Warning: don’t risk money you can’t afford to lose. What I write here is for your information and not financial advice.

Unbelievable gains (5x in a few months) have triggered significant interest in cryptocurrency. Meanwhile, rapid money printing (~35% of US dollars were printed in the last year) has raised fears about inflation, while high stock prices despite low earnings for many companies has fueled concerns about traditional investment. Cryptocurrency offers easier storage, movement, and liquidity compared to gold or other investments. Thus, more people than ever are looking to cryptocurrency to invest/store wealth and potentially for sending payments.

Many folks wonder where to begin. Here’s your guide from an interested layperson. (Disclosure: these are referral links that typically pay both of us a bonus if you use them to sign up).

What coins are out there?

  • Stablecoins. (USDC, USDT, Dai). These are pegged to the value of the dollar. They are convenient for moving money around and can earn you very high interest payments (from 2 to upwards of 70%), but their value isn’t going up unless the dollar does.
  • Bitcoin (BTC, XBT). The grandfather of all coins. Considered a major store of wealth, easily traded for almost any other coin, and easy to move around. The rest are “Altcoins.”
  • Ethereum (ETH). A full-featured coin that can run contracts. Currently supports most of the exciting projects in the space, like decentralized finance (DeFi) and non-fungible tokens (NFTs). However, transaction costs (“gas fees”) have risen significantly, often running $30-$60 per transaction, and they may lose out to other coins like BSC or DOT in the future depending on how things play out. Many “tokens” run on ETH, including some big ones like USDC and UNI.
  • Litecoin (LTC). Classic, “lightweight” coin for quickly and cheaply moving funds around and testing features for BTC.
  • Privacy-focused coins like Monero (XMR), ZCash (ZEC), Dash (DASH), and some lesser-known entrants like BEAM and Verge (XVG). These solve some issues with the other major coins.
  • Centralized projects. These are often frowned upon by the cryptocurrency community, since they are controlled by a small set of people and have single points of failure. Stellar (XLM), Binance (BNB), and Ripple (XRP) are big examples.

What’s the move?

  1. Buy cryptocurrency on an exchange.
    • Coinbase is one of the biggest, most well-known, easiest to use, and most secure. They offer some free coins (over $100 worth) if you watch short educational videos, answer quiz questions, and/or refer friends. Coinbase fees are really high at 2-3% or so per transaction, and they also seem to mark up the prices of cryptocurrency when you’re buying. If you have a Coinbase account, however, you automatically have a Coinbase Pro account too, however. Coinbase Pro has some more advanced trading features and isn’t as easy to use for beginners. However, the fees are much lower (almost 10x lower).
    • BlockFi (see interest section below) can be used to buy coins directly. They claim no fees on trading, but they mark up prices a tiny bit so they can make a bit of money on trades. A limited set of well-curated assets is available.
    • Kraken is a well-respected stalwart with a few more altcoins and compettitve interest rates on coins you stake.
    • Gemini is a secure, well-regulated exchange run by the Winklevoss twins.
    • KuCoin is a large, full-featured Singapore-based exchange with tons of coins and opportunities to earn interest by lending and staking (USDT offers a remarkable 70% APY for lending, though typical coins are 3-15%).
    • Uniswap is one of the largest and oldest places to exchange brand new decentralized finance (DeFi) coins, and to earn fees on them by “yield farming.” They gained a lot of respect by “airdropping” 400 of their token (UNI) to their users, which was worth $1,200 at the time and nearly 10x that amount now. Though other platforms are trying to improve on them by reducing fees (look out for Loopring, SushiSwap, PancakeSwap, and the aggregator 1Inch), this is often the go-to for these hot coins. The easiest way to use it is to have a MetaMask Chrome extension wallet to hold your assets in.
    • Honorable mentions: TradeOgre (lots of smaller coins), OkCoin (earning on Stacks (STX)).
  2. Get interest on your coins.
    • BlockFi pays high interest rates (often 5.5-8.6% APY, paid monthly) on coins or cash equivalents like USDC. They can afford to do this because they are lending crypto for interest and probably doing lots of aggressive trading on their end. They are relatively new, but considered reputable and secure. There is some risk with services like this (risk and reward go together), so I don’t recommend putting the majority of your crypto assets here.
    • Celsius is another major player, but only offers a mobile app.
    • Some exchanges pay you most of the interest you would get for “staking” your coins. They do it for you to make it simple and lower the minimum amounts required.
      • Coinbase pays relatively low rates — 5% on Cosmos (ATOM), 6% on Algorand (ALGO), 4.63% on Tezos (XTZ), 2% on Dai, and 0.15% on USDC. Coinbase Pro doesn’t pay interest. If you buy coins on Coinbase Pro to save on fees, transfer them to Coinbase (free/instant withdrawal, works seamlessly) to get the interest.
      • Kraken has better rates and supports more coins — 7% on Cosmos (ATOM), 5.5% on Tezos (XTZ), a nice 12% on Polkadot (DOT) and on Kusama (KSM), 9% on Kava and on Flow, and 5-12% on ETH (which can be locked up for ETH 2.0).
      • KuCoin has even more assets and good rates in flexible “Soft Staking.” Extremely high interest rates on USDT (70% or more).
  3. Keep your coins safe.
    • Set up security features like 2-factor authentication on all exchanges.
    • Minimize the amount of coins you store on exchanges.
    • The safest setups are official wallets on computers with little or no connection to the internet, or paper wallets (long term; make a few copies and store in multiple locations in case of loss).
    • Watch out for scams like sketchy paper wallet generators and unofficial software. If you download any software, it’s good practice and not too difficult to verify checksums (like SHA-256 or MD5) if the website provides them, which makes sure that no one has tampered with the files.
    • Watch out for the oldest scam in the book — anyone offering to take some crypto from you and send you more in return is not going to send you anything!
    • Be careful what websites you go to. Check the address to make sure you are on the right exchange and that it’s secure. People sometimes set up websites with common mispellings or send out sketchy links.
    • Never share your private keys or seed phrases for wallets with anyone. It’s best not to store them on anything that connects to the internet — write them down carefully, or store on unconnected devices.
    • Hardware wallets are good, but there are some glitches and plenty of stories of people locking themselves out.
    • Software wallets can be okay. Full wallets often require you to download entire blockchains (several GB), but are a good way to support projects you like. “Light” wallets don’t. Certain wallets allow you to keep many types of coins in one place —ZelCore is my favorite choice in this area, and is very secure and easy to use.
    • Don’t keep your eggs in one basket!

What coins should I buy?

In my opinion, you should prioritize Bitcoin (majority of your assets), and keep lesser amounts in the major altcoins (ETH, LTC, UNI, pretty much anything on Coinbase) and coins that allow staking/earning interest (XTZ, DOT, ATOM). From there, throw some money into hot DeFi projects. A great strategy is to see if Coinbase is about to list something (it pops up on Coinbase Pro before they start trading, or they blog about it), then buy some up on Uniswap before they start. This was a great way to snag NU or GRT before they quickly pumped ~400% each. Other assets I have my eye on are STX and B20, but you may be somewhat late to the game on these.

How do I research coins? How do I learn what’s hot?

Check Coinbase to see what’s being listed (currently, Sushi, MATIC, and SKL) and see if you can buy it cheap elsewhere before it pumps). Look up coins ($ then the symbol, like $BTC) on Reddit, Google, or Twitter. Get basic stats and charts on CoinMarketCap or CoinGecko, and check out the coin’s website (taking a look at their White Paper is smart if you have the time). Look for smart Twitter accounts, not just some moron shilling the same coins. Think what you will of the name but @WallStPlayboys are right 90% of the time, and you can go from there.

Addendum: Can I “mine” to become a millionaire?

Probably not. Mining means you are using your computing power to support a network, which pays you a small amount of their coin as a reward. It uses a lot of electricity, but it can be a profitable way to earn a coin gradually if you have the right equipment and pick coins wisely. It’s easiest to get in if you already have a high-end gaming PC and cheap electricity. NiceHash is easy, but has security risks, so it may be best to mine ETH or other major coins on your own. Every now and then, miners can get into brand new coins before anyone else can get their hands on them, but lots of projects end up being scams or withering away.

If you want your computer to make money for you, you are often better off leaving it running videos from Swagbucks and Gain.gg; $0.25-$1 a day each (and the latter can cash out directly to crypto).

One thought on “Cryptocurrency: Making money with Bitcoin, Ethereum, NFTs, DeFi, and more

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