As the popularity of Bitcoin continues to grow, more and more people are turning to centralized exchanges to purchase this digital currency. Still, it’s important to understand that when BTC tokens are kept on centralized exchanges, the owner never knows for certain if they are actually getting real Bitcoin or “paper Bitcoin”.

Paper Bitcoin refers to an “I owe you” Bitcoin, meaning that the exchange owes the user a certain amount of the digital currency. To ensure that the Bitcoin purchased is genuine, investors need to withdraw it to a self-storage wallet or sell it for another asset or product. This is because most exchanges won’t create a separate wallet for users to save on transaction fees, instead these companies display Bitcoin balances as a number next to the username on a spreadsheet.

Not Your Keys, Not Your Coins

The phrase “not your keys, not your coins” is a popular saying in the crypto community that emphasizes the importance of owning the private keys to one’s cryptocurrency holdings. It means that if an investor does not have control over the private keys associated with his cryptocurrency, he does not actually own his coins. On the other hand, if an investor have control over his private keys, he has full ownership and control over his cryptocurrency and can transact with it as he wishes.

Crypto exchanges tend to keep their BTC in wallets where they possess the private keys and store it safely. If they were to transfer small amounts of…