A. Whether you’d like to deposit, withdraw money and then exchange Bitcoins, the process all takes place in a digital online wallet.
A wallet is basically the programme where you can store your coins and facilitate transactions.
With your wallet, you’ll be given a private and a public key.
A private key, is a special code (with numbers and letters) that is given to each individual which links to their crypto account.
You can think of a private key as a user’s special digital ID.
With access to your private key, you’ll be able to control your account, facilitate transactions and it allows you to transfer funds out of it.
Below is an example of a private key:
A simple analogy of a private key is having someone’s full credit card details. This includes the credit card number, expiration date and security code. If you have this information, you can technically spend the cards funds as you please.
NOTE: You should never EVER share your private key to anyone… Also, you should never lose your private key, as once it’s lost you’ll never gain access to your crypto account again.
A public key, on the other hand, is a special code (with numbers and letters) that is available to the public.
Anyone with your public key, will allow any crypto-user to send funds into your account.
Below is an example of a public key:
A simple analogy of a public key is having someone’s bank account number. Anyone with this number can technically send money into your account.
NOTE: The public key is known to the public. If you lose your public key, you can find it again with your private key. Just remember to never lose your private key.
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Q. “Hi Timon, I am absolutely terrified when it comes to trading crypto-currencies. I keep thinking I’ll be hacked or my funds will be stolen one day.
What can I do to protect my private key from being stolen?”
A. This is a very good question.
Luckily, there are ways to keep calm and gain trust when it comes to protecting your private key and crypto-currencies.
Here are a few ways, you can protect your private key from ever being stolen.
#1: Never EVER share your private key with anyone
First of all, make sure you never share your private key to any institution, private individual or professional.
Some companies may ask for your private key, so they can exchange crypto-currencies on your behalf.
Best to find exchanges which are more reputable and WILL never ask for your private key.
#2: Store your private key on a USB
As soon as you’re given your private key to your crypto account, you need to save and protect it from any place it could get hacked.
Never store your private key on the cloud, email, smart phone or any device that connects to the internet.
Instead, you can save your private key on a USB stick as a plain-encrypted text.
If you feel this isn’t safe enough, then the third option is best.
#3: Save it on paper
The safest and best practice to save your private key is by making a paper wallet.
This is simply by writing it down on a piece of paper, printing out a few copies and then deleting the digital copy of it.
Then you can keep it in a safe place in your house or in a safety deposit box in a bank.
Either way, having a crypto private key is still much safer than your bank account.
Let’s put it this way. Someone guessing your 4-digit PIN code is 1 in 10,000.
The odds of picking your private key is 1 in 10⁴⁸.
There have been a few poorly run and mismanaged exchanges that have had crypto coins stolen, but nobody has ever hacked into a private key.
Hopefully, this brings you peace of mind and ideas for when you exchange cryptos in the future.
Analyst, Red Hot Storm Trader