An eCash supporter recently had his coins stolen by someone impersonating me on Telegram. My heart broke for him and it made me realize that with so many new people entering the space, it’s time to educate everyone on how to keep your eCash safe.
Unfortunately, there are plenty of scammers in crypto, and it’s easy to get fooled if you aren’t careful. I’m embarrassed to say even I got tricked the other day when I announced the winner of my Coingecko challenge. Someone quickly made a fake Twitter account impersonating the winner, provided an eCash address, and once I paid them they deleted all their posts. I only realized it after the real winner came forward a few hours later.
This is possible because we are operating in an online world where scammers can quickly create fake accounts using the same profile picture and a similar name. For example, CainBCHA looks an awful lot like CainBCHAl at first glance.
So first things first, always be weary of people who direct message you. They are probably not who you think they are. Two, never give anyone your password, private keys, or seed phrase. This could lead to you losing all your eCash and you will have no way of getting your coins back.
The revolutionary breakthrough made by Satoshi Nakamoto has given us the opportunity to no longer have to rely on banks or governments to manage our money, but it also requires that we take personal responsibility in order to keep our money safe.
People in crypto are always badmouthing banks and credit card companies, but the fact is those companies provide a valuable service. If I pay for something with a credit card and it turns out to be a scam, I can quickly call up my credit card company and they can reverse the charge. This isn’t possible with crypto. Once a transaction has been sent, for all intents and purposes, it can’t be reversed.
Which brings me to my third piece of advice. Always check at least the first few and last few digits of an address before you hit send. It’s easy to paste an address into your wallet and not realize that you’ve just pasted an old address that was sitting on your clipboard. Always be sure you’ve got the right one.
In summary, don’t trust anyone who direct messages you out of nowhere, don’t ever give out your password, private keys or seed phrases, and always make sure you’re sending your money to the right address.
So now that we’ve covered that, it’s time to learn the difference between taking custody of your coins versus letting someone else act as your custodian.
In today’s world, most people rely on banks to hold their money. This is because it isn’t very convenient, or wise, to store stacks of cash under your mattress. Also, paper money can’t be sent over the internet so without connecting your money to a bank account, you would have no easy way to pay someone unless they’re standing right in front of you.
Crypto solves both of these problems by being digital and being trustless. Now you can conveniently store as much money as you want on a piece of paper, on a flash drive, or even in your brain, and because we no longer have to rely on a trusted third party to hold our money, it enables us to have more financial freedom. Anyone can instantly send their money, no matter how large or small, to anyone else in the world using the eCash network with virtually no fees. In other words, the best money the world has ever seen.
But in order to take advantage of eCash’s censorship resistance, it requires that you take custody of your funds rather than relying on others to do so for you. This is what is meant by the system being trustless. No more having to trust central banks or governments or financial institutions.
And because crypto isn’t physical, it’s also much easier to store. You don’t need some huge safe like you might if you were holding a huge amount of cash or precious metals, which brings us to our main topic of discussion: how to hold your eCash.
There are mainly two ways to hold crypto, and they fall into the categories of custodial and non-custodial. We will start with the custodial solutions first.
Custodial Wallets
Custodial wallets are those where you rely on someone else to take custody of your funds. A perfect example of this would be exchange wallets since they are the ones who hold your private keys. Whenever you want to make use of your money you must ask the exchange to send your coins on your behalf as opposed to being able to send them yourself.
Sadly, this is probably what most people do. They buy their coins on some exchange (i.e. Binance, Coinbase, Huobi, Upbit, etc.) and just leave them there. The problem with this is that now you’re relying on someone else to keep your money safe. And while there are reputable exchanges that are fairly trustworthy, there are no guarantees they can’t be hacked, or that the exchange operator won’t simply disappear with your money (i.e. QuadrigaCX).
If you do decide to hold your money on an exchange, I highly recommend taking all necessary precautions to keep them as safe as possible including whitelisting addresses and enabling 2-factor authentication. And whatever you do, don’t give anyone your password under any circumstances, no matter who you think is asking for it.
While I realize that there will definitely be crypto banks in the future because not everyone will be comfortable taking custody of their coins, my hope is that with people being able to self-custody, such institutions will have to compete for your business and only the most reputable firms will survive.
Non-Custodial Wallets
To send eCash (or any other cryptocurrency) you must sign a transaction using what’s known as a private key. For every eCash address there’s a private key that goes with it, and only the person who holds the private key can unlock the funds sitting in that address.
Should a private key be lost, access to those funds would essentially be lost forever because there are a total of 1,461,501,637,330,902,918,203,684,832,716,283,019,655,932,542,976 possible keys to any given address, so good luck finding the right one.
Keep in mind that most users will never see the actual private key itself because today’s wallets generally manage all your keys in the background. Instead, what you are provided with whenever you open a non-custodial wallet is a 12 or 24 word seed phrase. It is of the utmost importance that whenever you create your own wallet, one of the first things you do is write down your seed phrase and keep it stored in a safe place, preferably off-line, so that in case anything happens to your device, you can easily retrieve your funds by inputting your seed phrase into a new device.
There are mainly two different categories of non-custodial wallets. Hot wallets and cold-storage wallets. Hot wallets are wallets that are connected to the internet. These wallets are what you would use for every day transactions much like the wallet you use to carry around your cash. Cashtab.com and Viawallet are two hot wallet choices for eCash, and while there may not really be anywhere to spend your eCash today, it’s important to build this infrastructure now so that eCash can be ready to be used as money in the future.
Cold storage wallets on the other hand are wallets that make sure your private keys never touch the internet. If you own any significant amount of eCash that you want to keep safe, a cold-storage wallet is what you should use. Some examples of cold-storage wallets I use are hardware wallets like Trezor or Ledger (for the purposes of this article I am going to ignore paper wallets or brain wallets). Currently, neither of those wallets support eCash on their own, but you can use them by downloading Electrum ABC and connecting them that way.
The benefits of cold-storage wallets are that they can’t be hacked since they are off-line, and are easily hidden away from potential thieves since they’re so small and inconspicuous. Even if you lose your hardware wallet, or should it become damaged, you can easily replace it with a new one and simply enter your seed phrase in order to retrieve your funds.
Imagine being a refugee and suddenly having to leave your country. Instead of being forced to leave everything behind and starting all over again, eCash gives you the ability to take your wealth with you, no matter where you’re going. It’s just a matter of writing down your seed words, or memorizing them, and keeping them away from thieves. Then once you arrive at your new destination you can simply enter your seed phrase in a new device and all your money will magically appear. Money that hasn’t been devalued because the politicians who ran your country drove it into the ground. This is money that is meant to retain its value regardless of the powers that be because it can’t be controlled or manipulated by some crooked bureaucrats.
That is the power of eCash. It has the ability to free us from the tyranny of the state and the incompetence of central planners. But if you want to leverage this power, you must educate yourself and others. Only then can we all be truly free.
Finally, in an effort to cement these ideas in your mind, here’s a 12 word seed phrase associated with one of my Cashtabapp.com wallets (if you already know about seed phrases please leave the money for someone else):
penalty mushroom evoke sadness symptom silly vast seat apple cargo person road
I’ve put 5000 XEC on it so that the first person to input the secret words can get the money. Remember, it’s not enough that you unlock the wallet, since these 12 words are now public, you will need to quickly move them to a wallet you control so that no one else can take them first. Even if the money has already been taken when you input the words, you will be able to experience what it’s like to input a seed phrase and why it matters. If you want a more detailed guide on how to use Cashtabapp.com, here’s a nice guide put out by none other than Day 13 winner Mihsak Yamoto.
I’m sorry to tell you this is just scratching the surface, and that there’s so much more to learn, but nobody ever said achieving real freedom was going to be easy. I just hope we can also have some fun along the way. Thank you for reading.