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Intro to Crypto - A True Beginner's Guide

Posted 10-26-2022, 10:34 AM

Intro to Crypto - The True Beginner's Guide

*Before we start*
I am not a financial advisor. Everything that I’m going to go over with you is completely at your own risk and I hold no responsibility if you lose money, or anything happens. I am just trying to introduce you to the crypto world and get your foot into the door if it’s something you’re interested in. You make all your own decisions.

Introduction
Welcome to the Intro to Crypto guide. If you are completely new to the cryptocurrency world and have no idea how to get started, then this is right for you. We are going to go over basically everything you need to understand what cryptocurrency is, why you should get into it, how you can get into, securing your assets, tax information, and much more. If you have any questions, never hesitate to ask! Let’s begin!

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Topics Covered

Terminology
What is cryptocurrency?
- Public Keys vs. Private Keys
Why Should You Consider Getting Into It?
Understanding the Blockchain
- Proof of Work vs. Proof of Stake
Exchange Sites
- Suggested Exchanges
- Basic Rundown of an Exchange
- How to Exchange
Wallets
- Wallet Types
- Suggested Wallets
- Setting up your First Wallet
- Transfer from Exchange to Wallet
- Setting up a Hardware Wallet
Securing your Assets
Tax Information
- Taxable/Non-Taxable Events
- Documenting Crypto Transactions
- Calculating Gains/Losses
Staying in the Loop
Frequently Asked Questions

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Terminology
It's important when getting into crypto to understand some of the common terminology and slang that is used. Here is a list of common terms and a simple definition. There are plenty of terms out there, but these are extremely common ones.

ATH (All-time high)
ATH, or all-time high, is simply a term used when a cryptocurrency reaches a value that is hasn’t reached before, giving it an “all-time high”.

Bear/Bearish
When you hear the phrase “it’s a bear market” or “the market is bearish”, investors are referring to the speculation that assets (cryptocurrencies) will decline in value.

Bull/Bullish
The opposite of a bear market is a bull market. Traders are speculating that an asset will rise in value.

DCA (Dollar Cost Averaging)
Investing a fixed amount of money into crypto on regular time intervals rather than all in at once.

DeFi (Decentralized Finance)
Umbrella term describing any financial service that is built on top of public blockchains. It expands the use of the blockchain from simple value transfer to more complicated use-cases. DeFi's goals are to disrupt financial barriers and remove central authorities out of the picture completely.

Fiat
A government regulated currency, also known as money. Examples are USD and Euros.

FOMO (Fear of missing out)
Investors are known to have a fear of missing out. When an investor believes that a crypto asset is going to rise in value, the investor will begin purchasing the specific asset, so they do not miss out on their speculated value increase to maximize profits.

Fork
When a cryptocurrency coin is developed, there are certain rules and protocols that the coin is based around. When a developer updates the protocols, the previous protocol usually becomes incompatible with the new chain being developed, causing a fork to happen.

FUD (Fear, uncertainty, and doubt)
The point of this term is a type of market manipulation. Essentially incorrect and misleading information is spread to try and decrease the value of an asset. Once the value decreases, the investor will reinvest at a lower price so when the asset rises, they will receive more profit.

HODL (Hold on for dear life)
A common cryptocurrency strategy where traders simply purchase an asset and just hold the currency for an extended amount of time even if it’s rising or falling in price.

Market Cap
A term used to describe the total market value of an asset. The market cap is calculated by multiplying the market price by the total number of coins in circulation. An example of this is if an asset is worth $5.00 and there are 100 coins in circulation, then the market cap is $500.

Moon/Mooning
A very common term is “(altcoin name) to the moon”. This is simply referring to a sudden and steep rise in value.

Pump & Dump
A market manipulation scheme where there is rapid inflation of a cryptocurrency and once the value reaches a certain threshold, the investors will sell the assets gaining massive profit. Once the dump occurs, the price of the asset will significantly decrease.

ROI (Return on investment)
Once an investor invests money into a cryptocurrency, they are hoping to actually receive profit from the investment once the asset rises. It is calculated via a ratio or percentage that shows how much the investor made.

Resistance
A resistance line is drawn though each peak of the price. This is where buyers halt and the sellers begin to sell, evidently lowering the price.

Short/Shorting
The act of selling a digital asset hoping that it falls in value so the investor can buy back in at a lower price.

Support
Used during technical analysis. A support line is drawn across points where the price bottomed out before going back up again. Investors were selling and lowering the price, but there were enough buyers to push the price back up.

Whale
An investor who can push extremely large transactions and influence the market to either decrease or increase in value.

White Paper
When a cryptocurrency is developed, the developers provide what is called a “white paper”, which should give users comprehensive information on what the cryptocurrency is, proper use cases, and innovations they implemented.

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What is Cryptocurrency?
You hear the term cryptocurrency and what comes to your mind? (I’m going to assume Bitcoin). In a nutshell it's a virtual currency, meaning there are no physical coins or bills that you carry around with you. With normal currencies like USD or CAD, they are produced by centralized systems such as a bank or the government. However, with cryptocurrency, they enter circulation through volunteer participation through the user's computer. This is one of the main reasons why cryptocurrency is so unique and something you should be studying - there usually isn't a single entity controlling it.

Typically, cryptocurrencies aim to be decentralized currencies that run on a network based on the blockchain technology (don’t worry, we will cover this later). There are an enormous number of different cryptocurrencies out there. Usually, companies and developers create the token to solve real-world problems.

What better way to describe crypto than Satoshi Nakomoto himself, the founder of Bitcoin. Nakomoto says that Bitcoin and crypto are a peer-to-peer electronic cash system. Its purpose is to create a decentralized electronic payment system without relying on trust and uses a ledger known as the blockchain to create immutable transactions.

Public Keys vs. Private Keys
Before we take a deep dive, we are going to go over two common but important terms – public and private keys. To start, cryptocurrencies required public and private keys to actually provide use-cases. A public key allows you to receive crypto transactions – they are paired with a private key. Essentially anyone can send transactions to the public key, but you need the private key to use them. The public key is usually the address you provide someone to send you a certain token.

A private key is the critical one here. You never, ever want to share your private key or keep it in an easy to grab location. If someone gains control of your private key, then they gain control of your assets. The private key gives you and only you the ownership of the tokens that are correlated with your public address.

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Why Should You Consider Getting Into It?
To start, cryptocurrency is the currency of the future. Due to the security features and problem-solving goals, crypto is gaining a lot of steam. Currently, companies are beginning to adopt crypto and accept them as a form of payment, which is huge. The greater the adoption, the more use-cases and longevity of crypto. Even though some companies are beginning to adopt it, millions of people and companies still don’t understand the true value and it will take some time before the world starts using it as a primary currency.

One major reason to begin investing in crypto is due to decentralization and having complete control of your assets. Now let’s make one thing clear, not every cryptocurrency has decentralization in mind and many assets are much more centralized than others. However, decentralization is important for the future of crypto. So what is decentralization exactly? The goal of decentralization is to stay clear from corporate and government influence, meaning that they do not have control over your assets and your personal details.

Know Your Customer, also called KYC for short, refers to the verification process that individuals go through to verify identity and get full user-details. It’s like going to the bank and opening an account, they require pretty much every single detail about you, which can hinder your privacy and provide security threats. This is where certain crypto projects step in and try to become decentralized, avoiding KYC and not requiring all your life details. So basically, decentralization does not have a centralized-entity influencing every aspect of the token and instead, the transfer of control is shifted to a distributed network.

Another major reason to get started with crypto is due to centralized inflation. If you haven’t heard of inflation, what this means is the decline in purchasing power of a given currency, such as USD, CAD, or Euros. As inflation increases, goods/service price increases, and the said currency buys less than before. What causes inflation and do you expect this to happen? Of course it’s going to happen! Now let’s go over how it occurs. An increase in monetary supply, meaning more money is being produced by the government and being handed out (reducing the overall value), or loaning money to banks. It’s an inverse relationship – as money supply increases, purchasing power decreases. Now with crypto, tokens usually have a set max supply, meaning that there is a cap on the amount of coins that will ever exist in the ecosystem. See why this is important and beneficial?

Let’s do some quick hitters to sum up why you should start investing in crypto:

The currency of the future
Immutable transactions once on the blockchain
Fiat has unlimited supply - crypto usually has a predictable supply
Safely send crypto/payments over a secured peer-to-peer network
Largely unregulated
Increased security features
Speed of transactions happen usually within minutes
Bitcoin holds a store value like gold
Crypto developers are working on solving real world problems
Mass adoption is on the rise, but a ways to go (better to get in early)
Decentralization and privacy
Prevent government and central influence
Avoid severe market inflation like current centralized currencies due to max supply
Have full control of your assets and your future
The list goes on

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Understanding the Blockchain
Alright, so earlier we briefly mentioned the term "Blockchain". What the heck is that? The blockchain can be described as a database. Remember, a database is where information is stored and is structured typically in a table format so administrators can find and filter information, making it more manageable and user-friendly. With the blockchain, it collects and stores data in blocks or groups.

Now, the blocks of data that are collected have a predetermined storage capacity. Once the capacity is reached, the blocks are chained to the previous block, coining the term "blockchain". Essentially, the blockchain stores data in blocks and are then chained together once the block is full. When the blocks are filled, a timestamp is given when it’s added to the chain and it becomes irreversible. The blockchain is a ledger of all the transactions on the network and there doesn’t need to be a central authority because users on the network can confirm the transactions. A great depiction to help understand the blockchain process is:

Image (Click to View)

Proof of Work vs. Proof of Stake
Proof of Work and Proof of Stake are two validation techniques used to verify transactions before being added to the blockchain.

Proof of Work is a method of verification where algorithm is used to provide a mathematical problem for computers to solve. Each computer solves the puzzle to verify a group of transactions (remember, these are called blocks) and then adds the block to the ledger. Whichever computer is first to solve the puzzle is rewarded with cryptocurrency. This goes hand in hand with the term mining. Mining is a peer-to-peer process used by nodes to add transactions to the blockchain, which uses the proof of work method. The main purpose of mining is to be the first miner to solve an output that the network accepts. The transactions are held in a mempool, which is basically just a holding area for transactions waiting to get processed. Again, once the block is validated, it gets added to the previous block. Proof of work and mining are basically synonymous.

Proof of Stake is a method where the number of transactions each person can verify is capped by the amount they’re willing to stake. The other term you will hear is simply "staking". When a user stakes their tokens, they agree to hold or "lock" their funds to support the security and operations of the blockchain. The protocol then picks at random from the node pool that have staked their funds. Users that stake will also receive staking rewards, which is typically earning crypto passively. It is strongly recommended that you get into staking once you understand crypto.

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Exchange Sites
Alright great, you decided that you want to get started by dabbling in the crypto field, what are your next steps? Well, a couple crucial areas we need to cover are exchange sites so you can trade cryptocurrencies for fiat and setting up your wallets to store the crypto once you purchase them. We are going to start with exchange sites. There are an enormous amount of exchange sites out there, but we are going to cover some of the ones that are popular and you will encounter the most.
Common Exchanges

Binance
- https://www.binance.com/en
- https://www.binance.us/en/home (If you’re in the U.S.)
Kraken
- https://www.kraken.com/en-us/
Gemini
- https://www.gemini.com/
KuCoin
- https://www.kucoin.com/
Coinbase/Coinbase Pro
- https://www.coinbase.com/
- https://pro.coinbase.com/
Bittrex
- https://bittrex.com/
Bitfinex
- https://www.bitfinex.com/ (Non-US customers)

Like I said, there are a lot of exchange sites out there. Always make sure when you are going to one, that it is a legit site and not some copy-cat phishing site. Also, some exchanges can only be accessed outside of the United States, so just be cautious of where you’re trying to sign up. The sites listed above are some of the most common. However, some states in the U.S can’t access it.

Basic Rundown of an Exchange
Since there are several exchange sites, I’m not going to cover each one. However, the process is relatively the same for each of them. If you get stuck, you can always ask for help and myself/others will do our best to assist – Google is also your friend. For this tutorial, I am going to use Kraken as the exchange.

Registration
**Important Information**
Most exchange sites are centralized and require KYC to register. They will need some personal information to gain full access to the account.
As stated before, we are going to do a walkthrough on Kraken.

1. So navigate over and click the “Create Account” button in the upper right hand corner. You should be presented with the account screen as so:

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2. Fill in your information accurately, check the box and click “Create account”. Once you submit the form, you should receive an Account Email to the email you used when you registered. Head over to your email and grab the activation code and enter it in your account activation form:

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3. Afterwards, confirm your password, complete the captcha, and click “Activate Account”. There your account has been created!

4. Once your account has been activated, we have a few more steps to go through. The next step is to secure your account.

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Securing your Exchange Account
Securing your account is extremely important. The majority of exchange sites will have extra security features you can enable to help keep your account safe. One of the common ways is 2FA. Let's run through it.

1. In the upper right-hand corner, you should see your name with a dropdown button. Click that, followed by clicking “Security”, followed by 2FA settings.

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2. 2FA or two-factor authentication is an extra step to help enhance account security. What typically happens is you download an app, connect your Kraken account to it, and each time you go to login, you’ll receive a prompt asking for the code. You’ll open your app and provide the code. Note, codes regenerate about every 30 seconds to ensure security. Once you enter the valid code, it’ll let you into the site. So let’s run through this process real quick. Go ahead and click “Change Method”. You should then be presented with a screen like this:

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3. The next step is to download an authentication app on your phone. I highly recommend Authy, but you can use Google Authenticator too. Open either your App Store if you're on an iPhone or Google Play Store if you're on Android and search for Authy or Google Authenticator. Once it’s downloaded and installed, go ahead and open it up and create an Authy account. Once that’s created, we are going to connect Kraken to Authy. On the main screen of Authy, you should see a button that looks like this:

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4. Click that and you should see a screen similar to this:

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5. Click the “Scan QR Code” button and head back to Kraken. Your phone’s camera should have opened with a square to capture a QR Code. On the 2FA screen of Kraken, you should see the black and white QR code.

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6. Point your phone at it and get the QR code within the lines. If done successfully, Authy should have added an account and you should see a random set of 6 generated numbers on the app. Take that code and enter it back into Kraken:

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7. Hit confirm and your 2FA should be all set up! Note there is also another option they let you select called the YubiKey. We are going to stick with Authy for now.

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Verifying Account
Cool, so we have registered an account and setup 2FA. The next step is to get verified. The majority of exchange sites will require some form of verification. They use this information for tax purposes and to make sure you are who you say you are. Depending on the verification you decide to go with, you may need a multitude of information to provide to the site.

1. In the upper right corner again, click your name and select “Get Verified”

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2. You will see a screen that shows the limitations of account levels. Kraken offers Starter, Intermediate, and Pro verification levels. Each of which requires more and more information.

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3. You should be fine with Starter until you get more advanced. So click the “Verify” button under the starter level. This process is typically quick and doesn’t require a whole lot of information. If you go to Intermediate, they require IDs and other documents. The starter requirements are as follows and typically verifies within minutes:

Sign-In 2FA
Email
Full Name
Date of Birth
Phone Number
Physical Address

Intermediate requires all the Starter plus the following:

Valid ID
Proof of Residence
Occupation Information
Social Security Number

Like I said, stay with Starter and once you are done, wait a few and you should receive notification once you have been verified!

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Adding Funds
Alright, we have registered an account, we have secured it, and verified. The next step is to fund your account and there are multiple ways to do it. Two common ways are to use a debit/credit card or connecting a bank account. Funding your accounts will allow you to purchase crypto. Otherwise you won't be able to get anything. Depending on your approach, you may need your debit card or bank account info so you can transfer funds.

1. Since you’re logged in, on the top row in the navigation bar, you should see a “Buy Crypto” button. Go ahead and click that.

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2. You should be presented with a screen to select how you want to purchase:

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3. I chose Pay with Online Banking. Go ahead and select your bank. It’s going to ask you to sign into your bank account and allow Kraken to access your funds. Once you enter your information you can go ahead and select the amount you want to purchase and the cryptocurrency that you want to purchase. Then click purchase! If you want to see more ways to purchase, you can navigate here and they will walk you through all of your options:
https://support.kraken.com/hc/en-us/arti...pto-widget

4. Once you purchase confirms, you should see your account balance on the navigation bar:

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5. Like I said, this process is very similar on other exchanges, but again if you have questions don’t be afraid to ask. Congratulations on purchasing your first crypto!

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How to Exchange
Now that you purchased your first crypto, we are going to run through how to use an exchange to exchange with other members. Exchanging is an important piece of the puzzle because you can convert from fiat to crypto and vice versa, exchange between cryptos, and sell to make money. So let's get into how to exchange on Kraken. Remember, each exchange site will be different, but should all have similar features.

1. With Kraken, on the top navigation bar, click “Trade”.

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2. Then you should see a screen like this:

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3. You’ll notice there are three options to trade. There’s Simple, Intermediate, and Advanced. For this tutorial, we are going to stick with Simple. If you have questions about Intermediate or Advanced, ask away. So earlier we purchased our first Bitcoin (BTC), so if we want to exchange BTC for something else, we have to use the BTC market. In the upper left, you should see Market. Click that and you’ll see all of the different markets you can trade with:

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4. If we wanted to trade BTC for ETH we would click the trade button. You should notice since we switched markets, it should say “Buy ETH with BTC” now. Alright, so now we want to purchase some ETH, let’s make sure we have “BUY” selected. Now there are two options when purchasing, you can either use Market or Limit. If you choose Market, it is going to purchase ETH at the best predetermined market price, meaning you have no say in what price you want to buy at. All you can enter is the amount of ETH you’d like to purchase. If that’s what you want to do, go ahead and purchase. Then your order should be filled relatively quickly because it purchases from current market value.

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5. Once you submit, there is an order list right below where you’ll see your new orders and the current status:

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6. If you decide to use the Limit option, you’ll be able to enter values:

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7. You can enter the amount of ETH you want and the fixed price you are trying to purchase at. So you can hopefully purchase at a price you're looking for (of course within reason). Once you purchase, this order may take some time to fulfill depending on what you set your numbers at. Once it’s confirmed, you should receive your new currency. Congratulations, you just made your first swap! Exchanging has way more involved than what we just went over, and it can take a while to fully understand it. If you switch to intermediate or advanced, you have way more options and trading power. For now, we will stay simple as I don’t want to overwhelm you. If you’d like to go into more depth, we can.

The next area we are going to go over are wallets. These are the most important pieces of crypto and are crucial. We are going to go over this in depth.

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Wallets
Just like your physical wallet you use to carry your cash and cards, crypto has wallets you can use to store your tokens safely. Let’s start off with types of wallets. Each type of wallets have their pros, cons, and specific use-cases. We are going to cover reach of these.

Wallet Types

Software wallets
- These wallets can be found in the form of mobile, desktop, and web wallets. Mobile and desktop wallets are wallets you download locally to your computer or phone and allow you to access your crypto anytime and anywhere. Web wallets are accessed through your browser so you don’t have to install or download anything.
- Pros of Mobile/Desktop:
  - Simplistic
  - Tokens are not stored online
  - Can hold a multitude of different coins
  - Some give you access to your private keys
- Cons of Mobile/Desktop:
  - Not the safest
  - Constant updates
  - Can be hacked due to virus and malware
  - If hard drive/phone crashes and you didn’t back up, you may have lost your tokens
- Pros of Web Wallets:
  - Easy to manage
  - Can enable 2FA
  - Easily connect to exchanges
- Cons of Web Wallets:
  - Private keys aren’t stored offline and can be accessed on third-party servers
  - Stored online can are prone to hackers
Hardware wallets
- These wallets are physical, electronic devices that stay on said person. Hardware wallets generate public/private keys and are stored on the device itself, which don’t connect to the internet, increasing security.
- Pros of hardware wallets:
  - Extremely secure
  - Provide backup and recovery phrases/seeds in case device is stolen, misplaced, or fails
  - Enable PIN password
- Cons of hardware wallets:
  - Costly
  - Limited accessibility
  - Limited crypto storage
  - Limited available crypto to store
Paper wallets/cold storage
- These wallets are literally a piece of paper which contains a crypto address and private key that are printed out in the form of QR codes (like the codes we used earlier to connect our exchange account to Authy). These are considered the most secure since you have 100% control of your funds and cannot be hacked.
- Pros of paper wallets:
  - Extremely secure
  - Cannot be hacked
- Cons of paper wallets:
  - Difficult if you need to exchange quickly
  - If you lose paper, coins are lost

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Suggested Wallets
Here is a list of wallets that are recommended. There are millions of wallets out there, be sure you download a legit wallet from the actual development site and that it’s not infected. If you are going to purchase a hardware wallet, ENSURE that it’s the actual company. There are a lot of fake sites out there who sell the tampered versions of these.

Software wallets:

Hardware wallets:

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Setting Up Your First Wallet
Now that you are overloaded with info, let’s download and setup our first wallet so we can store our crypto. Today, we are going to setup Exodus on our desktop. Make sure the wallet you are downloading is trusted, secure, and has high reviews.

1. Head on over to the official Exodus site. In the upper right corner, you should see “Download”. I’m going to select the Desktop version.

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2. Go ahead and download/install. Once it is completely installed, we are going to now setup a password and view your recovery phrase. Remember, the recovery phrase is used if you lose access to your computer or anything. As long as you have your recovery phrase, you’ll be able to regain access to your funds. So on the main screen we are going to click settings in the upper right-hand corner:

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3. Then click “Backup”

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4. Since I already have an Exodus account, your screen will look a little different than mine:

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5. You should be presented with a screen to make a password so you can access your account. Make sure it is strong, not used on other sites, and keep it saved in a safe location because it cannot be recovered. After you created a password, the next thing is to see your secret recovery phrase. Again your screen may be different, but it should be similar. The secret phrase is a 12-word phrase that contains backups to your private keys in case you lose access. THESE ARE CRITICAL. Get a pen and paper ready. Hover over each number starting with #1 and going to #12. Now, you want to make sure you are HANDWRITING these in the correct order, along with being spelled correctly. If you don’t do this, you can say goodbye to your crypto. So one by one, start writing your seeds by providing the number followed by the word. Example:

This
Is
My
Seed
Phrase

6. Like I said, make sure everything is correct and in the right order. It is crucial you save this phrase in a safe location that you won’t lose or have someone else gain access to. Once you have it written down, your Exodus wallet is properly backed up! Now let’s get into how to actually use it.

7. If you go back to your main page, you should be presented with a list of cryptocurrencies. Right now they should be showing zero.

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8. Exodus offers a huge amount of crypto assets that you can store on there. You can pick and choose what cryptos you want to show. If you go back to the upper-right hand corner and select “Settings”, then click “Assets”, you’ll see a list of cryptos. You can go through each one and check/uncheck the ones you want in your portfolio:

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9. Now head back to your main portfolio. Scroll down and click on Bitcoin. You’ll be able to see your BTC balance, send, receive, and view transaction history:

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10. With wallets, each token has their own specific addresses that are associated with said user. Let’s run through a scenario where someone wants to send you Bitcoin. You would click “Receive”. You’ll then see a screen like this:

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11. Here you will see your Bitcoin Address along with a QR code. If someone wants to send you BTC, you can send them your address (MAKE SURE IT IS EXACT):

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12. Once they send to the address, it’ll be deposited into your wallet!

13. Now let’s switch roles and say you want to send it to someone. You are going to hit send instead:

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14. Here you are going to paste the address that THEY give you into the send address. Then below, you can either enter the BTC value or the USD value of how much you want to send. Once you make sure it’s correct, hit send, confirm, and bam, you just sent crypto! Congratulations, you just learned how to send and receive crypto through Exodus. Now the other wallets will have a similar approach to Exodus.

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Transfer from Exchange to Wallet
Remember earlier we purchased Bitcoin on the Kraken exchange? Well, we don’t want to store crypto on exchange sites – we will go over security later. So let’s send from Kraken to Exodus - it’s pretty straight forward. Typically it is bad practice to keep your funds on an exchange site because of hackers and other reasons.

1. So first, go back to Exodus, click on Bitcoin, and then click “Receive”. Copy your BTC address as we will need it for Kraken. Head over to Kraken and log back in. Once you’re logged back in, at the top in the navigation bar, click “Funding”. The page that comes up next will show you all of your current balances. We want to withdraw to Exodus, so click the “Withdraw” button:

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2. Scroll down and click “Add address”

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3. It’ll ask for a description and the address you retrieved from Exodus. Once you input it, click “Save address”

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4. Kraken will send you an email confirming that you want to withdraw. Open the email, and click the confirm address link. You should be redirected saying the address has been approved. Then head back and click the “Withdraw” button like before. From there, you’ll select the address you just added, the amount you want to withdraw, and then click send.

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5. After the transaction confirms in the blockchain, you should receive the Bitcoin to your Exodus wallet and out of your exchange site! Like I have been saying, the process should be relatively similar for each exchange/wallet you use. Remember, each coin has a specific address. You can’t use your Bitcoin address for Ethereum. You always want to make sure you are utilizing the right address because if you use an incorrect one, the funds are gone.

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Setting up a Hardware Wallet
If you decide to invest into a hardware wallet, which is recommended, it takes a little bit of time to fully set it up and get used to it. Luckily there are plenty of resources out there. Let's go over setting up a Ledger Nano X and a Trezor Model T.

Ledger Nano X
There are a few steps involved to setup your Ledger Nano X. Please make sure you follow each step carefully to set it up so you can begin using it immediately. To begin setting up, follow these instructions:

1. First, you'll want to download a desktop/mobile application called Ledger Live. This application lets you set up each individual cryptocurrency wallet, see your current portfolio, send/receive, and buy/sell your assets. Ledger Live works on all major operating systems. So download and install. For more details on the Ledger Live app, head here.

2. The next step is to setup your pin for the Ledger along with seeing/writing down your 24-word BIP-39 recovery phrase. Remember, the 24-words are the only backups you have of your private keys - it's important you have them written down correctly. For a video walkthrough, you can view it here:

Video (Click to View)

3. After you have properly configured your new Ledger, you have to add applications to your device for each crypto you would like to store on them. Again, not every crypto is available for storage on the Ledger. For a video walkthrough, you can view it here:

https://www.youtube.com/watch?v=iaKI-vDQv94

4. The next step is to add an account to manage your crypto. For the cryptos that are supported by Ledger Live, you can view them here.

5. To send crypto from your exchanges/wallets to your Ledger, you can follow this video walkthrough:

https://www.youtube.com/watch?v=WZ3vES9q8QM

Trezor Model T
The other recommended hardware wallet is the Trezor Model T. Both have their pros and cons. Choosing the hardware wallet is based on personal preference. To get started with Trezor Model T, you can follow this in-depth guide found here.

Coldcard
Another recommended wallet is the Coldcard wallet. If you are interested in getting this one setup, you can follow this video walkthrough:

https://www.youtube.com/watch?v=sM2uhyROpAQ

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Securing Your Assets
Since you have successfully purchased and transferred cryptocurrency, we are going to cover an important piece – securing your assets. Security is hands-down one of the most important, if not most important topics we need to cover. Without good security, you could very well lose your funds.

Tip #1 – You don’t own your tokens unless you have control over your private keys
It is important for you to have control over your private keys because if they aren’t with you, they’re with someone else. Your private keys may come in a few different forms – it could be the actual private key of your wallet, a 12/24 word seed phrase (remember what we did with Exodus earlier?), or a QR code. The seed phrase uses BIP-39, which is a mnemonic phrase of random words used to serve as the private key. These are crucial to your assets. If the wallet you are using doesn’t offer this (such as a web wallet), just remember, you pose a risk to losing your funds. So always, always try and gain control of your private keys.

Tip #2 – Storing your private keys
As equally as important it is for you to gain access to your private keys, you need to safely store them. You should never store your private key on the computer or anything that connects to the internet. Instead, you should physically write them down and create multiple copies ensuring everything is accurate. Once everything is written down, you need to actually store it somewhere safe. They do make physical steel wallets where you can input your BIP-39 seeds to protect against fire, water, and other natural occurrences (check out Billfodl). If you don’t want to purchase that, it is recommended that you purchase a safe that is resistant to fires and other harmful elements. If you want to improve safety and have money to spend, purchase both. Make sure you have multiple backups and are stored safely from theft and elements.

Tip #3 – Don’t hold your tokens on an exchange
Exchanges are great because you can do exactly that, exchange tokens. They aren’t meant to be a wallet because they are prime targets for hackers and again, you don’t own the private keys. Once you purchase on an exchange, it is recommended that you immediately transfer out to your software or hardware wallet.

Tip #4 – Make backups
Playing off the other tips, you should always make backups of your private keys and other critical crypto data in case the worst-case scenario does happen. Back up regularly, store multiples, and encrypt when you can.

Tip #5 – Maximize exchange security
It is recommended that you register on multiple exchanges. When you register on an exchange, you should always enable 2FA, have unique passwords, and maximize all security features that the exchange offers (such as requiring 2FA upon all withdrawals). You don’t want someone coming in and taking your crypto or bank account information.

Tip #6 – Keep it to yourself
Don’t share your information, private keys, PINs, or anything with anyone - it’s just a recipe for disaster. Only trust yourself. If you are in public and need to do something that involves private keys or moving assets, make sure no one is next to you or looking over your shoulder, or a camera looking down at you. Play it safe.

Tip #7 – Get a hardware or paper wallet
The most secure thing you can do is get a hardware or paper wallet where you have COMPLETE control of your assets and private keys. Software wallets can be secure, but hardware and paper wallets provide better security since they are offline and are with said person.

Tip #8 – Keep software wallets up to date
Wallet developers are constantly pushing out updates for improvements and to enhance security against vulnerabilities. When possible, keep your software wallets up to date.

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Tax Information
Believe it or not, the IRS and other tax enforcers are all about cryptocurrency, especially in the United States. They are cracking down on individuals who are not or inaccurately reporting crypto. Let’s answer a question, YES crypto is a taxable event in the United States and other countries. Whatever country you are in, make sure you investigate tax requirements regarding crypto. In the United States crypto is treated as property when it comes to taxes. Capital gains and capital losses are required to be reported when you sell, trade, or dispose of crypto.

Taxable/Non-Taxable Events
The following are considered taxable events in the United States:

Trading crypto to fiat (like USD).
Exchanging between cryptos (like BTC to ETH)
Using crypto to purchase items or services
Earning crypto as a form of income

Each time you do one of the above, you are required to document and add it to your taxes at the end of the year.

The following are NOT taxable events:

When you buy and simply hold the token
When you transfer from one wallet to another one of your wallets

Documenting Crypto Transactions
Some tips to simplify the tax part of crypto are to create a spreadsheet. Whenever you purchase a token, document the following:

The token purchased
The date purchased
The amount purchased in fiat and in token form
The price of the token at the time of purchase

When you exchange or sell that token, document the following:

The date you sold
The amount you sold
The price of the token at the time of sale

Calculating Gains/Losses
To calculate capital gain/loss, you would use the formula

Code 
Fair Market Value – Cost Basis = Capital Gains/Loss

where fair market value is the price of an asset at the time of sale and where cost basis is how much money you put into purchasing the token. An example would be as follows:

Purchase 1 Bitcoin with a current value of $100 (we all wish bitcoin was this cheap). Then you sell the Bitcoin when it’s worth $200. So using the formula it would be as follows:

Code 
$200 (price when you sold) - $100 (the price when you purchased) = $100 capital gains

As you can guess, this can get really time consuming, but it is also important that you keep track. There is tax software out there that can calculate all of this for you however. A good tax resource that do all of these calculations for you is CryptoTrader.tax. They do all of the dirty work for you. How it works is you put in all of the exchanges that you use and then it connects and extracts your transactions. Then it puts together the report - of course it's not free.

Again, these are the tax requirements in the United States, please inquire about your country’s regulations.

When dealing with taxes it is always best to consult with a professional since they can walk you through and give you more specific guidance.

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Staying in the Loop
It’s important to stay up-to-date when it comes to crypto. Being able to research, gets news, see prices, and much more is crucial. Here are some great resources:

Google/News
An easy way is to simply go to Google and do a basic google search. You can search for “trending cryptocurrencies”, “cryptocurrencies to invest in”, or other searches. Then you can click on the News tab and get some intel on what people are looking at. Once you find something, then begin the technical/fundamental analysis!

Coindesk
Coindesk is another invaluable asset that should be in your arsenal. You can navigate to their website, see crypto news, articles, and other important information to help you on your crypto success!

Twitter
Twitter can be another great resource because you can see a lot of trending news. Just be careful because there are a lot of scammers and people hyping up coins that will not do anything. Search again and see what’s hot in crypto, and then analyze!

CoinMarketCap
This is another great resource to use to view the current coins and values. Simply look at the coin listings and look at the top 25-50. Pick and choose some coins to look at the charts and perform your research to see if you want to invest in anything.

HackForums
A huge resource for crypto. You can get tons of info in here.

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Frequently Asked Questions
Q: I'm seeing all of these people talking about safemoon and other tokens that they say are going to make them rich quick. Should I invest?
A: Please try to avoid investing into hype coins or in other words, shit coins. These provide no value to the market and can make you lose money very quickly. Common shit coins have the words “safe” or “moon” in them. Cryptocurrencies are supposed to provide value to the market and solve-real technological world problems. These hype coins do the exact opposite and people are trying to use them to “get-rich quick”. But please understand, that is a high and unnecessary risk.

Q: What is the best coin to invest into?
A: Bitcoin. It is currently and always will be the dominant cryptocurrency - don't let anyone else tell you otherwise. Bitcoin is the centerpiece to the whole blockchain. You think the price is high now? Wait until mass adoption takes place. Bitcoin may very well be all you need to support you financially.

Q: How come I'm not seeing profit quickly, I thought I would be rich super quick?
A: Crypto is not a get rich scheme. It is a way to secure your future and provide financial wealth over long-term. If you're getting into crypto to get rich quick, then maybe this isn't for you at all.

Q: How much should I invest?
A: If you are going to be purchasing BTC (which you should be) then purchase as much as you can with whatever you have. Bitcoin is the safest option. Whatever money you can throw into it, you should.

Q: What wallets do you recommend?
A: If you are looking for a software wallet, then I would suggest Exodus. It is secure, can hold a multitude of coins, and works on desktop/mobile. I also recommend purchasing a Ledger Nano X or a Trezor if you have a lot of money invested. It's always suggested that you don't have just one wallet. If something goes wrong and that wallet fails or your funds are stolen, what do you have left?

Q: I want to diversify my portfolio, how much should I delegate towards Bitcoin?
A: 80-90% of your portfolio should be Bitcoin. The other 10-20% should be invested into coins that have actual use-cases, a solid team, and a great roadmap. Don't invest into shit coins.

Sekhmet

11-23-2022, 05:14 PM

wow very informative blog thanks for your hard work and time typing it and collecting all this information's

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