Not Everyone Wants to Hold Their Own Bitcoin Private Keys, and That’s OK

For many, the point of Bitcoin is that it allows each individual user to be his or her own bank. Having said that, the reality is that many non-technical users choose to transfer the ownership of their bitcoin private keys to a third party (bitcoin banks). While this isn’t necessarily an issue for the long-term viability of Bitcoin or bitcoin, some say that the creation of centralized institutions on top of the blockchain misses the point of creating a decentralized payment system and currency in the first place.

Who Wants to Hold Their Own Bitcoin Private Keys?

Although there are many people who believe that everyone should be holding their own private keys, this line of thinking is not entirely practical. In Bitcoin, the loss of a private key means the loss of one’s money, and that’s something that will make the majority of the less-technically-inclined users uncomfortable. People are used to having someone else take care of the security of their funds, and that way of thinking is unlikely to change over the short term.

There are a few unique setups involving multi-signature addresses that can lower the amount of stress related to proper bitcoin security, but it’s unclear if a combination of spending limits and bank-level monitoring of funds will be enough to calm everyone’s nerves. For the most part, it appears that the average person doesn’t want to have to think about keeping their private keys secure.

Some Only Use Bitcoin as a Currency

Some may believe that having the majority of bitcoin users give control of their private keys to someone else means that the overall Bitcoin system is not of much use, but this is far from the truth. If someone is only interested in bitcoin as a currency or investment, then there isn’t much of a need for handling one’s own private keys. The only people who need to worry about private keys are the ones who are taking advantage of some of the intrinsic qualities of the Bitcoin system such as censorship-resistant payments or having the ability to be one’s own bank.

Some Will Still Want to Hold Their Private Keys

The earliest adopters of Bitcoin were people who needed to use a form of digital cash that had no friction whatsoever. Whether it was the Silk Road Marketplace or Wikileaks donations, there were thousands of individuals interested in Bitcoin because it allowed them to make open, unrestricted payments. This sort of base, fundamental value proposition of the Bitcoin system is what eventually led to the rise of bitcoin as a speculative commodity.

As long as the fundamentals remain the same, there is nothing wrong with using a bitcoin bank for online payments. Although that setup is more like e-gold than Bitcoin, not all users are interested in shopping on darknet markets or hiding digital money from their local government. Plenty of people hold gold without any interest in wearing it as jewelry, and a similar phenomenon is taking place in the bitcoin world.