Crypto keys are the key component in cryptocurrency, allowing you to access and manage digital assets. However, many people still need to learn about the importance of taking custody of crypto keys and keeping them secure. And we want to help you understand better why this is necessary.
This article will cover the basics of crypto keys, the importance of taking custody of them, and the best practices for keeping them secure.
Types of Crypto Keys
For all beginners, crypto keys are used to encrypt and decrypt information in cryptocurrency. There are two main types of crypto keys: private keys and public keys. Private keys are used to access and manage digital assets, while public keys are used to receive transactions. Together, private and public keys form a key pair, allowing you to access digital assets securely.
"Not your keys, not your crypto."
Self-custody means taking complete control of your digital assets, allowing you to send, receive, and store cryptocurrency without relying on a third party. Having a third party involved could cause your assets to be at risk of being lost or stolen in case of hacker attacks, bankruptcy, or technical errors. As you probably heard at least once in your life - "Not your keys, not your crypto.".
However, with this control comes the responsibility of adequately storing private keys, as failure to do so may result in the loss or theft of your assets. You become your own bank; if you lose your keys, you probably lose your funds, and nobody can help you restore them.
Sounds like a nightmare, no? But there is no need to worry; let's look at how to prevent unpleasant situations and ensure you keep your funds safe in your bank.
How to Securely Store Crypto Keys
To securely store crypto keys, it is recommended to use a combination of a hardware wallet, and a backup stored on a paper, metal plate, or encrypted on a USB stick in a safe place.
Hardware wallets provide a physical device for securely storing private keys and allowing you to access your crypto assets easily. Besides industry standards like Trezor or Ledger, there are more and more providers on the market. Some of them are SecuX, and Ellipal, which offer air-gapped wallets, or KeepKey for more basic use.
You can also use so-called paper wallets, which involve printing private keys onto a piece of paper and storing it securely. This is a simple and low-tech option if you prefer not to use technology for key storage.
Many of the hardware wallets also offer special metal mnemonic plates where you can impress your keys and protect them from fire, corrosion, and any other unexpected accidents.
Regardless of the chosen method, backing up your keys to protect against potential loss or damage is crucial. By utilizing any combination of these methods, you can be assured you made important steps towards security.
Risks of Keeping Crypto Keys Online
When crypto keys are kept online on centralized exchanges like Coinbase, Binance, or Kraken, they are vulnerable to various security threats, such as hacking, phishing scams, technical errors, and all possible business risks like insolvency. Hackers are constantly looking for opportunities to steal valuable information.
It is important to understand these risks and take steps to protect your crypto keys by keeping them offline and secured in a safe, secure location.
Best practices for self-custody of crypto keys
Besides using cold storage and hardware wallets, there are several best practices to keep your crypto keys safe, such as:
👉 Keep your recovery seed phrase safe.
The recovery seed phrase is a series of words that you can use to restore your keys in case your hardware wallet is lost or stolen.
You must store it in a safe (offline) place, such as a fireproof safe or a secure location only you can access. This way, you can be sure that your recovery seed phrase will be available if needed.
👉 Properly backup your keys
Another critical best practice is to back up your keys correctly. This means creating multiple copies of your keys and storing them in different locations.
For example, you can create one copy of your keys and store it on a USB drive (encrypted!) and another one on a paper or metal plate stored in a safe place.
👉 Create strong passwords
A strong password should be at least 12 characters long and include a mix of upper and lowercase letters, numbers, and special symbols. You should also avoid using easily guessable information, such as your name or birthdate.
It’s recommended to use password management tools like 1Password, LastPass, etc.
💡 Don’t mix the password with the passphrase. A password is a string of characters to authenticate a user and grant access to your online services. While a passphrase seed is a string of words used to generate a private key in cryptocurrency. It acts as a backup and recovery mechanism for your crypto assets.
👉 Use two-factor authentication (2FA)
2FA requires you to provide two forms of identification, such as a password and a fingerprint or a password and a one-time code sent to your phone, before you can access your keys. This helps to ensure that only you have access to your assets, even if someone else has your password.
With an understanding of the types of crypto keys, the risks of keeping them online, and the best practices for keeping them safe, you can take control of your digital assets and protect them from potential threats. We hope that our article helped you to do so.
With good habits, strong passwords, and tools like hardware wallets, you can keep your funds as secure as possible.
You can check out our list of best crypto hardware wallets here if you want to see available wallets and see which one is best for you.
If you want to continue reading more about security, you can navigate to our article about 5 tips for securing your cryptocurrencies.
What are self-custody wallets?
Self-custody wallets refer to cryptocurrency wallets owned and controlled solely by users, allowing complete control over digital assets without relying on any third party. This means users are responsible for the security of their private keys and must properly store and guard them to prevent loss or theft.
What is a recovery phrase?
A recovery phrase, a seed phrase, or a backup phrase is a sequence of words used to restore access to a cryptocurrency wallet. It serves as a backup of the private keys associated with the wallet, allowing users to recover their assets in case of loss or theft of their device.
The recovery phrase should be kept secure and not shared with anyone, as it gives complete control over the wallet and its assets.
What is an online wallet?
An online wallet in crypto refers to a software-based wallet that is accessible through an internet connection. This type of wallet allows users to store, send, and receive their cryptocurrency assets through a web-based interface or mobile app.
Online wallets are typically provided by a third-party service and can offer added convenience, but they also carry the risk of security vulnerabilities such as hacking or technical errors. Users need to research and choose a reputable online wallet provider with solid security measures in place.