Learn about private keys, exchanges and walletsPosted on: January 17, 2018, by : Dan Muresan
What are actually private keys?
To be able to hold cryptocurrencies, whether it’s Bitcoin or others you need first of all, a private key. The private key is basically a long string of alphanumeric characters (digits and letters) and you need it to control your cryptocurrencies. The private key generates a public key, which is the kind of address you give to people to be able to send you cryptocurrencies. But no one else should have access to your private key.
So you get some sort of account that can be accessed only by having both of these two:
- The Private Key (should be kept safe, and no one can see it/ have it, but you)
- The Public Key (it’s the address where others, people or exchanges, can send you the funds)
To create your own private key, you need to use an application called wallet that knows how to create and store this private key. Wallets are used to receive and send cryptocurrencies, to store them and to monitor the balance of cryptocurrencies. Although you do not normally need, you can have as many wallets as you like, just like some bank accounts. There are several types of wallets: web wallets, desktop wallets, mobile wallets, hardware wallets, paper wallets. Some are more difficult to use, others are very affordable and intuitive. Depending on the type of wallet, you have a greater or lesser security on your private key. Usually, the easy to use (web wallet) offers lower security and the private key is more vulnerable. The safest (no one can steal your private key) are hardware ones and paper wallets.
Today I will describe a simple and safe method that you can use to start quickly. In the coming weeks, I’ll teach you how to keep cryptocurrencies at the highest level of safety.
Exchanges are websites where you can buy cryptocurrencies. You can buy different types of coins, based on the exchange that you choose. Each of them have different pairs that you can trade. One more thing, you can practically buy any Bitcoin subdivision you want and this is also true for the other cryptocurrencies. Want to buy $10 worth of bitcoin? Very good. You can buy that. After creating an account on an exchange, you will be able to deposit and withdraw money. You will have a portfolio of cryptocurrencies and you will be able to see the history of transactions.
Buying crypto from an exchange requires that you first create an account on their platform. The exchanges I used to buy crypto are Bitstamp, Kraken, Bittrex. No matter what exchange are you using, you have to make sure you consider the steps below:
– Open an account.
– Submit identity verification: they will ask some of the following: a picture with an ID (driving license, identity card, or passport) and a picture of you recently made, or utility bills, depending on each exchange.
– Funding / Deposit money to your account. The method of deposit is via Wire Transfer. Select Funding or Deposit (depending on each exchange menu). You will have to make sure the name of the bank account is identical with the name you submitted in the exchange. You will get a bank account where to send the money and also a code that you have to put in the transaction description so they can determine that the money you received is associated with your account.
– Buying coins (Trade / New Order). To buy coins you will have to you create a purchase order similar to the stock exchange. In every order you must specify whether you want to sell or buy the amount of Bitcoin you want. After you’ve bought the coins, it’s not a good idea to keep them in exchange. As long the funds are in there, they are not yours. You do not control their private key, and if the company goes bankrupt, you coins are lost. So if you plan on long term investing, after buying the coins, you will transfer them to your personal wallet. Read further to learn what is a wallet and how to back it up.
Install a wallet
Install a wallet (Coinomi) on your mobile phone, that you find in the Google Play Store and save your recovery phrase. I recommend the Coinomi wallet. If you have an iPhone, a similar wallet is Jaxx. Both applications support most cryptocurrencies and both know how to create private keys for each cryptocurrency that you want to trade. These private keys exist only on your mobile – nowhere else.
If you lose your cell phone, well, the application gives you a seed to recover your wallet. It’s a string of words you must save it somewhere safe or copy it and put it in a safe place (do not keep it on your device, nor take a screenshot with it, just write it down on two pieces of paper and keep those in two different places).
In case you lose your phone, or it is destroyed, you can install the application (Coinimo or Jaxx or any other that you use) on another mobile phone and only by using this phrase you will recover all cryptocurrencies (so make sure you have this written down right after you install the app on your phone).
If you lose or forget the phrase, your cryptomones are lost forever and nobody can recover or replace.
Transfer coins to your private wallet
Now, you have the coins in an exchange and you have a wallet on your phone with the private keys backed up.
Next step is to send your coins to your personal wallet:
- In Coinomi or Jaxx, select the coin, click on Receive and an address will appear.
- Send the coins from the exchange to this address. Find the option Withdraw and select the coins you have previously bought. Enter the address generated from Coinomi or Jaxx (if you accessed the exchange on your laptop, you can send an email from your smartphone with the address and access it on your laptop).
- Re-verify the address before confirming. Compare again the one generated by Coinomi/ Jaxx with the one you introduced in exchange for the withdrawal. There were some viruses that were replacing the address you introduced in the exchange and the virus was sending the funds to different wallets.
And please keep in mind to stay up to date with all the new changes that can appear in these markets, as we are only at the beginning of this journey and many things will change!