Why Bitkey Ditched Seed Phrases | Clay Garrett SLP778

Clay Garrett (0:00)

That mindset, to me, doesn't feel like they're out there really talking to customers. In the wake of the coal card incident, there was a few different podcasts I listened to with leads within hardware wallet manufacturers. And a lot of times, the conversation was just, well, we should have made this more secure and therefore less usable, and we should just trust customers more and they'll figure it out.

Stephan Livera (0:19)

Hi, everyone. Welcome back to Stephan Livera Podcast. Joining me on the show today is Clay Garrett. Clay is lead at Bitkey from Block. Welcome to the show, Clay.

Clay Garrett (0:29)

Thank you, Stephan. Appreciate the opportunity to be here.

Stephan Livera (0:32)

So Clay, let's get into Bitkey and talk about the model, how it works, what you were thinking about the design of it, and the security of it. Obviously, recent conversations around security and self-custody. But yeah, I mean, maybe just start with a bit of an overview on the Bitkey product. I know you had an earlier version and then the V2 of Bitkey, which has a screen, came out, was it April this year or earlier this year, right? Talk to us a bit about that.

Clay Garrett (0:56)

Yeah, it came out in April at Bitcoin Las Vegas, we launched it. Yeah, so first of all, with the new release of the new Bitkey, the system itself didn't change. There's some significant things that changed about the hardware itself, which we can talk about. But Bitkey is a two of three multi-sig. So that means you need two of the three keys together to sign and spend at any given time. So the three keys are blocks key, so we have one key, and then you have two customer keys, one on the customer's phone, one on the Bitkey itself. So because you need two or three to spend, we cannot spend without you, and you can spend freely without Bitkey. And so that kind of creates some interesting options for both recovery and spending without your hardware, if you so desire, which I'm happy to get into the details of that. But we were just overall looking for a way to solve some of the pain points that we heard a lot from customers as we were digging into this about their self custody setups.

And one notable thing that people may or may not be aware of is that we actually don't export a seed phrase. So the entire system does not require you to write down anything, to remember anything new. We use things that are already in your life, including your cloud access, your phones, your fingerprint that you always have. And so we kind of bucked some things that were part of traditional self custody in doing this, but it opens up a lot of value that is hard to get in other types of setups.

Stephan Livera (2:24)

Yeah, and I think we should talk a bit about that because that makes me kind of remember this point because obviously with the cold card thing, everyone was spooked about entropy and then it became all about like, oh, yeah, you got to get your dice.

And to be clear, I've been an advocate of dice rolling, but I think it's important to step back and understand base rates here because most people lose money, or at least in Bitcoin, they've lost money because of losing their backups or kind of losing access to their coins, rather than an entropy vulnerability as catastrophic as the cold card one was. So do you want to just touch on that a little bit and how that plays into your design and the thinking of Bitkey?

Clay Garrett (3:03)

Sure, we use a term a lot called safety, and we sort of combine security and accessibility, recoverability all into one term that's essentially the thing that matters overall to customers, which is do I have access and am I going to lose access to my funds in any way? That could happen because of threats where our security posture matters a lot, but it can also happen because of everyday life.

If you're tasked with managing the life cycle of a seed, then that's something that now you have to take care of as well. And so I think security is an important part of it, but we talk a lot about safety because of that. It's the holistic view of the system in terms of how likely you are to actually retain control of your funds.

Stephan Livera (3:47)

Right. And I think there's all these trade-offs around how the product is designed. So let's just talk a little bit about the...

So you mentioned the two of three model, right? It's in the one key, in the Bitkey device, the physical device itself, one in the phone, and then one in the block server or Amazon Web Services Nitro server or Enclave. When are each of those used?