Michaël van de Poppe - 23 March 2022
The importance of crypto keys
“Not your keys, not your coins” is an expression that every cryptocurrency trader/investor needs to know. Like most expressions that remain as just an expression, this one goes beyond that. It’s basically the safety of your digital assets that you own.
This article will explain what this phrase means, in a nutshell, the differences between public/private keys and why it is so important to own keys.
Let’s quickly explain what “Not your keys, not your coins” means. When owning a crypto wallet you want to make sure you are the one that has access to the private keys. When using a software browser the private keys are stored in the browser, which makes it unsafe. This is the main meaning where the phrase comes from. If you can’t ensure that you are the only one in possession of the coins because a centralized party would technically be in control. The private keys are your access to YOUR account. If someone attempts to access our account they already have an idea of what your private key is.
Public and Private Keys
As a bank card has an account number, cryptocurrency has an address. This address takes the technical term as the public key. For example, if someone wants to send you a crypto coin, they will send it to your cryptocurrency wallet address (public key). Why is it called public? Well, you can receive without compromising your crypto. It is exactly the same when one receives money in their bank account and only needs your bank account number.
Private keys in simple terms are similar to a password. This identifies that you are the true owner of the crypto in your wallet. The phrase we mentioned earlier is speaking about your private keys. Your private key is also linked to the public key. If anyone can access your private key they can access the funds as the two are linked.
Why do keys matter? They are the gate to your wallet
Your wallet is in your control and not in any other third party. I mean you don’t want to trust some stranger with your private belongings right? It’s like giving some cash to someone and never seeing it back.
Having the keys to your wallet also gives you the liberty to not have any limitations on how much you extract or exchange. You also aren’t locked into technical difficulties if a bigger company has control over your account.
Forms private keys come in
It depends on what kind of wallets you have either cold or hot. Your private keys maybe come in one of the following forms:
256 character long binary code
64 digit hexadecimal code
However your keys are given to you, they are all a large number for a good reason. Security!
Wallet Recovery Seeds
This is of great importance in case you need to recover your wallet. If it’s a hardware wallet it may get lost, reset, stolen or damaged. The recovery seed is the only way you can get all your cryptocurrency back.
This recovery seed, which is also known as a recovery phrase, has a sequence of words that are given to you when you set up your wallet. They come in either 12,18 or 24 words. This phrase NEEDS to be written down ( unless you can memorize it) and kept in a safe place.
Why is this needed? Well, remember that your crypto assets aren’t technically stored on the wallet itself. It is stored on the collective decentralized network, which we talked about in one of our early posts: a blockchain.
You can see the seed phrase as a ‘Forgot password’ option for the blockchain. Instead of resetting your password through an email, you actually recover the entire account through the use of the seed phrase. For every new crypto wallet you create, you create a new seed phrase. It is of the utmost importance this seed phrase is written down and stored safely. If you lose your seed phrase, you lose the ability to recover your crypto wallets in case you are no longer able to access your wallet (e.g., if the device you stored your wallet on is destroyed).
To wrap this whole importance of your keys is basically saying that if you don’t own your keys, you won’t have the freedom to do what you want with your cryptocurrency.
Remember to also keep your keys stored somewhere safe. They always come with a recovery seed and NEVER SHARE your private keys with ANYONE!