Not your keys, not your coin. This is a phrase commonly tweeted by hardcore crypto investors. It means that if you don’t control the keys of the wallet, you don’t control the cryptocurrency.
The adage once again made rounds on Sunday as self-proclaimed bitcoin-hater Peter Schiff tweeted that he lost his bitcoin. The gold bug claims that he did not forget his password; his wallet forgot his password.
Whether the bitcoin-hater is telling the truth or not, the gold bug could have easily recovered his BTC holdings if he saved the private keys. The seed phrase was created so that crypto holders can always recoup their holdings in case the wallet gets corrupted or if they lose their password.
Even with this fail-safe measure, Binance CEO Changpeng Zhao thinks that it is better for most people to store their passwords on a centralized exchange.
Let’s face it: it is not easy to use, store, and send bitcoin. It takes some time for people to learn the ropes. Plus, there’s always the risk of losing your holdings if you forget your password and lose your private keys.
A Wall Street Journal analysis reveals that 20 percent of all BTC is lost forever . Storing your own keys can be challenging. This may have prompted Changpeng Zhao to emphasize the value of saving your coins on a trusted crypto exchange.
The chief executive of the largest crypto exchange may have a point. In 2019, Binance suffered a large-scale security breach after hackers took off with $40 million worth of bitcoin. Users did not incur any loss as the exchange’s SAFU fund covered the heist in full.
While Binance took the hit to protect their users, there are still numerous reasons why you should take responsibility to store your own keys.
Even though the largest crypto exchange lost $40 million to protect their users, it is never guaranteed that they’ll be able to cover all losses should another security breach occur. The SAFU fund has its limits.
User Nigel stressed this point in his reply to Zhao’s tweet. The crypto enthusiast enumerated the exchanges that used to be safe until they were not.
User Bob reminded everyone that at one point, Binance locked the exchange for two weeks. During this time, some users were not able to withdraw their funds.
Then, there’s also a chance that your crypto holdings can be locked at the exchange’s whim. They could give various reasons such as suspicious activity to keep you from withdrawing your funds.
All in all, it is still wise to store your own keys. It is much more difficult to face the reality that your trusted exchange got hacked than safely storing your seed phrase.