You cannot actually own cryptocurrency. This is a crazy reality that you need to know about, because you probably think right now that you can own crypto, that you can get some Bitcoin and put it in your wallet. And even if you have it in your own self-custody wallet, you cannot actually own it. Why? Because crypto is based on cryptography. Cryptocurrencies like Bitcoin and Ethereum are secured with cryptography, which relies on private keys and publicly generated keys derived from those private keys. What you may never have heard before is the reality that a private key giving you access to crypto in your own wallet is something anybody could generate.
This has actually happened before. When wallet providers set up poor private key generation algorithms, people have been able to generate the exact same private key and have had access to their funds handed to someone else. Now you're probably thinking, why is this worth learning about today? Everyone in crypto should understand that you have the illusion of ownership with crypto. You can't really own crypto the way you can own a house, or the way you have money in the bank, although the money-in-the-bank analogy is actually pretty similar to crypto.
The illusion of ownership
If you have your crypto on an exchange, that's not actually your crypto until you withdraw it. Basically, the crypto exchange is saying, we owe you this amount of crypto, and you don't see whether they're going to pay up until you actually try to sell it or withdraw. This is why you never want to have your crypto sitting on an exchange, at least not any meaningful amount. You always need it in your own wallet, and I've done a video talking about the best wallets. But even if you have your own wallet, no matter what the private key generation method is, you just have the illusion that you're the only one who can access your private key. You have a private key that anyone else is capable, at any time, of theoretically generating.
Now, Bitcoin is encrypted with 256 bits, which means there are 2 to the 256th power, or about 10 to the 83rd power, of possible private keys. If you're thinking, I don't really get how big that is, here's one way to picture it: imagine there are several different galaxies in the universe, and your private key is one atom in one of those galaxies. Another way of looking at the odds of just guessing a private key is to compare them to the odds of winning some of these big lotteries, which are in the hundreds of millions. In other words, to guarantee a winner every time, you'd need 100 million people to each buy a different lottery ticket. The odds of guessing the Bitcoin private key to a given wallet are about the same as winning some of these big lotteries nine or ten times in a row, back to back. That's about the odds you're looking at.
Why it's still only near-ownership
You could think this is pretty close to actual ownership, that it should be so difficult to generate a private key matching yours that effectively it is yours and nobody else will ever access it. Theoretically, if all the wallets followed the best private key generation practices to make sure they were truly random, and not generating keys in a predictable or non-random or less-random fashion, we could all just go use crypto for hundreds of years and nobody would ever generate the exact same private keys. Theoretically, we could all use crypto indefinitely and never end up on the same private key. But it is possible at any time, for any reason, that someone could, even in your own crypto wallet, just generate or guess the exact correct key.
Then there are things like quantum computers. It's already predicted that once they reach 100,000 qubits, they could actually start breaking private keys on things like Bitcoin. In the future, the Bitcoin network and all the other cryptos are going to have to be upgraded to deal with quantum computers. But what if there already are quantum computers that could crack Bitcoin, Ethereum, and most other crypto wallets? What if those computers exist in secret? With all the conspiracy theories I've gotten into, it seems obvious to me that certainly very powerful quantum computers exist that can already access any Bitcoin wallet, Ethereum wallet, and most other blockchains.
Why I stay diversified
So it's important to remember with crypto that, yes, I'm big into crypto. Yes, I buy 15% of any profit I make off my business as a YouTuber and Twitch streamer in crypto every month. But crypto at any time could fall apart. It is an amazing system. It is breakthrough technology. But the private key is its biggest flaw and potential issue. At any time, I think I have crypto in my wallet that I own, but for a variety of reasons I could lose access to it. Maybe you lose your recovery phrase. Maybe you have a tangible wallet and you lose your cards. Maybe there's some kind of EMP. Crypto is a bit fragile.
Now, in my experience it's still better than fiat currencies, which are constantly ruined through inflation. But my message here is to consider whether you're diversified sufficiently, so that if you did lose all your crypto, you wouldn't be ruined. I know some of you love crypto so much you take every bit of cash and stuff it into crypto immediately, and while that could work out really good for you, you could also lose everything doing it. For me, I have a balanced approach, and I realize I have no real ownership over the crypto I've got. In court and in regulations, this is something that will be considered more in the future, and it's important to remember if you're buying this, if you're investing in this, if you're trading and speculating.
Crypto is secured with mathematics, but it is truly open to anyone. It's just code on a blockchain, and some of these blockchains, especially the smaller, sketchy ones, have straight up changed the blockchain code to take or freeze wallets. Bitcoin is one of the most reliable in the sense that if it's in a wallet, you probably really have it and are going to be able to access it. A lot of what I do on Jerry Banfield Crypto Reviews is honest altcoin reviews, which you can dig into through my Crypto Reviews playlist.
I filmed this live on Twitch, and if you'd like to be part of the core community working through crypto with me, I would love for you to come join the Jerry Banfield Family.
Understanding that you never truly own your crypto is exactly the kind of clear-eyed thinking that keeps you diversified, protected, and ready for whatever the technology does next. Treat every wallet as something you hold rather than something you can guarantee, size your position accordingly, and you'll be able to enjoy everything crypto has to offer without betting your whole future on a private key.