Do You Really Own Your Crypto?
If you buy crypto from an exchange, using your hard-earned fiat currency, you own it right? That’s what most people assume, and in most cases they are correct.
However, what’s unknown to many people is that their assumptions can be incorrect, and they can come with disastrous consequences. What is the determining factor in establishing whether they own their crypto? You guessed it, private keys.
What is a Private Key?
“A private key is a tiny bit of code that is paired with a public key to set off algorithms for text encryption and decryption.”
It is essentially the unique bit of code which grants the user sole access to their crypto.
So who is in possession of the private keys? The exchange. If the exchange has your private keys, they essentially are the ones in control of your crypto, not you. It is of absolute importance that you understand exactly what a private key’s capabilities are, but even more so who is in possession of yours.
A reoccurring theme seen throughout this market is the delusion (at no fault of the exchange user) that the private keys for your wallet are always in your possession. With even the smallest of research into the terms and conditions of each exchange, the reality check comes incredibly fast that in the matter of a threatening incident, you’re left powerless over your own holdings.
Many people are unaware that it’s a disaster waiting to happen and without fail, they realise once it’s too late.
A frightening reminder of such occurrences can be noted back to December 2018 where Gerald Cotton, the founder of Canada’s largest cryptocurrency exchange, QuadrigaCX unexpectedly died of health complications at the age of 30.
As devastating as this news was, the story took an unexpected turn when investors learnt that he was the one in possession of their private keys; resulting in what’s now seemingly impossible to relocate. This is no insignificant matter either, over $190m worth of unknowing users funds are potentially inaccessible and lost forever.
There is a huge lesson to be learnt here, especially for the everyday ‘retail investor’ and that’s to ensure you’re using a quality source of information for your cryptocurrency knowledge and even more so, ensuring you’re going out of your way to learn even the basics of the technological aspects of the cryptocurrency market before investing your own money. The consequences are beyond a small loss in capital, your entire account could be in jeopardy.