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The concept of always using a personal or hard wallet in Crypto is a crucial principle when it comes to safeguarding your Bitcoin or other cryptocurrency assets. Understanding this concept is vital for anyone involved in the crypto space. I want to delve into the complex world of crypto security, highlighting the importance of keeping your digital assets in your own personal or hard wallet and away from exchanges.
Crypto operates on the premise that whatever you purchase or mine remains within a cryptographically secured wallet, ensuring that it cannot be seized by anyone else. This inherent value stems from the fact that once you possess your crypto, it cannot be taken away from you, not by the government, not by banks, or any other entity. All you need to remember are your passphrases, which are solely used to generate your wallet but you shouldn’t tell or show anyone else. With this approach, you can freely travel across borders without carrying physical assets while retaining access to your funds from anywhere in the world.
However, a significant issue arises when individuals entrust their crypto to exchanges, akin to depositing cash in a bank. Crypto exchanges have persuaded people to believe that this process is similar to banking, but it’s not. These exchanges often make lofty promises of almost impossible rates of return because they know you cannot get such returns elsewhere. The catch is that when they close down, the crypto stored in their wallets with their keys becomes their property, not yours. This is precisely why I emphasize the phrase “not your keys, not your crypto.”
Exchanges like FTX and others exploited people’s lack of understanding regarding the underlying technology by masquerading as banks or stock exchanges in safely storing assets when, in reality, they are not. It is important to exercise caution and be aware of this distinction. In my opinion, the only legitimate exchange is Coinbase, and that is primarily due to their status as a publicly traded company. Nevertheless, even with Coinbase, the same rule applies: if they go bankrupt, they retain ownership of your crypto.
To protect your digital assets, it is imperative to take control of your private keys by utilizing personal wallets or hardware wallets. By doing so, you maintain ownership and control over your crypto, mitigating the risk of losing it in the event of an exchange shutdown or bankruptcy. Like anything else security related, mass adoption of crypto means higher prices and greater returns but it also means risks for those less familiar with the ecosystem as a whole.
This notion of “Not your keys, not your crypto” underscores the importance of personal responsibility and security in the cryptocurrency realm. Understanding the technology behind crypto and taking control of your private keys is paramount to safeguarding your assets. By adopting a cautious approach and staying informed, you can navigate this complex landscape with confidence and ensure that your crypto remains truly yours.