Hodl Hodl
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Hodl Hodl

The importance of self-custody

How to stay in control of your Bitcoin?

The events of last week, which continue to reverberate today, with the fall of a centralized lending platform, and the suspension of withdrawals from the world’s largest exchange, should make us reflect once again on the great importance of the self-custody of our assets, and especially Bitcoin.

Bitcoin was designed as a digital asset that does not require third-party custody. The Bitcoin holder can easily guard the holdings by keeping the seed phrase safe, this does not require any complex or onerous technical infrastructure. It simply means having in your exclusive knowledge a series of words, which can be protected in physical format on some material resistant to the environment that can damage it, such as water or fire. For this reason, many people choose to engrave their seed phrases on metal (stainless steel plates or washers). And, of course, keeping this backup safe from prying eyes or thieves. With this simple and very cheap procedure, we can keep our Bitcoin safe and secure for life. However, we continue to observe how most people entrust their bitcoins to the third parties (exchanges, platforms offering enormous interest rates, shady investment funds, and other nonsense).

Unfortunately, the general public still does not understand the implications of the new Bitcoin monetary system. It continues to analyze the management of its economy based on a thought distorted by fiduciary money. That way of thinking leads them to believe that having BTC standing still in one address has no benefit and means losing money, as it happens with their savings in dollars or other currencies. This belief has been ingrained in many people because of the severe problem of the uncontrolled issuance of money and the loss of purchasing power that this practice entails, without realizing that Bitcoin works precisely the other way around. Bitcoin is issued less and less (halving every 4 years) and its fundamental properties make it more and more demanded, increasing its price accordingly. Given this dynamic, holding BTC untouched for at least four years can result in a considerable increase in your purchasing power. And exactly the opposite for the fiat money, which will be printed more and lose a lot of value during the same period.

Once you understand this, you no longer fear having BTC stored without moving. In fact, that’s the best thing to do if you want to preserve long-term value. But unfortunately, a large part of the public still does not understand it and sends their BTC to rather obscure centralized platforms that promise to pay generous interest on their users’ deposits, and in an effort to get those returns, they end up becoming pyramid scam schemes and/or investing their clients’ BTC in even shady companies, which offer them even more profits without clearly explaining how they do it.

Obviously, this ends badly over time, and the entire system collapses, as we have been to see so many times in the history of Bitcoin. As the already famous phrase by Andreas Antonopoulos says:

“Not your keys, not your coins.”

With all this in mind, at Hodl Hodl, we decided to build something different that is consistent with that fundamental principle and strictly respects users’ privacy, allowing them to operate in a P2P manner without a central control entity and having to present credit guarantees of any kind. This is how Lend at Hodl Hodl was born, a peer-to-peer lending platform that only provides its users with the technical tools to establish their loan contracts secured by Bitcoin collateral, locked in the safest place possible: Bitcoin’s blockchain!

Bitcoins used to back a loan are NOT held by Hodl Hodl but are instead placed in a multi-signature BTC address on the blockchain, leaving 2 keys (signatures) to the lender and borrower and us having one key to resolve the disputes that may arise.

Once the borrower deposits BTC as collateral in a newly generated escrow address, none of those involved in the contract can move it without the agreement of the 2nd party since the multi-signature address requires at least 2 of the 3 signatures to access the funds. This also guarantees that the deposited Bitcoin cannot be “re-mortgaged” in any way, which is perfectly verifiable by anyone simply by checking the escrow address with any block explorer, providing full transparency to the system.

All of this profoundly differentiates us from all the centralized platforms that operate in the market, which for one reason or another, end up being a dangerous security hole for their users. At Hodl Hodl, we develop tools that lead us to continue evolving towards a healthier and more transparent financial system.

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Hodl Hodl

Hodl Hodl

P2P cryptocurrency trading platform that doesn’t hold funds