“Not your keys, not your crypto”
This one will be a polemic post, and probably the big crypto companies are not going to like but that’s okay, I’m here to provide educational content no matter what! Today I’m going to talk to you about the famous term “not your keys, not your crypto”, and I’m going to explain how you can have the best privacy and anonymity that the crypto universe offers.
What are your keys?
First of all, when we talk about keys we are referring to both your public and your private keys. You can think of these as your account number and then also your password to your bank login. Your public key is needed when receiving funds. This is where another user knows which address is yours. It’s kind of like an account number that is reserved only for the account that you have within the bank, which in this example, is the blockchain and will be used to identify your account without actually using your password.
Now, the private key would be the password to the login information on the banking website and would be the same as the login to your crypto wallet. This is the key that only you should know and not anyone else because if anyone else knows your private key they can drain every bit of crypto that you might be holding.
To make it easier, most wallets have 12 to 24 words that you can write down to be able to log into your wallet, instead of trying to memorize all of the 64 letters and numbers that make up a private key.
In short, your private keys are used to create your public address and they are also used to send your money, so that’s why you don’t want anyone else to have access to them.
Accessing X owning
The next topic I’m going to get into is the difference between accessing and owning because something very important to note when it comes to cryptocurrencies is the difference between access and ownership.
Access can be shared, it is when multiple people have access to your crypto. They can move it around without your verification if they wanted to, so you’re pretty much sharing it with them.
Ownership, on the other hand, is where only you have access to your funds, only you can move them. Imagine if a friend of yours had access to your house while you are away on vacation, and they decided to throw a party. Well, they had access to your house and they did what they wanted to, even if they said they weren’t going to throw a party.
When it comes to cryptocurrencies and any blockchain network, if anyone other than yourself has access to those private keys, you should completely consider your account compromised because when it comes to money it’s best to assume the worst.
The difference between accessing and ownership is trust. With ownership you don’t have to trust anyone, you are the only person who can access those funds. If you share your private keys, though, you have to trust that other people aren’t going to steal them.
Major hacks
You might be wondering why this is important and now we’re going to get into one of the major hacks in cryptocurrency of all time. One of the most famous cryptocurrency hacks of all time was an exchange called Mount Gox.
MT.Gox
It was estimated that mount gox, which is an exchange very similar to Coinbase, had been jacked for around 850,000 bitcoins, which they could only assume was stolen. But it was some from their accounts and their customers, so these customers were simply holding bitcoin in their wallets shared on the mount gox service. What’s the issue here? These customers trusted the company to keep their wallets safe.
Now we don’t know if there was an insider who was like “ hmm that sure is a lot of money, I’d like to have that for myself” or if there was a hacker who found a vulnerability, but either way, a ton of private keys were lost and thus a ton of bitcoins were stolen. We can assume they were stolen because they weren’t returned.
To put this into perspective, 850,000 bitcoins is more than 7% of all the bitcoins out there, roughly more than half a billion dollars. I don’t know about you but I could do some damage with half a billion dollars. This is why you do not want to share your private key with anyone else including other companies.
Robinhood and Coinbase
Speaking of companies, let’s go over the problem with Robinhood and Coinbase. These are non-custodial exchanges, which means they do not give you a wallet for yourself, they share one with you. Robinhood doesn’t even give you a wallet, they just allow you to buy and sell. This means if you wanted to buy crypto and send it to your friend on Robinhood, you literally cannot do that. Similarly, if you wanted to receive some crypto from your friend, you also cannot do that.
Robinhood is a horrible place to buy crypto if you believe in the fundamentals of why crypto was created in the first place, and that is decentralization, privacy, and trust. You don’t even get an address with robin hood, they just act as a middleman to buy and sell certain cryptos for you.
Coinbase, on the other hand, lets you send the crypto that you’ve purchased off their platform. However, if you keep it on their platform and they get hacked due to a database issue on their side, all of your cryptos could be gone, very similar to the Mount Gox problem.
Coinbase is a good beginner exchange because it is fairly easy to buy a ton of large market cap cryptocurrencies and then it’s also very easy to use their user-friendly platform to send your newly bought crypto to a wallet that only you have access to. The key here is that you’re just using Coinbase as an exchange, not a wallet. I highly recommend sending your crypto to a wallet that only you control, so that way you have 100% ownership of the crypto.
In the case of Coinbase, they have those private keys, so technically anyone at Coinbase might be able to send your crypto to their wallet, and if they do it, you’ll never know where your crypto went.
Solution
So what’s the solution? Cold wallets. Two common wallets that you can send your crypto to ensure you are the only person who owns it are MetaMask and Ledger.
Metamask
Metamask is a browser extension, so you can use it on your desktop computer. Technically if your computer has a virus, you could lose your funds but it’s still much more secure than Coinbase or storing your crypto on some website.
Metamask is used by hundreds of thousands of people and the code is audited by very curious people, so it’s pretty much an industry standard, you can also use MetaMask to interact with decentralized applications. If you want to be an expert on MetaMask, I have a post about it right here for you, check it out!”
Ledger
Ledger, on the other hand, offers a USB version of a wallet. The private key is encrypted and then stored on that USB, where you must insert your USB ledger and then connect the device to be able to send your crypto. Technically it’s much more secure than MetaMask, and in this case, if you don’t share your private key with anyone else, you can be 100% certain that those private keys aren’t shared with anyone else.
Conclusion
In conclusion, when it comes to crypto, you do not want anyone else having your private keys. To do that, you can buy crypto on a big exchange like Coinbase, and then send it to a wallet that only you have access to, which MetaMask and Ledger are two pieces of software that allow you to create those private keys.
If you have any other questions about private keys, please stop by the KogeFarm Telegram or Discord communities, where you’ll always find someone willing to help you out.
