SECURITY: How Not To Lose All Your Money: Not Your Keys, Not Your Crypto

As you begin your adventure with cryptocurrencies, you will encounter the concepts of public keys and private keys. Understanding the difference between them and how to use them is incredibly important for the security of your investments.

The public key is used to send cryptocurrency to the wallet. The private key is used to verify the transaction and confirm ownership of the Blockchain address. If someone sends you, let’s say, 1000 HEX, the private key will be required to unlock that transaction and prove that you now own 1000 HEX. Think of your public key as your bank account number. You can share it with whomever you wish, who can then send money there. However, knowing your bank account number does not allow anyone to withdraw money or otherwise log in your account. An example of the public key format is: 0x9525395b11aF3f57668A342bDa0E31c84dE13cDc.

The private key is the most important password for your crypto wallet. It acts like the PIN to your bank account or the password to your email address. Only you should have access to it and keep it secret. You need to understand that if someone knows your private key, he or she will have access to all the cryptocurrencies in that wallet and can do whatever he or she want with it. The function of the private key, technically speaking, is to sign transactions that use your funds. Transactions using your funds cannot be verified by the network without the private key attached. The public key encrypts transactions that can only be decrypted with the corresponding private key.
Private keys are numerical codes that look like that one below, for instance: ea1f293fc442f43d912360ac73aadf4ca8a609d8a7693d8c4331f15cc9953cb8.

In order to make things more user-friendly, many wallet providers often encode the private key in a way that can be more easily saved and remembered.
Many wallets use an initial phrase, also known as a secret recovery phrase, to unlock the wallet. If you open a MetaMask crypto wallet, you are given a string of random words that you use to unlock your funds. Your private key is hidden in the software behind this user-friendly string of words. You must securely store and never share this particular string of words with anyone.

If you hold your crypto in an exchange wallet (such as Coinbase or Binance, for instance) or with a custodian, this company holds your private key for you. Strictly speaking, it controls your funds on your behalf and can do whatever it wants with it at any time. Hence the origin of the saying not your keys, not your crypto. Remember it once and for all and take it to your heart!

You must keep your private key safe and secret. Write it down and keep it in several places because, unlike bank PINs, there is no way of recovering it. If you lose your private key or it falls into the wrong hands, you can forget about the money in there.

The level of security for your private key depends on the size of your investment and, over time, probably progressing paranoia. It is a good idea to divide your private key regardless of how it is stored into two parts and keep them at different places. If someone finds one part, he or she is less likely to find the other. A sealed envelope among your other documents, steel plates such as Cryptotag Zeus or The Billfodl, to avoid destruction of your private key in the event of a flood or fire, kept in a safe deposit or bank box are also not bad ideas. And if you think that keeping a steel plate with your private key in a safe box is too obvious, you could always sink it into the bottom of the tomato soup you keep in the freezer….

Do not take screenshots or photos with your phone and do not save your private key in any file, as these digital copies are often the target of hackers.

Read more in my book ‘Second Crypto Revolution: Build Generational Wealth With Richard Heart’s Crypto Ecosystem’.

‘Second Crypto Revolution’ is now also available as an audiobook! Click here to listen!

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