PRINCIPLES
& PITFALLS
3-6′
Learning through trial & error
For almost 15 years bitcoiners have experimented with Bitcoin, identifying pitfalls, risky behaviours, best practices and guiding principles. Become aware of them early on and revisit them from time to time.
Key guiding principles
I. Not Your Keys Not Your Coins
Become your own bank! Bitcoin never got hacked but leaving your bitcoins on exchanges entails some risks. Take full ownership of your bitcoins: experience financial sovereignty by taking the control of your private keys. Learn how to store your sats and bitcoins in cold storage, using a hardware wallet.
II. Don't Trust: Verify!
You have a direct access to the Bitcoin ledger in real-time ! You can verify what you own, the status of your transactions or any transaction, as well as the past and on-going properties of the network.
III. Zoom out and HODL
When in doubt, zoom out! Bitcoin volatility is emotionally challenging. Check the track record of Bitcoin price since its creation and realize that it just keeps rising on and on, providing to the patient investor the best Return on Investment ever measured.
HODL is a misspelling of HOLD (Holding On for Dear Life). HODLing is the “buy and hold” investment strategy. Hodlers buy their bitcoins to keep them, not matter what. Whilst it is the best strategy on the medium to long term, HODLing requires fortitude.
Pitfalls & tips to avoid them
Here is a list of key pitfalls and other risky behaviour, as well as tips to avoid them.
Your seed words are the keys to your bitcoin. Anyone with control of these can access your funds. You should store these in a secure manner, but be mindful that you do not store them so securely that you forget where they are. Do not store them on your computer.
It is common in public chat groups such a Telegram for scammers to impersonate someone from the Bitcoin community offering support to someone that may be asking for help. NEVER…..EVER give your private keys or seed words to anyone, especially on the internet.
Bitcoin addresses are long strings of numbers and letters so prefer QR codes or at the very least do a copy/paste when sending to someone. Visually check the address at least once before sending.
The bitcoin you leave on an exchange is not yours. You have an IOU and you should learn enough to get that bitcoin off the exchange and into a wallet that you control the private keys of. There have been multiple exchange hacks in the past and people have lost large amounts of bitcoin, don’t let that be you.
Everything we do online these days comes with an account linked to our email. If your email account becomes compromised it can be an open door into your life for a scammer. Two factor authentication (2FA) provides and extra security layer to protect you from being hacked. Avoid using the SMS version and opt for an app or key based one, such as Authy or Google Authenticator.
The more you learn, the more excited you get about Bitcoin, especially if you spend time on the likes of Bitcoin Twitter. It’s very easy to get over excited and buy more than you can afford. Bitcoin is a young and extremely volatile asset, you should do your own research and never buy more than you can afford to lose. ‘Stay humble, stack sats’.
Bitcoin is extremely volatile, its not unusual to see a 20% price swing in either direction in a single day. If you aren’t experienced and you try to play these markets, you WILL lose money. Tread carefully.
The ‘crypto’ space is awash with alternative currencies, so called ‘decentralised finance’ applications and some down right scams. Such projects can be enticing but almost all of them are nothing more than marketing and buzz words and should be explored with extreme caution.
If you do not like the sound of KYC’d bitcoin, you can consider buying from Peer to Peer exchanges such as Bisq and HodlHodl which use an escrow service. However these are generally not as easy to use as the KYC alternatives. By far the easiest option to get yourself started it to buy some off a friend or family member.
The Bitcoin community is a vibrant and helpful one. There are hundreds of different telegram groups, GitHub or reddit pages and people on Twitter that are willing to help. Feel free to ask us a question too. Remember: if you are not sure, ask!
Simply, if you are not using your own node then you are using someone else’s, whether you know them or not. That’s how Bitcoin works. Having a wallet connected to your own node means you don’t rely on anyone else to transact which gives huge privacy benefits. By using your own node you can also be confident that the data displayed in your wallet is accurate and abiding by your nodes ‘Bitcoin rules’.
Buying KYC bitcoin from the likes of Cash App is a very fast and easy way to purchase bitcoin. But there are trade offs : when you sign up with these companies you will need to supply some form of photo I.D which tags the bitcoin you buy to your public identity. Due to the public nature of the Bitcoin blockchain, surveillance firms can ‘follow’ you and watch your future transactions.
Bitcoin lives on the internet which, much like the real world is full of people willing to take your stuff. Talking about owning bitcoin online or in the real world can quite literally post a target on your back for thieves or scammers. A common approach for people who interact with the online Bitcoin community is to create an online persona completely separate from their real world identity.
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