Bitcoin wallets and the security of your funds
We all have heard the phrase “Not your keys, not your coins”, but does everyone truly understand the real implications of not fulfilling this maxim?
Even today, after so many years of insisting on this principle, many people buy Bitcoin on centralized exchanges and leave them resting there, unaware of the serious risks this behavior implies. Or even worse, many newcomers still mistake an exchange for a wallet.
In this article, we want to tackle this situation and insist on using secure self-custodial wallets and properly managing the keys and seed phrases.
An exchange is NOT a wallet!
When you buy Bitcoin at a centralized exchange and leave them there, you are not the actual owner of the asset because you don’t own the keys necessary to move those coins out of the exchange. All you can do is to ask them to move the funds for you, in the same way you ask your bank to make a money transfer on your behalf. Still, it is NOT YOU who’s doing the actual movement, so the operation can be denied at any point, or worse, the exchange can be hacked or have any other problem that prevents you from accessing your money. So, any funds stored on centralized exchanges are NOT your money!
Your wallet, your money!
The case is different when storing your funds in a dedicated wallet. When you install a Bitcoin wallet on your smartphone or computer, or when you set up a hardware wallet, you do own the bitcoins that you store there, and you will be able to move your coins at your sole desire at any point of time, and no person or entity can interrupt it.
That’s why we call Bitcoin “censorship-resistant”.
But there are some significant responsibilities that come along with these advantages since being absolute owners of the money means taking care of its custody.
When you first install most self-custodial wallets, you will be provided with a string of words called “seed phrase”, that you must save securely, never lose it and maintain protected from possible damage, as those words function as a “master key,” and the only way to recover your funds in the case of having any problem with your device.
This is critical as there is NO other way to recover your funds if you lose those words! This is so important that many people opt to engrave those words on metal plates and store them in safe boxes.
If you have your seed phrase secured and set all the security measures on your device (screen block, pin, or password access), you don’t have to worry about your phone, computer, or hardware wallet. Your funds will always be secure, and you can even uninstall the software wallet from your device.
Hodl Hodl supports self custody in all the possible ways, this is why we never hold neither your Bitcoin nor your fiat money. What we do is provide tools for you to exchange those with other people in absolute privacy and security.
We strongly recommend using your own wallet when interacting with our platforms, and even when you can send and receive funds to and from centralized exchanges, it is much more secure doing it from your self-custodial wallet.
If you have any doubt about using our trading or lending platforms, don’t hesitate to contact us through any of our communications channels.
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