Advice To Beginner Investors In Crypto

Introduction

This post assumes that you've already decided to invest in crypto. So, I'm not going to advise you on whether to invest in crypto or not. But what I'm going to talk about is pitfalls you might want to avoid that many beginners fall into and how to avoid them.

Figure out what you want from your investment in crypto

What this point means is that before you invest, you should think about why you're in the space in the first place. Invest small sums to see how crypto works because you're curious about the tech? Want exposure to crypto that is small relative to your whole portfolio to balance it with high-risk assets? Are you after life-changing gains? Are you convinced that cryptocurrency is the future of money and that the current monetary system is in deep trouble and that you want to protect yourself? Or are you after quick profits? Something else?

Once you have clarified your goals to yourself, you can begin to work out how to go about realizing them.

Start with the most established and easily understood assets out there

Don't jump right into the deep end of the pool by investing in some highly complex DeFi thing the risks of which you don't understand even if endorsed by a friend or some ad you've seen online. Bitcoin is probably the best asset to invest in first. It's the oldest, the most established, the least volatile and the easiest to understand of all the assets. Bitcoin is also listed on the most exchanges. Crypto is novel and immature tech and it's best to do your own research first.

Get yourself a good desktop wallet and learn the basics of key management

Once you've purchased your first Bitcoin from a cryptocurrency provider online, you might want to consider not leaving your coins on the exchange for a long time. As they say in crypto, not your keys not your crypto. Cryptocurrency is all about taking responsibility for your own money.

The first order of business is getting a password manager.

Before you do anything, you need a password manager with which you can make an encrypted file containing all your passwords, private keys and wallet passphrases. There are many such programs available. Do a Google search on password managers and compare and contrast based on what reputable sources say about them.

Store the encrypted password files made with the password manager on multiple storage media stored in different locations. Keep the files up to date.

Now, hardware wallets are another way to store your crypto. But that's a large topic unto its own. In the beginning, you can do just fine by using a regular password manager.

Make sure you won't forget or misplace the password to your password manager.

Always keep the copies of your password files up to date. Make it a policy that you never destroy entries because you might accidentally lose something.

There is no authority that can restore your lost passwords in crypto.

The second order of business is to choose your wallet software

For Ether and ERC-20 tokens on Ethereum, Metamask is a popular choice. It's a browser extension and very convenient because you can use it to sign transactions when using web applications. There are many different options for different cryptocurrencies. Desktop wallets are good because you control which version of the software gets access to your private keys. The same applies for browser extensions because you install them yourself as opposed to navigating to a website and having your browser download the code to run every time. If a website is hacked, the hacker can inject code that can steal your keys. That risk is minimized by using a desktop app or a browser extension.

Be careful when transferring funds

Cryptocurrency addresses are usually non-human readable strings that are very easy misspell when inserted manually, which you always never need to do. But it pays to every destination address every time when making a transfer. If you're transferring a large sum, first sending a small sum as a test makes a lot of sense. A common issue is not paying in transfer fees. A transfer can easily get stuck in a pool of unspent transactions if you have set a too small transfer fee. Your wallet software usually handles setting a correct fee automatically. But you can manually adjust it. Transaction fees are highly variable on chains that use a Proof-of-Work consensus mechanism such as Bitcoin, Litecoin or Ethereum.

If your transfer gets stuck, there are tools with which you can unstuck it by increasing the transaction fee. You can google them up because they are different for each chain. Notice that if you're sending funds to Ethereum addresses that run a smart contract, the fees might be much larger than usual because the chain will run code in the destination address as transactions on chain.

These complexities are, by the way, one reason why chains that run a consensus mechanism not relying on mining such as Hive that has Delegated-Proof-of-Stake as its consensus mechanism are so convenient to use. There are no transaction fees and on Hive in particular the addresses are human-readable strings.

Conclusion

What I've written above should get your started. I recommend LeoPedia as a source of further material to study. Take your time educating yourself. LeoFinance is an online community of seasoned crypto veterans you can ask for advice or tips. It's easy to create an account using the Metamask browser extension wallet. Take a look at this post for instructions. Also check out this video. There is no better way to start your journey in crypto but earn crypto while discussing it on LeoFinance.

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