One of the features of Bitcoin (CRYPTO:BTC) that deserves a little more attention is that it can be stored in the brain. For the first time in history, a person’s entire net worth can be condensed into 12 words and memorized. My investment thesis here is that I should hold a form of money that I can store inside my head. Why? Because of geopolitical unrest.
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The recovery phrase
Bitcoin wallets are ultimately based on very large and random numbers. The recovery phrase is a human-readable version of the random number that represents your money. You’re likely to fail if you try to memorize a 40-digit number. Instead, a recovery phrase is made up of 12 to 24 words, which are a lot easier to remember.
The recovery phrase has many different names depending on the wallet or service you are using. It is sometimes called the backup phrase, seed phrase, or secret phrase. All of the names refer to the same thing: a list of words that represents your money.
There is really no difference between a recovery phrase and the money it represents. The way I see it, they are one and the same. If anyone were to learn your recovery phrase, they would have access to your money. This is why it is of the ultimate importance that you keep the recovery phrase safe. One of the best places to store it is outside of physical reality and inside the safe confines of your mind.
Practical application of the recovery phrase
Writing down your recovery phrase on a piece of paper and keeping it in a safe place is a perfectly fine way to store your money. However, there is a practical application of the recovery phrase that is relevant for the times we’re living in. With mass immigration resulting from warfare, climate catastrophe, or social unrest, money stored in a physical location like a bank is no longer sufficient in this globalized world. Furthermore, withdrawing money, transferring your life savings out of the country, or traveling across borders with cash or gold can be difficult, dangerous, or impossible.
The practical application of recovery phrases is that they help you recover your money wherever you may end up. It doesn’t matter if you are searched in transit, because it is not currently possible to search the contents of one’s mind. The caveat is that if you lose your memory and don’t have your phrase backed up elsewhere, then you’ve lost your funds.
The recovery phrase is a hedge against uncertainty
When I consider my investment portfolio, I am not just trying to maximize my gains. I am also trying to minimize my risk and hedge against events that may transpire on the world stage. With 90% of my money in Bitcoin, a subset of this is secured with a recovery phrase that is stored in my brain. Any cryptocurrency can be secured using a recovery phrase, but I’ve opted to keep the majority of my funds in Bitcoin. The reason I’ve opted for Bitcoin is the same reason I use recovery phrases to secure it: to hedge against uncertainty. Out of all the assets in the world, I want to select the asset that has the following properties.
- I can store it in my brain.
- It is likely to increase (or at least not decrease) in value on a five-year time horizon.
- I can access it when I need it.
The asset that I think best fits this description is Bitcoin.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
