American computer scientist and legal scholar Nick Szabo has opined that Bitcoin should be treated as a "trust-minimized insurance."

"The wisest of all will self-custody Bitcoin, the actual trust-minimized asset, as insurance against the most extreme outcomes, which any serious student of economic history knows have a far from zero probability," he said.

Unlike banks, custodians, or governments, Bitcoin doesn’t require you to trust a third party. If you self-custody your Bitcoin, no one can seize or inflate it. Fiat money (like USD, EUR) can be diluted through inflation or government debt issuance.

Bitcoin acts as a form of protection against extreme economic scenarios.

The two schools 

Szabo has responded to Fred Krueger’s framing of Bitcoin futures as two schools. 

The "dark side" school sees Bitcoin being co-opted, stolen, or heavily controlled. Users cannot trust institutions or wrapped solutions.

Within the "Joe" school, Bitcoin becomes high-powered money integrated into the banking system. Custody solutions, wrapped tokens, and credit instruments will exist. Trust-minimization is maintained through careful design.

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Szabo identifies with the "Joe" school, but he’s still advocating for self-custody as the ultimate trust-minimized insurance.

Even if banks and credit instruments adopt Bitcoin, the most prudent approach is to hold some personally. 

Under this hybrid model, institutions add low-dilution Bitcoin to portfolios as a hedge against inevitable fiat debt dilution driven by demographics, while individuals self-custody it for insurance against hyperinflation or systemic collapse.

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