By Kirsty Moreland
Dec 11, 2019 | Updated May 25, 2023
Read 6 min
Beginner
| KEY TAKEAWAYS: |
| — When you own cryptocurrencies, what you really own is a private key. Whoever has the knowledge of this key can spend the associated funds. — If you leave your crypto assets online, on an exchange for instance, you are basically not in charge: you are entrusting the exchange with your private keys. — Owning your private keys gives you much more power and control but it also means you have to take care of their security. — Ledger offers best-in-class hardware storage security for your private keys – so you stay in control of your crypto, no matter what happens. |
How you store your private keys is absolutely critical to the security of your crypto assets. Read on to find out how to make sure you’re crypto stays safe.
When you own cryptocurrencies, what you really own is a “private key”, a critical piece of information used to authorize outgoing transactions on the blockchain network. Whoever has the knowledge of this key can spend the associated funds.
If your private keys are stolen or misplaced, or if you store them on a device that crashes, there is no bank or institution to back you up or give you a replacement: you lose access to your crypto.
Where and How To Store Crypto – Your Options
Owning your private keys gives you much more power and control, but it also comes with the needs to take care of their security. Many tools are available to manage your keys, usually called “wallets”, but not all of them are secure. There are 4 different types of wallets you could use to manage your assets:
Hardware Wallets
Hardware wallets – such as a Ledger – are widely considered to offer the most secure wallet option for securing your crypto.
- Offline private keys
A hardware wallet stores your private keys offline, meaning nobody can access them except you. This immediately removes the risk of digital hacks to your wallet – hackers simply cannot access the device or the private keys inside it.
With a hardware wallet, even if a hacker succeeds in getting control of your computer, they will not be able to steal your private keys and access your crypto assets. Your private key is kept offline and limits the risk of hacking.
- Trusted display
Another major security advantage of hardware wallets is that they generally enable you to verify transaction details on the device screen. Using the interface of a software wallet is never totally secure, since it could be tampered with remotely by hackers. But by displaying your transaction details on the offline environment of the device, you’ll have complete certainty about what you’re confirming.
In short, hardware wallets are the most secure option for storing your crypto, both because they keep your private keys safe in an offline environment and because they offer certainty about your transaction details via their tamper-resistant screen.
Software Wallets
Software wallets are applications that manage cryptocurrencies. They can be installed on your computer or smartphone. You remain in control of your private keys; they are not shared with or controlled by a third party.
The biggest advantage of online wallets is that they are easily accessible from any computer or other device with an internet connection.
Unfortunately, since a software wallet is installed on your PC or smartphone, it is still connected to the internet which exposes your private keys to hackers. So although the private key seems to be concealed – you never really know who might have accessed it covertly via your connection. This is not the point of a wallet!
Exchange Wallets
Most individuals first get into cryptocurrency by purchasing coins on an exchange platform and leaving them there – especially if they have the intention to keep trading. But the big issue with using an exchange wallet is ownership: on this type of wallet, you will never be in control of the private keys for your assets.
Instead, you are entrusting a third party (the exchange) with these private keys and mandating them to serve as a safeguard. In other words – you’re trusting a stranger with your funds. There are a number of problems with this.
- Exchanges can be hacked
While exchanges provide some basic levels of security, the fact is that most trading platforms are not security companies, and you are entrusting them to keep your private keys protected with whatever measures they choose to implement. If a hack does occur – your funds go with it.
With a series of high-profile hacks on major crypto exchange platforms as well as a constant stream of headlines around individual crypto attacks, it’s more evident than ever before that security must be top of mind for every crypto investor no matter how large or small their assets.
- Embezzlements and bankruptcy
You’re also trusting the exchange platform not to undertake malicious usage of your assets, or to handle them negligently. In both cases, you’d once again be left empty-handed, since your crypto is technically not yours while it is in the exchange wallet.
So to summarize, exchange wallets may be handy for trading, and alleviate the burden of managing your private keys – but they come at the very high price of losing control of your crypto.
The Safest Way To Store Cryptocurrency
Hardware wallets are booming in popularity and becoming the new standard bearer for crypto security, and among them, Ledger is regarded as the most trusted name. This is down to the industry-leading components inside our devices.
Secure Element and Custom OS
Even hardware wallets can face physical attacks that aim to get access to your private keys. Hackers may try to “listen” to the device’s electric or electromagnetic signature, for example, to gain access to your data. To this end, all hardware devices use encrypted chips, and the type of chip used determines the wallet’s ability to withstand this type of attack, and keep your assets safe.
Ledger is a pioneering hardware wallet technology that provides unprecedented levels of security for crypto assets through a Secure Element (SE) chip — a chip designed specifically to resist highly skilled attackers — and a custom OS designed specifically to protect crypto assets.
Additionally, our physical devices are independently certified by ANSSI, the French cybersecurity agency.
In other words, Ledger offers you best-in-class security for your crypto assets. Furthermore, Ledger hardware wallet combined with the Ledger Live app enables you to manage your crypto easily and securely. Buy, sell, stake or swap crypto without compromising the security of your assets. Dealing with crypto has never been so easy and secure!
Secure Your Crypto Properly – Use a Ledger
Threats to your crypto can take various forms, be it hackers targeting your precious private keys, physical attacks of your device, or trusting crypto exchanges with your portfolio. Why should you sacrifice your control of your crypto – or your peace of mind as you manage your hard-earned assets?
Using a Ledger hardware wallet offers a safeguard against these key threat vectors, as well as complete transparency as you transact on Web3. It’s a no-brainer: why would you use anything else to store your crypto private keys?
Knowledge is Power.
As a seasoned cryptocurrency enthusiast with a profound understanding of blockchain technology and crypto security, it's evident that the key to safeguarding your digital assets lies in the responsible management of private keys. The article you provided, penned by Kirsty Moreland on December 11, 2019, and updated on May 25, 2023, sheds light on the critical importance of private key security in the realm of cryptocurrencies.
The central concept emphasized in the article is the idea that when you own cryptocurrencies, what you truly possess is a private key. This key is the linchpin that authorizes outgoing transactions on the blockchain network, and whoever possesses this key has control over the associated funds. The overarching message is clear: the security of your private keys is paramount in ensuring the safety of your crypto assets.
The article categorizes the various options available for storing private keys, highlighting the pros and cons of each. Here's a breakdown of the concepts discussed:
-
Hardware Wallets:
- Definition: Physical devices like Ledger, considered the most secure option for storing crypto.
- Key Features:
- Private keys are stored offline, reducing the risk of digital hacks.
- Trusted display for transaction verification on the device screen.
- Advantages:
- Highest security due to offline storage and tamper-resistant screen.
- Protection against digital and physical attacks.
- Recommended Solution: Ledger, acknowledged for best-in-class hardware storage security.
-
Software Wallets:
- Definition: Applications installed on computers or smartphones to manage cryptocurrencies.
- Key Features:
- Private keys remain in the user's control.
- Easily accessible from any device with an internet connection.
- Drawbacks:
- Vulnerable to hacking as the wallet is connected to the internet.
- Caution: While convenient, the security is compromised due to online exposure.
-
Exchange Wallets:
- Definition: Wallets provided by cryptocurrency exchanges.
- Key Features:
- Private keys are managed by the exchange, not the user.
- Risk of funds being compromised in the event of exchange hacks or malpractice.
- Risks:
- Exchanges may be susceptible to hacks or misuse of assets.
- Warning: Users lose control of their crypto assets while stored in exchange wallets.
-
The Safest Way to Store Cryptocurrency:
- Recommendation: Hardware wallets, particularly Ledger, are highlighted as the safest option.
- Security Measures:
- Secure Element (SE) chip and custom OS to resist physical attacks.
- Independent certification by cybersecurity agencies for added assurance.
- Advantage: Ledger offers best-in-class security for crypto assets.
-
Conclusion:
- Safeguarding Crypto: The article concludes by stressing the importance of choosing the right storage solution to safeguard against threats like hackers, physical attacks, or undue trust in exchanges.
- Ledger Endorsem*nt: Ledger hardware wallets are presented as the optimal choice, providing security, transparency, and ease of crypto management.
In essence, the article advocates for the idea that knowledge is power in the world of cryptocurrencies, and securing your private keys with a reputable hardware wallet like Ledger is the key to maintaining control and peace of mind over your digital assets.
