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“Not your keys, not your crypto”, a common phrase whose usage spiked in the cryptocurrency space after the instances of exchanges failing and leveraging clients' assets. Understanding this term's significance is more crucial than ever, but a vast majority of individuals may not understand this concept. Self-custody of crypto may be confusing for the typical beginner.
We will be covering the phrase “not your keys, not your crypto”, what it means, and why it’s essential for investors to understand this concept.
Understanding "Not Your Keys, Not Your Crypto"
The phrase “not your keys, not your crypto” encompasses the principle of having total self-custody of crypto assets in the world of blockchain technology. With the traditional banking system, the typical individual trusts a third-party institution to hold and secure their money. At banks, an individual has an account number and password but doesn’t hold the actual keys to the bank vault.
However, in the realm of cryptocurrency, the “keys” are a metaphorical representation of cryptographic keys associated with your cryptocurrency. These “keys” come in two forms: private and public keys. The public key is like a bank account number, enabling individuals to receive funds. The private key is described as the pin code to your debit card, granting you access to spend or send your cryptocurrency.
When individuals say “not your keys, not your crypto”, it means that if you do not possess your cryptocurrency’s private keys, you do not truly own the associated assets. Instead, you’re entrusting them with a third party, such as a cryptocurrency exchange.
The Importance of Private Keys
The importance of private keys is notable, but not the only factor, in individuals protecting their own cryptocurrency holdings. Possessing your private keys gives you complete control over your crypto, but securing your own private keys may present its own set of challenges.
If an investor has ownership of their private keys, misplacement could lead to irreversible consequences. Unlike a forgotten bank account password that can reset or fraudulent transactions that can often get reversed, losing private keys could result in the permanent loss of the associated cryptocurrencies.
What’s the Best of Both Worlds?
While the principle of "not your keys, not your crypto" might seem like a more secure strategy compared to using a centralized exchange, it can also carry inherent risks for individuals unfamiliar with the significant responsibilities of self-custody. This approach tends to cater more to savvy investors than newcomers getting a start in the industry.
However, at iTrustCapital, we prioritize the protection of our client's assets in tax-sheltered IRAs, relieving them of the stress of private key management. We use a regulated custodian and a third-party liquidity provider to ensure that client assets are never mixed with our operational funds. This guarantees that all assets are held Off Balance Sheet on a 1:1 basis. Our business practice prioritizes transparency and security for our clients and their assets, mitigating any fear and providing them with a more secure platform.
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This article is for information purposes only. It does not constitute investment advice in any way. It does not constitute an offer to sell or a solicitation of an offer to buy or sell any cryptocurrency or security or to participate in any investment strategy.
iTrustCapital is a cryptocurrency IRA software platform. It is not an exchange, funding portal, custodian, trust company, licensed broker, dealer, broker-dealer, investment advisor, investment manager, or adviser in the United States or elsewhere. iTrustCapital is not affiliated with and does not endorse any particular cryptocurrency, precious metal, or investment strategy.
Cryptocurrencies are a speculative investment with risk of loss. Precious metals are a speculative investment with risk of loss. Cryptocurrency is not legal tender backed by the United States government, nor is it subject to Federal Deposit Insurance Corporation (“FDIC”) insurance or protections. Clients do not receive a choice of custody partner. The self-directed purchase and sale of cryptocurrency through a cryptocurrency IRA have not been endorsed by the IRS or any regulatory agency. Historical performance is no guarantee of future results.
Some taxes and conditions may apply depending on the type of IRA account. Investors assume the risk of all purchase and sale decisions. iTrustCapital makes no guarantee or representation regarding investors’ ability to profit from any transaction or the tax implications of any transaction. iTrustCapital does not provide legal, investment or tax advice. Consult a qualified legal, investment, or tax professional.
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