Bitcoin Security Expert Warns of Third-Party Risks and Recommends Three-Wallet System

Self-custody has become an essential aspect of cryptocurrency management due to the risks associated with relying on third-party services. Jameson Lopp, a Bitcoin security expert, warns that trusted third parties pose a significant threat to crypto holders, overshadowing smart contract risks.

The increasing number of physical attacks on crypto holders highlights the need for enhanced security measures. Phishing attacks remain a major concern for individuals managing their own crypto assets, with scammers often impersonating reputable brands to trick users into granting permissions. Physical threats, including home invasions and malware targeting devices that secure private keys, also pose significant risks.

Lopp recommends using a three-wallet system to manage risk in crypto transactions. This involves segregating wallets based on the amount of funds and risk involved, with hot wallets for small amounts and cold wallets for larger holdings. Users are advised to avoid keeping all their assets in one wallet, as this can lead to significant losses in the event of a breach.