Cryptocurrencies, NFTs, blockchain technology, and Web3 form part of the new digital economy promising decentralization and transparency. The blockchain revolution changes the future of finance or the Web by overturning traditional authorities and Big Tech platforms for managing security, storage, payments, etc.
If you’re excited about the benefits cryptocurrencies bring about, such as speed, transactional transparency, etc., or want to make a fortune out of crypto, you need to learn about crypto trading essential tips, tactics, and the mistakes you should avoid.
First and foremost, you need to create a cryptocurrency wallet to store a variety of cryptocurrencies, buy goods and services from other individuals, or just tip the content creators you enjoy.
With a wide range of digital wallets to choose from, you need to consider the features the wallet offers, such as security, coin support, ease of use, user interface, level of privacy, customer support, fees, built-in services, etc., to select the one that best suits your investment needs.
As such, you might consider the CoinStats Wallet suitable for both newbies and professional traders, enabling you to manage all your DeFi and crypto in one place.
The way to successful investing is by doing your own research and learning from experienced traders with years of experience investing in cryptocurrency markets.
With this handy guide, you can learn how to avoid the common mistakes in handling a cryptocurrency wallet.
Let’s get right to it!
Common Mistakes Everyone Makes In Crypto Wallet
As cryptocurrencies operate decentralized, no authorities are involved in acting on your behalf and guaranteeing your assets’ security. You have sole responsibility for your funds once you take your digital assets into custody.
Here we’ll explore the common mistakes that cryptocurrency investors and traders make and how to protect your funds from unnecessary losses.
Mistake #1: Failing to keep your keys safe
Cryptocurrencies use public-key cryptography (PKC) to encrypt and decrypt transactions. Cryptocurrency wallets’ public and private keys are a part of the PKC framework. You can share your public key to receive transactions, but you’ll still need the private key to prove that you are the owner of the cryptocurrency received in the transaction.
You must keep your private key secret and never share it with anyone. A private key gives you access to cryptocurrency associated with the key and the ability to prove ownership of the funds.
Private keys are made of a long string of randomly generated numbers and letters, taking the forms of a 256-character long binary code, 64-digit hexadecimal code, QR code, or a mnemonic phrase. Users often miss or mistype a number when copying private keys for safekeeping, eventually resulting in the complete loss of access to the crypto wallet and funds.
Unlike a password or a PIN, you cannot reset or recover your keys if you lose them. So ensure to keep your keys safe and secure because if you lose your private key or fail to keep it secret, you’ll lose access to all your funds stored in that wallet.
Lost keys are among the most common mistakes that crypto investors make.
Mistake #2: Failing to check your transactions for typos
One of the most common mistakes, called a fat-finger error, that even experienced crypto investors make is entering a trade order that isn’t what they intended. This happens when an investor accidentally mistypes an incorrect amount or enters data in the wrong field leading to significant losses.
So, remember to always carefully double and triple check all the transaction details, such as the amount, the address, the transaction type, etc., and enter them in the required fields before confirming a transaction.
Mistake #3: Storing cryptocurrency only in custodial wallets
Custodial wallets offered by centralized cryptocurrency exchanges are probably the easiest way for beginners due to their ease of use and easy sign-up process. However, using a custodial wallet means putting the custody of your funds with the wallet provider and handing over the security of your funds. While you are technically the owner of your digital assets stored on the platform, they are held by the exchange, making them vulnerable to attacks on the platform and putting them at risk.
As we know, several documented attacks on high-profile cryptocurrency exchanges have led to millions of dollars worth of cryptocurrency stolen from these platforms.
So, to be on the safe side, store your cryptocurrencies offline in a non-custodial wallet.
Mistake #4: Failing to keep a hard copy of your seed phrase
If you ever lose access to your wallet, your seed phrase or recovery phrase, consisting of up to 24 randomly generated words in a specific order, can be used to generate your private keys and access your cryptocurrencies.
You should securely store your seed phrase by printing/writing it on paper or metal to preserve it in the long run. Keeping a hard copy of your seed phrase will
help prevent losses from damaged hardware wallets, crashed computers, etc.
Mistake #5: Failing to take proper security measures
Other common mistakes include using public Wi-Fi networks, falling for crypto scams, using wallets with lots of features but a low security level, etc. The reality is that you can never be too careful when it comes to keeping your wallet and investments safe.
Mistake #6: Misunderstanding the Blockchain Trilemma
Usually, blockchains can maximize two out of three main characteristics: scalability, security, and decentralization. In selecting a blockchain to transact on, you should understand the degree, risks, and benefits of each to avoid making mistakes. As such, choosing to transact on a blockchain because of its scalability and compromising on its security will be a mistake to avoid.
The cryptocurrency market has become one of the largest and fastest-growing markets in the world. You can invest in cryptocurrencies with your own cryptocurrency wallet without the need for a traditional financial institution and the hefty fees associated with it.
The decentralized nature of Blockchain gives you complete control over your funds and puts the responsibility on the investor, so it’s vital to carry out due diligence and learn from past mistakes before putting your funds at risk.
We hope our list of the 6 most common mistakes in handling cryptocurrency wallets will help you avoid them in your cryptocurrency journey.