The Evolution of a Crypto Collector - Crypto #5

The Evolution of a Crypto Collector - Crypto #5

Publish Date
Sep 19, 2021
As you engross yourself within the world of cryptocurrency, you discover more and more. Indeed, that is a large part of the appeal, for me at least! Naturally, it is also undergoing rapid evolution as well, which keeps you on your feet.

Level 1: Starter

For most, you'll start by experiencing cryptocurrencies through a Robinhood or a Coinbase account. These experiences are relatively static, and akin to buying a stock in a brokerage account. Unintimidating, controlled, quick and easy.

Level 2: Intermediate

The next step is to realize that there are better exchanges out there with more options as far as what cryptos you can buy, lower fees, more anonymization, and more... if you buy elsewhere. Kraken and Binance US still follow KYC ("Know Your Customer") rules that mean that the US government will be aware of what you are doing. But again, you have some more options on what to buy!
Everything we've spoken about thus far are exchanges. They are where to go when you want to buy and sell crypto. While they allow you to store cryptocurrencies there as well, they are not designed for that purpose. Indeed, they are an attractive target for hacking because they hold so many assets. So eventually you will want to move your money off and into a wallet of some kind. A wallet is, quite simply, a place where you put your cryptocurrencies (aka just like a real wallet). This could be a browser extension, an iPhone app, a standalone computer application, or a USB-like device. But moving the money off an exchange and into a wallet is more secure and lets you do more cool things with your assets.

Level 3: Advanced

The next level is to go decentralized: use your software (or hardware) wallet and start interacting with Dexes (Decentralized EXchanges). These are the wild west of crypto & finance. You can trade A for B, all sent to and from hashed identifiers established with just a password: no e-mail address is even associated with the account. Now in practice, well, this still could be tracked back to you because any blockchain is a public ledger.

And Beyond!

Now, there are currencies where the nature of their network does obscure your identity. You can uses these dexes to buy Monero (XMR), ZCash (ZEC) or Secret (SCRT). Such money can't be traced because the addresses to the wallets are encrypted as well (in short). I, of course, don't have any of these, but it would be next to impossible to prove that I did without my permission.
You can also move any of these currencies on to a "hard wallet" which is a fancy name for a USB flash drive. The main benefit of this: it can't really be hacked.. as the wallet would generally not be connected to the internet. That contrasts to a web-managed service (inherently connected to the internet and thus a potential target for hackers), or a software wallet (that could be hacked if your computer was the target of a computer virus).
Now, what this intersects with is our topic for next time: how to generate yield on your cryptocurrency holdings. Some offerings are available on centralized exchanges like Coinbase and Kraken. Other options open up by using wallets or adding your assets to these Decentralized exchanges... basically there's a bunch of cool shit you can do if you are willing to explore and have a decently high risk tolerance.