How to take control of your crypto keys

Not your keys, not your crypto. The saying is an important reminder of the property rights behind bitcoin (BTC), ethereum (ETH), and other crypto assets. Unless you hold the keys to your assets, they’re not really yours.

But if you’re new to crypto, this may sound strange. After all, traditional investments like stocks and bonds don’t have keys. Shouldn’t buying crypto be enough to own it for all intents and purposes?

We’re going to discuss why self-custody is important and how you can start holding your own keys.

What are crypto keys?

Cryptocurrency is built using cryptography, the science of mathematically conveying messages in code. And money is a form of communication. Private keys allow you to transact with cryptocurrency by leveraging the underlying cryptography. With keys, you can send and receive assets to and from bitcoin addresses or ethereum accounts.

This dynamic is totally different from securing other investments, which primarily rely on custodians. For instance, when you trade stocks, the trading takes place between institutions and they keep track of who owns which assets. For cryptocurrency, this process is done online on a blockchain which is maintained by a decentralized network of computers.

Beginning with the bitcoin whitepaper, crypto was designed as a way for you to control your destiny, beginning with a decentralized network. By transacting peer to peer, you can have total control over your wealth without having to trust a third party such as a bank or credit card provider.

Why keys matter

If you can’t transact on the base layer of a crypto network, your assets aren’t really yours for all intents and purposes. But you need your own set of keys to do this.

When you first buy ETH, BTC, or another asset on the exchange, the exchange interacts with the underlying networks so they hold the keys. It isn’t until you withdraw your assets from the exchange onto your keys that you’re able to transact on the network yourself.

For years, exchanges and custodians have proven risky for securing crypto. It’s a situation we’ve seen happen in crypto time and time again. In 2022, many exchanges and custodians collapsed with assets hanging in the balance. And all too often, investors don’t know something is wrong with an exchange until it is too late.

But fear not. There’s a lot you can do to protect your crypto assets. Self-custody is the act of safeguarding digital assets with a set of keys you control, and it is the best strategy for ensuring the long-term security of your assets. At Casa, we make self-custody easy and safe for investors of all walks of life by securing your crypto with multiple keys. Learn more about our membership plans here.

Choose your storage method

If you’ve just started investing in crypto, your assets are most likely on an exchange. Before you begin withdrawing your assets, you need to generate your own private key.

It’s crucial that your private key is random. Because your assets will be tied to your key, you don’t want it to be easy for a person or computer to guess. We all know it’s bad to have “1234” for your password. The same premise holds for private keys.

Unlike a password, however, private keys can’t simply be reset without repercussion if they fall into the wrong hands. This is why it’s important to practice cold storage and keep your private key offline for any assets you plan on holding long-term.

Crypto key storage is best done with hardware wallets, dedicated electronic devices for signing transactions. Hardware wallets keep your key isolated from the internet and only provide the necessary cryptographic proof needed to send assets.

For smaller amounts, it is acceptable to use a mobile wallet, but we don’t recommend using a mobile wallet for assets greater in value than what you would carry in cash.

Generate your key in private

Once you have your hardware wallet, it’s time to set it up. It’s best to do this before trying to withdraw from an exchange because you will need your device to generate a new address to receive your assets.

First, be aware of your surroundings. Find a private, secure location away from other people. Before you begin, go ahead and remove cameras and microphones from the room, especially smart devices. This protects your key in the unlikely event that a bad actor tries to spy on you and intercept your key upon creation.

While these instructions may seem extreme, remember that security is about taking that extra step to protect yourself. You need to be cautious when creating a key. There are no do-overs in crypto.

Devices tend to differ in their setup instructions, and in most cases, they will generate your key. This is to be expected. Technology can generate randomness much more effectively than human beings can. Some hardware wallets such as Coldcard allow you to generate a key with more advanced methods such as rolling dice. Just be sure to stick to the instructions, and don’t try to get too clever for your own good. If you’re using a hardware wallet with Casa, you can access setup instructions on our Support Center.

Say goodbye to exchanges

Once you’ve generated your own keys, it’s time to withdraw your assets. Once you log onto your exchange and initialize your transaction, the exchange will ask for your address.

Create a new address on your hardware wallet or within the Casa app. Be sure to double-check your address is correct before proceeding with a transaction. Safety first.

Once you begin your transaction, it may take several hours or days to process and confirm on the blockchain. This all depends on the exchange, the crypto asset, and the transaction fee market at the time. Wait for your transaction to receive multiple confirmations before attempting to send the assets elsewhere. Congratulations, you’re now holding your own keys.

Final thoughts

Remember, not your keys, not your crypto. By generating your own crypto key and keeping it in cold storage, you take the important step of self-custody and leverage the decentralized asset crypto was meant to be.

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