When you buy cryptocurrency, there are two things you receive to make the ownership official – a private key and public key pair. The private key offers you control over the wallet, whereas the public key is the wallet address.
Today, it’s very easy for you to buy crypto such as bitcoin. So, you should be very careful about the platform you choose. This is because the bitcoin you buy might not actually be yours.
For example, PayPal, one of the companies that made a great push into cryptocurrency in 2020, is one of the platforms that currently allow American users to sell, buy, checkout, and hold with cryptos including litecoin, bitcoin cash, Ethereum, and bitcoin. Furthermore, Venmo, PayPal’s mobile wallet allows customers to sell and buy cryptocurrencies.
PayPal has made it so easy that you can invest as little as £0.72 without having to create another special account to deal in cryptocurrency. But one important thing that you need to find out is whether these cryptos are actually yours. Keep in mind that PayPal usually manages these wallets, meaning you don’t really hold your own cryptocurrency.
Another important thing that you should know is that PayPal only gives you access to the public address, and the company gets to control the private key. Moreover, with PayPal, the bitcoin you have in your account cant be transferred to other accounts. This is a big downside, considering the fact that the bitcoin is supposed to be yours to do with as you please.
It’s like an ‘I owe you’ arrangement for your bitcoin. It’s like when you deposit some money into your bank account. In doing so, you trust the bank has your money in their bank account and they are giving you an ‘I owe you’.
What this means is you cannot just move the bitcoin to cold storage or transfer the tokens to a wallet that’s out of PayPal’s management. PayPal says that this allows them to money laundering issues that some of the big players are often involved in.
Keeping Your Cryptocurrency
Essentially, not every person wants to deal with the issues concerning storing their bitcoin. In simple terms, if you lose the private and public keys, you can easily lose the coin. Technically, if you’re a beginner in the cryptocurrency world and you aren’t comfortable holding your public and private key, then it’s much safer to let PayPal handle it for you.
It’s always crucial to ensure your private and public keys are safely stored. A few months back Ripple’s former CTO lost the private key and has to forfeit around £288 million worth of BTC in today’s price.
Keep in mind that PayPal’s interface is very easy to use so it will be simpler for you to manage your cryptocurrency from their platform. This means if you don’t plan to do anything else besides buying and holding the cryptocurrency, then this makes complete sense.
Moreover, if you have an existing PayPal account, all it takes for you to get into the crypto space is to click on the “buy” button just under bitcoin. There’s a very small difference, and if you just want to buy worth a few pounds then you can trust PayPal to keep your bitcoin safe. However, if you’re more concerned about self-storage, then you’ll not like their service. But if you’re going to survive and thrive in the centralized exchange, then you’ll have to assume some risks. Not to mention the fact that PayPal has a history of freezing thousands of accounts. Also, centralized exchanges are highly vulnerable to threats that can possibly affect users.
Buying bitcoin through PayPal can only be compared to purchasing a financial contract. This is because you cannot remove the cryptocurrency from their platform and you cannot send these anywhere, its like you’re buying a bitcoin derivative, rather than the real deal.
As it’s the case with other options contracts, a buyer stands to lose or gain a lot of cash.
Nowadays, bitcoin prices are soaring hitting £31,288 as of 7th august 2021, with advocates saying bitcoin might reach £80,000 by the end of 2021.
Overall, you might have some bitcoin stored on an exchange or in your wallet, but this doesn’t really mean the bitcoin are actually yours. This is because if you don’t have your private or public keys, then the cryptocurrency doesn’t belong to you.
Newsround. (2014, January 24). BBC. https://www.bbc.co.uk/newsround/25622442
Reuters. (2021, July 9). Square plans to make hardware wallet for bitcoin. https://www.reuters.com/business/square-plans-make-hardware-wallet-bitcoin-2021-07-09/
Akhtar, T. (2021, January 13). Ex-ripple CTO can’t remember password to access $240M in bitcoin. Yahoo | Mail, Weather, Search, Politics, News, Finance, Sports & Videos. https://www.yahoo.com/lifestyle/ex-ripple-cto-t-remember-164553413.html