POLYNICE LEGACY FUND

1. What Is Self-Custody?

Self-custody means you hold your own Bitcoin. Not a bank. Not Coinbase. Not Cash App. You.

When you keep Bitcoin on an exchange (like Coinbase or Robinhood), the exchange holds it for you. They control the keys. They can freeze your account, get hacked, or go bankrupt — and your Bitcoin goes with them.

With self-custody, you hold the cryptographic keys that control your Bitcoin. If you have the keys, you have the Bitcoin. No one can take it, freeze it, or lose it for you. This is the fundamental principle: "Not your keys, not your coins."

2. Hardware Wallets

A hardware wallet is a small physical device — about the size of a USB stick — that stores your Bitcoin keys offline. It never connects to the internet on its own, which makes it virtually impossible to hack remotely.

How it works:

1. Your private key (the secret that controls your Bitcoin) is generated on the device and never leaves it.
2. When you want to send Bitcoin, you plug the device into a computer. The transaction is built on the computer but signed on the device.
3. The signed transaction is sent to the Bitcoin network. Your private key never touches the internet.

Why we chose the BitBox02 Bitcoin-only edition:

• It only supports Bitcoin — no altcoins, no complexity, no extra attack surface.
• The software is fully open-source — anyone can audit the code.
• Simple to use — touch sensors, clear screen, minimal buttons.
• Made by Shift Crypto in Switzerland.
• Each keyholder in our trust receives one BitBox02 device.

3. Seed Phrases

When you set up a hardware wallet, it generates a seed phrase — a list of 24 random English words. This seed phrase is your Bitcoin. The device is just a tool to use it.

If your device breaks, gets lost, or is stolen, you can buy a new one, enter your 24 words, and recover everything. The Bitcoin isn't stored on the device — it's on the blockchain. The seed phrase is just the key to access it.

Critical rules for seed phrases:

• NEVER share your seed phrase with anyone. Not family, not tech support, not "Bitcoin customer service." No legitimate service will ever ask for it.
• NEVER type it on a computer or phone. Computers can be hacked. Phones can be compromised. The seed phrase should only ever be entered on the hardware wallet device itself.
• NEVER take a photo of it. Photos sync to the cloud. Cloud accounts get hacked.
• Write it on paper or stamp it on metal. Paper works but can burn or get water damaged. Metal seed phrase backups (stamped on steel plates) survive fire and flood.
• Store it separately from the device. If someone steals both the device and the seed phrase, they have your Bitcoin.

4. What Is a Timelock?

A timelock is a rule written directly into Bitcoin's code that says: "This key can only spend after X amount of time has passed."

Bitcoin has a built-in opcode called OP_CHECKSEQUENCEVERIFY (CSV). It lets you create a wallet where one key works immediately, and a second key only activates after a set period of inactivity. No company controls this — it's enforced by every Bitcoin node on earth.

Our trust uses this as a dead man's switch:

• The primary key can spend anytime — this is how the trust operates normally.
• The recovery keys (held by family) are locked and cannot spend.
• If the primary key is not used for ~12 months, the recovery keys automatically unlock.
• The maximum timelock Bitcoin allows is ~65,535 blocks (~455 days). That's a hard limit in Bitcoin's protocol — no wallet can exceed it.

Why this is more secure than a bank:

• A bank can freeze your account, comply with a court order, or go bankrupt. A Bitcoin timelock can't be frozen, overridden, or changed by anyone.
• No third party is involved. The rules are enforced by the Bitcoin network itself.
• If the administrator is active, the recovery keys can't do anything — they're locked by Bitcoin's code.
• If the administrator disappears, the family gets access automatically. No lawyers, no courts, no probate.

5. How Our Trust Wallet Works

The trust uses Liana — a free, open-source Bitcoin wallet designed specifically for timelock recovery. Here's exactly how it's set up:

1. Two spending paths are written into the wallet's Bitcoin script:
   • Path 1 (Primary): The trust administrator's key. Can spend at any time.
   • Path 2 (Recovery): A 2-of-3 family multisig. Can only spend after the ~12-month timelock expires.
2. Day-to-day operations: The administrator uses the primary key to manage the wallet — receiving contributions, refreshing the timelock, and (when approved) making distributions.
3. The refresh: At least once a year, the administrator sends the trust's Bitcoin back to itself. This creates a new transaction on the blockchain, which resets the 12-month countdown. The recovery keys go back to being locked. It takes 30 seconds.
4. If the administrator is ever incapacitated: No refresh happens. After ~12 months, the recovery path unlocks. 2 of the 3 recovery keyholders can then move the funds to a new wallet.

Think of it like a heartbeat monitor. As long as the administrator sends a heartbeat (the annual refresh), everything runs normally. If the heartbeat stops, the family takes over.

6. What If Something Goes Wrong?

What if the administrator loses their device?
No problem. They use their sealed recovery packet (containing the 24-word seed phrase) to set up a new device. The Bitcoin is on the blockchain, not on the device. Nothing is lost.

What if the administrator forgets their device PIN?
After too many wrong PIN attempts, the device resets itself. The administrator recovers using their seed phrase backup on a new device.

What if the administrator dies?
The family waits for the ~12-month timelock to expire. Once it does, 2 of the 3 recovery keyholders can move the funds. No lawyers, no courts, no probate needed — Bitcoin's protocol handles the transition. The family should then set up a new wallet under new management.

What if the administrator forgets to refresh?
The recovery keys activate. This isn't a disaster — the recovery keyholders are trusted family members. The administrator can still spend with the primary key (both paths are active once the timelock expires). The administrator should immediately do a refresh to re-lock the recovery path.

What if someone steals a device?
The device is PIN-protected — useless without the PIN. Even if they crack it, they have one key. If it's the primary key, the administrator recovers from their seed phrase and does a refresh to a new wallet. If it's a recovery key, the attacker needs a second recovery key AND must wait for the timelock to expire. Not a realistic attack.

What if a recovery keyholder's house burns down?
If both the device and seed phrase were in the house, that recovery key is lost. The trust still functions normally — the administrator has the primary key. The remaining 2 recovery keyholders should rotate to a new wallet with a replacement recovery key. This is why recovery packets should be stored separately (bank safe deposit box, another family member's house).

7. Self-Custody vs. Exchanges

Here's how self-custody compares to keeping Bitcoin on an exchange like Coinbase:

Real-world examples of why this matters:

• Mt. Gox (2014): The largest Bitcoin exchange at the time was hacked. 850,000 Bitcoin were stolen — worth over $70 billion at today's prices. Customers lost everything. Those who held their own keys were unaffected.
• FTX (2022): One of the world's biggest crypto exchanges collapsed overnight. The founder was using customer funds for personal gambling and investments. Billions in customer assets vanished. People who self-custodied their Bitcoin lost nothing.

These aren't edge cases. They're exactly why self-custody exists. If you don't hold the keys, you don't own the Bitcoin.

8. The Golden Rules

Every keyholder in the trust must follow these rules:

1. Never share your seed phrase. Not with family, not with "support," not with anyone. If someone asks for your seed phrase, it's a scam. 100% of the time.
2. Never type your seed phrase on a computer or phone. Only enter it directly on the BitBox02 hardware device. Computers and phones can have malware that captures keystrokes.
3. Never photograph or screenshot your seed phrase. Photos sync to iCloud, Google Photos, or other cloud services. Cloud accounts get compromised.
4. Store your recovery packet separately from your device. If both are in the same place and that place is compromised (fire, theft, flood), you lose both. Keep the device at home and the recovery packet somewhere else (another family member's house, a bank safe deposit box).
5. The administrator must refresh the timelock every year. This is the single most important maintenance task. If the refresh is missed, the recovery keys activate. Set a calendar reminder. Better yet, refresh every 6 months for safety margin.
6. Recovery keyholders: know how to use Liana. If the timelock ever expires and you need to act, you need to know how. Practice at least once so you're not learning under pressure.