Enough eyes, enough hands.

A few years ago a friend asked me how to store his Bitcoin with minimal headache and maximal security. Most crypto purists will disagree, but I told him a Coinbase account with a YubiKey is probably the simplest and safest approach for the majority of retail users. Yes, there are many great hardware wallet solutions out there, and yes, there are sophisticated approaches to self-custody, there are multi-sig setups with social recovery, bias-free dice rolls, etc. But the average user of cryptocurrencies is not and should not be an expert in secure custody solutions. Nor should they have to think through the risks and tradeoffs of different entropy sources, air-gapped signing devices, and the finer points of seed phrase storage.

The recent wave of Coldcard wallet attacks¹ is a perfect example of this.

The risk that moves, not disappears

It is a truth universally acknowledged that crypto assets stored on exchanges like Coinbase or Gemini introduce counterparty risk. But there is a less-often-acknowledged risk in self-custody. Customers typically buy hardware wallets or use open source wallets from teams that are much smaller than these large custodians, with smaller revenues and corresponding security budgets. Even the vendors that take security extremely seriously, due to their size, almost always have less capital and people to invest in their security.

To their benefit, they also have a smaller attack surface to defend. But, at least for the successful ones, their widespread distribution often means they end up securing large amounts of funds relative to their size. Many users protecting their crypto with the same insecure software makes for a juicy target. A hacker that finds a systemic flaw gains an outsized return by attacking many small targets via the same firmware failure. The traditional custodians are big, centralized targets with even more funds available, but they're also protected with deeper layers of security and policy controls, and recovery mechanisms.

Enough eyes

Eric Raymond, writing about Linus Torvalds, gave us Linus's Law: "given enough eyeballs, all bugs are shallow."² With the continued advancement of AI systems there may soon be enough eyes to find every bug, and enough hands to exploit all of them. I expect Coldcard not to be the last, but rather the first, of many open-source wallets to become casualties of an emerging AI-driven security arms race.

The actual best security solution for custody is still spreading funds using multiple custodians and vendors, making sure their code and systems are audited, and using multisignature setups to protect large stores of funds. For some subset of people, that's a level of overhead and operational complexity that reads as fun to solve. For the rest of us, there's always Coinbase.