My own experience and research. Should those I care about be bold enough to join me on the crypto high seas.
Disclaimer: Decentralised Finance (DeFi) is not for the litigious or adult babies.
We all play the finance game to survive. You have the time for and access to medium articles, so you’re probably 👌 Please still try to understand options and consequences.
Try out a few options before forming opinions. I’m Australian. I heard of “snow” and had ideas about what it might be like. I only started to understand while jogging through the German winter.
Standard finance (central assets)
The standard financial model puts information and decisions at the centre.
Central decisions aim to stabilise and chase the status quo.
Quantitative Easing is printing money to buy assets. Charts move up and to the right without external change. Old management saying “what you measure improves.”
Some central assets:
- Cash (central banks supply, states tax)
- Bank accounts (delegated ownership and access)
- Equity (corporations supply, states regulate)
- Real estate (states tax and regulate)
This is usually convenient. Central entities are economic deities (ostensibly) on your team.
- they freeze and reverse bad transactions
- they fix inconvenient market trends
- they offer money for nothing
- they absorb chaos and foreign happenings
- they research and think
They are entities and deities because they are concepts not people.
There are trade-offs.
- your assets and transactions can be frozen
- your property folio is the next generation’s affordability crisis
- your assets are invested in things you hate
- your assets are trapped in a single region
- your independent thought and learning is irrelevant
Decentralised Finance (DeFi/edge assets)
DeFi uses every trick in the book to push responsibility to individuals.
There are rules but permission is never required. Anyone can generate new keys at any time to join the network. Nobody can stop you if you hold the keys. Nobody can help you if you lose the keys.
This flips the traditional model. Every problem and opportunity is global and uniquely yours.
It’s not an answer to anything on its own, just a tool. Old engineering saying “When all you have is a hammer, everything is a nail.” DeFi tools are helping us explore new solutions to old problems.
Aren’t you scared?!
I’d be stupid not to be. DeFi is terrifying and inconvenient. I’ve survived with central assets for decades and find it easy to do so. I could keep bumbling along as I am then retire to a beach soon. Markets and mistakes can wipe me out any moment in DeFi.
Fear is no reason to do or not do anything. DeFi exists as long as we show up. That’s why I’m here.
Please don’t remortgage the house!
What does it cost?
A few hundred dollars upfront for hardware. A few hundred dollars annually for physical security.
Use a custodial service?
Custodial services like Coinbase let you buy and sell crypto without keys.
Old crypto saying “Not your keys, not your coins.” You can’t avoid custodians entirely, just get in and out fast.
How to handle keys?
Buy a hardware wallet from a reputable manufacturer. Yup, a wallet for keys; software developers love mixing metaphors. Buy direct from the manufacturer and follow instructions. Everything else is insecure as it relies on you never making mistakes.
Hardware wallets have an 8 digit pin and wipe after a few failed unlocks. You can safely travel with one. It will wipe itself if someone tries to use it. I don’t think it needs to be declared at customs (I’m no lawyer… grey area?). The electronics are tough and survive impacts, X-rays in airports, etc.
Buy a few with the same or different keys for extra convenience and security.
Backup and restore is the only time keys ever leave or enter a hardware wallet.
The backup of your keys takes the form of 24 “seed words.” Anyone with the seed words can spend (steal) the money on your keys.
A piece of paper is not appropriate for serious funds. Fire or flood can easily become a double disaster.
Cover all nearby cameras. Don’t read seed words aloud. Never type or photograph your seed words for any reason. Hackers love key loggers, screenshots and hijacking audio and visual devices.
Don’t leave seed word backups lying around your home.
Rent a safety deposit box from a private vault company. Do not use banks as they are more likely to drill under pressure. Banks may tie your access to a bank account that can be frozen. Read the terms and conditions!
The smallest boxes are fine for key storage and relatively affordable.
What to get?
Start with ETH.
- It is decentralised (this is the point of DeFi but can’t be assumed)
- It handles the most daily transactions (not theoretical or fake volume)
- It is over four years old (an important metric)
- Other tokens are built on the ETH network
- It has an awesome web service that works with hardware wallets
- There is active R&D pushing the network forward in critical areas
- It typically processes transactions in under a minute
- It’s “good enough” in every way for beginners
Yes, Bitcoin is “hard money” as in gold, but also as in “difficult to use”. Walk before you run!
How to get some?
The best option
Find someone who has some and offer them goods and/or services. Buy some from a friend.
Getting it direct from a person you trust is always the best option. I work for and prioritise clients who pay ETH. It’s fantastic for international business.
The second-best option
Buy on the open market operated by an exchange.
Some exchanges handle state money and some are crypto only. There is a huge difference.
Good international exchanges that handle state money (USD & EUR):
You’ll need to do KYC to use a state money exchange. This means scanning your passport and sending it to strangers on the internet. Somehow these laws are supposed to reduce crime.
Trade other tokens?
Once you’re in the ecosystem you can move between tokens very easily. You have access to pure crypto and decentralised exchanges (DEX).
Lots of other crazy fun stuff out there and in the works.
The first thing to try is trading ETH against DAI. DAI is a decentralised token that roughly tracks $USD so is relatively safe.
Send and receive?
Use My Ether Wallet (MEW) with your hardware wallet. Follow the instructions!
Try out new services/addresses with small test transactions.
If you want to get fancy with websites that support ETH get MetaMask. Use your hardware wallet with MetaMask too!
Use Etherscan — a website that scans and visualises the ETH blockchain.
Every address, transaction and token appears here in almost real time.
It is a courtesy to send an Etherscan link when sending ETH.
Dealing with volatility?
To decrease volatility make many transactions over a long time. This cancels out large price dips and spikes.
Regardless of the charts your personal volatility is set by your own behaviour. Large infrequent purchases mean high personal volatility.
The long term average of crypto has been very good to be exposed to so far. Old saying “don’t stress the small stuff, everything is the small stuff.” Old trader saying “Time in the market not timing the market.”
Use DAI instead of ETH; 1 DAI is always roughly $USD 1. It’s not exact due to the decentralised algorithm but it’s pretty darn close.
Avoid centralised stable coins (everything other than DAI). Scams and regulatory issues are incoming — get the popcorn ready.
Buy an ICO/IEO/I*O?
If you are asking the answer is no. Please don’t ask again. The answer is no.
Short/leverage trades on margin?
God no. Do you even know what that means?
Send ETH to someone on chat/social media?
Running a full node?
If you know what this means then yes please and thank you! If not, don’t worry about it.
This is different in every country. You need an accountant. I am not an accountant.
Likely it is income tax for invoices and capital gains for state money trades. Go find a good local accountant and pay them for real advice.
Is it private/anonymous?
No, every transaction is traceable. Despite what it looks like, “they” can track you! Neither ETH nor Bitcoin are magical tax evasion schemes or “crime coins.”
If anything in this document is new to you, Monero is too complex. Use ETH for things that can be public until privacy features are easier to use.
Well, no… This space is global, messy, emotional and evolving 24/7/365.
This gets you in the door. Go explore, get rekt, get rich, have fun, whatever!