Why non-custodial wallets suck
There’s a strong mantra amongst those experienced in bitcoin and cryptocurrencies that you need to store everything in a non-custodial manner if you want to get into bitcoin as the only option, and this is terrible advice.
There are a couple of reasons for this, which I’ll walk through here, but the first most notable concern is the emotional intelligence that is lacking of the preacher, and the second is simply this is not what the market is demanding.
Don’t get me wrong, I started working in infosec +20 years ago, and would prefer if everyone did store bitcoin in a non-custodial way, especially as CEO of https://coinos.io which is a custodial wallet, but that’s just not attached to the reality of customer demand.
Let’s start with the emotional intelligence side of things — it often feels like many bitcoiners cognitively lack empathy when you listen to them preach their non-custodial dogma, often doubling down that technical correctness is the only type of correctness, or some comment that it’s not their responsibility to care about your feelings — and I just heard Raoul Pal note he’s divesting from Bitcoin partially to tribalism. (You only need to watch 10 seconds of the video to hear the quote).
As much as you have the right to look at the sky and yell “Don’t look up!”, or carry your Jesus/Vaccine cardboard sign at a busy intersection, it should be obvious that you’re creating a polarizing environment and not changing hearts or minds — and you should consider whether or not you have the cognitive abilities to empathize with someone who is interested in getting into bitcoin, without making perfection the enemy of success. Don’t over complicate things and learn how to listen.
The other notable reason custodial wallets win for new users is paying attention to what the market demands, and this also requires the capability to not let your personal emotions override what your users actually want. From a tech perspective, the least friction for the user to onboard is one of the best startup goals you can have, and why coinos.io still exists 9 years later to non-technical new users, like those in El Salvador this fall— you can have an account in less than 10 seconds from reading this. No one has been faster yet. Compare this to not just setting up a non-custodial wallet, but even the ability to understand what a custodial wallet is, if you’re not in the industry.
A good example of this is trying to convince a business owner today who has never used bitcoin, on how to accept bitcoin payments as a point-of-sale. With https://coinos.io/receive you can be receiving bitcoin, liquid, or lightning payments in less than the time it takes you to read this sentence.
Remember, it’s a lot easier to get someone into bitcoin with the least friction you can (consider sending a bitcoin voucher to a loved one), and surely over time they will ask you more questions, and in my experience, that’s when (and only when) you need to complicate things for them. Make it easy and fun, then you will establish a trusted presence as a subject matter expert, and when your users come back to you, when they’re ready (not when you are!) you can explain important topics like custodianship.
We should not underestimate the effect of listening to no coiners, and acknowledging their questions and concerns, without the need to preach.
In summary, non-custodial wallets have a notably steep learning curve compared to their custodial counterparts, and they’re often brought up in an arrogant, toxic, or tribal manner that does not feel welcoming to a potential new bitcoin user.
The topic of non-custodianship is complex even amongst experts, and there’s a large industry need to improve upon this. Our friends at keys.casa and bullbitcoin are starting to work on this if you’re interested.
I’ll end this by re-iterating that non-custodial wallets are the ideal every bitcoiner should eventually get to, especially if you’re holding an amount of bitcoin you can’t afford to lose. “Not your keys, not your coins” is an important mantra when speaking on bitcoin in general, but ultimately we don’t need to lose market adoption to the king of cryptocurrencies out of ego or our inability to understand the value in emotional intelligence which unfortunately wasn’t also built into the bitcoin blockchain.