I bought a crypto – what’s next?
Why is the issue of security so acute in the world of cryptocurrency?
The purpose of a cryptocurrency is to provide absolute control over its assets to the user. Also, thanks to it, intermediaries in the form of banks are excluded from the equation.
However, when you receive such authority, you need to understand that in addition you also receive responsibility. After all, cryptocurrency has such characteristics as irreversibility and decentralization.
Therefore, if an operation was made on the blockchain, it is irreversible. Complain, in the case when it was erroneous, there is no one. So, I bought crypto. How to ensure its safety?
It is very important to understand that buying cryptocurrency does not mean that you are getting something physically. That is, it is not presented in the form of banknotes or coins, like rubles or dollars. What you actually own is the private key . And it needs to be kept in a safe place.
Understanding what a private key is and how cryptocurrencies work will help you get a general idea of what exactly will help secure your crypto assets.
Public key and private key
Unlike ordinary money familiar to everyone, whether it be rubles or dollars, cryptocurrency is entirely a digital asset. In other words, it cannot be touched. For security purposes, when working with cryptocurrency, two keys are used, private and public.
The public key acts as the address for receiving the cryptocurrency. It can be compared to email. Other network users can transfer cryptocurrency funds to it.
The private key is the “password” to where your assets are stored. That is, it makes sense to keep it in a safe place. After all, it is the one who has the private key that is considered the real owner of the assets.
So, if you don’t own the private key, then you don’t own the cryptocurrency either. Because of this principle, the expression appeared: “Not your keys, Not your crypto”, which means “Not your keys, not your cryptocurrency”.
Not your “private” keys, not your cryptocurrency.
This expression highlights the risks associated with cryptocurrency exchanges when it comes to custody. When, having bought a cryptocurrency, a user leaves it on the personal account of the selected exchange, it may seem that the funds are protected.
You will need a username and password to access them. In fact, everything is completely different. It is the exchange that is the actual owner of the user’s cryptocurrency. The user relies on the exchange and requests access to his funds every time he wants to take any action.
A number of questions arise here. For example, what happens if an exchange has security issues? What if the user is not satisfied with the deposit and withdrawal policy of the exchange or the amount of transaction fees?
Bought crypto on the exchange? They can easily introduce new rules, and the user will have to follow them, since he does not own the private key, and, accordingly, is not the full owner of the assets that are stored on it.
Thus, the intermediary represented by the exchange returns to the system, which was originally conceived as decentralized, and it would be absolutely logical for the user to own the private key and keep it in a safe place.