How Do I Know My Bitcoin Custody Works
Validating That Custody Functions as Intended
This memo is published by CustodyStress, an independent Bitcoin custody stress test that produces reference documents for individuals, families, and professionals.
The Difference Between Existing and Working
Someone sets up bitcoin custody. They move coins into their arrangement. Time passes. Nothing goes wrong. The question surfaces: how do I know my bitcoin custody works? This question emerges not from failure but from the absence of any signal. The setup sits untested. It exists. But existence is not the same as function.
This memo examines the gap between assuming custody functions and having evidence it functions. Most people complete a setup and then stop. No event forces them to use the system under real conditions. The system remains in a state of untested potential. Whether it works is unknown because it has never been used in a way that would reveal whether it works.
The Difference Between Existing and Working
A custody setup can exist without working. The hardware wallet sits in a drawer. The seed phrase is written somewhere. The bitcoin shows a balance when checked. These facts indicate existence but not function. Function would require using the system to move bitcoin, then seeing that movement succeed.
Existence creates a false sense of completion. The holder finishes the setup, sees the balance, and concludes the job is done. Nothing contradicts this conclusion. The balance remains visible. The hardware wallet powers on. Every surface indicator suggests everything is fine.
Working means something different. It means the system can produce a valid transaction when called upon. It means all the pieces connect: the seed phrase matches the wallet, the passphrase if used is known, the PIN unlocks the device, the signing process completes. Each link in the chain must hold under actual use.
The holder has no way to know these links hold without testing them. Existence does not reveal connection. A seed phrase that looks correct could be transcribed with errors. A passphrase could be misremembered. A PIN could be forgotten. These failures remain invisible until the system is used.
What Testing Would Reveal
Testing exposes gaps that observation cannot detect. A recovery test, where the holder attempts to restore access using only stored materials, surfaces problems before they become permanent losses. The holder would discover whether the seed phrase is complete and correct. They would learn whether they remember the passphrase.
Most holders never perform this test. Testing feels unnecessary when nothing is broken. It requires effort toward an outcome that seems already achieved. Why test something that appears to work? This reasoning keeps the system untested while appearing logical.
What testing reveals is the distance between appearance and reality. The seed phrase written on paper might be missing a word. The handwriting might be illegible for certain characters. The passphrase might have been modified slightly from what memory now provides. The hardware wallet might require firmware that no longer exists.
Without testing, these gaps remain hidden. They exist alongside the functioning components. The holder sees only the functioning surface—the balance that displays, the device that powers on. Beneath the surface, breaks in the chain wait for the moment they matter.
Time as a Source of Drift
Custody systems change over time without anyone touching them. Memories fade. What seemed obvious during setup becomes unclear years later. The passphrase made perfect sense when created. Now its logic has vanished. The PIN was memorable then. Now it blurs with other PINs from other contexts.
Physical materials degrade. Paper can become damaged, faded, or lost. Metal can corrode or be thrown away by someone who does not know what it is. Hardware devices can fail, lose battery backup, or become incompatible with current software. The passage of time introduces failure modes that setup cannot anticipate.
Dependencies also shift. A wallet application might discontinue. A derivation path that was standard might become obscure. A recovery process that once worked might now require tools that no longer exist. The external environment around the custody setup does not hold still.
The holder who completed setup five years ago faces a different situation than the one they remember. Their setup is the same, but the context is not. Whether the system works in today's environment, using today's knowledge and today's tools, remains unknown. Time creates distance between what was set up and what currently exists.
The Holder's Position
The holder occupies a position of confident uncertainty. Confident because the balance appears. Uncertain because the balance appearing does not prove the balance is accessible. These two facts coexist without resolving into clarity.
This position feels stable but is not. The holder believes they own bitcoin they can spend. This belief rests on a chain of assumptions: that the seed phrase is correct, that they know the passphrase, that the hardware works, that recovery is possible. Each assumption might be true. None have been confirmed.
The holder's daily experience provides no information. They check the balance and see the number. They put the hardware wallet away. Nothing happens that would test whether access remains possible. The system sits in storage, its function unverified, while the holder proceeds as if verification has occurred.
A holder in this position does not know what they do not know. The gaps are invisible precisely because they have not been tested. Someone confident in their setup might have a broken setup. Someone worried about their setup might have a perfect one. Without testing, the relationship between confidence and reality is random.
What Knowing Requires
Knowing that custody works requires evidence beyond existence. The evidence comes from using the system in a way that would fail if something were wrong. A transaction that succeeds proves the signing path works. A recovery that succeeds proves the backup materials are valid. Success under real conditions produces knowledge. Existence alone does not.
This knowledge has a shelf life. Even after testing, time continues to pass. Memories continue to fade. Materials continue to age. A test that succeeded last year does not guarantee success today. Knowing is not a permanent state. It is a snapshot that degrades as circumstances change.
Knowing also varies by component. The holder might know the hardware wallet works because they used it recently. They might not know whether recovery from seed phrase alone would work because they have never tried it. Knowledge about one part of the system does not transfer to other parts.
Full knowledge would require testing every failure scenario. What if the device is lost? What if the passphrase is forgotten? What if the seed phrase is the only thing that remains? Each scenario represents a different path through the system. Each path might work or fail independently. Knowing whether custody works means knowing whether each path succeeds.
The Gap Between Confidence and Knowledge
Many holders have confidence without knowledge. The confidence comes from the experience of setup. They went through steps. They followed instructions. They saw the balance appear. These experiences generate confidence that the system is sound.
Knowledge requires a different experience: the experience of need. The holder needed to access their bitcoin and succeeded. The holder needed to recover from backup and succeeded. Without the experience of need, confidence floats free from verification. The holder feels certain about something they have never proven.
This gap between confidence and knowledge creates risk that does not feel like risk. The holder does not experience uncertainty because they do not perceive the gap. Their experience tells them everything is fine. The setup is complete. The balance is there. What more could be needed?
What is needed is the moment of truth that either confirms or denies function. Most holders avoid this moment. Testing invites the possibility of discovering a problem. Discovering a problem requires solving it. Solving it requires effort. Avoiding the test avoids all of this while preserving the feeling that everything is fine.
Scenarios of Hidden Failure
A holder stores their seed phrase on paper in a safe. Years later, they need to recover their bitcoin. They retrieve the paper and discover one word is illegible. The ink has faded or the handwriting is ambiguous. They cannot determine whether the word is "arrive" or "active" or something else entirely. The seed phrase is incomplete. The bitcoin is inaccessible.
A holder uses a passphrase in addition to their seed phrase. When they created it, the passphrase made sense: a combination of meaningful words and numbers. Years later, they attempt recovery. The passphrase they enter does not work. They try variations. None succeed. The passphrase was slightly different from what they now remember. The variation is small but absolute.
A holder stores a hardware wallet with bitcoin on it. The device requires a specific software application to function. When they attempt to use it, they discover the application no longer supports their device model. The company has moved on to newer hardware. The old application version is unavailable. The device contains bitcoin that cannot be signed with current tools.
In each scenario, the holder believed their custody worked until the moment it did not. The failure was present from the beginning or accumulated over time. Nothing signaled the failure until actual need arose. By then, the failure was complete.
Summary
The question of how to know bitcoin custody works describes a gap that most holders occupy without realizing it. A setup can exist without functioning. Time degrades memory and materials. Confidence accumulates without evidence. The holder proceeds as if verification has occurred when it has not.
Knowing requires testing under conditions that would reveal failure. Without such testing, the holder has belief but not knowledge. The belief feels stable because nothing contradicts it. The absence of contradiction is not the same as confirmation. The system remains untested while appearing complete.
This gap persists because nothing forces it to close. The holder can live their entire life without testing their custody, as long as they never need to use it. The moment of need is the moment of truth. Whether that moment produces success or failure depends on facts that remain unknown until then.
System Context
How to Verify Bitcoin Custody Still Correct
For anyone who holds Bitcoin — on an exchange, in a wallet, through a service, or in self-custody — and wants to know what happens to it if something happens to them.
Start Bitcoin Custody Stress Test$179 · 12-month access · Unlimited assessments
A structured, scenario-based diagnostic that produces reference documents for your spouse, executor, or attorney — no accounts connected, no keys shared.
Sample what the assessment produces