As many users can attest to, Bitcoin is still in a sort of “Wild West” situation when it comes to regulation. A result of this is that scammers are prevalent, just like in pretty much any other area of our lives, and it’s paramount that you do what you can to protect yourself. Here are some tips to do just that!
Only Send Funds to Those You Trust
If you’re sending funds to someone, make sure it’s someone you can trust. It’s always a tricky area when dealing with online marketplaces, but doing due diligence will go a long way towards helping cover yourself. For example, Google a business’ name before sending coins, or deal with those that already have a solid footing and are well-known. If working with individuals, try to work out a system that protects both of you (escrow is a large one). While it’s still not a 100% foolproof method, it decreases your risk dramatically.
A great rule of thumb is to think about walking down the street. If someone comes up to you and says “You give me $100 today and I’ll mail you xyz item tomorrow,” would you do it without more information about them? Probably not. And if you wouldn’t do it for them, you shouldn’t do it for someone online that you can’t even see.
Only Trust Known Exchanges
I hate to say it, but a lot of exchanges aren’t trustworthy. From bad security to stealing, it can be a dangerous area. A good general idea is to go with the most popular (based on volume) ones at CMC. As you start to get more comfortable and learn a bit more about the various options, you can branch out from there for trading and such, but those should help with the journey.
The second part of this is to not leave more on an exchange than you can afford to lose. Even the top exchanges have been hit in the past. Just Google Mt Gox for a great example, though others have as well, such as Bitfinex and BTC-e. With low transfer fees and quick transactions, it’s a good idea to transfer in, do what you wish to do, and move coins back out.
Use a Hardware Wallet
Web wallets are susceptible to the same risks as exchanges. Running a local wallet is a lot safer, but someone could get into it via a virus or other entry point. A paper/brain wallet isn’t feasible for actual usage, just storage. Hardware wallets, however, allow ease of use and the ultimate security. The Trezor, KeepKey, and Ledger are all very trusted and solid options, though there are more out there as well. For various options, be sure to check out this article. While it’s not all-inclusive, the landscape is constantly changing and it should help better understand what to look for.
Stick With the Main Coins
We all love the idea of making a quick dollar, but the risk in crypto is huge. Altcoins come and go, as well as ICOs, and it’s important to stick with the most known coins. For example, DOGE, BTC, LTC, and ETH are some trusted ones. That said, the first and most popular one is still BTC, which makes it the least risky out of any of them (though there will always still be an element of risk with it, despite what some may claim).
If you’re hunting for gains, there are definitely some out in the altcoins, but you need to take the saying “don’t risk what you can’t afford to lose” to a whole new level. With them, expect that you’re either going to make or lose a lot. Seeing 50%+ moves in an hour are not uncommon, for example, but there are a lot of “pump and dump” schemes, where manipulation is prevalent. For anything but going for trading gains, stick with the main coins. And be very, very, very careful if dealing with ICOs. The vast majority are offering ridiculously bad deals, so even if they don’t run off with the funds, getting an ROI is often difficult.
Once you have mastered these four skills, you should have a great base for taking part in the cryptocurrency ecosystem. With trusted coins, a hardware wallet to store them in, and extreme scrutiny when it comes to sending funds to anyone or using unknown exchanges, you’re ready to move on to some more advanced topics.