The growth in the cryptocurrency is undoubtedly encouraging more people to participate in it. Far from being just the passing fad that many tagged it to be in 2011, the market has emerged as one of the most popular in the financial space. With this influx of new traders and speculators, there seems to be a constant supply of newbies in the space. A big part of the learning experience are the mistakes that are made by these newbies while finding their feet. Some are hilarious while others can have devastating consequences. There is even a Reddit thread that chronicles some of the mistakes that crypto users have made over the years.
It can be argued that the internet has created a culture that has greatly affected the way we do things. The ease of access to information means that it isn’t necessary to know something when you can just “Google” it when needed. The computer is now treated as the personal assistant that knows and does all things for us. With Bitcoin and cryptocurrencies, it is almost suicidal to leave everything in the hands of the computer or online services. A great deal of personal involvement is required in order to prevent costly mistakes.
Below are some of the costly mistakes that newbie cryptocurrency users have been known to make.
1. Lost Keys
Cryptocurrencies are built on top of a blockchain which offers robust security features. The encryptions coupled with their decentralized nature make it such that possession of cryptographic keys is the only way to prove ownership of a cryptocurrency. Losing your keys means that losing your access to the coins that you own. It is different from forgetting your password or your pin where you can request to reset your pin or have it sent to your email address. There is no customer care for the blockchain and no way to recover your key if you lose it.
Lost keys are one of the most common mistakes that newbie cryptocurrency users make. Whether due to lack of information, carelessness or a combination of both, many newbies have been known to lose their keys and have their coins lost in the process. A recent Fortune publication reported that there are approximately 4 Million Bitcoin lost forever due to a number of reasons, with lost keys being one of them.
2. Keeping Coins in Online Wallets
Based on the popularity of social media platforms like Facebook, Twitter, and Instagram, it has become common for people to live vicariously via the Internet. Hosting something on the web seems to be a more convenient way of doing things. Most newbies after signing up with an exchange service and purchasing their first cryptocurrencies neglect to take them out of the exchanger’s website. Again, this is another case of ignorance, laziness or a combination of both.
Ownership and control are two vital aspects of possessing any asset. Both are required to be truly in control of an asset. Coins stored in an online wallet may be owned by the user but they are not controlled by the user. Online wallets are a target for hackers and cybercriminals looking to steal valuable cryptocurrencies. Keeping your coins in an online wallet puts them at the risk of these hackers and thieves. There have been a number of high-profile cryptocurrency hacks that have led to millions of dollars in cryptocurrency stolen from a few exchange platforms. The safest thing to do is to invest in an offline wallet and once the purchase of a cryptocurrency is complete, the coins should be moved to that wallet.
3. Not Keeping Hard Copies of Important Information
A word document that lists all your addresses, keys and other pertinent crypto information isn’t a hard copy record. A hard copy record would be that word document printed out and stored in a secure location in lieu of any damage to your digital records. Many newbies have lost their coins due to crashed computers, hard drives, flash drives etc.
Tyler and Cameron Winklevoss, more commonly known as the Winklevoss twins have admitted to putting a high premium on the security of their Bitcoin holdings. The twins bought $11 million worth of Bitcoin in 2013 that are now worth roughly $1 billion today making them the first known Bitcoin billionaires. They split the private key of their Bitcoin wallet address into 4 and store them on 4 separate pieces of paper which are held securely in 4 different safety deposit boxes.
While not everyone owns such vast Bitcoin holdings, even the smallest crypto asset is still a valuable commodity and such be held securely. It is okay to have digital records of all your crypto information but it as also important to have a backup hard copy of those digital records.
4. Fat-finger Error
Fat-finger error has been the bane of online traders since the emergence of the use of computers in the financial market. Fat-finger error can be defined as a human error that occurs when the wrong key is pressed on a computer (or smartphone) keyboard. Some of the most calamitous trading errors ever recorded in the financial market has been due to fat-finger errors.
One of the most common fat-finger errors that many newbie cryptocurrency users make is when entering trades on a crypto trading platform. Every decimal is a place value that has considerable ramification in fiat currency. Newbies sometimes enter the wrong amount or even the wrong place value, entering a trade in mBTC when they thought they were dealing in BTC. Another fat-finger error occurs when sending coins to a wallet. It is better to copy and paste as one wrong entry could mean sending coins to the wrong wallet.
Like any other form of trade, a bit of care and patience never goes amiss. Also, regularly updating one’s information and knowledge is important to make sure that certain mistakes aren’t made. Cryptocurrency transactions are irreversible and as such, the onus is on the user to carry out due diligence before carrying out any transaction.
Keen to find out more about FundYourselfNow? Join our crowdfunding revolution conversation on our Telegram group, or follow us on Twitter.