Despite cryptocurrency’s recent legitimization as an investment choice, Web3 and its environs are still very much a Wild West. Every day, more and more people enter the cryptocurrency market, and with that comes a steep learning curve rife with rookie blunders.
These simple mistakes, whether committed intentionally or through carelessness, often lead to significant financial loss or theft. In certain situations, users may lose all of their cryptos.
Read on to learn about four of the most common crypto mistakes and how to avoid them.
Sharing Your Weak Seed Phrase and Being Scammed
Every positive has an accompanying negative. Hackers and fraudsters abound in today’s crypto ecosystem, all with one goal in mind: to part you from your money. If you’ve been keeping up with the latest crypto coin news, you’ll know that sometimes even seasoned professionals in the field can’t resist giving in to their baser instincts and being taken in by even the most elementary hoaxes.
Typically, victims of these scams are asked to provide their “seed phrase,” or a string of words that, if cracked, would grant the perpetrator access to the victim’s entire digital wallet, including all of their private keys and any money therein. Many newcomers fall victim to phishing scams when they insert their seed word onto a website that seems official but is a copy of an existing, legal page.
Your secret seed word should never be revealed. If they do, just close the tab or ignore the notice. Do not follow any links or download any files sent to you through direct messages (DMs) on Twitter, Discord, or Telegram.
Spending Money on Excessive Gas Prices
There’s a charge called “Gas” that users of cryptocurrencies must pay to compensate miners for the processing power they need to confirm and carry out transactions on a distributed ledger. Because gas prices are determined by network activity, they tend to rise while making a purchase. This may make what would normally be a quick and cheap transaction into a major hassle, with the expense of petrol often exceeding the actual worth of the transaction.
Time-sensitive trades and mints are using non-fungible tokens (NFTs), among other examples. Transferring tokens from one personal wallet to another, however, is not always an emergency. Find a time when petrol prices are low and wait for those who can. If not, your investment in the digital sphere will be wasted.
Transferring Cryptocurrency to an Incorrect Wallet
Beginners often and carelessly make the mistake of sending funds to the incorrect wallet address. Wallet addresses are alphanumeric strings that range in length from 20 to 42 characters.
You should always utilize the “Copy Address” option or copy and paste the address into the “Recipient” box when transferring funds from an exchange to your wallet or vice versa. The same rules apply when giving money to a close personal acquaintance or relative. Don’t attempt to input every single character manually; doing so gives too much room for mistakes. Verify the address again before sending any cryptocurrency. Next, double-check everything you just did.
Even if only one letter is transposed or misplaced, your whole payment will be routed to the wrong account. Spending a little more time making sure everything is perfect is well worth it.
Using a Hot Wallet to Store Your Cryptocurrency Wealth
Hot and cold wallets are the two main categories of cryptocurrency storage options. Each wallet has a corresponding private key, which acts as a cryptographic password and gives the owner access to the cash stored inside it.