Where are my coins?
|— When you own cryptocurrencies, what you really own is a private key. Your coins are associated with a set of “public/private keys”.|
—Your coins do not physically exist on any device — not even your Ledger hardware wallet.
— Ledger hardware wallets store and safekeep your private keys, so that you can be the custodian of your own money.
In a world where we’re used to banks and institutions, self-custody can be tricky to understand. Here, we demystify the things that seem complicated – they’re not so tricky once you know how.
Private and public keys
Your “private key” is comparable to an actual key: this 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. The same way you wouldn’t share the key to your bank safe with anyone, you should not share this private key with anyone.
In addition to a private key, there is also a public key.
There is a cryptographic link between the public key and the private key. It’s possible to recover the public key if you own the private key. However it’s impossible to find the private key using only the public key.
So there is a “private key” and “public key” set. That still doesn’t answer the question, however: Where are my coins?
Where are my coins?
When you save a picture on your phone, there is a file stored in the phone’s memory. When you use Outlook there is a local copy of your emails on your computer.
Your crypto assets are not physically present anywhere, nor stored in any folder. There is no physical entity representing your cryptocurrencies.
Instead, there is a relation between the public key and the associated coins, much like a certain amount is held within your bank safe. Blockchain technology makes it possible to know the balances associated with a public key. You can then access these balances each time you want to move your coins or make a DeFi transaction such as staking, lending or swapping your crypto.
This information is distributed and replicated across a network of computing machines (for instance, several thousand in the case of the Bitcoin network).
Are the coins in my hardware wallet?
Following the first part of this article, the answer should now make more sense. No, coins are not stored in your hardware wallet. Your hardware wallet only stores and protects your private keys.
Knowledge is power.
Just getting into crypto? Congratulations – you made a great choice! To get a handle on how it all works, check out our School of Block video on the basics of blockchain, where we explain the financial revolution in plain English.