– When you own cryptocurrencies, what you really own is a private key. Whoever has the knowledge of this key can spend the associated funds. – If you leave your crypto assets online, on an exchange for instance, you are basically not in charge: you are entrusting them with your private keys. – Owning your private keys gives you much more power and control but it also means you have to take care of their security. – Hardware wallet offer best in class security.
When you own cryptocurrencies, what you really own is a “private key”, a critical piece of information used to authorize outgoing transactions on the blockchain network. Whoever has the knowledge of this key can spend the associated funds.
If your private keys are stolen or misplaced, or if you store them on a device that crashes, there is no bank or institution to issue a backup or a replacement: you lose access to your crypto.
“Not your keys, not your bitcoins”
The way most individuals first get into cryptocurrency is by purchasing coins on an exchange platform, and leaving them there, especially if they have intentions to trade.
If you are keeping your crypto assets on an exchange, you are entrusting a third party with these private keys and mandating them to serve as a safeguard.
While exchanges provide some basic levels of security, the fact is that most trading platforms are not security companies, and you are entrusting them to keep your private keys protected with whatever measures they choose to implement. You’re also trusting the exchange platform not to have malicious usage of your assets.Your are basically not in charge, and hoping for the best.
With a series of high profile hacks on major crypto exchange platforms as well as a constant stream of headlines around individual crypto attacks, it’s more evident than ever before that security must be top of mind for every crypto investor no matter how large or small their assets.