There are more places to “buy” cryptocurrencies popping up every day. Unfortunately, a number of these crypto exchanges aren’t actually selling crypto assets.
Some, like Venmo, let you spend your coins with a handful of preapproved merchants. Others, like Robinhood, never let you spend or even transfer your coins. These kinds of exchanges force you to treat your crypto as just another investment, only allowing you to “buy” or sell them.
Imagine walking into a bank to get some cash only to have the teller inform you that your cash can only be spent with the bank’s partners. Now imagine that the teller refuses to give you your cash at all.
Instead, they offer to keep holding it for you or to write you a check that should clear in a few days. If you’re smart, you’d probably close your account and store your crypto somewhere that actually lets you use it.
When you “buy” cryptocurrencies from Venmo, Robinhood, or similar exchanges, you’re basically just depositing funds into a bank like the ones in these ridiculous scenarios. These exchanges maintain full control of both public and private keys, meaning they own your coins, not you.
Where Are Your Bitcoins?
Bitcoin and other cryptocurrencies are stored in wallets. Most people use digital wallets, often in the form of an app or an account on a website. But you can also store your coins in a hardware wallet that might resemble a hard drive or USB stick. Or you can print out a paper wallet to keep your coins safe on any old piece of paper.
Paper wallets are typically nothing more than a couple of strings of letters and numbers with QR codes to match. These strings of letters and numbers are the wallet’s public key and private key.
The public key is like a bank account number; it’s all you need to deposit funds into the wallet. The private key is like the PIN for the wallet and is required to access the coins in the wallet.
When you don’t have access to the private key, you technically don’t have control of the wallet or the coins within it. This is where the phrase “not your keys not your Bitcoin” comes from.
Buying Bitcoin or any other cryptocurrency from the kinds of exchanges discussed above will not provide you access to your private key. As a result, these exchanges can prevent you from using or even selling “your” coins whenever they so choose.
It might sound farfetched to think they’d prevent you from even selling “your” coins. But they have on multiple occasions, often at the worst possible times. As a result, these exchanges have cost countless individuals untold amounts of money.
There’s nothing wrong with investing in Bitcoin or other digital assets. In fact, Bitcoin has proven to be one of the best investments in history. But thinking of cryptocurrencies as nothing more than an investment or restricting their usage completely defeats their purpose.
Bitcoin was designed to be a decentralized currency and if you maintain control of your private keys that’s exactly what it is. It isn’t controlled by any government, corporation, group, or individual. It’s simply a computer code that’s hosted independently on tens of thousands of nodes around the world.
Check out our other blog posts for a more detailed explanation of Bitcoin. But the short version is: it’s not what you’re buying if it doesn’t come with a private key. Because as you now know, not your keys, not your coin.
If you’re looking for a way to actually buy cryptocurrencies, stop by any RockItCoin Bitcoin ATM. With more than 900 locations throughout the United States, there’s sure to be one near you. And just to be clear, we never retain copies of your private keys. When you buy from us, your coins and your keys are yours and yours alone.