CPOBV on Nostr: AI generated notes from a recent discussion. # Bitcoin custody and privacy ...

AI generated notes from a recent discussion.

# Bitcoin custody and privacy technologies exploration

Fri, 06 Jun 25

### BitKey Discussion and Trade-offs

- BitKey implements 2-of-3 multisig setup:
- One key on BitKey device
- One key on phone
- One key in cloud (managed by Block)
- Key advantages:
- User-friendly interface
- Customizable spending policies based on amount
- Recovery options through emergency contacts
- On-chain visibility of funds
- Key limitations:
- Vendor lock-in - cannot export keys to other wallets
- Requires trust in Block/BitKey team
- Cloud key backup raises privacy concerns
- Marketing stance against seed phrases criticized by experts

### Seed Phrases (BIP 39) Benefits

- Enables wallet migration without on-chain transactions
- Represents private keys in human-readable format (2,048 possible words)
- Allows physical backup (metal plates, paper)
- Supports key sharing between parties
- Provides sovereignty over private keys
- Multiple wallets support BIP 39: Blue Wallet, Phoenix, Nunchuck, Coldcard, SeedSigner

### Privacy and Bitcoin Fungibility

- Privacy fundamental to Bitcoin protocol through private keys
- Collaborative transaction types enhance privacy:
- PayJoin (implemented in Bull Bitcoin, Cake Wallet)
- CoinJoin
- Silent Payments
- Atomic swaps
- Chain analysis limitations:
- Common input heuristic can be broken
- Transaction history becomes untraceable through privacy techniques
- Jurisdictional differences affect “clean” vs “tainted” Bitcoin definition

### Mining Decentralization Challenges

- Current issues:
- Silicon production centralization
- PCB manufacturing concentration
- Mining pool centralization
- Promising developments:
- New chip makers emerging (Brains, Block, Auradine)
- HashPools project using Cashu spec
- Ocean Pool experimenting with Coinbase transaction payouts
- CTV payment trees could reduce economic barriers for small pools

### Technical Innovations

- Block height: 900,052 (as of 06/06/2025)
- Bitcoin price: $104,275
- Sat/USD rate: 960 sats per dollar
- Key developments:
- BitVM enabling zero-knowledge proofs
- CTV (Check Template Verify) enabling vault constructs
- Key Teleport for secure configuration sharing
- Cashu integration with Lightning Network

### Future Considerations

- Post-hyperbitcoinization scenarios:
- Settlement layer vs cash-like instruments
- Need for privacy-preserving solutions
- Hardware production sovereignty
- Mining pool decentralization
- Development community collaboration:
- Cross-chain learning incorporation
- Open-source innovation
- Technical trade-offs evaluation

---