Taking care of our safety

Hello!

This is my first post i hope it will be useful. Beforehand, i want to thank @leo.voter for giving me the opportunity to be here sharing with you and Hive for the beautiful ecosystem that offers us to share.

The topic i bring you today has to do a bit about that limbo in which we seem to find ourselves when storing our cryptos.

The topic has probably already been addressed, but i think the reminder is not superfluous. At this point i'm sure more than one is still scared about what can happen with their cryptos. I mention this mainly because of the cases that have recently occurred with some Exchanges such as the well-known FTX that has kept the typical user in fear, who will surely have their funds frozen there.

Image source

The problem we face as users is centralization, which means to depend absolutely on a third party to take care of our funds, to be able to exchange them for others and to dispose of them under the terms they consider. An entity that describes these characteristics is represented by the most renowned exchanges. These are markets whose main role is to trade tokens, exchange them for others or sell them for FIAT money. The idea of exchanges is perfectly understandable and they are very important for the whole crypto ecosystem and in general for everything that can be given some kind of value (that can be bought or sold). The exchanges, over time have allowed people to store their coins or money in them as if we were talking about a bank, although some clarify that you should not use their services as a piggy bank, this practice is allowed. There are also other wallets that you use on the web, which work similar to these exchanges, where we must request permission to make use of our funds.

Image source

These services offer an advantage and that is that, if you are a little careless with your information, they provide security that you may find very comfortable. For example, to enter you need some confirmations (an email password, a text message to your phone...) and they have a set of behind-the-scenes tools that allow in most cases to avoid hacker attacks directly to our assets. Being hot wallets, we have quick access to our funds and those resources can constantly move at our convenience. That is why it is so tempting to use them. To cite a few examples, we can find Binance, Coinbase, Kraken, Payeer, Local Bitcoins... This last one is not a centralized Exchange, maybe i will talk about this in a next occasion and its services were suspended because of the harsh crypto winter to which they could not adapt. We would like most exchanges to say goodbye like Local Bitcoins who has given a 12 month window to its users to withdraw their respective funds.

As these services are in charge of managing our funds, in most cases, they work as a huge bank of coins and if a user needs to use his resources, he makes a request with a Memo and from this huge bank, the part that corresponds to the user is withdrawn and sent to where he requires it. Then, in general it is not the user who makes the transfer but the Exchange itself, so that, although we manage those resources as ours, they were not necessarily the cryptos we had before having deposited them in the Exchange. Already in the blockchain it does not represent the same thing; it has the same value, of that there is no doubt, but they are not the same data (hash address) that we handled from the beginning. It is as if we put more snow in a snowball and other users add more and more, it grows and then we want to use the part of snow we had added to throw it to our neighbor, we would put our hand in that huge common snowball and we would take out our portion of snow, but it was not necessarily the same we had added from the beginning, the set of snowflakes that formed this new snowball are different from the one we had formed at the beginning.

If we are ordinary users, handling transactions in this way is not a problem in general. The only concern is that coin bank, where we have seen cases where in good faith the users grow for the ideas proposed by the project and out of nowhere, the leaders of the project, those who manage these huge volumes of capital, put their hand in and dispose of these resources for their own benefits, (enrich themselves, donate to political campaigns, foundations or even steal it with a blatant rug pull) On the web you can find many cases like this and unfortunately most of them do not end up as nice as the Local Bitcoin case that had a trajectory in the crypto world of approximately 10 years.

One of the alternatives that experts propose to reduce the risk is to manage our funds ourselves in another type of wallet. These wallets for sure we will use them very often, so they propose us another type of hot wallet such as Metamask, Trustwallet... With these we will be able to manage a large amount of blockchains and coins. The good and bad of it are the phrases seeds that with them we will be able to access the cryptos that belong to us from any wallet. The management that we do of our cryptos with our wallet is directly with the blockchain. So, that snowball i was talking about before, once it is placed in the wallet it will not be modified at any time, it will be easily identifiable in the blockchain and when we make use of those funds in the blockchain they will move exactly as they were when they were deposited. Once the funds reach our domain, we can say with total security that these funds are ours and what happens with them will depend only on us.

Image source

Here comes the "downside" of being the only ones who can watch over our own funds. The security we impose on our accounts: not clicking on strange links, not giving others access to our account, not sharing our seed phrases, not crossing crypto networks to send goods, not accepting smart contracts that we have not requested... We must be very diligent in every step we take in this world. There are many who don't care if you have a lot or a little, if they have the opportunity to snatch those funds from you they will certainly do it. Also, there is the case in which these seed phrases can be lost to us, in this case there is nothing to do to recover our assets. But, all this can be due to small human errors and i can assure you that by taking each step with patience and reflection, these errors can be minimized to the point of not committing them.

The other type of wallet that experts share with us is to use cold wallets. These, in my opinion, are made when you want to save and you are not interested in moving your funds so much, you do not want to interact so much in an Exchange, sell or buy or in general connect so much to the internet. They are electronic devices that store our seed phrases and every time we want to use our wallet we must connect this device to the computer to give us access to our passwords and therefore to our funds. This is one of the safest systems that exist, because to violate the wallet it is mandatory to physically access the device. Some examples of these are the Trezor and Ledger.

There is another level of security which is to store our information in a cold wallet, but, that this wallet is difficult to access even for ourselves. The idea would be to store it in some vault or bank and every time we are about to make some kind of interaction (a withdrawal or deposit) we would have to go to the bank to access our wallet and be able to access our funds. Although it is something extreme, i see it very useful for those who manage extremely high amounts and it is not so essential to access them at all times, for example, a company, an organization, a millionaire...

Conclusions

Although this world offers a lot of tools to optimally manage our finances, the option you want to use to store your assets is fine, as long as you are aware of the risks you run using one instead of another.

Always be careful where you click, the safety of your assets will depend mostly on it. Try to keep a low profile on your finances. Unless you want to share your methods or your evolution earning money, there is no reason to be telling the world how much you have in your pocket. If what you are spending on investments is very important to you, be much more cautious, take care of yourself and your loved ones.

Who is scaredwolf?

I am an enthusiast for new technologies. I'm happy to say that i'm still learning from it all. I try to keep up with this fast moving world. I like nature, animals, mountains and the food too.

My purpose in Hive is to learn and what i learn i would like to share with you. I hope this information is welcome and more importantly that it is useful.

Thanks for watching!

Posted Using LeoFinance ^Beta