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Part of the CustodyStress archive of observed Bitcoin custody incidents
Bitcoin Custody Outcomes by Custody System Type
How outcomes differ across custody system types in documented Bitcoin custody failures. Each custody type creates a distinct failure structure — different dependencies, different recovery paths, and different outcome distributions when those dependencies fail under stress.
This comparison does not describe which custody system is safest in general — it describes which custody systems appear most often with blocked outcomes in the archive's documented failure cases. The archive documents failures, not the full distribution of custody arrangements in use. Custody types that are more widely adopted or more likely to generate public documentation will appear more frequently.
Blocked % is calculated from determinate cases only (blocked + constrained + survives). Indeterminate cases — where the final outcome is unknown — are shown separately but excluded from percentage calculations.
Outcome distributions by custody type
Blocked
Constrained
Survived
100% blocked
0% constrained
0% survived
Most common stress: Coercion
72% blocked
3% constrained
25% survived
Most common stress: Passphrase unavailable
64% blocked
4% constrained
31% survived
Most common stress: Coercion
63% blocked
31% constrained
6% survived
Most common stress: Vendor lockout
58% blocked
0% constrained
42% survived
Most common stress: Passphrase unavailable
What the distributions reveal
Institutional custody has the highest blocked rate in the archive at 100% of determinate cases. The archive's assessment product models this custody type's behaviour across seven stress scenarios — the product's three core dimensions (Liquidity, Dependency, Durability) directly correspond to the failure surfaces that produce these outcomes.
Self-custody failures and exchange custody failures have structurally different outcome patterns. Self-custody failures — hardware wallets, software wallets, multisig — tend toward permanently blocked outcomes when the failure is knowledge-based: a missing seed phrase or forgotten passphrase has no recovery path. Exchange custody failures tend toward constrained outcomes because institutional processes — bankruptcy claims, account recovery, regulatory intervention — provide partial or delayed resolution even when access is initially blocked.
Hardware wallet with passphrase failures produce high blocked rates because they introduce a second independent secret. A user who loses the passphrase while retaining the seed phrase and device cannot access the wallet — the passphrase opens a different wallet than one without it. The CustodyStress assessment explicitly models this as a Dependency failure surface: access depends on the passphrase existing in memory or in a separate documented location.
Multisig failures in this archive reflect coordination failures more than key loss failures. The arrangement may have been structurally sound — keys distributed, backups created — but the quorum could not be assembled because a keyholder was unavailable, uncooperative, or their share of the key material was inaccessible. The Dependency dimension in the assessment captures this: access that depends on multiple participants remaining available and cooperative.
Collaborative custody's outcome distribution reflects its design: a third-party co-signer can facilitate recovery even when the primary holder is unavailable, which limits blocked outcomes. But the arrangement introduces institutional dependency — if the third-party service is unavailable, the recovery path that runs through them is closed. Cases in this category often involve vendor lockout or service discontinuation as the triggering stress condition.
Custody type and the assessment model
The CustodyStress assessment models how custody systems behave under seven stress scenarios — death or absence, device loss, cognitive failure, coercion, legal seizure, forced relocation, and time-based degradation. Each custody type produces different outcomes across these scenarios. A hardware wallet without a passphrase survives device loss if an independent seed backup exists; the same wallet fails device loss if the seed was never recorded. The assessment captures which of these conditions apply to a specific setup.
The archive outcome distributions here describe what happened in documented failures — the assessment produces a forward-looking model of how a specific declared setup would behave. The archive shows what tends to happen; the assessment shows what would happen to a particular arrangement.
Figures describe observed outcome distributions within documented cases in this archive. The archive is not exhaustive and reflects documented failures rather than the full distribution of Bitcoin custody arrangements in use.
Bitcoin Custody Incident Archive — CustodyStress · custodystress.com/cases · 895 documented incidents
Outcome terms
Survived
Access remained possible under the reported conditions.
Constrained
Access remained possible, but only with delay, dependence, or significant difficulty.
Blocked
Access was not possible under the reported conditions.
Indeterminate
There was not enough information to determine the outcome.
Assessment terms
Survivability
The degree to which a custody system maintains the possibility of authorized recovery under stress.
This archive documents cases where a legitimate owner, heir, or authorized party encountered barriers accessing or recovering Bitcoin due to a failure in the custody arrangement. The central question for inclusion is: did the custody structure fail a legitimate access or recovery attempt?
Inclusion requirements
A case must satisfy all three of the following to be included:
- Legitimate access attempt. The person attempting to access or recover the Bitcoin was the owner, a designated heir, an executor, a legal authority, or another party with a legitimate claim — not a thief, attacker, or unauthorized third party.
- Custody structure failure. The failure was caused by a property of the custody arrangement — missing credentials, structural dependencies, documentation gaps, knowledge concentration, legal barriers, or institutional constraints — not market conditions, individual-level fraud or theft, or protocol-level issues. Platform-level failures that block legitimate user access are in scope regardless of their cause.
- Documentable outcome or access constraint. The case must have a stated or inferable outcome: access blocked, access constrained, access delayed, or access eventually achieved through a recovery path. Cases with entirely unknown outcomes are included only where the structural failure is documented and the constraint is unambiguous.
In scope
- Owner death or incapacity — Bitcoin held in self-custody that becomes inaccessible to heirs or designated parties because credentials, documentation, or operational knowledge were not transferred
- Passphrase loss — BIP39 passphrase forgotten or unavailable, blocking access to a funded wallet even where the seed phrase is present
- Seed phrase or wallet backup unavailable — no independent recovery path existed or the backup was destroyed, lost, or never created
- Device loss without independent backup — hardware wallet, phone, or computer lost or destroyed with no recovery path outside the device
- Documentation absent or ambiguous — heirs or executors cannot determine that Bitcoin exists, which wallet holds it, or how to access it
- Knowledge concentration — only one person knew the procedure, passphrase, or access method; that person is dead, incapacitated, or unreachable
- Multisig quorum failure — a threshold signature arrangement cannot be completed because signers are unavailable, uncooperative, incapacitated, or have lost their keys
- Legal authority / access mismatch — a court order, probate ruling, or power of attorney establishes legal entitlement but provides no technical path to access
- Institutional custody barrier — exchange or platform hacks, insolvency, regulatory seizure, or operational failure that caused a access constraint or failure for legitimate users, whether temporary, prolonged, or permanent. The failure of the custodian to remain available or solvent is itself the in-scope event.
- Forced relocation or geographic constraint — physical access to a device or location required for recovery is blocked by displacement, border restrictions, or political circumstances
- Coercion — the holder was compelled under threat to transfer Bitcoin or disclose credentials during an access event
- Hidden asset discovery — heirs or executors locate a wallet or account but cannot access it due to missing credentials or operational knowledge
Out of scope
- Market losses, investment losses, yield scheme losses, or Ponzi scheme losses
- Hacks or theft targeting an individual's personal security (phishing, SIM swap, social engineering, malware) where the custody architecture itself did not fail
- Unauthorized transfers where the holder's custody system was not the cause of the failure
- Ordinary transaction mistakes — wrong-address sends, fee errors, mistaken amounts
- Protocol-level failures — cryptographic vulnerabilities, consensus bugs, firmware integrity failures
- Deliberate burns or tribute burns
- Cases where the stated loss is unverifiable and no structural custody failure is described
Source and verification
Cases are drawn from public sources including forum posts, news reporting, court documents, academic research, and direct submissions. Each case is reviewed against the inclusion criteria above before publication. Source material is retained and available on request for documented cases.
The archive is observational and descriptive. It does not attempt to document all Bitcoin custody failures — only those meeting the criteria above with sufficient documentation to describe the structural failure and its outcome.
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