Managing Private Keys: Your Greatest Responsibility
|— Not your keys, not your crypto – this is crypto’s most important mantra |
— Crypto means freedom from banks and central authorities – but it also means greater responsibility for you. How you approach this may define your experience
— While hot wallets allow you to store your crypto conveniently online, your private keys also remain connected to the internet, and this is a significant threat to the security of your assets
— Using a hardware wallet allows you to keep your keys completely offline even when signing transactions, and is by far the most secure way of managing private keys
If financial freedom is important to you, managing private keys needs to be your priority.
If you have been following our weekly financial freedom series, then you’re now aware that obtaining true financial freedom is something that isn’t just reserved for the uber wealthy or super financially savvy—but something we can all obtain.
It’s also something we should all strive for.
After all, not only does it create new financial possibilities and offer a new perspective on the way we manage our money, but it also acts as a shield against a huge number of potential risks—ranging from simple theft all the way up to more complex socioeconomic risks like inflation.
But like many things, you’ve got to be careful with your money. When you’re your own bank, you’ve got access to an incredible number of new opportunities, but you also need to take steps to secure your vaults, right?
This is where financial responsibility comes into play. To be really free, you need to need to take steps to ensure your finances are protected. Here’s what that means in more depth.
Great power, great responsibility
As we previously touched on, when you are your own bank, you are the only one who has control over how your money is used—for better or for worse.
While you no longer have to deal with extortionate fees and endless hoops to jump through to access your money, you also bear full responsibility for the security of your assets.
After all, if they’re lost or stolen, it is unlikely anybody will be able to help you recover your funds.
…This too goes for cryptocurrencies.
Though managing private keys can empower you with financial freedom and unlock a wealth of new opportunities, you will need to take steps to ensure your digital assets are both secure, and easily recoverable in the unlikely event that anything should go wrong.
This means you will need to use a wallet that makes the process essentially fool-proof.
After all, we have all heard stories about the man who accidentally threw away a hard drive containing Bitcoin that had ballooned in value to more than $100 million as of 2017. Or the countless other poor souls who had misplaced their wallet file and had forgotten to create a backup—permanently losing their funds as a result.
This is because just like cash, if cryptocurrencies like Bitcoin or Ether are lost, they’re practically impossible to recover.
This is both one of the greatest strengths and weaknesses of digital assets—since the same security that prevents them from being hacked, also prevents them from being forcibly recovered without authorization.
When it comes to cryptocurrencies, this authorization usually comes in the form of a recovery phrase. Depending on the wallet you use, this is usually either a 12 or 24-word phrase which is the ultimate key to your funds.
With your recovery phrase, you (or anyone else) who has it, can easily recover all of your cryptocurrency wallets at once.
Because of this, it’s important that your recovery phrase is kept private and stored in a secure location—since you probably don’t want anybody else to have such unrestrained access to your funds, right?
Using cryptocurrencies the right way
Ensuring you have true ownership of your cryptocurrencies isn’t all that difficult—you simply need to use a wallet designed for managing private keys, while making it simple to securely recover your funds, should the worst comes to the worst.
Fortunately, there’s plenty of ‘em around, many of which are incredibly easy to use.
Once you’re experienced at managing private keys, you’ll be free to move your funds around as and when you please, and won’t have to worry about relying on any third parties to make or receive payments.
Some of these wallets, like our Ledger Nano series products, can also act as a direct bridge to the rest of the crypto economy by combining it with the Ledger Live app—allowing you to send/receive, exchange, stake, and lend out your assets for a yield without relying on any centralized services.
With the Ledger Nano X, nothing is left to chance. Your cryptocurrency wallets will be secured by a military-grade secure element making it incredibly difficult to crack, while you will be safe in the knowledge that your funds are never locked in.
You’ll be provided with a 24-word recovery seed when creating your wallet—simply store this in a secure place, keep it private, and be content in the knowledge that financial freedom is now yours. Now the question is… What will you do with it?
Knowledge is power – so keep on learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block video Can We Go Decentralized?