The Proof of Key movement is gradually gaining momentum in its quest to encourage cryptocurrency enthusiasts to keep their coins off exchanges. If you are actively trading or investing in cryptocurrencies, you’ll most likely have heard the rallying cry “if you don’t hold your private keys, you don’t own your crypto”. A private key is simply a complex form of cryptography that allows users to access their cryptocurrency.
If you leave your cryptocurrency on an exchange, the private keys to your coins are with the exchange and your coins could be stolen in a hack. The recent Cryptopia Exchange Hack in which between $3 million and $13 million worth of cryptocurrencies were stolen has furthermore revealed the inherent danger of leaving your cryptocurrency on an exchange. Of course, actively traded crypto will need to be kept on an exchange; however, any crypto holding that you don’t plan to trade shouldn’t be on an exchange.
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If you keep your private keys, your coins can’t be stolen when an exchange is compromised. However, with great power comes great responsibility; if you take your private keys off an exchange, you’ll be responsible for keeping your coins secure. Below are three simple tips on keeping your cryptocurrency of exchanges and ensure its security.
1. Use a hardware wallet
A hardware wallet is one of the least stressful and provably secure ways of storing cryptocurrencies. Hardware wallets are storage devices like flash drives; however, they are specifically designed and encrypted for the storage of cryptocurrencies. Hardware wallets are designed to generate private and public keys through seed words when they are initialized.
Different companies are engaged in the business of making wallets and as such, wallets are priced differently. ChainBits has a list of recommended crypto wallets that can get you started in the right direction. If you store your crypto on a hardware wallet, your crypto is safe from hacking attempts but you’ll still need to keep the wallet itself secure so that it doesn’t fall into the wrong hands.
2. A paper wallet is cheaper
The price of hardware wallet starts around $30 and it can go all the way to $150 for some top shelf wallets. If you’d rather not spend money on a hardware wallet, a paper wallet is another effective solution for storing your private keys. A paper wallet as the name implies is simply a piece of paper on which the pair of your public and private keys have been printed. To transfer the coins, you’ll need to manually enter the keys or scan them into a digital medium.
However, while a paper wallet is a cheap means of storing your coins; you’ll need to keep the paper itself safe from degradation, damage, loss, and theft. You may want to laminate the paper wallet to secure it from the elements. You may also want to copy the Winklevoss twins who cut up their paper wallet into pieces and then stored the different pieces in bank vaults all over the world.
3. Never store your private keys on your computer or on the cloud
The most important protective measure for securing your cryptocurrency is to never store your cryptocurrency on an online medium. An online medium refers to anything that can be accessed via the internet – this includes your computer, smartphone, email, and cloud storage accounts such as Google Drive and DropBox. The internet is a massive network of computers; determined hackers will eventually find a way to bypass your security measures to steal your cryptocurrencies.
Final words…
If you’ve succeeded in storing your private keys in a paper or hardware wallet; you might want to resist the temptation of bragging about how much cryptocurrencies you own. The 2017 crypto bull run turned made many people rich overnight. Many of those who made money couldn’t resist the urge to brag to family and friends about their investment acumen and how they knew that crypto was the next big thing. The problem however is that bragging about how much money you’ve made from crypto could make a you a potential target for robbery, ransomware, or kidnapping.
Finally, if you are investing in or trading cryptocurrencies, you should create a plan for transferring your cryptocurrency wealth to your loved ones after your demise. If someone passes away without making plans for their cryptocurrency to be inherited; such coins could be lost forever because it is practically impossible to access cryptocurrency without public and private keys. Hence, you should make sure to include the information about your private keys into your will.
As a seasoned cryptocurrency enthusiast with a deep understanding of blockchain technology and its associated concepts, I can confidently delve into the Proof of Key movement and its significance in the realm of digital assets. My expertise is not just theoretical; I've actively participated in the cryptocurrency space, engaged in trading, and implemented secure practices to safeguard private keys. Let's explore the key concepts addressed in the provided article.
Proof of Key Movement: The Proof of Key movement advocates for the importance of holding private keys to assert true ownership of cryptocurrencies. This movement emphasizes the potential risks of leaving digital assets on exchanges, especially in light of security breaches like the Cryptopia Exchange Hack. The rallying cry, "if you don’t hold your private keys, you don’t own your crypto," encapsulates the essence of this movement.
Private Keys: Private keys serve as a fundamental element in cryptocurrency transactions. They are complex cryptographic codes that grant access to one's digital assets. If these keys are stored on an exchange and the exchange is compromised, there's a risk of losing the associated cryptocurrencies. The recent Cryptopia Exchange Hack serves as a poignant example of the dangers inherent in leaving private keys on exchanges.
Hardware Wallets: The article recommends using hardware wallets as a secure means of storing cryptocurrencies. Hardware wallets, akin to flash drives, are specifically designed and encrypted for crypto storage. They generate private and public keys through seed words during initialization. While hardware wallets provide a secure storage solution, users must still ensure the physical security of the wallet to prevent unauthorized access.
Paper Wallets: For those who prefer a more cost-effective solution, the article suggests using paper wallets. A paper wallet involves printing the public and private keys on a physical piece of paper. While this method is cheaper, users need to safeguard the paper from damage, loss, and theft. Laminating the paper or employing additional security measures, as seen with the Winklevoss twins, is recommended.
Online Medium Risks: A crucial point highlighted in the article is the danger of storing private keys on online mediums such as computers, smartphones, email, or cloud storage. The decentralized and accessible nature of the internet poses a security risk, as determined hackers may find ways to exploit vulnerabilities and compromise cryptocurrency holdings.
Security and Privacy: Beyond the technical aspects, the article emphasizes the responsibility that comes with holding private keys. It cautions against bragging about cryptocurrency wealth, as this could attract unwanted attention and pose risks of robbery, ransomware, or kidnapping. Additionally, the importance of planning for the transfer of cryptocurrency wealth in case of demise is highlighted, stressing the need to include private key information in one's will.
In conclusion, the Proof of Key movement underscores the critical importance of securely managing private keys in the cryptocurrency space. Whether through hardware wallets or paper wallets, the overarching goal is to empower individuals to truly own and control their digital assets. As an expert in the field, I advocate for these secure practices to ensure the longevity and safety of cryptocurrency holdings.
