Not Your Keys, Not Your Coins: How to Keep Your Assets Safe
A popular phrase in the Web3 landscape is “not your keys, not your coins.” This phrase is a catchy and simple way to express one of the most important concepts when it comes to staying secure in the cryptocurrency industry. This concept is the fact that, when it comes to cryptocurrencies and other digital assets, having complete ownership of your own funds is critical.
This article will explain why that’s the case and will cover how you can go about keeping yourself secure while trading and holding digital assets.
What are centralized custodial exchanges?
Currently, the most popular way to purchase cryptocurrencies and many other digital assets is through what is known as a centralized exchange. Centralized exchanges are granted this name due to the fact that they are controlled by a central authority, such as the company that maintains the platform.
Here, we encounter two different kinds of centralized exchanges: non-custodial and custodial exchanges. On a non-custodial exchange, you simply nominate your own cryptocurrency wallet for your funds to be sent to. This makes non-custodial exchanges a much safer option, as you do not have to rely on someone else in order to keep your funds safe.
When it comes to custodial exchanges, on the other hand, the exchange holds onto your digital funds on your behalf. To do this, they will operate a cryptocurrency wallet in which your funds are stored. This is an incredibly popular way to purchase and store digital assets, which is why exchanges offer this service in the first place. However, when you leave your coins in someone else’s wallet, you are running into a very serious set of risks.
Not your keys, not your coins
The two most important pieces of information tied to your digital holdings are your public key and your private key. True to their names, it is safe to share your public key but you must always keep your private key out of anyone else’s reach or knowledge.
Anyone who knows a private key has full control over the funds within the cryptocurrency wallet that the key is associated with. When you choose to leave your crypto with a custodial exchange, you are actually not the person who is given the private key. Rather, because the exchange is operating a wallet for you, they are the ones who hold the key.
If we compare this to physical currencies, it becomes very easy to imagine why this is a major problem. Much in the same way that you would never store your dollars in a stranger’s wallet, the same logic is best applied to the crypto world as well.
Unless you are the sole owner of your private key, your funds are not safe. In fact, at that point, your crypto may as well not even be considered yours. With your private key, someone has full control over how your funds are spent and stored. This is why “not your keys, not your coins” has become such an important message among crypto security experts and educators.
This message is especially important when you consider the fact that hackers stole nearly $2 billion USD worth of crypto in just the first half of 2022. Custodial exchanges are a significant contributor to these losses, as there have been many prominent cases of exchanges either losing their customers’ digital assets as the result of a breach or choosing to run away with these funds altogether.
How to keep ownership of your crypto
As alarming as these stories of theft and loss may be, the good news is that it is actually incredibly easy to keep your crypto secure with just a little bit of research. Since the crypto movement is built around the idea of being your own bank and having autonomy, the best way to stay safe is to stay to those values.
Rather than leave your crypto in a wallet belonging to a custodial exchange, you should transfer these funds immediately to your own crypto wallet. Here, you have a few options, and you will need to put in the research to find a wallet that is right for you. Check out our previous blog post about self-custody wallets to learn more about the different wallet types.
Whichever wallet you choose, it is crucial to make sure that you never give out your private key to anyone under any circumstances. If you do, you need to immediately create a new wallet that has not been compromised and transfer your funds there instead.
If you are yet to buy crypto, it might be a good idea to instead purchase from either a non-custodial centralized exchange or a non-custodial fiat-crypto exchange platform. Both of these options have become increasingly beginner-friendly over the last few years, meaning it is no longer a daunting task to purchase crypto through this method. When you do so, you will just need to provide your own wallet address for your funds to be sent to.
Overall, much in the same way that you would not leave your money in a stranger’s wallet, you should treat your digital money the same way. Always store your funds in your own wallet, never share your private key, and remember this mantra: if they are not your keys, they are not your coins.
Accessing freedom and security through AVADO
Being your own bank is just one of the many ways that the Web3 world allows you to take back control of both your life and your finances. As providers of plug-and-play blockchain devices that make it incredibly easy for anyone to freely get involved with the space and earn money independently through staking, we are massive advocates for security and individual autonomy. When staking using our devices, you are always in control of your own keys and your own coins.
Browse our website today to find more helpful content and to browse our extensive range of blockchain devices.
