The Most Common Mistakes to Avoid in the Crypto World

There are different types of blockchain networks in this world. Most of the blockchain networks are based on the PoW(Proof-of-Work) and PoS(Proof-of-Stake) consensus algorithms. If you are going to make the transaction on the blockchain, you need to know, your transaction will be irreversible so your simple mistake due to human error can cause a huge loss. You may ask the question, why is it impossible to reverse a transaction on the blockchain?

Well, all the transaction records are stored in the blocks and they are connected to form a long chain which is followed by mathematical rules and further encrypted to ensure security. Once your transaction is processed, two hashes communicate with each other to form an immutable and irreversible data set in the block which is unique.

So, an attempt to reverse the transaction would need a lot of computing power, and is almost impossible. This handy article attempts to discuss the most common crypto mistakes and the tips to avoid them. We can see so many discussions on the internet but users are still committing mistakes and losing huge amounts of cryptocurrency.

1. Creating and Using a Wallet Without Saving the Private Key & the Secret Phrases:

Most users forget to back up the secret phrases or the private key of cryptocurrency wallets due to the misconception that everything can be recoverable just like the recovery process of traditional web-based passwords and the passwords are stored in the servers but in reality, a decentralized wallet does not store your secret phrases and private key in the server.

First of all, be familiar with the types of wallets. The online wallet or hot wallet can store your private key in the secret servers but the offline cold wallet does not or more precisely, the non-custodial wallet does not store the secret seeds online i.e. once you uninstall the wallet from the device that you have been using, everything will get wiped out.

Even in the case of non-custodial wallets like SafePal, they have the additional option to create the wallet like you can set up the paraphrase word that is required along with the secret phrases of the multi-coin wallet otherwise, the coins/tokens in the wallet won’t be displayed correctly as the addresses for the different supported coins/tokens will be different if you miss switching the paraphrased word.

2. Sent Coins/Tokens to the Wrong Address: -

This is the most common mistake that any sort of user can make while making transactions. Especially, some exchanges have the same abbreviation for the tokens/coins but they could have different blockchain networks.

Binance Smart Chain and Ethereum addresses are the same but if you send BEP-20 tokens to the ERC-20 address on some cryptocurrency exchanges, your crypto will be lost as most cryptocurrency exchanges do not refund/recover your crypto in that case. In some rare cases, if the exchange has access to the incorrectly sent crypto, they might refund you but they charge you a huge amount for the full recovery process.

Another example is, if you are familiar with the Tether USDT token, it is supported by the different blockchain networks like Ethereum, TRON, Stellar, etc. but if you forgot to double-check the address and sent to the address of the different blockchain network for the same USDT token, it will be lost. In addition, some blockchains like Stellar, Binance Chain, etc. also require you to add a separate memo tag. If you don’t enter the tag, your crypto will be lost.

3. Falling for Scams: -

There are so many scammers online. Sometimes, greed can cause an excessive loss. Scammers keep showing attractive investment schemes promising higher returns but in reality, they eat your money without returning a single penny. There are so many malicious Doubler and cloud mining sites that will steal your money. Also, the cryptojacking malware is there to use your computer resources to mine the hackers’ desired cryptocurrencies.

4. Malicious Software: -

Hackers have created pirated software and scattered them over the internet. Some of such wallets look exactly the same as the original wallets but in reality, they secretly adjust the servers to store your details. Your crypto in the wallet will be lost once hackers get access to your wallet. Some of them also advertise attractive rewards, but you will not receive anything.

5. Choosing the Wrong Coin to Invest in: -

In the cryptocurrency markets, not all cryptocurrencies are genuine and profitable for investing. Scammers have created so many useless currencies. The most common phenomenon is to pump and dump the price to sweep away your invested amounts.

You can still find many complaints against scam projects on the internet. Scammers raise the funds through an ICO or IEO and they list the coin/token on malicious exchanges and start to manipulate cryptocurrency prices to draw you into the trap. Sometimes, even trained traders can fall into such schemes due to greed.

6. Putting All of Your Coins in One Wallet: -

Sometimes, you can lose your wallet’s private key due to human errors. There are so many examples of people keeping millions of dollars’ worth of crypto inside their wallets. Some users have lost the private keys where they stored their cryptocurrencies.

Wrapping Up…

Blockchain technology is the best gift of modern computer science and technology, there is no doubt, but you also need to understand its limitations i.e. irreversible transactions and unrecoverable private keys if you lose them. Users need to understand all the precautions while using cryptocurrencies and crypto-wallets. For the security of your crypto holdings, you can make an offline copy of the secret phrase and the private key to store in a fireproof container.