People like to talk about self-custody, keeping your own keys, securing your bitcoin. Cold storage. Get your bitcoin off of exchanges.
All of this is true. But what is the actual user experience in doing so?
Maybe you just had someone ask you to put an app on your phone, and they sent you some bitcoin. Or you joined Nostr, set up some stuff you didn't understand, and now you're getting zaps! Yay, zaps!
You can now go to your local big box store, buy a hardware signing device (called a crypto wallet) from hardware companies like Ledger or Trezor, and follow some YouTube videos on how to transfer your bitcoin onto these wallets. Hopefully you're buying some bitcoin from somewhere that allows you to send it to your own wallet.
But then what? Even a little bit of research and listening around those that use bitcoin as money, and you will hear that Ledger and Trezor are not good companies, their products aren't great, and maybe you should buy a different product like a ColdCard or Blockstream Jade.
Now you feel like maybe you barely escaped getting rug pulled by an exchange, probably got ripped off by a hardware company, and maybe these guys that have apparently been around forever and are super nice will finally have your best interests at heart.
Well, maybe they do, maybe they don't. We can give them the benefit of the doubt. In fact, let's do that to everyone you've interacted with so far, from the exchange (wherever you bought your bitcoin, or wherever you may be storing it now), to the hardware companies - who have had their battles, granted, but still may be putting out quality products, to the people on the internet, who of course always tell the truth!
The fact is, you've been thinking about this all wrong. Bitcoin isn't one thing. Neither is money, for that matter. Do you think pirates just kept big treasure chests of gold and silver coins around for when they went into town to get a pint? Nope! They hid it where they could, lost some along the way, and likely spent their lifetime (however short it may have been) trying to figure out the best way to keep as much as they could, while always hoping to add to their stacks!
In the meantime, they would find ways to take a little of their treasure, exchange it into the local currency, and enjoy a pint in peace. You can do the same!
So let's consider this - in most cases, the amount of wealth you wish to store, and the duration of time you wish to store it for, will dictate the level of security you will use to store it.
If you have about $5 in zaps - maybe 15k satoshis, or a very small portion of a bitcoin - well, are you wanting to store it for a long time? Probably not; you would probably just as rather buy a coffee with it, or spend it on zapping other people on Nostr. Is it a large enough amount to warrant a sophisticated security system with multiple elements of physical and digital security? Nope. Not worth any of that. So, holding it in a phone app like Strike or Phoenix or Wallet of Satoshi, or even in a browser extension like Alby is probably just fine.
But - not my keys... right. OK, so if you lost that $5 (to any kind of disaster or thievery) would it matter to you? Sure, might make for a rough morning, but you'd get over it pretty quickly after throwing a few air punches, maybe a facepalm if you did it to yourself. It's OK that this amount of bitcoin live in what amounts to a very non-secure place. You don't know anything about the companies or their applications, and shouldn't trust them even one little bit - and you just have to be OK with that money vanishing without warning.
Ok, then what if you have a few hundred dollars in your CashApp that you bought bitcoin with? You know, more than you'd want to just walk around in the street with? Does CashApp provide the security that you want? Do you trust them as a company? And when might you want to spend that money, or send it to a family member? Chances are, you might want to hold on to it for a bit, just in case this whole crypto thing catches on. Well, you might be just fine to keep it at CashApp then. This is actually right around a decision level for many people, once they've reached a threshold that they no longer feel comfortable losing, and right around the amount where it may feel worth it to pay for more security. Does paying a couple hundred dollars to secure a couple hundred dollars make sense? Nope, probably not, unless you are ultra-certain that those million satoshis will be worth millions to you one day. And even if this is the case, consider you might be better off buying another hundred dollars worth of bitcoin than buying some fancy hardware.
However, there are some cheaper options. There is something called an OpenDime. If you're really not going to spend it, you can store your sats on an OpenDime (it plugs in like a USB key so you can set it up and retrieve the address you will need to receive your sats). They are selling right now at 3 for $69, but you may be able to find them cheaper, especially around holidays. Just make sure to not buy used ones! There are some other options that are even less technical - some resemble credit cards, even, so you feel like you're saving sats to a reloadable debit card. There will likely be more of these in the future. Or, maybe you just find a better online solution for storing your bitcoin - go with Strike, Swan, or River. Maybe you take the time to learn a little bit more about mobile wallets and try a different one that better meets your needs.
How does this scale up? Maybe you've hit a stacking goal, like 28 million sats - the amount needed to statistically be in the top 1% of bitcoin holders. As of now, that can be done for less than $10,000 US. Maybe you've done better, or started earlier, and have managed to save 1 whole bitcoin, maybe more. Well, it makes sense to take the storage of that much more seriously, as the amount relative to the time you wish to store it has probably gone up significantly. This is where you may seriously be considering bitcoin as your retirement or your legacy.
However, none of the other uses you may have had will have gone away. You will still want to zap your friends, and have some sats in a phone wallet or browser extension to do that. You might want to pay for small items, or even larger items - maybe pay your bills, even, or your rent. There are ways to do all of that, and they might still involve using Strike, or Swan, or River. You will probably still be buying more bitcoin, or even better, earning some bitcoin by exchanging products or labor. (This is not the same as earning yield, interest, or staking fees - those have historically been very unsafe methods to increase your bitcoin total, and many have lost significant amounts of bitcoin to services that promised passive income.)
It is very important to remember that just because your total bitcoin accumulation increases, your use cases and your time you wish to store certain amounts based on those cases do not disappear, and neither should your solutions.
I think some that may have found bitcoin early on, and quickly found themselves with an apparent windfall, which they already may consider retirement or legacy-building savings, skipped some of these earlier steps. They may not have had the lightning network, weren't able to easily and instantly zap their friends, and may have been able to buy products and services only through lengthy and painful user experiences, if at all. Instantly, they are thinking of the most complex ways to store their wealth, and they have the relative accumulated wealth to afford them.
And there are some very complex systems available to store your bitcoin wealth. Many are as complex as your imagination could create, because they were built based on someone's imagination of what a complex storage system would be. Not all of these complex storage systems are expensive, and some aim to be as cheap as possible - like for free, you can try and remember your 12 or 24 word seed phrase in your own memory.
However complex these systems get - requiring multiple signing devices, with multiple seed phrases stored in multiple geographic locations, maybe with a time-lock element or a trusted third party participating for a fee - consider that these systems do not invalidate less complex systems, and can be used in coordination with other less complex systems.
Let's imagine you have 10 BTC. Further, you're convinced that bitcoin will be worth a million dollars one day. That means your 10 BTC represent 10 million dollars (to you). You want to save enough for your retirement, and plenty to pass on to your children. You still work for a living, and earn enough money to pay your monthly expenses and have some left over. You may have some debts, but nothing you find yourself struggling with each month. You're not overly technical, so have no interests in bitcoin nodes, bitcoin mining, or playing with a bunch of odd hardware and software.
Here is how your bitcoin storage could look. You set up a bitcoin IRA with Swan or Unchained. They help you acquire a hardware wallet (or two) as part of that setup, and you end up putting about half of your bitcoin there - so let's say 5 bitcoin. You have a multi-signature setup with a trusted third party securing wealth that should guarantee you a comfortable retirement and leave something for your children. But, you still have 5 bitcoin. They may be sitting on Coinbase or Binance. You know you don't want them to be there, but you know you might want to spend them. Or you don't want them wrapped up in the tax structure involved in an IRA. Well, since you learned a little bit about hardware wallets, you go and get a couple more. Maybe you get one for each of your two children, and put 1 BTC each there, just to make very sure they will get something. Now you have 3 BTC on Coinbase. You finally decide you're going to pull that down to a single wallet, so you go buy another hardware wallet, and put it there.
None of this was all that technical. You have some various seed phrases to remember with all the different wallet setup you did, and you probably have those written down somewhere, maybe sitting in a safe. Maybe you stamped them into steel.
But what about zapping your friends? What about doing a little dollar-cost averaging with your extra income each month? You just left Coinbase, Swan is begging you to smash buy...
Well, you set up some simple buying on Swan. Maybe you try $100 a month to start with. That builds up, you have a year's worth of bitcoin on Swan. Meanwhile, Strike seems interesting, you can take your paycheck in bitcoin like a sports star, you can send your money around the world if you want. So you set up a Strike account too, maybe put $500.00 there. Then someone gets you on Nostr, shows you Alby, and you are able to take 50000 sats from your Strike account for zapping your friends.
This is getting close to the boundary (or maybe even crossing it repeatedly) for someone non-technical, that doesn't want to buy hardware or learn software. We've dealt with several hardware devices, several companies (and their websites or software), and your bitcoin is all over the place.
But you've achieved everything you set out to do. You have retirement. You have your children taken care of. You have your own bitcoin held with your own keys. You have ways to increase your bitcoin accumulation. You have Lightning capability, and your friends are happy. You can buy things if you want. This happened with about 6 layers of storage (multi-sig IRA, kids hard wallets, your hard wallet, your Swan DCA, your Strike account, your Alby account). Each works differently, but if you have more than you'd like in one of the less secure layers, you can move some to a more secure layer.
Every so often, you decide you want to take some of the Swan savings and move it to your IRA (or your personal cold wallet) - done! - and a good idea, as no-one knows when a 3rd party will fail. Maybe you start taking a portion (or all) of your paychecks into Strike, and need to move that to a cold wallet or your IRA. No big deal. You need some more sats to zap your friends on Alby - also easy to make happen.
This is all very flexible. There are a lot of technical options I haven't mentioned. I may have mentioned more than I should have. I have more layers that I use, more use cases that I have built layers specifically for. There are bitcoin nodes, lightning nodes, bitcoin mining, Nostr relays, streaming income, value for value, coin join, whirlpool, cashu, and more - with more being added each day, it seems. It is important to work on what works for you. If you don't understand it, and can't change it if a future tool becomes a better solution, then maybe it isn't be best solution for you.
We have not really discussed taxation or other government concerns. I purposefully did not go far down the path of selling bitcoin, not because I don't think it is a good thing, but because it is easy to find yourself in a situation where you are either breaking a law or may be fined or taxed if you don't report a sale (or if you do). I'm not here to give that kind of advice. The layered concept of storing your bitcoin may give you some ways to deal with those issues, though. I did mention the bitcoin IRA - that is something that is specific to US taxation rules. Most bitcoin companies (all that provide a way to buy or sell bitcoin other than peer-to-peer) only operate in certain countries and/or states. This is a long way of saying that your solution will be influenced by where you are, and what you have available to you - and to some extent, how comfortable you are with working slightly outside the rules.
I hope this was informative. I may follow it up with some more technical examples, but wanted to cover at least a high level conceptual view of what layered bitcoin storage looks like, and how security may differ at each layer.