Getting started in cryptocurrency.
Welcome to my new series on cryptocurrency.
What they are, what they do and how to get involved.
This is part two of a larger series that began with learning about, What are cryptocurrencies?
The focus of the first article was to outline this whole series and to give some background information on the blockchain / cryptocurrency sector and it's different use cases as well as where to learn more about the various topics discussed.
The purpose of this post will be to show people how to take their first steps into cryptocurrency and where to start looking for more details.
Today’s topic: Taking your first steps.
In this post we are going to look at the following topics and try to gain a better understanding of these four areas.
- Personal security.
- Using wallets.
- Effort, investment or trading.
- Tracking your portfolio.
Your first steps into cryptocurrency will be frustrating as a lot of new information is put in front of you all at once.
Don't worry though. It's not that bad once you get the basics down.
Part 1: Personal security.
This is very important information.
This cannot be stated enough. When you create a wallet to store your various crypto holdings you get a set of keys. Unlike with traditional finances the responsibility is on the individual to secure their own funds. A big part of the crypto culture is personal responsibility.
- Store your wallet keys securely.
- Double check addresses.
- Use small transfers to test a token before making large ones.
- Beware of scams!!!
As this sector is not fully regulated by most countries that leaves it a lot more open to scams and theft. Unless your crypto is stored on a device to which you have the only access then it is not fully under your control.
Funds left sitting on an exchange or hosted on a decentralized finance platform are highly vulnerable and the best practice is to move them back to your own external device at all times when they are not needed.
Not your key's, not your crypto!!!
The above phrase is one that you will constantly hear from experienced crypto users who have seen the results of not securing your funds or worse. That have learned the hard way how easily mistakes can happen.
There are a lot of options out there these days that will allow you to hold your funds more securely and also remember that there are a lot of people out there who would happily take your funds if they can get their hands on them.
Decentralized finance and newer projects are the riskiest places to put your funds so try to stick to the larger more established options with a long track record of success and no issues with user funds.
Part 2: Using wallets.
If you have purchased crypto already or just thinking about getting some then having a wallet is the next step. The exchange that you use to purchase crypto on will have inbuilt wallets for each of those different cryptocurrencies but it's when you go to move your funds away from their systems that it can get complicated.
Also while your funds are in their wallets then it is not 100% safe as they hold the keys. You are just seeing a balance on their website.
Whatever crypto that you will be holding must be supported by the wallet and there are many different choices out there.
- Hardware wallets.
- Software wallets.
- Desktop wallets.
- Mobile wallets.
- Paper wallets.
The main choice at the start will be based on what your plan is for the cryptocurrency.
Which wallets are suitable to the cryptocurrency that you are holding.
Then what is your use case for that cryptocurrency.
Holding, staking, trading, transferring?
As stated in the beginners guide to crypto. Have your plan first.
Then make the purchase.
Then find out how to link your crypto to the right wallet for that purpose.
My wallet of choice is the Metamask browser extension which you can use for holding Ethereum, Binance smart chain and Matic among others and this also covers all second layer tokens that are built onto these three main blockchains. You can also add other networks to the wallet manually but 90% of my activity is across these three blockchain and the Hive blockchain.
The other wallet that I use the most often is Hive Keychain which again covers all tokens and apps that are created as part of the Hive eco-system. This is the blockchain that I interact with more than any other and so it is my most used wallet as well.
Learn to install Hive Keychain.
The browser extension wallet is very useful for crypto that you are actively using and the wallet itself is used to also interact with each eco-system to allow you to login and move assets across the various parts of this eco-system at ease.
Most blockchains have fees of some level for when you move or transfer these assets and interact with that blockchain through your wallet which can range up to hundreds of dollars on Ethereum, down to cents on Polygon and most importantly free of charge on Hive.
I could write a separate post on wallet choices alone but there is already enough information out there for users with this article by Cryptopolitan: Hardware vs Software wallets. a very good look at the different options. There are too many options out there to make that choice for you so do the research and find your best choice.
From the article above:
Many cryptocurrency platforms and exchanges offer various hardware wallets and software wallets. The ultimate choice mostly depends on a user’s business plan that determines the type of wallet. Both wallets offer their advantages and disadvantages.
Hardware wallets are much more secure but are limited in their scope. A software wallet can be accessed anytime and much more conveniently than a hardware wallet. There are many types of wallets and ways to access them, but the choice of a wallet hinges on purpose, security, and user-friendly features at a reasonable price.
The rule of thumb is to compare features, emphasizing security – remembering not your key, not your coin – come up with a solid plan, and choose a crypto wallet suitable for the purpose.
To sum up the post,
- Choose your cryptocurrency.
- Find a compatible wallet.
- Install it securely.
- Store your keys safely.
- Do a small test transfer to make sure that you have gotten everything set up correctly.
Part 3: Effort, investment or trading.
While the easiest way to get involved with crypto is to buy some tokens though an exchange, stake it for returns and hope that the price rises over time. That would be the most passive and slightly boring way to be involved in this exciting industry.
The wider crypto eco-system has expanded so much in the past few years that there are many better ways to build up your portfolio of tokens. Crypto is fast paced, fluid and expanding rapidly. Digital currencies allow us to move between tokens and projects in seconds and continuously try to increase our holdings.
Even better again is putting them to work. While crypto can be stored offline and left to appreciate, by getting involved in the crypto world you can earn even more crypto or use your current stake to earn more tokens though decentralized finance or those staking options.
I have built my portfolio by being an active member of the Hive blockchain. Every day I earn various tokens across the wide range of apps, games, communities, defi and airdrops. You can earn a lot of crypto just from your time and effort which will give you a nice bankroll that you can use to become more passive in future and try investing or trading.
Most of these funds I have staked to my wallet on chain where it earns interest and curation rewards for being active on the chain. While some I have converted to the Hive stable coin that earns 20% APR. My crypto is working for me every day and that is how I want it.
Some funds, I have moved to other platforms like Cosmos, Binance Smart chain and Matic to stake in liquidity pools and earn yields but these are a subject that I will circle back to further along the series as they will need a full post.
The main point here, being that your crypto holdings should be earning more crypto for you. Standing still is stagnation and to be successful in crypto you need to be putting your portfolio to work every day and expanding it.
If you are purely an investor then "Dollar cost averaging," is a good strategy to follow until you gain more experience in the various options and platforms. This is where you set up a regular buy of your chosen tokens at a regular interval regardless of price fluctuations. Invest steadily over time and hope that the prices continue to rise over that time period.
This can be done manually or a lot of the larger exchanges like Binance or Crypto.com have options to set up for a direct debit on a weekly basis to automate the process. There are many more options but I prefer these for my own use.
In the beginning I used to have a direct debit for $100 Bitcoin and $100 Ethereum every month which I would then move to my hardware wallet for safety.
It was a safe and simple way to get started on the investing side while learning how to earn tokens for free and brought me to the point that i am at today.
Some people like to try and play the markets with these funds which can be very lucrative if you can time the buying and selling correctly which we will again feed back to in more detail when we look at the different ways to make a trade.
The short version of this type of practice would be to buy low and sell high. If you can manage to do this continually then you will be very successful as crypto is subject to large price fluctuations. However having the skills to do this correctly and the patience to wait out lower prices is not easy for everybody.
Part 4: Tracking your portfolio.
One last point in the getting started section is to how to keep track of your various tokens across multiple platforms. While this might not seem very important at the beginning of your crypto journey, if you are active I can assure you that the tokens will build up very fast over time and you will spread out to multiple tokens across multiple chains.
Again there are any number of apps and websites that you can use to track your tokens for free or with a charge depending on the level of detail that you require.
As a beginner I like to use the portfolio tracker on Coingecko for it's quick and easy to use option.
For more options to choose from both paid and unpaid you can check out this helpful list from softwaretestinghelp who have set out the options in much greater detail. There are hundreds of choices so a lot of this will come down to personal preference in your early days.
You might not think that it's important but one mistake that I made in the early days was not tracking how and where I transferred my funds as crypto is still subject to taxes in most jurisdictions and if you do end up growing your portfolio over time it will be a good idea to have it all on paper to figure things out.
This again comes down to personal responsibility just like the security of your funds and this theme will be a big part of the future of cryptocurrencies.
Summary
This post is an overview of how to make your first steps into the crypto space more than anything else.
Future posts in this series will be a little more detailed and specific to the topics listed above but I hope that people will find this helpful for how to get started and the resources provided for more information.
The main take away for anybody looking to get started should be,
- Do your own research.
- Set out a plan.
- Safety first.
- Put your money to work.
- Track it as you go.
- Keep building your portfolio over time.
Simple but effective advice with more help and links in the above post to accomplish these basics.
The next post will be more technical in nature as it looks into the technology behind the industry.
More resources:
Belemo: Hacked again but funds are safe.
Dbooster - HBD savings are at 20%
Taskmaster4450 - Hive. A compounding machine.
Khaleelkazi - Consistency in dollar cost averaging.
Taskmaster4450 - The evolution of Hive.
