What’s All the Fuss About Keeping Your Cryptocurrency Keys off Exchanges?
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.
Image Source: Investinblockchain
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.