All right, everybody, welcome to the Bitcoin Bottom Line.
I'm CJ Wilson with Stephen McClurg and Josh, though, I guess, what do we call you, Josh,
the the metrics wizard or the analyst crypto historian is also crypto historian.
Okay.
And today we're joined by a crypto luminary.
So he's so bright, his background so bright that he actually looks like he's in a scene
from The Matrix, Jameson Lopp, who is one of the foremost experts in Bitcoin security
and some of these technical models that we as Bitcoiners need to be aware of.
So Jameson, thank you for joining us today on the Bitcoin Bottom Line.
You bet.
Happy to join you from my anonymous white void.
I love it.
It's like I heard you talk one time and you were you were explaining that anonymity is
a huge model in security.
So the the downside really of being like a big Twitter personality or big Bitcoin personality
is people know who you are.
So in order to combat that, you have to sort of like obfuscate your trails around.
Right.
Can you talk about that a little bit?
We just jump right into it and then we can talk to some of the other security models
behind your your process.
Yeah.
I mean, a large part of it is just trying not to leak any information about where I
am, where I'm going, more physical security related stuff, the the pieces of my operational
security that tend to be extreme are mostly government related stuff like so any public
property, anything you own that is a publicly registered thing, an asset like a vehicle
or land or house or whatever.
That's where it gets really tricky and very jurisdiction specific to make sure that your
name doesn't end up on those public records that are very easily searchable.
But then going beyond that, actually, the easier stuff is just trying to break any ties
between your name and other various like online activities that might somehow then be correlated
to rough geographic location.
But it's it's a whole field unto itself.
And I generally tell people if they're interested in going down that rabbit hole to just buy
Michael Bazzell's Extreme Privacy Guide, I think the fourth edition just came out a month
or so ago and it's close to 600 pages and it seems to add 50 to 100 pages every year.
So it's it's not getting any easier, that's for sure.
Yeah, I think like as a as a I guess I would call you a celebrity in the space.
Right.
I mean, you're you're always talking at the let's say Bitcoin 22, 21, whatever you're
at these on you're on stage sometimes doing these things.
So people sort of know where you're at.
How much is that?
Has your willingness, I guess, to to just make public appearances and stuff changed
over the years or is it just like your skill level has gone up about kind of Batmanning
in and out of situations?
I'm definitely a lot pickier about public presentations and things that I go to.
And yeah, I did go to the Bitcoin 22 conference.
That was the first one I have been to in over two years.
Of course, there was the whole pandemic thing, but I'm getting a ton of requests now that
things are opening back up and I'm turning pretty much all of them down.
Because it's one of those things where you're you're you're marketing yourself as being
in a specific location at a specific time in the future.
So that could definitely be used against you.
Yeah.
Well, we certainly are glad that you are at Bitcoin 2022.
We were all there.
It's good to see you there.
Don't get to see you much.
But but I think it's been twice in one year and I won't say where the other place was.
But but given that, you know what you guys do at Casa, you do have physical locations
different places.
You help white glove people onto your platform.
I'm a client full disclosure.
And so how does that work exactly?
And how do you guys kind of protect the business while you're trying to protect your clients
at the same time?
Well, I mean, the most important thing is that we architect these setups so that there's
no single point of failure.
And that includes Casa as a business.
Now we have been a remote company since inception.
We do have a handful of physical like co-working locations, but they're not publicly disclosed.
It's not something you can find on a website or through any sort of people finder or business
directory, anything like that.
So it would be very difficult for a physical attack against like multiple Casa employees
to happen.
But most importantly, we have to assume that a physical attack against Casa employees might
happen because really none of them have the same level of operational security as I. Some
of them are getting there or they're certainly better than your average person when it comes
to privacy.
But the most important thing is that even if a wrench attack did happen against myself
or the CEO or any high level ranking person at the company, that there's no way that that
could lead to any sort of loss of funds or compromise for our clients.
And that's the whole point of having a distributed key setup.
So that's the sort of foundation upon which the company is built.
I can sleep well at night knowing that even if a worst case scenario happened where all
of our servers got blown up or seized by the government or what have you, that that would
only be a minor inconvenience for our clients and it would not result in them being locked
out of potentially their life savings.
So I guess along with that conversation, like when you have different tiers of clients,
right, they're going to have different levels of Bitcoin, they're going to have different
levels of personal security, financial security, maybe legal entities like shielding legal
entities, family trust, things like that.
Has Taproot and the development on Bitcoin in the last, let's say, four or five years,
has that really given you guys more options in terms of how to price the concierge services
or whatever?
Because I think that's one of the weirdest things about Bitcoin is, hey, we want to help
you be secure, right?
But we have to advertise that we help people.
And then we also...
So there's like this weird thing where you have to kind of put it out there what you
do, but then you don't want too many people to know how you do it or anybody to really
know how you do it, right?
So how do you guys balance out your own internal business innovation with the innovation that
Bitcoin itself allows you to do?
I would actually say that we're very open and more than happy to talk about how we do
it.
And in fact, on our website, we have a wealth security protocol, which is like 35 or 40
pages of in-depth explanation, essentially of all of the decisions that went into how
we architected the product and using multi-signature aspects of protocols, using multiple different
manufacturers hardware devices for managing the keys and then figuring out how to actually
distribute them geographically.
So we don't want any of this to be a sort of security through obscurity.
An attacker should be able to completely understand our architecture and still not be able to
do anything about it.
On the sort of tap root, and I guess what you're getting at is a sort of more complex
scripting side of things.
We're definitely keeping our ears open with regard to what is being developed throughout
the ecosystem.
One thing that we're very interested in is aggregated signatures because that provides
a really big privacy boost for multi-sig users and also sort of transaction fee and data
size savings.
However, the reason we haven't already rolled that out and the reason you haven't seen
Schnorr rolled out in a sort of general sense is that there's a number of different ways
to do these aggregated signatures.
And unfortunately, most of them are highly interactive, which means that you basically
have to have multiple different signing rounds happening.
However, we are seeing, in fact, just a couple days ago, a new paper, which was entitled
Roast came out, which was a new way of doing the Frost type of aggregated signatures, which
my understanding is should allow you with one pre-computed round, which I would think
that CASA as a multi-sig provider, where we're helping coordinate that, we would be able
to do that ourselves.
And then the user themselves would only have to do one round of signing so that it would
basically be the same type of user experience of what they're seeing right now.
Otherwise, it would get really onerous.
And also, when it comes to any of these protocol changes, we have dependencies.
We have software dependencies, we have hardware dependencies.
So this is one of the trade-offs of us supporting many different manufacturers for the signing
devices.
This gives us additional robustness in the sense that you're not exposing yourself critically
to any supply chain attacks, where there might be some sort of exploit or vulnerability in
one of those manufacturer's devices.
The flip side of that is you are now limited to whatever the subset of functionality that
all of the devices in your keyset can support.
So if we want to roll out some sort of cool new aggregated signature scheme, but only
Trezor supports it, then we're going to have problems with clients who have a Trezor and
a Ledger and a cold card.
So yeah, there's a lot of moving parts.
And as a result of that, we're probably never going to be the first early adopter of any
of these technologies.
But also, we don't want to be a super early adopter because we want to observe the landscape
of what's happening in the ecosystem and hopefully let other people make mistakes and shoot themselves
in the foot and let us learn from their mistakes.
Yeah.
Part of that low time preference thing that Bitcoiners are supposed to have, right?
It's like know what the goal is, but then maybe inch your way there so you're taking
just positive steps the whole way and not opening yourself up.
One of the things that we always talk about, myself and CJ, and then I tell clients as
a Valkyrie, people say, well, wait, don't you have funds that hold Bitcoin for people
and don't you have ETFs and don't you offer all these services?
Don't you use your own funds?
Why do you use a service like COSA?
Why do you use hardware wallets yourself?
And my answer is always diversification, right?
Different people have different levels of skill.
If you have very little skill, you just go to Coinbase.
If you've got a little bit more, then you might have a hardware wallet or use a different
service.
And some of these services now don't require a whole lot of skill at all.
And then even for our funds, it's people that say, okay, I've got this family trust.
I've got to report the numbers back to my accountant.
I've got to report them or it's a corporation or it's a fund that has to have statements
and then so some people can only use certain solutions.
Some people like myself, I like to diversify across a lot of different solutions in case
there's a point of failure.
How do you feel about that given obviously that's your business?
What has this week been like as far as have you seen inflows?
Have you seen outflows at COSA?
Just give us your general thoughts on the diversification.
Yeah.
Okay.
So I think in general, the only reason that I have come across that makes sense to me
for why someone would use a custodian is if they're in a regulatory position where they're
legally required to use a qualified custodian.
And so we certainly understand that those type of entities are not a fit for us.
We have no intention of ever being regulated, of ever being a financial provider.
We are really a security consulting service.
I would say our biggest value is actually giving people the ability to actually get
on the phone with someone if something goes wrong or if they're not sure what to do.
It's very rare to find that level of service in this space, especially for self custody.
Most all self custody options tend to be sort of community-based support or the companies
are so huge and retail-based that if you're trying to get in contact with them and get
help, you might be waiting for days or weeks to get what is probably a templated response.
That'll be really annoying.
I've run into that myself with a number of different companies in the space where you
can tell that they're outsourcing their support to the Philippines or something and the support
people aren't even allowed to type their own stuff, they're only allowed to choose from
a dropdown of different possible answers to any given query.
When it comes to diversification, I think there's logical ways of doing it and then
there's other ways that might feel logical on the surface but actually be a bad decision.
One of the most common forms of diversification that we see at least in the self custody space
is people buying a handful of different devices or creating a handful of different single
signature wallets and then just sort of spreading those around.
The idea there is that if any given seed phrase or device or whatever gets compromised, then
they'll have lost some portion of their holdings but it won't be catastrophic loss of everything.
Our take on that is that what you're doing is you're taking the old adage of not putting
all your eggs in one basket and that makes sense and you are decreasing the likelihood
that you'll have one single catastrophic loss.
I think what people don't necessarily realize is that that type of diversification actually
increases the chance that you will have some small form of loss.
The type of diversification that we like to see instead is where you have one logical
constructed vault and the diversification is within the different security protections
around each of the keys that comprise that vault.
Whether that's geography, whether that's the type of hardware that's securing it, really
even then the potentially physical layers of security around where you're putting it,
whether that's in a safe or in some sort of professional vaulting service that is requiring
various forms of authentication to even enter into the building.
With CASA, we have different levels of authentication that we set up for requesting signature from
the key that CASA holds.
For our concierge level clients, that basically includes doing an audio video call with someone
verifying various details, giving them opportunities to provide duress phrases and so forth and
basically making sure that everything is good on their end.
Plus then actually having a multi-day waiting period even after authentication happens just
to once again make a sort of $5 wrench attack scenario less and less likely or be a higher
or higher cost.
We do see a number of people and entities that are diversifying between self-custody
and third party custody.
I think that does make sense as well in certain situations and I myself am in that situation
where while I self-custody the vast majority of my funds, I also have funds that are spread
out between various services and that are providing me with other functionality.
Sometimes that comes in handy.
It actually came in handy this week when I got a margin call on one platform and I was
able to authenticate myself and instruct them to move some funds around without me then
having to spend a whole lot of time going around to geographically distributed keys
to actually make an on-chain transaction to move extra collateral into that service.
I think that's where lightning really works really well.
If you have like a sort of emergency lightning wallet, then theoretically you can move things
around from the exchanges that are actually willing to process lightning transactions.
Then that kind of helps you a little bit.
I mean obviously there's some super out there like Bitcoin or hardcore things like you could
have an open dime or something like that if you really needed to do a combination of like
a physical and a quick one-way transaction or something like that.
But I think the thing that kind of freaked me out was as we had the price dip, the mempool
gets clogged up because people start moving coins around and then some people are going
to be getting margin called and won't be able to get there depending on what the length
of time between the margin call and the actual action is, right?
That's really where there's I think still a little bit of immaturity in the Bitcoin space
for that because like you said, if you have to chase things around, that's a time delay.
If you have a time crunch, we have to figure out as an industry what's the most efficient
way of solving that problem.
Sadly, one of the most efficient ways of doing it is paying by fiat because you can just
sort of call and do a wire if you have to unwind a dollar loan against a Bitcoin position
or something like that.
But if you have a Bitcoin to Bitcoin thing, sometimes it's way more convenient because
it's like one sat per byte or something like that and you just fire it off at three in
the morning on a Sunday, it's no problem.
But other times, you have a mempool clogged in the middle of the week and you're like
shit, I just have to call a bank and or sell on an exchange and then get wired the money
and then wire the money to somebody else or whatever.
So I think we're still at that phase where we're going to see some of that stuff developing
where you can maybe live completely on Bitcoin, but I don't know if we're totally there yet
because not everybody is going to have a lightning wallet with enough money to really handle
their day-to-day spending.
That's how I think we're getting close.
One interesting aspect about the sort of convenience and speed issue with multisig is that in our
default setup, we really originally designed it for a single individual who was then spreading
their keys out and intentionally making it difficult to spend.
That's really as part of the security model.
If it's hard for you to spend, it's going to be really hard for an attacker to spend.
However, one thing that we have noted because we have a number of funds and teams and corporations
and such that are using CASA's team product, it's actually faster and more convenient for
a multisig where your keys are distributed amongst many different people for you to coordinate
and be able to create and broadcast an on-chain transaction even in comparison to a third-party
custodian because many of these third-party custodians are going to have one or two if
not more business day delays between you authenticating with them to request a withdrawal and them
actually processing it.
Whereas in an optimal scenario, if you have an emergency where you need to move funds
somewhere out of a shared treasury, within five or 10 minutes, you can have everybody
plugging in their devices, passing around the partially signed transaction, and then
having a fully completed transaction that you can broadcast out on the network.
Yeah, I think that's where necessity is the mother of invention.
As we run into these things, like I was talking to somebody about it the other day, when you
go to buy a house through your shell corporation that's named obscurely with a symbol in there
or something like that in a random state that protects you, I'm just trying to stay on theme,
the contract is very thick usually.
It's like usually there's all these disclosures and all these things you have to sign in triplicate
because there's been lawsuits for decades about these different things.
That's the learning process.
By the time someone goes to buy their first house, there's been so many houses sold and
so many litigious things that that's why they have all these things in there.
I think at some point, Bitcoin transactions or Bitcoin-based companies or Bitcoin teams
will have more tools in the same sense, more tools to work with because you'll have the
security assessor, you'll have a chief Bitcoin officer for the company, you'll have various
security protocols that are just de facto, that's just the way people do it.
Once Bitcoin as an asset class either gets more distributed or more valuable because
the stakes are so high.
I think guys like yourself that have been way earlier had your vision on it the whole
way, but new people as they come into this are like, oh, hey, I have $5,000 with the
Bitcoin or something, now what do I do?
Maybe you're not engaged at this level, but when I've been in let's say like clubhouse
rooms or Twitter spaces or whatever with other people from Casa and they have this explanation
of like, okay, this is how you get there.
I think people have the goal of accumulating a lot of Bitcoin, but then it's like they
have to have the security from day one as a guiding principle because otherwise they
end up with a bunch of it and then they have no security and that's really when they're
the most vulnerable.
Almost like if you buy too much too soon before you have your personal security and your signing
devices and your ability to use all these different devices because a cold card is much
different than a ledger in terms of the actual operation.
I think the biggest issue is people making the leap from the traditional brokerage type
of system to this new system.
What generally happens is someone creates an exchange account and they make their trade
and that's it because that's how every other system works, every non-crypto traditional
financial system.
They probably don't even understand that withdrawing is a thing.
The exchanges aren't necessarily incentivized to push you towards the withdrawal features.
There's definitely a lot of learning that's going to happen.
That's one of the reasons that I think this is going to be a generational thing that humanity
will have to absorb over the years.
Then also because people aren't used to having the same level of risk, if someone logs into
your brokerage account, they're probably not going to be able to completely wipe out your
account in an hour or so and you have no recourse.
For that reason, people don't understand that the risk is a lot higher and that they do
need to think more about security.
That's how they end up just using the same poor cybersecurity practices that the vast
majority of people are using where reusing passwords, either not using a two-factor authentication
or using really weak two-factor authentication like SMS-based stuff.
I just heard, I think yesterday, one of the CASA employees posted that they had a friend
who got into crypto a few months ago and had a Coinbase account.
They were just asking them, hey, is it possible for someone to clean out my account because
they logged in for the first time in six months and balance was zero and someone had just
withdrawn everything, probably because they were reusing their passwords.
That's where you need stuff like you need people like Valkyrie or CASA or somebody else
that is going to have some sort of emergency break and you can have some sort of human
interaction.
I think that's what's really interesting is Bitcoin has this ability to go really fast
and to move huge sums of money in very quick periods of time, but it also has the ability
to go real slow because of multisig to force you through these hoops.
I think that's one of my favorite things about having a multisig set up personally.
I use exchanges, I buy Bitcoin at various different places, I try to manage my UTXOs,
I have a mining company, I try to do all this stuff.
I think that you can get so complex with your own security setup that it does get to a point
where you might be, I want to say, creating a random scavenger hunt for your spouse if
something happens to you.
In that regard, for someone that has a huge technical setup, how do you manage the spouse
kids' will and testament kind of thing?
You have the master book, you have the post-its that you've got to spin through at the right
time and the stars, it's all of a sudden where it's like Goonies, right?
You got to have the thing and turn the thing and then the stars are coming through and
one-eyed Willie falls off the wheel and then that's how you have access to your Bitcoin.
I think it's like we're weird, we love the analog as humans and we love the technical
as geeks but then combining analog and technical together is, like you said, it's a generational
thing that, I don't know, technically I guess it's a cypherpunk thing, right?
To kind of want to do that.
But I just have this sort of like steampunk idea of you have this magic dust, you put
it over a book and then it shows you the code to get into the safe, to get into the phrases,
to get into your wallets, to do the multisig and hopefully none of that ever happens to
my wife but I have to leave little Easter eggs somewhere for her to figure it out.
Yeah, so that's a case where diversification or overcomplexity is actually a threat.
This is how a lot of people have lost a lot of Bitcoin over the years, is that they tried
to get cute, they thought that they were a security expert and they created an incredibly
secure setup and in fact it's possible to go too far and create a setup that's so secure
that you lock yourself out of it or you lock your loved ones out of it and really probably
twice as much Bitcoin has been lost due to reasons like that than has actually been hacked
and stolen.
So that's something to keep in mind is that it is possible to have too much security and
to create setups that are too complicated.
So that's why we have very specific inheritance plans that we have standardized and work with
our clients on where there is a treasure map of sorts but it's a very simple guide and
also we're capable of onboarding your spouse or your beneficiaries into our platform so
that we can help them out when the time comes.
So some of the things that we always tell people that when it comes to security, there's
a few simple things.
One always use maybe an authenticator app instead of SMS, that's a basic one.
We also tell people to have multiple emails, have one email that's sort of like your spam
junk type email that anytime that you've got to use your email to do something like log
on at a hotel or something like that which is in itself a security risk but always use
a spam email but then always create another email that doesn't have your name in it for
any financial transaction.
It doesn't matter if it's crypto, bank accounts, it doesn't matter and then having two laptops,
one that you only do financial transactions on and those are some of the basics but if
you have one piece of advice, one thing that somebody could do that can protect them and
their security, what's the key thing that you would say?
Buy a YubiKey and use a password manager that you unlock with that YubiKey and then you
should only know one password and the only password you should know is the master password
to unlock your password manager.
Every other password that you have should be randomly generated and like over 20 characters
long.
That's going to protect you from some of the most common stuff because you have to assume
that every service that you create a login to is going to get compromised and that those
credentials might get leaked and then this is something that we see all the time or really
anyone who runs an online service, every once in a while whenever there's a big data leak,
your service starts getting hammered with just lists and lists of all of these leaked
usernames and passwords because people are just trying them.
They're like, you know, there's a good chance that at least like half a percent of these
usernames and passwords are getting reused on other common services.
So humans are a very bad source of entropy so don't create your own passwords.
So along those lines though, there's something to be said about the nature of your passwords
in the sense that the longer they are, the harder they are to hack, right?
And so some of these apps or web services or whatever, they have like a limit to the
amount of characters you can use or they limit you from using other characters.
So it's almost like in a way they're broadcasting how they're at some point going to get hacked
because they have a limit to that.
They have a top end limit to their security protocol, right?
So I remember a couple of years ago there was like an iCloud hack where all these celebrities
whose emails were basically like firstname.lastname.me.com or something like that, like no obfuscation
of their email at all.
It was just literally just firstname.lastname.
And they had their stuff hacked to the point that their iCloud photos were being put online,
right?
And people were like up in arms.
They're like, oh my gosh, there's naked pictures of like these actresses and stuff like that.
And it's like, well, you know, the whole point of Bitcoin and I mean, one of the great points
about Bitcoin is it obfuscates your wealth so that you can have a ton of money or no
money and then like nobody really knows how much you have at all because if you're doing
everything right, then it's always a mystery, you know, because you don't have just one
huge wallet that's got everything in it that you're like, oh, I need to pay for tacos.
So here's like, you know, 50,000 sats coming out of a wallet that's got 100 Bitcoin in
it or more or whatever.
But I really think that like we're at this weird meeting where like there's a lot of
plebs that are coming into Bitcoin and their dollar cost averaging and they're coming
up to a point where they're about to transition from, you know, having let's say a million
sats to 10 million sats or 10 million sats to 100 million sats or something like that.
And so they're getting to that point where they're, especially with Bitcoin being as
cheap as it is today and the economy being crazy, people are kind of squirting more money
into Bitcoin as they go, as they learn more about it.
And so there's going to be this really weird like ramp, I think, of exploits that happen
because like you said, the human is the soft target, right?
If their password is, you know, big boobies one, two, three on every service they use
or like what's the kid from Kyle from Wisconsin or whatever, you know, it's like, you know,
you have to think about the Bitcoin that you have today could be worth 10, 20, 100 times
what it was worth today, one day.
And if someone has your password now, then they can get in your email now and then they
can, you know, like stay with you.
And there might be a whole benefit for hackers or whatever else for hacking people today,
but not exploiting them today because the Bitcoin is not worth as much.
So I think like that game theory is so interesting because it's like there's all these things
tumbling at the same time.
So I think like the more you get into it, you get like the sort of conspiratorial mindset.
You sit there and think like, well, I really have to take extra steps, you know, because
otherwise and, you know, and cut emails off and stop using that email for everything.
Because if you have one email for like 15 years, there's a, I mean, the longer you have
that email, the higher the chances that someone's going to get into it.
And if you have some sort of reset button or whatever that they can go through your
email to get, then you're going to get hacked at some point, right?
As a person.
So, yeah, I mean, that's, that's good.
Cybersecurity 101 is treat your, your email account is actually your most important account
because that's how hackers tend to get into all of your other accounts, you know, resetting
passwords and whatnot.
So I would also recommend, you know, once you get that YubiKey, use that YubiKey for
everything, especially your email service.
And then this comes down to, you know, there's like three different types of authentication.
There's something, you know, like a secret, like a password or a private key.
There's something you are, which is like biometrics.
And then there's something you have and something you have is like a YubiKey, you know, a physical
device so that, you know, if you have that form of authentication, nobody out on the
internet is going to be able to grab that and then impersonate you.
So that limits your attack surface down significantly from everybody on the internet to someone
who is willing to go to the extremes of, you know, physically coming to your location and
taking control of that device.
Yeah.
Well, we really appreciate you coming on, Jameson.
This is the end of the Bitcoin bottom line.
Hope we have you back soon.
Yeah, thanks for having me.
And Jameson, you provide a lot of really cool resources on your website.
Can you tell everybody about that a little bit?
Yeah.
Last I checked, there's over 1500 links to different resources and a couple dozen different
categories.
It's very easy to find the site.
It's just bitcoin.page.
And that'll take you directly to my resources that I maintain on a daily basis.
Thank you so much for like what you provide for free, really, the open source aspect of
Bitcoin is so cool because it brings out this really interesting skill set.
And I personally have gone through there a lot and tried to double check resources and
stuff like that.
So I really say thank you as a Bitcoiner that's never met you, you know, in person or whatever
and might not ever meet you in person because of Ghost Protocol, right?
Then, you know, it's just keep up the good work, man.
And, you know, I definitely I think from a lot of other people, a lot of our listeners,
they're going to take their security a lot more serious.
You know, they're going to be a lot more secure with their life and their Bitcoin as a result
of this conversation and, you know, what you do.
Yeah, we really appreciate it.
With great sovereignty comes great responsibility.
Great.
Well, thanks, everyone, for joining us on the Bitcoin Bottom Line.
This is Stephen McClurg, my host CJ.
And thank you, Jameson.