How do I keep my Ether safe?
Wallets, vaults and private keys
Safely storing your Ether is very important. Unlike other types of money, which are typically stored in and controlled by banks, Ether provides many more options to store and control your money.
Remember your private key that you need to move your Ether? Well that is literally the key to storing it. Whoever has the key, controls the Ether. These keys can be in digital or even in physical form i.e. written down on a piece of paper.
How to store your private key then? You can leave the key in your pocket, but that’s not too secure. You can put it in a safe – that’s a lot better. But someone can still break into your house and steal it. Given you want to use your Ether regularly, you might also want to keep some or all of it in digital form on your phone so you can access it more easily. The only problem is that if you lose your phone, you will also lose your key, and there is no way to get it back.
That is why companies like Luno exist – not just to make it easier to buy, sell and use Ether, but also to store it securely. We do this by taking your private keys and storing them in a physical bank vault with access controls like fingerprint and retina scans. In fact, it’s not just one vault, it’s a number of vaults across several continents. And we build it in a way that one must access the keys from multiple vaults and put them together to be able to extract the Ether, similar to the old movies where nuclear submarines need 3-5 ‘launch codes’ from different generals to be able to launch nuclear weapons. This is commonly knowns as ‘multisig’ (multiple signatures required).
Ether is very safe when it is stored like this, but there is one potential weak link: you need to trust the people storing the keys on your behalf. There are many reputable companies like Luno that you can rely on, but also many others that either don’t store your Ether properly or might pretend to store it and then misappropriate it. The great thing about Ether is that unlike old money, you have the choice – whether you store it yourself, in physical or digital format, or whether you rely on someone else to safeguard it for you (or even a combination of all of these).
The way Ether is often stored is also one of the biggest ironies of Ethereum – the world’s global currency that was designed to be used online, is mostly stored ‘offline’, in physical bank vaults and detached from the internet. Who would have thought!