Vitalik Buterin Takes Aim at Saylor’s Bitcoin Custody Claims

Vitalik Buterin, co-founder of Ethereum, has voiced his disapproval regarding recent comments made by Michael Saylor, the co-founder of MicroStrategy, who advocated for institutional custody of Bitcoin (BTC).

Buterin’s criticism emerged after Saylor claimed in an interview that large institutions holding Bitcoin could lower the likelihood of asset seizures that might be inflicted by rogue crypto holders.

Saylor Calls for Institutional Custody

During a discussion on October 21 with Madison Reidy, a self-identified Bitcoin maximalist, Saylor explored various topics, including the potential for wider asset acceptance among businesses and governments, and emphasized the necessity of user-friendly BTC investment products to facilitate mainstream adoption of cryptocurrency.

Nonetheless, it was Saylor’s reaction to Reidy’s inquiry about the potential dangers of centralizing Bitcoin within a few large institutions that provoked backlash from the crypto community.

Reidy pointed out that such a situation could elevate the risks of asset seizure and confiscation, reminiscent of what transpired with gold in the 1930s. Saylor dismissed these concerns as being raised by “paranoid crypto-anarchists.”

“People say that, but it’s mostly paranoid crypto-anarchists. It’s a myth and a trope that repeats itself. First of all, the government didn’t really seize gold back then; people voluntarily turned it in,” stated MicroStrategy’s former CEO.

Saylor asserted that major regulated entities such as BlackRock and Fidelity should hold Bitcoin instead of individuals or smaller custodians. He argued that this approach would safeguard the cryptocurrency against government seizures while stabilizing it within the larger financial ecosystem.

Moreover, he suggested that the very individuals he referred to as anarchists could inadvertently trigger a Bitcoin seizure event due to their noncompliance with legal frameworks:

“I think when Bitcoin is held by a bunch of crypto-anarchists who aren’t regulated entities, who don’t acknowledge government or don’t acknowledge taxes, or don’t acknowledge reporting requirements, that increases the risk of seizure.”

Buterin’s Perspective on Self-Custody

Conversely, Vitalik Buterin disagreed with Saylor’s stance. In a response on October 23 to a post by crypto security expert Jameson Lopp, Buterin argued that Saylor’s perspective essentially promotes centralization, which contradicts the principles Bitcoin was created to uphold.

In his view, placing trust in institutional players for asset custody undermines the very essence of decentralization that cryptocurrencies are built upon.

Buterin also criticized the outdated “mountain man” stereotype associated with BTC self-custody, noting that innovations like zero-knowledge proof and account abstraction have transformed the security considerations involved in self-holding.

The developer believes that Saylor’s vision for institutional custody is perilous, asserting that self-custody, despite its challenges, is vital for the long-term security and integrity of Bitcoin.

Nonetheless, Ethereum has faced its own centralization challenges. A report from 2023 indicated that over 60% of its nodes are operated through centralized services such as Amazon Web Services (AWS) and Google Cloud. This led Buterin to propose the use of stateless clients as a potential solution, although he recognized that achieving this may take 10 to 20 years.