Crypto Mistakes To Avoid
Admin
Dec 8, 2021
Understood by most users, cryptocurrency allows one to transfer value anywhere in the world in an easy and safe way and allows users to have a considerable amount of control over their own finances. However, this great feature also comes with security concerns. Crypto can offer an extremely high degree of security if it is used properly, but it’s imperative to avoid some very key mistakes. To ensure the safety of your crypto, it is the user’s responsibility to adopt some basic security practices. Let’s have a look at the most important...
Keep Login Details Safe
Exchange accounts and wallet interfaces such as Metamask or Trustwallet all make the access to crypto easier, and are accessed often using only usernames and passwords instead of private keys. Although in some cases a private seed key is required to be written down in the event such login details are lost. (A private seed key is algorithmically derived from the long string of numbers represented by your seed phrase. Your private seed key gives you full access to your wallet).
But for these login details, it is imperative that users store their usernames and passwords in highly secure locations. The best of these has consistently proven to be a “Password Manager”. A password manager is an encrypted application that stores user’s passwords without ever having access to those user’s details (ie. the application and its servers cannot access the user’s data due to how it is encrypted). Password managers offer features such as end-to-end encryption, two factor authentication (2FA), location-based security, and in some cases biometric authentication, all within user friendly interfaces. This list by PC Mag highlights some of the best password managers for 2022, and we at MEX Digital encourage all users to utilise this kind of security measure.
Don’t Forget Keyphrases
Crypto wallets are secured via “private keys”, and are most often displayed as a 12-word phrase that must be laid out in a specific order. Whether it be a hardware or software wallet, they all use high end encryption methods to secure funds and data.
The English-language wordlist for the BIP39 standard that Bitcoin uses has 2048 words. Most key phrases contain only twelve random words, meaning the number of possible combinations for any key phrase is 2048^12, which is 2 to the power of 132! That is more combinations than how many stars are in the universe (1 billion trillion by the way)!
So, you can rest assured that a crypto key is highly, highly unlikely to be cracked, but that means users must make sure they know where they keep their key phrases! Because if you forget or lose it, trying to randomly guess it will be like trying to win the lottery.
Double Check Your Deposit Address
One of the most common mistakes in crypto is inserting incorrect addresses. As we wrote previously on our blog, a crypto address contains anywhere between 24 and 36 alphanumeric characters - and one wrong character could mean catastrophe.
It is essential that when transferring crypto from one wallet to another, say for instance from your hardware wallet to your MEX Digital exchange account or vice versa, that you double check that you have pasted the correct address. After the final confirmation, and the “send transaction” has happened, there is no getting it back.
Also be very mindful of cryptojacking viruses that can infiltrate computers, whereby they change your copied address and paste in the address belonging to the hacker. While these viruses have become rarer due to strong intelligence crackdowns by law enforcement, they are still out there, and can catch users off guard if they move too quickly.
Do Your Calculations Correctly
Many users get lost in the unique numbers of crypto: 0.01 BTC per ETH or buying 0.15 ETH with $450. Those decimal digits can confuse people, and it’s important that you do your calculations correctly.
For instance, let’s use the example of an investment into Bitcoin at the price of $50,000 per BTC. If you wanted to invest $1000 and hold it, you would be buying 0.02 BTC. Often, users miscalculate this, and either buy too much, or too little. Investing $10,000 by buying 0.2 BTC or only $100 by buying 0.002 BTC.
Do your math correctly, and ensure you are buying and investing the right amount you have determined, as based on good investment principles of course!
Miscalculating Fees
This brings us to the final common mistake in crypto. Users miscalculating fees and investing less than they expected. Fortunately here at MEX Digital our fees are extremely competitive, and you’ll barely notice much of a deduction off your trades, but sending crypto is often the most expensive part.
Bitcoin and Ethereum themselves have high transaction fees, so again, using an example based on a price of Ethereum at $4,000, let’s look at a typical ETH transfer. At present, the GAS (transaction) fee of an Ethereum transaction is an astonishing $100. That means if you wanted to send one single bought of Ethereum on an exchange to a hardware wallet, you would essentially lose $100 of your investment. And, you wouldn’t be able to send $4000 worth of ETH, as the blockchain would only allow you to send $3900 due to the $100 fee the chain will charge you.
Trading fees can have similar impacts on your investment, but as we’ve covered here, they’re not as significant as transaction fees. Make sure you do your calculations before doing such transactions, so as to not get caught out with less than you intended!
We understand that crypto is a big wide world, and can be daunting for many. But this is the responsibility every user must take for the right to have decentralized, self-sovereign finance.
It is absolutely imperative each user educates themselves and keeps up to date with how this most remarkable technology works. And that’s what we’re here for. This blog is designed to give you as much knowledge as possible to help you in your crypto journey.
