What is API Key?
An API or ‘application programming interface’ key is a unique identifier that allows one system to communicate with another. In the world of cryptocurrencies, an API key is used mainly when your wallet communicates with exchanges, but also with other programs. API keys can be set up in different ways. One of these is as a ‘View Only’ key. In this case, the program can only view your data but is not authorized to dispose of your funds in any way. This may be worthwhile, for example, if you are dealing with your taxes and need an expert to look at the state of your finances. However, API keys are also used for trading, when your chosen program can trade your funds (‘trade option’) or even transfer them elsewhere (‘transfer option’). Here, great care is needed as you are giving someone the ability to control your funds.
Sources: coinledger.io, academy.shrimpy.io