Storing Cryptocurrency Safely
One of the most revolutionary qualities of cryptocurrencies is that for the first time in human history, you can send value around the globe without permission from any middleman. However, with such great power comes responsibility.
To be able to use crypto assets like Bitcoin in their most censorship-resistant, permissionless manner, you need to know the private key that your cryptocurrency is associated with. This will look like a random string of letters and numbers. Despite its seeming randomicity, the private key is the single most important aspect of securely using cryptocurrency correctly.
Some cryptocurrency storage methods, like an exchange wallet, never allow customers to see their private key. This means, to make any transaction, they first need to have it approved by the centralised service holding the cryptocurrency on their behalf – not really permissionless then, eh?
If you choose to store your cryptocurrency on a centralised exchange or similar service’s wallet, whether it be for trading or out of sheer laziness, you should be aware that you stand a significantly increased chance of losing all your money. Exchanges are hacked all the time. In many examples, customers have lost all the cryptocurrency stored on the trading venue’s wallets.
Best practice with regards cryptocurrency storage is always to record your private key and look after it. Always use wallets that show you, and only you, your private key. Once you buy your cryptocurrency from an exchange, brokerage, peer-to-peer marketplace, or wherever, you should immediately send it to a wallet that you hold the private key to. You can then use it with whatever cryptocurrency casino you like.