if you were to like a really kind of crude example is you take a Bitcoin, you time lock it for a year, it's still your Bitcoin. Is this using minisccript? There's a couple ways to implement it. I think we're, depending on the shape of the solution, we're not sure exactly how we're going to do it. But yes, we're using, I mean, you can also do it with just some time locks, just basic time locks on the second spend path. Okay, so then there's one more piece of the solution. So, and this is the thing with self-custody is like it's all trade-offs.

And so what happens, okay, first door, you kind of solve the attack problem, but you break self-custody. Second door, you fix self-custody, but you've actually reintroduced a new attack, which is, I'll just take your keys and hold on to them for two years. For two years and then get your Bitcoin. Yeah. So we have to fix. So that's the last thing to fix. And so our idea here is that we would restrict where that Bitcoin can be sent to.

So this is back in kind of a covenance pattern. And so, okay, this Bitcoin can only be sent to a predetermined address. And so that way, even if the attacker steals your keys, they can only send that Bitcoin to a predetermined address that you may still control. Assuming they didn't steal that as well. So here's, yes. No, this is your, yeah, this is exactly right. So 100%. And so the way that would be enforced because Bitcoin doesn't have covenants yet is you can do it on the hardware's firmware.

And so you can say, hey, the firmware will only sign transactions of a certain shape. And that shape is going to be the shape we decided when we set up the vault. And so you can configure what that shape is and then it's locked forever. And so, and this is sort of. of another reason why the seedless architecture gets you there because if the key is inside the hardware, then the hardware can determine how the key is used. If the key is exported out of the hardware, which is what seed phrases are, then no system can make any decisions about how the key is used. So anyway, so the last piece of this, which you've already sort of started

poking holes in, and this is the piece we need help with, is like, what should that final destination be? Yeah. Because if it's just another wallet, then they could steal that too. Can I tell you my really non-bitcoin perspective on this? Like, people are going to hate me for saying this. But I wonder if the best place is like a Bitcoin exchange address. That's where we ended up to. That's where we ended up to. And I love that you got there.

We didn't get there maybe quite as fast. Wow. But yes, I think so. And it's weird to say being such a self-custody maxi. But one of the things that institution and custodial Bitcoin does really well, is it's not susceptible to physical violence the way private keys are. Institutions cannot be physically coarse

the way private keys can be physically coarse. And so even though I would pick self-custody over custodial Bitcoin, 100% of the time, actually not 100%. If there is a violent attacker trying to steal my Bitcoin, where do you want my Bitcoin at that moment in a K-YC-based exchange?

Yeah. And so one of the nice things about a solution like this is it says, okay, you can basically put it there in that moment that you need it there, and then it's identity-based. And it's like, don't let perfect be the enemy of good in this situation. Like, I agree that I don't hold Bitcoin on any exchanges,

but in that situation, I can't think of a better place for it to go. But I guess the best solution would probably be allowing users to decide. It would be put in address in. That's how we would implement it. You put it, you want it to be, you know, the other things we thought about is, could it be another bit key? And, like, how do those start chaining together? Could it be someone else's Bitcoin's wrong?

you get into this situation where you have to like educate users on how to keep the second bit key and all this stuff. And like, I'm sure you don't want the headache of that. Because if something goes wrong, they're going to be like, this is what you told me to do. Yep. And so the other one is like, could it be inheritance? Like should we plug out the inheritance solution into that escape route? And so this is really where we're looking to solicit feedback, which is like, because we only want to build things that people want to use. And so if people look at this and they're like, you know what, I do want it in an exchange. In this one moment, in this one case, I wanted it in exchange, great. If everyone's like, no, that's the worst

idea ever, I don't want to do that. But I mean, truthfully, like, apart from the fact that obviously it's going to a KYC exchange, like, if that did happen, you could just withdraw it again. Yeah, exactly. It's not the end of the world. And that's the other thinking, too, is almost everybody, everybody, unless you're a miner, has an exchange that registered to. That's where they got their Bitcoin from. Yeah. And so, like, you already have an account set up. You already have a relationship there. And most likely your Bitcoin came from there in the first place, do you want to be able to teleport it? That's not actually how it works, but do you want it to be able to go there in a wrench

attack? Yeah. The thing that that doesn't fix, and I actually think is potentially impossible to fix is the, like, you're still, the attacker that comes into your home who wants your Bitcoin can't get it. And like, it never stops the physical side of that attack. And this is where like, because they still might chop your finger off. But I do think this is where things like Anchorage are really interesting.

thing where you can just send them the Bitcoin. Just have it and go on. And then you've got the insurance claim. Yeah. Would you ever look into doing insurance type stuff within Bitkey? Oh, I don't know. I thought you were going to ask me what my thoughts on it. And I was going to say, yeah, I think the insurance angle is very powerful.

Would we put it on our roadmap? I don't know, to be honest. So the Bitkey product in and of itself very narrowly. It's a non-KYC product. So, like, I don't know if you can do. insurance without KYC. I seriously doubt it by that. If maybe someone figures that out, sure.

Would it be a better Block product? So like Block does a lot for Bitcoin. They've got Cash app for buying Bitcoin Square for spending it, Bitkey for storing it, and Proto for empowering it. Spiral for developing it. Spiral for developing it. Would one of those other brands, like, could we do some ecosystem play where like you can get insurance through like cash or something?

Maybe. It's not on the roadmap, but I think looking at the synergies between the different Bitcoin solutions is really where we turn Bitcoin into true permissionless money, where it has all the features of traditional finance in its own ecosystem. So yeah, it's a great idea. And I do agree with this piece of even when you take on the assumption of the attacker has full knowledge and the victim is fully compliant, will they be pissed if they can't get Bitcoin? can't you can't really design away that piece. And so, yeah, I think there are interesting insurance angles here. Yeah. You've obviously thought about this a load. And you said you've been a product manager for 20 years. Can we take a step back? Why are you in Bitcoin? What happened? How did you get here? Oh. So my career up until about 2020 was all in like big tech, internet firms and AI.

And then right around 2020, I kind of caught the, I want to say Bitcoin bug, but honestly, it was the blockchain bug. And I really believed in this idea of decentralization and permissionless. And then I kind of sort of came to realize that Bitcoin was really the only truly decentralized permissionless protocol. And it had real product market fit with permissionless money. And that's what I wanted to work on. and that I found my way to block and like, you know, like Jack Dorsey's Bitcoin ethos was like really refreshing after sort of the defy DGEN tour. And so I joined the Bitcoin team about a year before we launched the first version of hardware and have been there ever since.

Nice. And so you obviously spent a load of time looking into the hardware wallet side. Is there anything else you look into in Bitcoin deeply? I mean, no, not as deeply as self-classity hardware wallace. I mean, that's like my full-time job and I and I love it. But just being like, you know, a nerd and like liking the Bitcoin space. So you're not getting into the quantum debate? I mean, I've listened to so many people on it that like know a lot more than I do. My take is probably naive, but it's I think, I don't think we can freeze coins. I think that's, I think that's just, that's just theft. It's just another version of theft. And so,

Okay, and this is, this is my current thoughts, but like, I don't know, I changed my mind sometimes on this. But are stolen coins that big a deal? And so like the one, so let's say whatever, the million coins get broken by quantum computers. So there's a ton of, there's a huge supply shock. The price crashes. All the real believers pick up a ton of super cheap sats. Is it an existential threat to the Bitcoin? network. And I've seen people argue yes that like, okay, if that happens, then miners do this,

and then once the miners do this, then this thing happens, and now Bitcoin's gone. I don't know that I buy that. What to me feels like of if we confiscate people's coins, that's an existential threat to Bitcoin. If the supply instantly increases by $5 million, like not increased to $26 million, but obviously all these coins just flood the market. Is that existential to Bitcoin? I don't think so. And so I think it would suck. But anyway, I feel like my take is that the quantum resistant algorithms exist. Bitcoin will upgrade the protocol in time. Most people will upgrade their coins in time.

And then would I rather be in a world where Bitcoin broke the promise of property rights or in a world where the price crashed tremendously? I take the price crash. So there's nothing else to say because I agree with everything you just say. I passed the test. Do you think there's anything that we've missed on the hardware wallet conversation that you pay a lot of attention to? Yeah. Well, the one thing I think a lot about is this idea of like what is a hardware wallet, which seems like kind of a trivial question.

But if you think about hardware, it is an air-gapped piece of technology that does signing. And it necessarily, you don't want it on the internet because it keeps your key super safe. If you think about a wallet, it has to be connected to the internet because its job is to scan the blockchain, tell you your balance, construct transactions, and broadcast them to the network. So the idea of like a hardware wallet is a little bit ambiguous and it doesn't mean like a wallet that has a hardware signers. There's no Bitcoin in there. Right. And so like is this a hardware wallet? Like this by itself, well, Bickey's a little special.

But like if you take a hardware wallet, usually they're like a better name. would be a hardware signer. A signing device. Right, it's a signing device. And the reason I think that's important is because wallets should have not only like transaction capabilities but recovery capabilities. Like where do you put these ideas like recovery and inheritance and all of the things you might want from your like Bitkey self-custody system and we don't really like have a good phrase

to talk about self-custody as a system? And you know that's how we think about Bikki. It's how we build bit key. And so, you know, are we a hardware wallet? Well, we have a hardware signer. Are we a collaborative custody solution? Well, we have a collaborative key. And so, like, what category are we in?

And I think of it personally of, like, self-custody as an overall solution. So custody solutions, self-custody system. And so this idea of, like, hardware wallets, I think, unless, like, you're ready to go really deep with someone about it, can give people, like, a misconception about, like, what, like, the different. components that are being put together, especially when you get into like multi-sig. It's like if you have multiple keys and some of them are hot keys and some of them are cold keys, like how do you refer to that? And so I just think of like thinking of self-custody as an overall system and how it handles

security, recoverability, privacy, and ease of use is like the framework to bring to it and then looking at the system as a whole. It's just, it's not as marketable to call it a signing device as a wallet. Right. But so one of the like shade that gets thrown at things like Trezor and Ledger and like these hardware wallets signing devices that like have multiple coins on is that like complexity is the enemy of security in a lot of ways. Yeah.

And so like comparing you to like I'm sure one of your bigger competitors being like cold card, this is far more complex in its design like in the sense that it's collaborative custody, it has inheritance, it has like potentially wrench attack protection in the the future. Like, does that add any issues with security? Whereas, like, you know, like, if you buy a cold card, it's just, it has your keys. Like, that's, that's kind of it. It's just, it's just a plain signing device. Yeah, yeah. No, it's a, it's a good question. And I think the way I would answer it is, if you compare just the hardware signer to the hardware signer, then there's no extra complexity. When you start comparing a hardware signer to a full

self-custody solution, then there's all of this extra complexity on the recovery system. like you mentioned. But what I would sort of urge you to do in that comparison is to say, well, what's your recovery solution? And so you need to compare, if you're taking, let's say, the cold card approach, you're not just comparing the cold card hardware to the Bitkey system. You need to compare the cold card hardware plus whatever multi-sig you've set up, plus whatever recovery you've set up, plus whatever inheritance you set up. And is that system, and the complexity of that system compared to the complexity of the big key system, I would expect the Bickey system be far more elegant in its design because it's, you know, it's,

you're not doing a DIY project yourself. Yeah, that makes sense. Like I am, I think there'll be a lot of Bitcoiners out there that think they have a really secure setup. And if push came to shove, maybe that wouldn't be the case. So, and it's one of the things that like really scares me in terms of pushing people who I know who are getting into Bitcoin into self-custody is it's like there's a really steep learning curve there into doing it. Not just like, buying a hardware wallet and sending Bitcoin to it. But then actually protecting those keys is a big step if you're doing it like the seed phrase way. Yeah.

So one of my, when I was doing some like product research for designing BitKee, I was at, I think it was the Op Next conference because I wanted to talk to like the hardcore Bitcoiners. And what I was going around asking folks, I thought it was really illuminating. This is a little bit technical, but I think it's really helpful is that a lot of them had multi-success. setups, right? So let's say you have a two of three multi-sig setup. And you've done all of the things, these are people who are really good at it. You've done, you've put them in geo-separated locations, and you've done your, you've got your descriptor backup, and you've done all those things. Okay. So then a scenario happens where one of your keys gets compromised. And it's just like it's gone missing. You go to check on it, it's gone, whatever. Or your device is dead or something. One of your keys is in bad shape. So now what you need to do is, is, you know, is, you need to do is, is, you know, is, you know, is, you know, is, you know, it's, you're just, you you need to move to a new wallet, right? You need to sort of fix your setup. Yeah.

And so the question I asked them is kind of given this scenario, do you, A, take your two existing keys, get a new third key, and create a new two of three with those keys? So you have, instead of A, B, C, which is the original, you have A, B, D, okay? Or the alternative is, do you get three new keys, you know, whatever, D, E, F, okay? And the reason it's not like a philosophical question, it's more of an operational question, because it's how many signing devices do you need to do a migration like that? Like do you have one key on each device or are you loading different descriptors onto it and have one hardware wallet that's actually, or one hardware signing device that has multiple wallets loaded onto it?

And so my question is like, which one have, when you did your testing, which approach did you use? And for most people, they've never tried it before. And they could do it, like they have the know-how to do it. But the fact that you haven't tested your recovery system or even sort of done it, to me, is a signal of just how complex this stuff is. And so even the, like, hardcore folks who haven't done a multi-sig recovery and thought through the number of devices they want to use and how they're going to micromanage those devices,

to me says, Bikki is for you because we have tested it. We know how to do it. I can give you the BitKee answer. I can tell you the BitKee answer takes 10 seconds of a loading animation in the background and it's done. And that I think is really the strength of BitKee. And so it's like it's doing the thing that you would probably choose. And so when I tell people, oh, this is exactly how BitKee does it. It's like, oh, this isn't a Normie wallet.

Like this is the solution I would do that I haven't tested yet, but I could test it in a few minutes on BitKee. Yeah. The problem in that scenario as well is it's probably the most high-stress scenario when you're trying to figure this stuff out. Like you're not going to be thinking straight when you're worried that like your life's savings of Bitcoin is gone. Right. Yeah. It's, it's a wild, yeah, being, being in that situation for real is like, I mean, I get nervous when I'm like, because when we do all these testing, it's like, I don't want to lose the like 20 bucks on my wallet that I took out of the treasury for testing. I was like, oh, but like to do it with your life savings is stressful.

Yeah. I think the big key thing is awesome. And I think the screen is a huge addition. Thank you. It's very cool. Is there anything else you want to talk about before we close out? Oh, no, I don't, I don't think so. Well, I'm excited to see how this goes. Vegas starts tomorrow, man. It's going to be a wild few days. Yeah, it's, I always love these conferences. I've already lost generational wealth at the tables. Again, this is two years running.

There's still time. There's still time to win it back. Exactly. It never works that way, though. But thank you, man. This has been really cool. Thank you. No, I've enjoyed you doing this. And let's go have fun in Vegas.

Yeah, let's do it.