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A Crypto Wallet is Not What it Seems
Wallets for cryptocurrencies work differently than traditional wallets, learn how to keep your assets safe.
Cryptocurrencies have reached new levels of mainstream adoption this year. However, the vast majority of people have never purchased any crypto and many have purchased some for the first time this year. Whether you are thinking of making your first cryptocurrency purchase or you have a decent start in the crypto world, the complexities of storing your coins should be well understood. Cryptocurrencies give financial power back to the individual, but with that power comes increased responsibility to manage our assets properly.
Not Your Keys, Not Your Coins
One of the most commonly repeated phrases in the cryptocurrency community is “not your keys, not your coins”, which means that if you have coins stored in an app but do not control your “private key” then you really don’t own the cryptocurrencies stored in that application at all. Many “wallets” are not particularly transparent about how this works and I’m guessing a significant number of people reading this don’t have a concrete understanding of what this phrase means. Let’s break it down.
Note: For simplicity I am going to talk specifically about Ethereum, but this information applies to most cryptocurrencies including Bitcoin.
Background
What are “keys”?
When a friend sends you money on Venmo, they use your email address to find your account much like a bank transfer can be initiated to a specific account number. When someone sends you some Bitcoin they need your receiving address, which is your public key. This public key can be sent to anyone since it only allows others to send you coins, not take them.
Every Ethereum account has a public and private key pair that are generated when the account is created. The private key allows someone to access the funds associated with that account. So your private key is similar to the password to your Venmo or bank accounts; if someone were to gain access to your private key they could easily move all of your coins.
Luckily private keys are much harder to hack — hacking passwords is often just brute force guessing — than…
