As a cryptocurrency holder, you need to understand some of the best ways to keep yourself safe. Hackers and security threats are always lurking, and you want to ensure that you can easily maintain your assets’ safety in the long run.
One of the most significant safety concerns for crypto investors is the private key. Everyone who owns units of a cryptocurrency has private keys, and they are perhaps the item you need to guard the most if you hope to keep your assets safe.
Understanding Private Keys
A private key is an extended mix of numbers and letters that you get at random when you own cryptocurrencies. The key has a mathematical link with your public key, which is essentially your crypto wallet address. Thanks to advanced-level cryptography, it is almost impossible to break a private key’s code and derive it from the public key.
The private key concept forms one of the fundamental parts of cryptocurrencies. Due to the decentralized nature of cryptocurrencies, it is vital to keep your private keys safe. Losing your private key is not like losing a bank PIN. You can go to the bank and present proof of ownership to get a new PIN - if you lose your private key, your assets will be lost for life.
Several people have found out the hard way that losing private keys is detrimental. Earlier this year, reports told the story of James Howells, an IT programmer from Newport, Wales, who threw a hard drive containing the private keys to his Bitcoin stash in 2013. Howells reported that the hard drive had keys to his 7,500 BTC, which was worth about $275 million when the story broke.
Despite offering to donate 25 percent of his assets to the city if they helped him dig the landfill where he threw the hard drive, the city refused.
Keeping Your Private Keys on Exchanges Isn’t the Best
When you start your crypto journey, it can be tempting to keep your assets on exchanges. These platforms are convenient to use, and they are all the better since they provide features like trading and more. However, when you exchange custody of your assets, you essentially leave your private keys with them.
Like every asset custodian, exchanges aren’t immune to hacks and theft. There have been several instances where exchanges get hacked, and user funds end up paying the price for this.
Hacks on exchanges are rare, but you don’t want to be caught up if one gets hacked and your funds are all there.
The Best Ways to Safeguard Your Private Crypto Keys
Thankfully, several methods can help you keep your assets safe and stay on top of things.
One of the many beauties of cryptocurrencies is that they let you take ownership of your funds however you will like. Some people prefer to have all the control of their funds, and non-custodial wallets essentially provide the best service.
Non-custodial wallets are straightforward. They allow you to hold on to your private keys, and you get to control your funds. The best thing about these wallets is their ability to prevent issues such as funds getting frozen or blocked transactions.
There are different types of non-custodial wallets, some of which include:
- Hardware Wallets
If you’re the type of investor who doesn’t feel safe with anything with an internet connection, a hardware wallet is what you need. These physical devices work to protect your coins and tokens, and they do so with “cold storage.” Manufacturers claim that hardware wallets reduce the chance of security threats and malware attacks, so they tout them to safety aficionados.
Some hardware wallets offer their own private keys, as well as a way of recovering the cryptos they hold in the event of a device loss or theft. You can find hardware wallets that focus on Bitcoin and others that accept different types of cryptocurrencies.
Hardware wallets are generally a good option for anyone who wants to keep their cryptocurrencies safe. However, be sure to do your research and ensure that the manufacturer you’re working with has a solid reputation.
- Paper Wallets
If you’re looking for an even more low-tech safety option, you can try paper wallets. The method is simple - write out your wallet key on a piece of paper, keep it in a safe, and only get it when you need it.
Simple as this method is, it comes with several risks. For one, wallet keys come with different characters combined, and a small error in your record means you probably won’t be able to access your funds anymore. That said, you could find some paper wallets that let you print your address out on a pic of paper for easier access.
Commit the Key to Memory
The only time to recommend this will be if you have a really sharp mind and can remember things easily. To be honest, the best way to secure your keys and ensure that they don’t get hacked or stolen is if you commit them to memory.
You can train your brain and ensure that you remember every character. It could take a while, but it’s impossible. However, given the complexity of the task, this step isn’t especially recommended. Again, remember that one missing letter or number could cost you your funds.