Not Your Keys, Not Your Crypto
November 15 2021
The best way to store your private keys
Keeping your private keys safe, secure and under your complete control is essential to ensure financial independence and autonomy, which is what attracted a lot of early crypto adopters and remains a key value in the crypto community. In addition to empowering monetary sovereignty, it also serves as a way to hold third-party services accountable by testing them for their solvency.
Proof of Solvency
Purchasing a digital asset means you're buying a key that represents ownership of such value. Requesting proof of that key is a useful method to determine potential risk with exchanges and other digital custodians. Exchanges are suspected of not holding onto the coins and actually failing to carry sufficient reserves. There's also the possibility that the exchange or wallet provider becomes insolvent, has its accounts frozen, or pulls a salacious exit scam. If a large enough volume of crypto is moved by a significant portion of asset holders, custodians are challenged to prove they can accommodate users' demands for ownership of their coins.
Recently, BitUniverse released an Exchange Transparent Balance Rank feature, which aggregates trading volume for the top 60 cryptocurrency exchanges. According to the list, the world's most popular centralized exchanges store at least 1.9 million BTC ($13.9 billion).
Research from Viewbase shows a similar ranking of leading exchanges for reported monthly trading volumes and ether balances.
The ability to verify the activity by these entities is the accountability that is built into blockchain technology, one of the greatest aspects of the technology. It is extremely important to pay attention to this due diligence because a huge disparity between the crypto balances and transaction activity can indicate foul play; in fact, 95% of total volume reported is faked according to a report by BitWise Asset Management.
While regulators are getting stricter, there is still a real lack of protection for exchange users whose funds may be exposed to hacks. In the event that a less-than-desirable event like a hack or fraud happens to the service you keep your crypto on, you may have no way of getting it back. But even custodians like Coinbase and Bakkt have full control of the coins and can refuse or limit withdrawals. Smaller exchanges have made no commitment to any safety standards.
With crypto, long time holders are reminded to be mindful of who truly owns the private keys, and those who are new investors should also be aware of the importance of moving coins away from the initial institution where they bought them. With crypto — you become the single point of failure — since you own the keys — — if you delegate the keys — you are increasing the risk. Make sure your keys are backed up elsewhere — the default is paper, but there are new solutions that enable you to encrypt your paper backups so that you always retain access to your assets.
About the Author:
Kyle Graden is a digital native who was born in what's considered the Millennial Generation. Kyle is a nomadic entrepreneur, growth consultant, and QryptoQueer, striving to make a more accountable, transparent, and equitable world. Kyle's experience in the blockchain and cryptocurrency industry spans from marketing a crypto hedge fund to being named to the Top 100 Fintech for UN SDG Influencers list to speaking at conferences and participating in hackathons.
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(including Cryptocurrency Seeds, NFTs and Art)
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The Winklevosses came up with an elaborate system to store and secure their private keys. They cut up printouts of their private keys into pieces and then distributed them in envelopes to safe deposit boxes around the country, so if one envelope were stolen the thief would not have the entire key.
The idea behind Vault12 is how do we essentially split that responsibility, make that problem of key control less a technological one by essentially making it into a social one with networks of people that they trust.
Exchanges are the main target for hackers. Those are the biggest honeypots. So the number one rule in Crypto is, do not keep your money on an exchange, and if you're going to custody that money, you need to do it off of the exchange with a product like Vault12.
Security and usability are inextricably linked, the former cannot exist without the latter. Vault12 understands the need for end-to-end management of this experience as well as the importance of integrating into the prevailing crypto ecosystem
As we move to a more open financial system driven by advanced blockchain technology and cryptocurrency, we need smarter ways to ensure that the system is trustworthy. Vault12 does this by addressing a foundational need -- ensuring that your crypto assets are not only protected by decentralized security, but also by your trusted inner circle. Your private key never exists in one place or with one entity, reducing risks from hackers as well as everyday accidents.
Security is the lifeblood of industry, commerce, and leisure. As more people use decentralized applications, they will need a way to back up their crypto wallets and exchange accounts. Vault12 provides a simple and natural way to reduce risks and combat the fear of forgetting seed phrases and private keys.