After spending a year in the crypto space, I have decided to start trying to contribute to this industry, which I have been having fun in. This article is targeted to newcomers in crypto, however I am sure that some experienced people may also find this beneficial. I will also link useful sources to check out, so you can be super safe while riding the Web3 wave.
General
Since entering crypto the main motto I have heard and now live by is:
"Do not trust… VERIFY!” - Some Crypto person.
This is something everyone in crypto should know and should always be reminded, due to the fact a lot of crypto is speculation. The best way to hedge against speculation is by DYOR - Doing Your Own Research. It’s funny that this is a common phrase used by people in crypto, because it’s a lesson I am sure most of our parents have taught us when we were younger. But, instead of it being phrased as “Do your own research!” it was more “You wouldn’t jump off a bridge if your friends told you to?”. An example of DYOR in crypto, is checking out the project creators before you jump into a NFT set or a new token launch. You do not want to be rug pulled by a well-known crypto scammer just because you could not be bothered to do research beforehand. Check additional help at the end for more information on how to DYOR.
Exchanges
So, you have purchased your first 0.2ETH off Coinbase and feel like you are in 2052, all your mates laughing at you, thinking you have wasted your money. You insist, “No, I have made a wise decision buying ETH and keeping it on Coinbase. I have full ownership and can just sell when ETH reaches a new ATH, right?”. Are you:
A. Right, and your no coiner friends do not get crypto and should get to know.
B. Need to slow down and rethink this because you are jumping the gun.
If you chose B, you are right. Although exchanges like Coinbase and Binance let you buy and sell crypto, you do not actually own the coins and tokens you purchase. This is a bit of an illusion. Exchanges like Coinbase are centralised exchanges, meaning they have ownership of the assets, and you are in a sense paying them to borrow that 0.2ETH. The risks that come with this:
- Exchange hacks - The 2016 Bitfinex hack is a good one to investigate
- Exchange crashes - Try selling your Crypto when the market is going hyperbolic or crashing, in fact, good luck logging into your Coinbase. Most likely all you will see is a technical difficulties page
- Accounts being frozen - Even though, exchanges are a bit of a safe space for people in crypto, they are just like banks. If they do not like you or think you are being suspicious, you can have your account locked and all that money from your student loan which you used to ape into Dogecoin is just gone, like that. You can find plenty of people on Twitter raging about this.
At this point you may be thinking, I am new to crypto and want to still casually invest on an exchange, fully aware of the risks. Well, you are kind of in luck. The options you have, to be a bit more protected from a 3rd party accessing your funds on an exchange are:
- Using complex and different passwords - It’s 2022, we all pretty much live on the internet in one way or another. You should not be using “Password12345” as your password still. You should also make sure your passwords are different on every website you are on. If a hack occurs on a random website you have signed up to with the same exact login for an exchange, a hack can just use that to access your exchange account.
- Using 2FA - Most exchanges nowadays force you to have 2FA which is a good thing. Apps such as Google Authenticator can help. Another way this is done, is by having a code sent by SMS.
Bonus EXTREME security methods:
- Using multiple emails - This is one which I only learnt the other day in a Coin Bureau video, I highly recommend checking out, so is linked at the end. Having multiple emails is very useful since if one gets compromised you have the others to fall back on. Furthermore, this could also restrict access to your other exchange accounts.
- Having multiple phone numbers – Understandably, this is not so common, but the benefits for this are exponential. Imagine someone steals your phone with your Coinbase details saved for easy access. If your Coinbase is registered to the sim card in your phone, then you can say cheerio to your funds.
Wallets
Now you have found out, that centralised exchanges are similar to banks, and you do not actually own your assets. What do you do now? How can you feel more secure? How can you have true ownership?
Well, the answer to all those questions is a crypto wallet. You can think of these as an actual wallet or your online identity (that is for another day). Crypto wallets come in all different temperatures and flavours and just Goldilocks, there is one that is just right.
Hot Wallet
Hot wallets are your wallets like Metamask (ETH), Phantom (SOL), Argent (ETH and Mobile only) and many more. They allow you to interact with DApps - Decentralised Apps, such as Uniswap and other Layer 1/2 blockchain apps. They also allow you to use marketplaces such as Opensea. As you can probably tell by now, you can hold NFTs in your wallet as well as normal tokens and coins. The main risks with these are:
- Connecting with a malicious smart contract or DApp - This can lead to your funds being drained, or hackers being able to access your wallet at any time. To prevent this, I recommend reading the pop-up message about the smart contract you are going to sign and limit permissions the contract has. Treat smart contracts like real contracts. For further tips check out Taiki Meada’s video linked in additional help.
- Losing your private keys or forgetting seedphrase - There is nothing worse than thinking you have finally made it, then when you try to get into your Metamask you realise you did not write down your seed phrase and you have have lost access to your 50 BTC. It is imperative that you write down your seed phrase on a piece of paper and store it somewhere safe IRL. If it is stored on your laptop someone can hack it, one day and see that you have it laying around in a folder.
Also, make sure you never share your seedphrase with anyone ever. You would not give away your car’s keys to a stranger.
Bonus tip: Have multiple hot wallets, this is like diversifying your assets amongst yourself. Just like you should not go all in on one crypto or NFT set if you want to make it, you should not have all your crypto and NFTs in one wallet (this is also applicable to exchanges).
Cold Wallets
Cold wallets are the most secure way to fully own your crypto. Ledgers made by reputable companies such as Trezor and Ledger, have secure crypto wallets which are like pad locked hard drives. Just like hot wallets such as Metamask, they are protected by a seedphrase and if you do not have it, you can never unlock them. The thing which sets cold wallets apart from hot wallets is your crypto is stored offline so no one can access them easily. Think of it as frozen pizza, to eat it, you need to heat it up. Key issues with cold wallets are:
- Losing or having your cold wallet stolen - best way to prevent this is by storing it somewhere safe, some ideas are, a safe or maybe a bank vault. To scare you more about this, check out this BBC report.
- Losing your seedphrase - As mentioned earlier, WRITE IT DOWN!
Social Media
This section, is going to be more targeted to Discord since most of the crypto community engage with each other on that platform. Quite frankly, I always use it for crypto. However, this will also be applicable to other social sites such as Twitter and Telegram which also has a large crypto community.
One of the main issues with social media and crypto are scammers. Even though, they will always exist in any industry, crypto scammers are crafty, so these are some tips to try and avoid these tricks:
- Disable DMs - On Discord whenever you join a server, disable DMs from that server this means that scammers will not spam you with malicious links. A bonus with this is you will build up a good network of people you have a good relationship with from being in a project together to the point you can talk to them often.
- Do not click links without checking - The risk of this is you can end up being directed to a website where your wallet automatically connects, and your funds are drained. One way of preventing this is reading the URL to identify typos or the wrong domain at the end. For instance, “discod.gg instead of discord.gg”. Another tip, is also checking the protocol of a URL (the HTTP bit) if it is HTTPS, it should be more secure, however this does not mean it is to be trusted.
- Do not engage in negativity - Social media is now a pretty negative landscape, so it is easy to get into an argument with a random person from halfway across the world. But a problem with this, is that the random person could be a hacker and you have just earned yourself a place in their bad books.
Emotions
At the end of the day, I can write about how to stay safe in crypto, but it is down to you to try and follow some of these tips and not to give into temptation. A quote I always use to help me get over FOMO is:
“Curiosity killed the cat” - Could have been me…
Yes, I guess you could say I am a hypocrite for using this quote, because I was curious enough to get into crypto and I have not been “killed”. But the way this should be interpreted is:
- Do not try and chase every bag - You may be running around trying to catch them all and end up falling down a pit once the rug is pulled.
- Do not click that link from a stranger (or possible friend) - You would not follow a stranger into a dark alley, so why do it online?
- It is ok, if you miss out on the next BAYC - You most likely missed out on BTC in 2013, you probably missed out on one of the big PFP projects, I have missed the bus over a thousand times. My point is hey ho, there will always be another one.
- Take a break now and again - As common and cliché as this sounds it remains true. If Pandora took a break and did something else every time, she looked at the box, I am sure she would have not opened it.
Conclusion
On our quest to get the Moon Lambo, we all want to try and find that 1000x gem that blows up overnight. This can lead to us being reckless and irresponsible, which is understandable, “You’re not you when you’re hungry…” - Snickers AD campaign 2010s. Instead of all of us trying to stress and scramble to get to the top by using a degenerate mindset, we should tweak it and be a sophisticated degenerate. Build your foundation by having a crypto wallet, (ledger, Metamask, etc). DYOR before investing, do not click on any suspicious links, do not give the keys to your wallet, and always check a variety of sources you believe are reputable. After you have followed these points, go nuts if you want and bet your whole portfolio on that trippy dancing frog and pray it reaches 100ETH. In the meantime, have fun and… Be a sophisticated degenerate.
*Not Financial Advice*
Additional help
Coin Bureau:
https://www.youtube.com/watch?v=h6m7psfXxzQ
Taiki Meada: How to protect your Metamask wallet from malicious smart contracts
Whiteboard Crypto: