The Los Angeles Fire Disaster Is a Stark Reminder: The Time to Rethink Your Bitcoin Custody Strategy Is Now

The cryptocurrency community has long championed the mantra “not your keys, not your coins,” but natural disasters like these expose a critical flaw

The fires ravaging Los Angeles have left behind an apocalyptic landscape of destruction. So far, over 12,000 structures have been damaged or destroyed, more than 180,000 people have been displaced, and entire neighborhoods now resemble moonscapes of charred foundations and twisted metal.

As residents return to the places they once called home, they face the overwhelming task of rebuilding their lives, coping with the emotional trauma of loss while grappling with the practical challenge of recovering what property they have left.

Amid this devastation lies a less-discussed but equally important casualty: bitcoin self-custody. The cryptocurrency community has long championed the mantra “not your keys, not your coins,” but natural disasters like these expose a critical flaw in common storage practices.

Many bitcoiners store their seed phrases on paper, an option that provides zero protection against fire. Fireproof bags and safes are better than nothing, but also not so reliable that one should trust them to protect a large amount of wealth.

Even those who have opted for seemingly indestructible metal storage plates face a sobering truth: when your home is reduced to rubble, retrieving that metal plate becomes a hazardous or even impossible task.

Imagine standing in the smoldering remains of your home, inhaling toxic air, surrounded by debris, and unsure if the site is even safe to enter. Emergency management teams may block access, and looters may be circling. Even if your metal plate survived, could you safely recover it?

This unsettling scenario underscores a hard truth: the time to rethink your bitcoin custody strategy is not during a crisis but well before one arises. The California fires are a stark reminder that stability is always temporary on a long enough timeline. Natural disasters, political upheaval, or personal emergencies can strike without warning, turning even the most well-laid plans into desperate scrambles.

The key to robust bitcoin preparedness is making decisions from a position of strength rather than during moments of chaos. If you’re reading this from a place of stability, use it as an opportunity to take proactive steps. Your current circumstances offer the clarity of mind needed to make rational choices.

If you are committed to true self-custody, understand that secure bitcoin storage goes beyond memorizing the phrase "not your keys, not your coins." Robust custody practices require thoughtful planning, redundancy, and an understanding of the tools available.

When you set up a hardware wallet, you have the option to use a single-signature (“single-sig”), or multi-signature (“multi-sig”) setup. Single-sig is exactly what it sounds like – one key will provide access to all of the bitcoin in that wallet.

Multi-signature (multi-sig) setups allow you to distribute your keys across multiple locations, reducing single points of failure and mitigating the risks posed by natural disasters, theft, or technical failures.

“Collaborative custody” utilizes a multi-sig setup to further manage risk of loss. In this approach, a company that specializes in bitcoin custody keeps one or more backup keys on your behalf so that you can get help recovering your bitcoin in an emergency.

Learning how to properly secure your critical data, set up an encrypted vault, and run your own bitcoin node for direct network access are essential components of comprehensive bitcoin security. Every approach to self custody – single-sig, multi-sig, and collaborative custody – comes with trade-offs. Here’s how each custody model relates to key aspects of bitcoin security:

A single-signature wallet requires only one private key to sign transactions, making it very private and reliable, as long as you do not lose your key. If you store that key in a single location, it becomes a single point of failure. A natural disaster, theft, or other catastrophic event could leave you unable to recover your funds. This is a reasonable solution for many people, just make sure you are comfortable with your disaster recovery protocol.

With a single-sig setup, there is no external safety net. If you lose your private key or experience an issue accessing your wallet, there’s no one to help you recover your funds. While this maximizes sovereignty, it also leaves you solely responsible for securing your bitcoin.

Inheritance planning with a single-sig setup can be challenging. If your heirs don’t know how to access the key because the instructions are lost, or simply unclear, they could be locked out of your bitcoin forever. On the other hand, if you document access too explicitly and store it insecurely, recovery instructions could leak and increase the risk of theft. Balancing security and accessibility requires careful planning.

Single-sig wallets offer maximum control over your funds. You can transact without asking anyone else and retain full, permissionless access to your money, which is one of the most extraordinary properties of bitcoin. However, this also means that if you lose your private key, you have no fallback option and your funds will be lost forever.

Multi-signature wallets that you manage yourself allow you to distribute keys across multiple locations, mitigating the risk of total loss