What is hashing?
Hashing is the practice of using computer algorithms to encrypt data into strings of numbers and words called alphanumeric codes.
Hashing is pivotal to data privacy and security on blockchains as it substitutes sensitive information with arbitrary code.
In practical terms, the process is responsible for blockchain and crypto users being able to generate public wallet addresses and execute transactions without compromising personal details.
What is a public key in crypto?
Crypto (or cryptocurrency) is a type of non government-issued currency that uses an advanced form of mathematics called public-private key cryptography to send and receive value over the internet. Crypto uses this advanced maths to secure funds and make sure no-one else can spend them.
Transactions happen peer-to-peer, without the need for a middleman like a bank.
To send crypto over the internet, users must request the public key of the person they want to send cryptocurrency to.
A public key is akin to a user's home address.
Anyone who has someone's public key can send them cryptocurrency, just like anyone who has someone's home address can send them a parcel. Every transaction associated with a public key is visible on the blockchain.
Giving out a public key does not mean users lose control of their wallet. Public keys take the form of a randomly-generated string of letters and numbers. Public keys do not reveal any personal information.
Despite these safeguards, many users choose to conceal their public keys as best they can to maintain the privacy of their transactions.
What is a private key in crypto?
Cryptocurrency uses an advanced type of mathematics called public-private key cryptography to send and receive value over the internet securely.
While a public key is like a user's home address, a private key is like a front door key. Anyone who has a user's public key can send them cryptocurrency, just like anyone who has someone's home address can send them a parcel. With this public key, they cannot access the cryptocurrency inside your wallet. For that, they would need a user's private key.
A private key unlocks the value of what is inside a cryptocurrency wallet.
A private key gives users the ability to spend, withdraw, and access their cryptocurrency wallets through a digital signature. It proves ownership of a wallet and the digital assets it carries.
A private key is used to sign each transaction that users send to blockchain networks to certify that it was really sent by them, and is not a fraudulent transaction. Users must keep their private keys secure, and not share them with anyone.
Private keys come in the form of alphanumeric codes but wallet providers tend to encode them in a way that is easier to remember or note down. So, a private key can be multiple words that make up a “seed phrase” or “secret recovery phrase”.
Sole ownership of private keys is referred to as self-custody.
Users can take self-custody of their crypto by using web wallets or offline wallets. This is opposed to wallets provided by crypto exchanges that take custody of your keys on your behalf
What is a rug pull?
In crypto parlance, a rug pull is a scam or ponzi scheme carried out by the developers of a cryptoasset (or NFT project). The term refers to the rug being pulled from beneath your feet.
Rug pulls usually take place on decentralised exchanges because cryptoassets can be listed on them without being properly audited. They tend to follow a standard pattern with the outcome seeing developers abandon a crypto project at the cost of investors.
Developers make ambitious promises or secretly buy large amounts of a cryptoasset to artificially pump its price and lure in waves of new investors. Once the price of the cryptoasset has skyrocketed, developers dump all the crypto they hold onto the market and crater its value.
Consumers may be vulnerable to rug pulls if they invest in lesser-known digital assets without researching them independently.
Important Information
This publication constitutes a marketing communication and is provided for informational purposes only. It does not constitute investment advice, a personal recommendation, or an offer or solicitation to buy or sell any financial instrument.
This document (which may take the form of a presentation, press release, social media post, blog article, broadcast communication or similar instrument – collectively referred to as a “Document”) is issued by Bitwise Europe GmbH (“BEU” or the “Issuer”) and has been prepared in accordance with applicable laws and regulations, including those relating to financial promotions.
Bitwise Europe GmbH, incorporated under the laws of Germany, is the issuer of the Exchange Traded Products (“ETPs”) referenced in this Document under a base prospectus and the applicable final terms, as supplemented from time to time, approved by the German Federal Financial Supervisory Authority (BaFin). The approval of the prospectus by BaFin relates solely to the completeness, coherence and comprehensibility of the prospectus in accordance with the Prospectus Regulation and does not constitute an endorsement, recommendation or assessment of the merits of the products.
The market analyses, views and scenarios presented reflect the assessment as of the date of publication and are based on information considered reliable. However, no representation or warranty is made as to their accuracy or completeness. Forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Past performance is not a reliable indicator of future results.
Capital at risk. Cryptoassets are highly volatile and involve a high degree of risk. The value of investments in cryptoassets and crypto-linked ETPs may fluctuate significantly, and investors may lose part or all of their invested capital. No capital protection or guaranteed compensation mechanism applies in respect of market losses.
Any investment decision should be made solely on the basis of the relevant base prospectus, the applicable final terms and the key information document, in particular the section entitled “Risk Warning”. The base prospectus, final terms and additional risk information are available at: www.bitwiseinvestments.eu
Access to certain documents may require self-certification regarding your jurisdiction and investor status and may be subject to additional disclaimers and important information.
For further details, please refer to the full disclaimer available at: www.bitwiseinvestments.eu/disclaimer
