Not Your Keys, Not Your Energi
Convenience vs. Security
If we are going to say “Be your own bank”, we must also be prepared to teach people about risk calculation and management.
- Andreas M. Antonopoulos, Blockchain Expert, and Author.
One of the most important principles to remember when you are invested in cryptocurrency is the principle of “Not your keys, not your coins.”
This is a phrase that is often repeated, and which we will spend a few minutes to break down with a simple explanation and example, in addition to providing guidance for how best to secure “your keys”.
All cryptocurrencies, including Energi (NRG), are built upon the concepts of public-key cryptography — cryptographic systems which use both public keys for identification and private keys for the purpose of authentication and encryption. Most important is understanding that the safety of your cryptocurrency is entirely dependent upon safeguarding the private keys which secure and encrypt your personal wallet. The entire concept of cryptocurrency depends upon the fundamental idea that whoever has the private keys to a wallet is the rightful owner of the wallet, and is authorized to make transactions to or from the wallet that the private keys belong to.
Whose Keys Are These?
The principle of “Not your keys, not your coins” originates from the fact that if your coins are stored in a wallet to which you do not hold the private key, then you cannot truly claim or prove ownership over those coins — they may be coins purchased by you, however as previously mentioned ownership of coins in a wallet is entirely determined through ownership of the private keys that secure the wallet they are stored in.
When you store your NRG in an Exchange, your coins are actually being stored in a wallet which is secured by the private keys that belong to the Exchange. In other words — although you believe — rightfully of course — that the coins are yours, the wallet they are stored in does not belong to you. You have no control over the security or safeguarding of the wallet your NRG coins are stored in, and if something were to happen to the Exchange wallet your NRG coins are stored in, you would have no ability to protect your NRG coins.
In this article, we will explain the difference between storing your NRG coins on an Exchange, in our Energi Rain Wallet or in the Energi Core Wallet. We will take a deep look into the importance of securing your NRG coins on the local Energi Core Wallet versus the convenience of leaving some NRG on an Exchange or in the Discord Rain Wallet.
Energi on Exchanges
2018 set a new record for the highest number of cryptocurrency Exchange hacks ever coordinated. Over $1.5 billion worth of crypto was stolen last year, and this troubling figure has only slightly improved this year, with $356 million stolen in just the first quarter of 2019. These alarming statistics raise a serious question: How secure it is to hold funds in a 3rd Party Exchange outside of one’s control?
Centralized Exchanges function much like a bank: there are owners, safes, rules, and regulations. This makes the experience safer in some ways but at the risk of your funds being frozen if the centralized Exchange deems any action to be against their rules. When handling your Energi on an Exchange, it is very important to only have the amount you are trading and/or willing to leave at risk on the Exchange due to the possibility of losing your coins as a result of the types of issues mentioned above. We recommend always using the Energi Core Wallet to store the majority of your NRG to avoid many of those issues. Under no circumstances should you ever leave your entire balance of NRG on an Exchange.
Some users choose to use our Energi Discord Rain Wallet as an online storage for their NRG. Here, users have the ability to share and receive NRG within our Discord Rain channel by participating in friendly conversations with other members of our huge community. All NRG stored within a user’s Discord Rain Wallet is also staking and earning rewards.
We have recently added a disclaimer to our Discord Rain Wallet advising users not to permanently store their NRG in the Discord Rain Wallet and to only leave small amounts, such as the amount they would like to share with other members of the community. The reason for introducing this disclaimer was to remind users that, at times, their funds may be unavailable — such as when recent changes to the Discord platform resulted in the Energi Rain Bot becoming unavailable for a period of time unexpectedly. For this reason, we encourage users to only leave their NRG on the Rain Wallet for a short period of time.
Although Exchanges and the Discord Rain Wallet are excellent places to store your NRG for the short-term, in the longer term, a better plan is to use a safer method to store and maintain your NRG — it is important to note that Energi’s Treasury does not provide insurance to users who have lost their funds due to Exchange hacks or scams, and so we are very vigilant and pro-active about keeping the Energi community educated and prepared for all possible eventualities.
In the world of crypto, investors have a high level of power regarding owning their finances, and in taking control away from the banks and centralized financial institutions; but with those powers comes great responsibility — it is each investor’s responsibility to ensure that they transfer and secure their funds appropriately. While this responsibility may seem daunting at first, it becomes easier once you get the hang of it.
The blockchain ensures the anonymity of every transaction, so tracing a single purchase back to the purchaser can be very difficult if not impossible. Furthermore, reversing a cryptocurrency transaction, even a fraudulent one, is all but impossible. If your ATM card is stolen, you can probably get your money back. If your Bitcoins are taken, you are most likely out of luck.
- Cryptocurrency author at Blokt
Storing your NRG in the Energi Core Wallet avoids many of the risks associated with leaving your NRG on an Exchange or in the Discord Rain Wallet. Energi Core Wallet users are in complete control of their NRG when accessing the Energi Core Wallet, and can also earn rewards by staking the funds in their wallets.
From the moment of purchasing NRG on an Exchange, the Exchange holds your cryptocurrency funds in their wallet on your behalf. To gain control over these funds, you must move them into your own Energi Core Wallet. Taking control of your funds, and ultimately gaining financial autonomy, you can secure and control your NRG and “be your own bank”.
Create Your Own Energi Wallet
The first step you’ll want to take to secure and control your coins is to create your own Energi Core Wallet, hosted on your own private computer. We recommend creating a backup file of your Energi Core Wallet and storing it on an external flash drive that you own and can secure safely. It is important that you are the only person to have access to this computer and to create multiple backups in case you are unable to access the computer in the future.
Here is a short video detailing how you can create your Energi Core Wallet Address and backup your Energi Core Wallet:
There are many benefits to storing and managing your NRG coins in your own wallet, hosted on your own device. Apart from avoiding the same unfortunate fate as many Exchange hacking victims, you can continue to earn staking rewards by keeping your Energi Core Wallet online 24/7. For users who do not wish or are unable to run their systems 24/7, you can also step things up a level by hosting your Energi Core wallet on a VPS which runs 24/7, allowing you to continue staking your funds 24/7. Doing this will provide the same rewards as staking on an Exchange, but will provide you an additional layer of security since your NRG is in your Energi Core Wallet. The private keys to the Energi Core Wallet are your keys.
Here’s how you can host your Energi Core wallet on a VPS server:
Leaving NRG on Exchanges or in the Discord Rain Wallet must always be done cautiously. Although these facilities provide a degree of convenience they are not as secure as storing your NRG in the Energi Core Wallet. It is important to always remain aware of appropriate security measures and safety practices and to use the information provided above when storing and handling your NRG.