Alright, class, let’s put our tinfoil hats on for today’s discussion. In today’s lesson, we are going to address surviving the fabled $5 wrench attack with our health and bitcoin stack intact.
First, some background: what is a $5 wrench attack?
I’m glad you asked. It’s actually quite simple.
Imagine for a moment that through some sequence of events, crooks or criminals learn that you are the proud owner of a handsome stack of satoshis. Whether through poor operational security on your part, or a customer data breach, or by other means, it doesn’t really matter. They know (or assume) that you own and control the private keys to a stash of bitcoin. And now they know where you live. Add in one of Bitcoin’s pre-programmed bull cycles, and now, our hypothetical criminals decide it’s worth paying you a visit. Upon visiting you, they physically coerce you to hand over your stack. Maybe they make you hand over your seed phrase. Maybe they force you to get out your hardware wallet and transfer your stash. As any bitcoiner who has been in the space for more than a few months knows, there are no take backs on the bitcoin network. No one is coming to save your ass if you’ve already transferred your bitcoin. If it gets to this point and you haven’t already thought about what you might do, you’ve lost.
“But that’s not fair,” I hear you say. “I’ve done everything Uncle Jim told me to do: I got a hardware wallet, wrote down my seed phrase, and took custody of my bitcoin.” Have you also heard them mention that radical freedom requires radical responsibility? Read that again and internalize it. Read it one more time.
This reminds me of a phrase I’ve heard Matt Odell use: “Treat your bitcoin like its value is 10 times greater than the present price,” because it will be. Do yourself a favor and become familiar with educational resources like Matt and Bitcoin Q+A. They’ve managed to make seemingly impossibly technical procedures straightforward with actionable, direct instructions. Their material can take you from “YOLO! All my bitcoin is on an exchange!” to the level of custody security we’re about to discuss in the span of one bitcoin market cycle (yours truly serves as proof).
So what’s the solution to the dilemma?
There are multiple options that can help you in the home invasion scenario. They all have their tradeoffs, and they are not necessarily mutually exclusive. After review, I believe that a geographically distributed multisig wallet is the best solution for secure self-sovereign bitcoin custody. Signing devices from multiple vendors can be used as a strategy resilience cherry on top. Additionally, the sooner this becomes the standard for self-custody in the bitcoin community, the sooner crooks will be disincentivized from attempting these attacks.
OPTION 1: Decoy wallet
A decoy wallet is one that you load with enough bitcoin to satisfy a thief, but not so much that you wouldn’t be willing to sacrifice it in an emergency. Most bitcoin plebs have a “hot”…