What are private keys?

In reality, it’s not coins that need to be stored and secured, but the private keys that give you access to them. Private keys are what you need to protect if you want to keep your bitcoin safe from hackers, user error, and other possible issues. When you own cryptocurrencies, what you really own is a “private key.” Your private key unlocks the right for its owner to spend the associated cryptocurrencies. As it provides access to your cryptocurrencies, it should — as the name suggests — remain private.

Oftentimes, cryptocurrency exchanges are the best way to get some coins, but many people who use these exchanges make a mistake after they’ve gotten their tokens. They keep them on their exchange wallets instead of transferring them to a private wallet/hardware wallet. Private keys themselves are rarely handled by the user, instead, the user will typically be given a seed phrase that encodes the same information as private keys.

Some have asked me this question: Do I need to generate a private key?

So why generate it anyway? Here are some of my reasons:

- You want to make sure that no one knows the key

- You also want to learn more about cryptography and random number generation

Cold Storage

The method of cold storage is less convenient than encrypting or taking a backup because it can be harder for users to access their coins. Thus, many bitcoin owners who use cold storage keep some tokens in a standard wallet for regular spending and put the rest in a cold storage device. This reduces the effort of digging out coins from the cold storage now and then for everyday use.

Some of the popular forms of cold storage are the Hardware and Paper wallets

Hardware wallet

The two most popular and best Bitcoin and cryptocurrency hardware wallets are:

  • Ledger Nano X (review)
  • Trezor T (review)
  • Trezor
  • Keepkey

Hardware wallets are a good choice if you’re serious about security and convenient, reliable Bitcoin & crypto storage. This is because they keep private keys separate from vulnerable, internet-connected devices.

Your all-important private keys are maintained in a secure offline environment on the hardware wallet, fully protected even should the device be plugged into a malware-infected computer.

Paper Wallet

Other types of cold storage are Sound wallet and Deep cold storage.

Hot Wallet

Hot wallets are wallets that run on internet-connected devices like computers, phones, or tablets. This can create vulnerability because these wallets generate the private keys to your coins on these internet-connected devices. While a hot wallet can be very convenient in the way you can access and make transactions with your assets quickly, they also lack security.

Having discussed the security challenges prone to hurt wallets, some of its benefits are that it is

  • The easiest way to store small amounts of bitcoin and crypto
  • Convenient; spending and receiving payments is easy and fast
  • Some hot wallets allow access to funds across multiple devices

Storing tokens on exchange wallets can be dangerous for several reasons.

1) Lack of Ownership

2) Unregulated

3) Hacking Risk

In conclusion, it is not the smartest thing to do to keep your coins on an exchange. While they may be convenient, it’s much better to get a hardware wallet of your own to store any crypto coins you own.

If an event were to occur where the exchange is hacked or your account becomes compromised, your funds would be lost. Cryptocurrency exchanges do not provide insurance, making safe storage of cryptocurrencies especially important. As mentioned previously, it is not wise to keep large amounts of cryptocurrency in any hot wallet, especially an exchange account. Instead, it is suggested that you withdraw the majority of funds to your personal cold wallet as explained above.



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