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Cryptocurrency is only around a decade old if we count the creation of Bitcoin as the start of it all. However, it only started becoming famous when ICOs and different altcoins began popping out of nowhere like mushrooms last 2011. It’s already 2019, yet crypto newbies still suffer from the same mistakes old users went through when they were newbies.
These mistakes are probably the main weaknesses of cryptocurrency use, but it doesn’t mean we cannot warn other newbies or teach them how to be more careful.
Here are five of the most common mistakes done by crypto newbies.
1 – Losing the Wallet Keys, Especially the Private One
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The most important strings of data that are directly exposed to user influence are the private and public keys.
Private and public keys are the keys used to access a Bitcoin wallet and all the bitcoins inside.
The private key is the one that you should keep in secret. Don’t share this to anyone else other than you. The private key is the key that gives you permission to spend the money on your Bitcoin wallet.
The public key is the one you can use to receive bitcoins into your wallet. The public key is hashed to form the shorter public wallet address, which you can share to people who will send you BTC.
If you lose any of the two, you will lose any ability to safely access your BTC wallet. Losing your public key will leave you with no choice but to share your private key, which is a fundamental mistake in using cryptocurrencies.
Lose your private key and you will never access your BTC funds ever again.
So make sure you keep your keys somewhere only you know and can access. Many experienced crypto users actually advice new users to keep hard copies of their important crypto information and keep them safe somewhere they won’t be destroyed or stolen. If you have to write it down on durable paper, do it.
2 – Keeping ALL Your Crypto Funds in Online Wallets
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They say that once your information flows into the Internet, it will stay there in one form or another most, if not all of the time.
That is why experts advise to at least store your funds in separate wallets, with most of them stored in offline, cold storage until you have to use them immediately.
Cold storage is detachable hardware for storing cryptocurrency, something similar to a flash disk or a hard disk. Cold storage can be disconnected from the Internet, preventing online hackers from accessing your funds.
Warm storage is online storage that is constantly connected to the network. This is something similar to a server. Since this is always online, crypto funds stored in warm storage is constantly in danger of getting hacked and stolen.
Warm storage offers convenience in exchange for security, but since we don’t always use all of our funds, it’s better to divide your funds separately. Funds needed for immediate spending can be stored in warm storage while the rest can be stored in cold storage.
3 – Joining Bad Communities
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The crypto community is an unregulated market and community where anarchy prevails. The whole market is divided into “tribal” communities, each following a specific type of coin or token.
When the ICO craze reached its peak back in 2017, so many newbies were dragged into scam communities. Of course, most of them lost quite some money for different reasons. Some gave away their keys, others just didn’t get what they paid for.
To unprepared people, the crypto landscape can be very dangerous, but the key is to find trustworthy communities whose members actually look out for each other. Serious communities like these put enough effort into improving their branding and marketing, to the point that even traditional news outlets and financial institutions acknowledge their credibility.
And of course, no decent community will always tell you to do research. Bad communities, on the other hand, will want you to stay ignorant and dumb.
4 – Acting out of FOMO (Fear Of Missing Out)
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The crypto market is highly volatile due to the lack of regulations and the existence of whales. Prices can spike and plummet within the same day and getting caught in such corrections can wipe out your funds.
Since the market is unregulated, there is no mechanism that stops or at least controls market manipulation. These manipulators work with other influencers to move price via shilling and fudding, or the intentional spreading of sensationalized, misleading information to induce greed and fear that will make people buy or sell.
The only solution for this is DYOR (do your own research). Due to the anarchic nature of the crypto community, the most reliable reference you will have is yourself. Don’t feel bad about this because everyone else is doing it and cryptocurrency was created to eliminate the reliance on a centralized authority in the first place.
5 – Sending Funds Accidentally or to the Wrong Address
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One characteristic of crypto transactions is that they cannot be reversed or cancelled once they are confirmed by the network. This is one of the things crypto users must carefully manage.
As mentioned earlier, crypto transactions require the receivers’ wallet addresses, shortened, hashed versions of the public keys. Though short, they are still strings of random numbers that can be quite tough to remember.
A user must make sure that they intend every crypto remittance they make and that they send their money to the intended user. This is another reason crypto users are advised to write down any information needed for any crypto transaction.
Cryptocurrency is a relatively new niche technology that can be hard to understand if you don’t have prior tech knowledge. However, just like any other activity, it can be learned through constant exposure and application.
If you’re a newbie, it’s understandable when you make mistakes, but still, make sure your mistakes don’t cost you all the money you have. If you can do that, you’re pretty much ready to face the big world of crypto.