You can be the best crypto investor in the world, but if your crypto gets stolen or lost, you’ll lose every last scrap. So it’s important to safeguard your crypto as best you can. There’s a popular saying in crypto: “not your keys, not your coins” – meaning that if you don’t hold your own private keys, you can’t really be in control of your own funds.
Whether you hold your keys depends on what kind of wallet you store them in. So let’s look into the different types of wallets, keys, and the pros and cons of holding your own keys versus storing them elsewhere.
You use crypto wallets to store your crypto keys. There are two main types of wallets:
Your keys are what lets you access your funds and transact on the blockchain. There are two kinds of keys:
The private key is very important, as without this key you can’t send your crypto to another wallet, or use your funds in any way.
Crypto exchanges are custodial wallets. When you leave crypto on a centralized exchange like Binance or Coinbase, they’re responsible for safeguarding your keys.
A benefit of storing your keys on crypto exchanges is convenience. If you’re actively trading crypto with different strategies, keeping some of it on an exchange can save you time and hassle. If you’re doing this, you’ll need to make sure the exchange is reputable by doing some due diligence. It’s also a good idea to use more than one exchange to spread your risk in case any of them have any issues.
If you’re ready to start your crypto journey, Ledger offers a secure and easy way to do just that.
There’s no better place to buy, sell, manage, and exchange them than Ledger’s all-in-one app. Combine it with their state-of-the-art hardware wallet, and you’ll discover complete control and maximum security.
Ledger gives you the keys to be your own bank, providing full control and self-custody over your assets. In addition to this Ledger continues to integrate more and more crypto coins through Ledger Live and external providers like FTX. Giving you access to interact with the blockchain ecosystem in a secure way.
Keep your digital assets safe in style: find out more on Ledger.com
There’s always the chance that any crypto exchange could be hacked – but if you’ve done your research, hopefully you’ve chosen wisely and picked a reputable, secure exchange. But even if your chosen exchange is fully armored up, they still technically own your keys. This means they have the ultimate access to your crypto on the blockchain – that might not be such a good thing.
For example, Coinbase is known to be one of the most secure crypto exchanges out there. But because it’s a publicly listed company, it had to make a new disclosure in case the company ever goes bankrupt – saying it might have to treat customer coins as company debt to fend off starving creditors.
If you’re buying and holding crypto for a longer time, you’re better off using a non-custodial wallet, a.k.a an offline “cold” wallet. This way, you hold the keys yourself, so you’ll always have control over your crypto and access to your own funds. The most basic way of doing this would be to have a paper wallet – where you write down the keys on a piece of paper, laminate it, and guard it with your life.
An even better cold storage solution might be to use a hardware wallet, where you can secure all your coins, tokens and NFTs in one device. These are just as safe as paper wallets, but also allow you to back up your keys. So if you lose your wallet, you’ll still be able to retrieve your crypto.
This guide was produced by Finimize in partnership with Ledger.
Check out Ledger’s mini-website at finimize.com.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.