Academy

The crypto world, with all of its information, can be overwhelming. Here, we’re
solving this dilemma for you, by making crypto accessible and understandable.
Complex theory made easy, and step-by-step how-to-guides, will help you navigate
through the opportunities in the crypto space. This book helps you to start your
journey.

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 CHAPTERS
1. The Basics
1.a. Introduction to Bitcoin and its Revolutionary Properties Page- 6
By now, you’ve probably heard a lot about Bitcoin and its potential to transform the world we
live in. But how will it do that? What is so special about it?

1.b. Fiat Money vs. Bitcoin Page- 15

We live in a world where a lack of control over our money has become the standard. Currencies
around the world are characterized by year over year inflation as their purchasing power
continually reduces.

1.c. Answers to Common Criticisms of Bitcoin Page- 27

Over the years, there have been several misconceptions about Bitcoin and its operation.

1.d. What is Ethereum? Page- 36

Ethereum is a blockchain-based operating system that facilitates the development of smart
contracts and decentralized applications

1.e. What are Altcoins? Page- 44

Alternative coins, typically shortened to “altcoin” is a term used to describe all other
cryptocurrencies apart from Bitcoin.

1.f. Cryptocurrencies and the New Frontiers Page-60

Cryptocurrencies were introduced to the world as digital currencies, but they’ve quickly evolved
beyond that.

1.g. Frequently Asked Questions (FAQ) About Using Crypto Page-68

If you’re new to the world of cryptocurrencies, you may have plenty of questions. To help you
get started, we’ve put together some questions that newbies frequently ask about cryptos.
2. Trading Strategies
2.a. Trading Basics Page- 76
In the context of financial markets, trading involves the buying and selling of assets to earn
profits.

2.b. What is Technical Analysis? Page- 83

Technical analysis involves using past market data (price action and volume) to predict how the
price of a stock, currency pair, or cryptocurrency token will move in the future.

2.c. Technical Analysis Advanced Page- 92

The technical analysis of a financial asset typically starts from its price. Subsequently, the
trader tries to identify short-term and long-term trends, using resistance, support, and trend
lines to see if the asset is bullish, bearish, or in a range.

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 2.d. Crypto Trading Strategies Page-99
There is an abundance of trading strategies that you can utilize to navigate the
cryptocurrency markets and achieve gains.

2.e. Trading With Leverage Page- 109

Before we begin this lesson, please understand that trading with leverage is not meant for
beginners or people who don’t have a firm grasp of the basics of trading.

2.f. 10 Common Trading Mistakes to Avoid Page- 116

Buy low, sell high – this is the most significant rule of trading. If you do this 70% of the time,
regardless of what the market throws at you, you will be successful trading cryptocurrencies.
39. DeFi
3.a. What is DeFi? A Guide to Decentralized Finance Page- 122
One of the most revolutionary aspects of blockchain technology is that it enables
decentralization.

3.b. Decentralized Exchanges: All You Need to Know Page- 130

Decentralized exchanges (DEXs) have arguably become one of the most significant
applications of blockchain technology.

3.c. How to Set Up Metamask: a Comprehensive Guide Page- 140

In our lesson on cryptocurrency wallets, we briefly mentioned Metamask. Founded in 2016
by Consensys Metamask has become one of the most popular options for accessing
decentralized applications (DApps),

3.d. DeFi Investment Strategies Page- 154

Decentralized Finance (DeFi) is rapidly changing finance as we know it. This financial
revolution has opened the doors to many new opportunities for wealth creation
among crypto market participants.

40. Earn, Without Selling Crypto

4.a. How to Earn Passive Income Through Crypto Staking Page- 163
The crypto industry keeps on expanding, and one of the best advantages of its development
is that people get access to different earning opportunities.

4.b. DeFi Tools: Liquidity Pools and Yield Farming Page- 182
In terms of maximizing the earning opportunities in the crypto market, yield farming has
been one of the go-to strategies for investors.

4.c. A Guide On How You Can Earn From Promoting Crypto Page- 195
In this guide, you will find out how to earn by promoting crypto. Many projects spend a
significant part of their budget on marketing and promotions, and you can benefit from that.

4.d. Everything You Need To Know About Airdrops Page- 201

It’s hard to find anyone who doesn’t like free stuff. Even in the crypto space,

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 those who don't have that much to invest patiently participate in events with prizes and
giveaways, hoping to win and finally own the digital assets they want.

5.NFT
5.a. What are NFTs? Page- 210
NFTs are taking the world by storm. You’ve probably seen updates from someone famous on
the internet claiming they’d just purchased their first NFT.

5.b. A Guide to Minting and Trading NFTs Page- 220

The NFT sector provides an opportunity for anyone to register their assets on the blockchain
and get a non-fungible token in return.

5.c. NFT Success Stories: Bored Apes, CryptoPunks, CryptoKitties Page- 228
Non-fungible tokens (NFTs) are mainstream now, so this may be difficult to imagine.
But there was a time when only a small minority were familiar with terms like Bored Apes,
CryptoPunks, and Meebits.

6. Go Deeper: more theory

6.a. IDO, IEO, ICO: Explained Page- 236
Many cryptocurrency enthusiasts are on a never-ending search for their next big investment
with the greatest opportunity for growth.

6.b. DAO Explained Page- 247

DAO is an acronym that stands for Decentralized Autonomous Organization.
As the world continues to evolve and implement new blockchain based applications, DAOs
have established their potential to revolutionize organizational structures as we know them.

6.c. Crypto Glossary Page- 255

A – Z of the Most Important Terms in Cryptocurrency and Blockchain

7. Buying and Selling Crypto

7.a. Centralized Exchanges: All You Need to Know Page- 269
During the first years after Bitcoin’s invention, it was fairly complicated to buy and sell the
new digital asset.

7.b. How to Open an Account on a Centralized Exchange Page- 276

If you attended the last class, then you've probably learned of the many crypto exchanges
available on the market. So, what happens next?

7.c. How To Buy And Sell Cryptocurrencies Page- 285

After learning how to open an exchange account, you're now ready to buy your first
cryptocurrency.

7.d. Keeping Crypto Safe Page- 293

In the last lessons we discussed cryptocurrency exchanges and we mentioned that one of the
reasons people use them is to store their crypto.

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8. Investing Strategies
8.a. An introduction to Cryptocurrency Investment Strategies Page- 304
Just like investing in stocks, real estate, or any other traditional asset class, investing in crypto
requires a well-thought-out plan.

8.b. How To Build A Portfolio Page- 311

As we have seen in the previous section, the composition of your portfolio will largely
depend on your unique situation.

8.c. How to Find Projects With Long-Term Value Page- 323

We briefly mentioned a couple of important aspects to look at when researching
cryptocurrency projects in “Investment Strategies”. In this lesson, we’ll dive a little bit deeper
into those.

8.d. What is Fundamental Analysis? Page- 330

There are two ways investors can analyze an investment to find out whether it’s an attractive
opportunity or something to avoid: technical analysis and fundamental analysis.

8.e. How To Avoid Common Mistakes in The Cryptocurrency Market Page- 343
However promising the cryptocurrency market is, it remains speculative and volatile. We
can never eliminate the risks, but there are several ways we can try to minimize them.

8.f. Must-know Investing Tips Page- 352

The cryptocurrency market is full of opportunities and promising projects. Investing in
this market, however, doesn’t come without risk.

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 1. The Basics

1.a. Introduction to Bitcoin and its

Revolutionary Properties

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In this class, you’ll learn the following:

 The origins of Bitcoin

 What is Bitcoin? What does it do?
 How blockchain technology, bitcoin mining, and decentralization works
 What makes Bitcoin truly revolutionary, and
 What to expect from Bitcoin in the future

By now, you’ve probably heard a lot about Bitcoin and its potential to transform the
world we live in.
But how will it do that? What is so special about it? And why is Bitcoin regarded as one
of the greatest innovations of the 21st century?

The origins of Bitcoin

For a long time, people have suffered from the injustices of the traditional financial
system. Banks take a percentage from every transaction, charge fees for maintaining
an account, and freeze customer funds at will.

Additionally, they often take hours to process payments and there are maximum
withdrawal limits on most accounts. It’s really a framework plagued with inefficiencies
and hidden costs. And until the advent of digital currencies, we accepted it as the
standard. Another big issue with the centralized financial system is transparency.
Customers have very little information about financial institutions and how profitable
their investments are; people don’t even know where their funds go once it’s
deposited at the bank. A handful of experts realized that something needed to change,
but the technology at the time was not advanced enough to create a solution. “I don’t
think we shall ever have good money again before we take the thing out of the hands of
the government…all we can do is by some sly roundabout way, introduce something
they can’t stop.” – F.A. Hayek, Nobel Prize-winning Economist.

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However, when the Digital Revolution started in the late 20th century, it created new
opportunities for innovation and disruption. Slowly, the world began to transition from
analog to digital. The digital computers and record-keeping applications developed
during that period laid the groundwork for the technologies that birthed Bitcoin.

A solution finally emerged during the 2008 financial crisis. This is particularly ironic
because many argue that this crisis was caused by the aforementioned injustices of the
traditional financial system. Anyway, an anonymous programmer (or group of
programmers), acting under the pseudonym of “Satoshi Nakamoto,” released a white
paper called “Bitcoin: A Peer to Peer Electronic Cash System.”

The Bitcoin white paper introduced the concept of a global digital currency, free from
the monetary policies of central banks. For the first time ever, citizens around the
globe would be able to take control of their money. It would be completely
decentralized, with no financial intermediaries or institutions. One year later, the concept
became a reality when the Bitcoin network was launched as open-source software, and
the first 50 Bitcoins were created.

What is Bitcoin? What does it do?

So, what exactly is Bitcoin?

Bitcoin (BTC) is a digital currency that has no central authority. Its network is public,
permissionless, and completely transparent.

BTC can be transferred easily between people, payments are completed quickly, and users
have complete control over their funds. Bitcoin can be used as money to pay for goods and
services, but it is mainly used as a store of value and long-term investment. It is optimal as a
store of value because the Bitcoin network was created with a hard-capped maximum supply of
21 million. While central banks around the world can print more fiat money and cause their
currencies to lose purchasing power steadily, Bitcoin will have a limited supply. Given this

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guarantee of scarcity, many advocates argue that Bitcoin not only retains value better than
central currencies, but also better than gold.

The belief is that one day, BTC may become a well-recognized alternative to gold as the
foremost store of value. By all accounts, Bitcoin is a groundbreaking invention. And since its
release, it has changed the concept of money and how people interact with it. However,
moving away from the currency, another important aspect of Bitcoin is its underlying
technology.

The platform was built exactly as Hayek envisioned when he talked about an alternative to
traditional money. Backed by the revolutionary blockchain technology, the Bitcoin network takes
control out of the hands of governments and central authorities. It is almost impossible for
them to shut it down, and the system was designed to be immune from manipulation,
tampering, and bribery. How does the blockchain accomplish all these? We’ll discuss that in the
next section.
How blockchain, Bitcoin mining, and decentralization works

We understand that blockchain technology, mining, and the Bitcoin network are concepts many
people may not be familiar with. So, here’s an analogy that breaks it down using terms that are
easy to understand.
If you get confused while reading the latter parts of this section, revert to this explanation to
find your bearing.

Here it goes: Think of the Bitcoin network as an online bank. But this time, you own/manage
your bank account through a wallet application on your phone. The bank has a ledger that
keeps a record of all transactions and the balance in every wallet to ensure no one cheats the
system. The currency used in this system is not dollars or euros but BTC.

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So, every time you send BTC to another user, tellers verify that the amount really left your
wallet. After confirming the payment, they send the details to fillers that add the transaction to
the ledger and update the receiver’s account. The fillers also have an added responsibility – they
keep a copy of the ledger on their computers. There are thousands of these fillers spread
worldwide, and no one knows who or where they are.

However, in this framework, the bank has no official staff. As a result, those in charge of
confirming payments (tellers) and adding them to the ledger (fillers) are account holders like
you. If they do a perfect job, the tellers get rewarded with some BTC. Essentially, the ledger is
the blockchain, the tellers are the miners that validate payments, and the fillers are the nodes
that verify transactions and keep a copy of Bitcoin’s ledger.

The network is decentralized, i.e., it has no central point of authority because the ledger is on
thousands of computers and not in a central location. Please note, however, the above is an
oversimplification that attempts to give you a big-picture overview. To truly understand the
magnificence of Bitcoin’s system, you still need to read the subsections below for a more
accurate and in-depth description:

How blockchain technology works in technical terms

A blockchain is a decentralized and distributed ledger that keeps records of transactions across
an entire network of computers. Consider a blockchain as a chain of blocks; the blocks get filled
up as they record transactions, and when an old block is filled, a new one is created (or mined).
Now, once transactions are stored in a block, they can’t be edited and they remain there forever.
Because of this particular quality, records stored on a blockchain are time-stamped, and almost
impossible to change or delete.

The blockchain is the infrastructure upon which the Bitcoin network exists, and it does
three key things for the currency. One, it keeps a ledger of all transactions. Two, it ensures all
new transactions are verified and added to its ledger (the blocks). And three, it facilitates the
creation of new Bitcoins. Here’s how it works in practice: The Bitcoin software currently runs on
thousands of computer systems around the world.

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These devices constitute Bitcoin's network, and they are called “nodes.” These nodes are a key
part of the blockchain’s framework. They are connected to each other and constantly exchange
data amongst themselves to stay updated. Nodes are responsible for many things, but their
most important tasks are keeping an updated copy of Bitcoin’s ledger, verifying new
transactions, and adding them to the chain.

Whenever a Bitcoin transaction is completed, the network receives details about which wallet
sent the BTC and which received them. The payment is then validated by a mining operation
and if found legitimate, the data is sent to the nodes. The nodes also verify the transaction,
through a complex operation called proof-of-work. Once the transaction is confirmed, it’s added
to the bitcoin ledger. So, the ledger basically keeps a record of transactions. Because it is backed
by blockchain technology, the framework is transparent, secure, and immune to tampering.

How mining works

Now, about mining. Mining is the process through which BTC transactions are validated and
added to the ledger. It also leads to the minting of new Bitcoin. The mining operation happens
after a payment activity is initiated on the Bitcoin network and before it’s sent to the nodes.

Here’s a simple explanation that explains mining: Whenever a transaction is initiated, Bitcoin’s
algorithm generates a complex mathematical equation. This puzzle aims to validate that the
payment really occurred and users aren’t trying to trick the blockchain. As a result, solving the
equation requires vast computational power and miners use sophisticated computer systems to
find a solution and confirm the transfer of Bitcoins.

Once confirmed, the transactions are added to a block, verified by nodes, and the block is added
to the ledger (or the blockchain gets updated). About 500 transactions are needed to complete
a block. And each time a block gets complete, new Bitcoins are created and given to the miners
as a reward for solving the puzzle and validating transactions.

The complex and energy-intensive process required to create new Bitcoin supports its
value proposition. This is not just money being printed out of thin air, but a currency
that’s backed by cryptography and digital energy. Now that you have an understanding of

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blockchain technology and mining, it’s time to shed more light on a word you must have heard
several times in connection with Bitcoin and cryptocurrency: decentralization.

What decentralization really means

Remember, the Bitcoin network exists on thousands of nodes that are distributed all over the
world and maintain a copy of Bitcoin’s ledger. As a result, there is no central point of authority
(or failure). This feature is called decentralization, and it’s perhaps the most crucial attribute of
Bitcoin and blockchain technology. Because of it, no authority can shut down the Bitcoin
network, tamper with the ledger, or hack into the framework.

No entity can remove wallets from the network, freeze funds, or exercise control over Bitcoin
owners. Bitcoin and many other cryptocurrencies are only viable today because of
decentralization, and this attribute is only made possible through blockchain technology. So far,
we’ve spent time explaining how Bitcoin works. And along the way, you may have gained an
insight into how powerful the technology really is.

But in case you still have some doubts, this next section will dispel them. Below, we outline why
Bitcoin is revolutionary and how it is changing the world.

What makes Bitcoin revolutionary?

Before Bitcoin, banks had complete control over the circulation of money. By
extension, they controlled all related industries like insurance, credit and loans, and
investments. This restricted access to a select few, and millions of people missed out
on opportunities to create wealth.
Then comes Bitcoin, a peer-to-peer network that seeks to give control back to the
people. And within years of its release, an entire ecosystem developed around it.
Currently, hundreds of cryptocurrencies are disrupting the traditional financial sector,
providing equitable access to loans and investments. Bitcoin started this financial

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revolution, and it has transformed how the world perceives money and value. But that’s
not all.

1. The Bitcoin network is completely democratic. There is no leader, and power belongs to
all users. It is arguably the first public and permissionless digital network in the
world.
2. Bitcoin introduced blockchain to the world. On its own, the blockchain is a
transformative technology - and in a short period, it has led to the creation of
thousands of disruptive solutions, including NFTs, smart contracts, decentralized
finance, and many others.
3. Because of Bitcoin and the applications developed from its underlying technology, anyone
in the world can gain access to the global economy, take out loans, invest in
profitable assets, and even raise funds for their ventures.
4. Due to its limited supply, only 21 million BTC can be created. As a result, Bitcoin
may continue to increase in value and purchasing power. In comparison,
dollars and fiat currencies are printed without limitation, and the resulting inflation
reduces their value every year.
5. Just like the Digital Revolution sped up the development of Bitcoin and
Blockchains, many experts believe these technologies will, in turn, speed up the
development of an interconnected web, Web 3.0.

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What to expect from Bitcoin in the future

What should you expect from Bitcoin in the future? Currently, there are an estimated 106 million
Bitcoin owners. That may seem like a lot, but it’s only 1.3% of the world population. The general
belief is that Bitcoin has not reached critical mass, and there’s room for it to grow.

As more people learn about Bitcoin and get involved in its trading, holding, and investing, the
cryptocurrency will keep thriving. To this end, it’s helpful that new applications like non-
fungible tokens (NFTs), decentralized finance (DeFi), and the Metaverse are being built
around cryptocurrencies. Bitcoin is the foremost crypto, so, any growth in these altcoins is
expected to positively affect its growth and value. In conclusion, Bitcoin and its underlying
technology have touched all major global sectors. They inspired transformation globally, from
finance to healthcare, logistics, manufacturing, entertainment, agriculture, and the arts.

In just over a decade of its release, it has given rise to a trillion-dollar crypto industry with
thousands of disruptive applications. And that’s just its sociological impact. As a store of value,
Bitcoin has returned incredible gains to investors. It has multiplied in market price consistently,
outperforming all other financial assets by a large margin. Yet, it’s still growing and remains one
of the most profitable assets in the world today.

Just as the internet revolutionized how we communicate and access information, Bitcoin is on
track to do the same for how we interact with money and value. Bitcoin has changed the world
as we know it in just over a decade. And from all indications, the revolution is just getting
started. Was this class informative enough to help you understand Bitcoin, how powerful it is,
and the potential it has to change the future? In the next one, we highlight the differences
between fiat money and crypto. Here’s something to keep in mind – since 1913, the US dollar
has lost 96% of its purchasing power!

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 1.b. Fiat Money vs. Bitcoin

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In this class, you’ll learn the following:

 What fiat money is

 Why governments use fiat money
 The problems associated with fiat money
 How Bitcoin attempts to solve these problems
 The role altcoins play in solving these problems

We live in a world where a lack of control over our money has become the standard.
Currencies around the world are characterized by year over year inflation as their
purchasing power continually reduces. Citizens are accustomed to storing their money
in banks, which have withdrawal limits and are closed after 5 pm on weekdays as well as
on weekends. We are limited to subjective borrowing rates and sometimes even denied
them based on how we have acted in the past.
These are the plaguing characteristics of fiat currency which, until the advent of
Bitcoin, have been accepted as a normal part of life. Today we will challenge these
characteristics in comparison to Bitcoin to define the differences between fiat money
and cryptocurrency.
Furthermore, we will analyze why Bitcoin has become such a popular choice of money
since its invention in 2009.

What is Fiat Money?

Dollars, pounds, and euros are just some examples of fiat currencies and you probably
use a fiat currency on an almost daily basis. Simply put, fiat currencies, like the
aforementioned ones, are money because governments say they are.

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Fiat literally means “an authoritative order’’ and in this case, the order is that your
banknotes have value. See, a fiat currency doesn’t actually have any intrinsic value.
Whereas many currencies in the past were backed by commodities such as gold or
silver, fiat currencies aren’t. Their value is completely arbitrary and comes from the
government’s stamp of approval; the value of a dollar or any other fiat currency comes
from the fact that the government declared it legal tender.

Since fiat money is legal tender we are obliged to pay taxes in this government-issued
currency. It is often said that the backing of the USD, for example, is the U.S. military
(this is how a government can enforce its decree). The history of fiat currencies goes all
the way back to the Chinese Yuan dynasty, but it took until the seventeenth century
until it was adopted in Europe for the first time. Marco Polo (1254 - 1324) failed to
convince contemporary Europeans to use the Chinese model after he returned from his
travels. Europeans would continue to use currencies backed by precious metals for
centuries, often in the form of promissory notes that were redeemable on demand.

The largest and most prominent fiat currency, the U.S. dollar, has existed for over five
decades. Becoming a fiat currency only after U.S. president Nixon took it off the gold
standard in 1971, the USD is one of the oldest fiat currencies around. Fiat currencies
tend to have short lifespans because of arbitrary inefficiencies that have historically
often led to hyperinflation.

The Reasons Why Governments Use Fiat Money

Central banks are responsible for supervising and regulating banks as well as providing
financial services liquidity (lender of last resort). They are also expected to keep
unemployment low, the currency stable, and inflation manageable. They have a few
monetary tools at their disposal to help them achieve this:
 Reserve requirements
 Interest rates
 Money supply
This is relevant because a central bank can only use these monetary tools because of
the fiat money system. Bitcoin’s inflation rate, for example, is coded into the protocol
and can’t be altered. Arbitrary fiat systems, however, give central banks control over
interest rates, reserve requirements, and the money supply.

Now, you might think that fiat is indispensable to keep the economy going strong, but
central banks around the world have time and time again failed to achieve their goals.
On top of that, central bank policies are often said to:

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  Cause boom and bust cycles
 Distort incentives in the economy
 Destroy market price discovery
 Create malinvestments

Another common criticism of central banks is that their policies increase wealth
inequality, more about this in the next section. Many of the problems with fiat currency
that we’ll discuss in this lesson are either exacerbated or even created by central banks,
so keep this in mind while going through the next section.

The Problems With Fiat Money

Many of the major fiat currencies we know today used to be directly or indirectly backed
by gold. They only became fiat when the peg with gold was abandoned by President
Nixon in 1971. As a consequence of this action, many governments now had a
possibility they didn’t have before: they could print money infinitely. And there we
have our problem.

With the peg to gold gone, governments were now in full control over the money
supply and began stimulating the economy by printing more money. It's worth noting
that printing money in modern times simply means a few numbers being added into a
central bank excel sheet. It sounds great in theory: the government adds money into
circulation when the economy is facing difficulties and extracts money from the
economy when it’s overheating.

What we have seen in reality is that central banks around the world have been
continuously printing money and keeping interest rates down since the notorious dot-
com bubble in 1999.

A Melting Ice Cube

So, what is the big deal? Well, the more money a central bank prints, the less
valuable the money that’s already in circulation becomes. With the number of
products and services in the economy staying at the same level, it will require more
money to afford them.

This is referred to as inflation, which is widely considered to be the biggest weakness of

fiat money. To be considered valuable, something has to be scarce; think of a
precious metal like gold. It costs a lot of effort, time, and money to mine gold and as a
result, it has a very low and predictable inflation rate. No wonder gold has been widely
considered to be valuable for about the last 5,000 years.

Unlike gold, your dollar or euro does not hold its value because of the reasons we have
mentioned before. It’s for a reason that MicroStrategy CEO and crypto-enthusiast

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Michael Saylor compared fiat to a “melting ice cube.” Below is a chart that shows the
effect of inflation on the purchasing power of a dollar between 1913 and 2011.

Hyperinflation
In a worst-case scenario, unrestrained money printing can lead to a phenomenon called
“hyperinflation’’. When inflation runs rampant and is above 50% per month, it is known as
hyperinflation and we have seen it occurring throughout history time and time again.
Unfortunately, hyperinflation is not a phenomenon of the past as plenty of countries are going
through a hyperinflationary period as we speak. Without diving too much into history (enough
hyperinflation in the present to talk about), we can’t skip over what happened in Weimar
Germany (1918-1933).

Since the short-lived republic couldn’t meet the reparation payments after WW1, the
government started to print money like there was no tomorrow to meet its obligations. It
doesn’t take a genius to figure out what happened to the value of the Reichsmark(Germany’s
currency at the time). After a few years of exponential inflation, people had to pick up their
salaries with wheelbarrows, and piles of cash were used to warm homes instead of buying
goods. Perhaps unsurprisingly, some historians and economists argue that it is hyperinflation
that eventually led to Hitler’s ascent.

Starving Billionaires
Far from being a thing of the past, hyperinflation also rears its ugly head in the present. A few
prominent examples of countries that have experienced (and are still experiencing)
hyperinflation in the 21st century are Venezuela and Zimbabwe. It’s not uncommon to find
piles of cash next to roads in Venezuela and by the number of billionaires Zimbabwe has, you
would think the country is the biggest economic success in human history.

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The truth, however, couldn’t be any different. As governments continued to print money, more
and more zeroes needed to be added to the banknotes. One way central banks generally
attempt to fight inflation is by increasing interest rates. This, however, has the potential to
cause a recession or, even worse, plunge an economy into a deep recession. Taking this into
consideration, it’s no wonder politicians prefer to kick the can down the road. Another country
that is fast on its way to join the unfortunate club of countries suffering from hyperinflation is
Lebanon. In the summer of 2021, the country experienced year-on-year inflation of close to
140%. It didn’t take long for people to take to the streets and start lighting banks on fire.

Cantillon Effect
Inflation has many negative side-effects, but one of them is called the “Cantillon effect’’, which is
not that negative at all for the wealthiest in society. Grossly oversimplified, the Cantillon effect
states that the distribution of money into the economy does not happen evenly. The closer
people are to the money printer, the more they tend to benefit from inflation. Now, that’s great
for about the top 1%, but not so much for the bottom 99% (as depicted in the chart below). You
probably remember headlines about the growing fortunes of wealthy celebrities and
entrepreneurs such as Jeff Bezos and Elon Musk during the Coronavirus pandemic. They saw
their fortunes grow while millions filed for unemployment, proving that the Cantillon effect is
still very much relevant today.

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Censorship
Another noteworthy disadvantage of fiat currencies is the fact that they aren’t
censorship-resistant. Fiat currencies are controlled by a single party and that single
party decides who is allowed to use it and who isn’t. If you happen to live in an
authoritarian country and you express your dissatisfaction, your government might use
its powers to cut you off from the financial system.
In other words, you need permission to use the financial system and essential
components of this system like commercial banks and brokers are at the mercy of
government regulators and supervisors. With about 97% of fiat currencies being digital,
having your bank account closed or frozen is akin to being barred from the
financial system.

Russia banning its citizens from withdrawing more than $10.000 in foreign cash during
the Russia-Ukraine crisis is one example of financial censorship. With the ruble
collapsing due to sanctions imposed on the country, limiting access to foreign currency
had a devastating effect on peoples’ savings.

Single Point of Failure

With the government having control over a nation's fiat currency, citizens are more or
less required to have faith in their government institutions to act in the best interest
of the people. We all know, however, that politicians and other officials are corruptible
and that means the money is too. This, in turn, often leads to mismanagement and
cronyism, further fueling economic inequality and exclusion. In addition, a single point
of failure means that your fiat money is vulnerable to malicious actors such as
hackers. Given the centralized nature of a fiat money system, people trying to
undermine it know exactly where they have to target it. Since most of us keep our hard-

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earned money in a bank account, it’s no surprise that banks are fending off cyberattacks
daily.

Sound Money Principles

Before we take a look at Bitcoin and cryptocurrency, it’s important to discuss something
we call “sound money”. To be considered sound money, money has to meet the
following characteristics:

 Durability (the money has to be durable)

 Scarcity (the money has to be scarce)
 Medium of Exchange (the money has to facilitate the trade of goods, for example)
 Divisibility (it should be possible to divide the money into smaller units)
 Portability (you need to be able to carry the money with you)
 Store of Value (the money should retain its value over time)

If you’ll read through the list, you’ll notice that fiat money is missing a few essential
characteristics and can therefore not be considered to be sound money. See, your euro
or dollar isn’t scarce because the money supply increases continuously due to money
printing. Without scarcity, fiat currencies are not a great place to store your wealth,
explaining why it lacks the store of value characteristic.

Bitcoin
Many of the problems with fiat money that we have discussed at the beginning of this
lesson culminated in the great financial crisis of 2008. As a response to this, a person
or group going by the pseudonym of “Satoshi Nakamoto” created Bitcoin.
We have gone over the history of Bitcoin and how it works in the first lesson. Here we
will focus on how Bitcoin and cryptocurrency solve some of fiat’s inherent problems.

21 Million
One of the most notable characteristics of Bitcoin is its scarcity: there will only ever be
21 million bitcoins. It is exactly this scarcity that explains why Bitcoin has shown to be
such a good store of value since its inception. While nearly all major fiat currencies have
suffered from rampant inflation since the start of the Covid-19 pandemic, Bitcoin
holders have seen their wealth increase in the years after the market crash in March
2020. Of course, that's a relatively short time period, but if we look at a chart of Bitcoin´s
inflation rate (below), we see that the number of bitcoins coming into existence will
sharply decrease over the next few years after which it stabilizes. Bitcoins can not be
copied or printed out of thin air like fiat but has to be mined. Since the number of
bitcoins being rewarded to these miners is coded into the protocol, the inflation rate of
Bitcoin is predictable. Having a predictable rate of inflation makes an asset appealing to
store value in for the coming years and/or decades. Since a fiat currency’s inflation rate

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is unpredictable and can change rapidly, investors and savers around the world have
been fleeing to sound money assets such as Bitcoin and gold to hedge against
government mismanagement and protect their wealth.

So, it's no wonder that countries that have been experiencing high rates of inflation have
seen the strongest growth in crypto adoption. Take for example Nigeria where inflation
hasn’t been below 10% since 2015. A survey taken by German database company Statista
revealed that 32% of respondents said they either used or owned cryptocurrencies.

Permissionless
We discussed earlier how the traditional financial system can exclude and/or discriminate
against certain people or groups of people. Bitcoin, however, is an open and permissionless
network: everyone who has an internet connection and a laptop or smartphone can participate.
You don’t have to ask anyone’s permission and the Bitcoin network doesn’t care about your
religion or political opinions: it is in fact completely neutral. Unlike the traditional financial
system, Bitcoin does not give priority to certain people and treats all participants equally no
matter what their background is.

Censorship-resistant
Every payment you make is in fact an expression of your preferences, whether you realize it or
not. By spending money in a certain way you express what your political views are, what your
religion is, or simply what you like to eat. In contrast to fiat transactions, Bitcoin transactions
can not be reversed or stopped. If you live in a free, democratic country and you’re used to
spending money the way you like, you’re probably not too worried about how censorship-
resistant your money is. However, there are hundreds of millions of people worldwide who live
in authoritarian countries where the government has strict control over the financial system.
Let’s take Belarus for example; since the government has full control over the financial system,
activists protesting against the regime of Lukashenko used Bitcoin to fund their activities.
People supporting the protests from abroad sent Bitcoin to Belarussians and the government
was not able to stop it.

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Worldwide
Have you ever tried sending a euro to Japan from a European country? It’s nearly impossible.
The traditional financial system has not adapted to the digital age as much as we’d like.
People who work abroad and send the money they earn back home to support their families
understand this problem very well. Even in the 21st century, it still costs a lot of time, effort,
and money to send money abroad. Companies like Western Union and MoneyGram charge
high fees and it can easily take up to a week for the money to arrive. Fintech companies have
been trying to address this problem, but they mainly just build on top of the legacy structure
already in place. Unlike the traditional financial systems, Bitcoin doesn’t know borders. When
sending a Bitcoin transaction, it doesn’t matter whether you’re sending bitcoin across the world
or to your neighbor. Your nationality simply doesn’t matter to the Bitcoin network, Bitcoin
doesn’t have a headquarter and isn’t established in any one country.

Cutting Out the Middleman

As described by Satoshi in the Bitcoin whitepaper, Bitcoin is a peer-to-peer network. This
means you send your transaction directly to the recipient without the need for an intermediary(a
bank, for example). By essentially cutting out the middleman, the high fees they usually charge
are also eliminated. This makes Bitcoin transactions much more affordable, but that’s not the
only benefit of cutting out the middleman. The Bitcoin network is up and running 24/7, so
you won’t have to wait the whole weekend for money to arrive if you send a transaction on
Friday. When sending Bitcoin from wallet to wallet, the average transaction takes anywhere from
ten to twenty minutes.

Transparency
Many critics of Bitcoin often like to bring up the argument that Bitcoin and other
cryptocurrencies are used to launder money and facilitate other criminal activities. We’ll debunk
this myth in the next lesson, but for now let’s focus on one aspect of Bitcoin which makes it a
terrible choice for criminals: its transparency. Every transaction ever made on the Bitcoin

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network has been recorded on the Blockchain: Bitcoin’s digital ledger. Contrary to popular
belief, Bitcoin is not anonymous. Bitcoin is pseudonymous: if you know who a Bitcoin address
belongs to, you can track all of a person’s Bitcoin transactions(from one particular wallet) with
Blockchain explorers like the one below.

Altcoins
There are over 15.000 different cryptocurrencies and many of them try to solve
problems existing in the legacy financial system. Some of them claim to solve problems
we discussed in this lesson better than Bitcoin and others focus on completely different
problems entirely. Decentralized Finance(DeFi) is a hypernym for peer-to-peer financial
services that operate on public blockchains and it’s actively trying to disrupt the financial
system as we know it. We'll lay out exactly what DeFi is in another lesson, but for now
just remember that DeFi is attempting to decentralize financial services such as
borrowing, lending, investing, etc. What Bitcoin is doing to money, DeFi is trying to do
to the financial services surrounding the money.   The aim here is to, once again, cut
out the middleman and make financial services affordable and accessible to as
many people as possible. Relevant to this lesson are the improvements DeFi is
supposed to offer when compared to traditional banks and other financial institutions.
Some of the most important ones are listed below:
 Global from the first day
 Better user experience
 Transparent code
 Interoperability
 Permissionless

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The following are a few examples of prominent DeFi projects trying to disrupt the
financial services industry:

 Aave (an open-source protocol for earning interest and borrowing assets)
 Compound (a leading lending protocol)
 Balancer (automated asset management and liquidity protocol)
 Uniswap (a decentralized exchange)
 Augur(a decentralized prediction market platform)

Conclusion:
As you can see, the possibilities are endless here and many of these projects are still
very much in their infancy. The second-largest cryptocurrency Ethereum is the
driving force behind many of these projects as they are often built on the Ethereum
network. However, Ethereum is facing competition from smaller and newer altcoins and
developers around the world are also working on making Bitcoin more suitable for DeFi
applications. You can read about these topics in the following lessons.

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1.c. Answers to Common Criticisms of
Bitcoin

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In this class, you’ll learn about Bitcoin and:

 Why it’s not a bubble

 Why it’s a great store of value
 The benefits it has over regular money
 How it promotes green energy
 How the network is constantly optimizing
 …and much more.

Over the years, there have been several misconceptions about Bitcoin and its
operation. Some of them come from people who don’t understand the technology
behind the cryptocurrency and are truly curious to learn more. But a handful of
criticisms originate from deniers who don’t believe in Bitcoin, and have been predicting
its death since it became mainstream. However, the Bitcoin network and community
grow stronger each year. It is not a fad or a bubble on the verge of busting. Instead, it
provides tangible value to millions of people and has inspired the development of
other digital currencies with real-life applications. Below, we highlight some of the
common criticisms of Bitcoin along with answers to help you gain a better insight into
the workings of the world’s foremost cryptocurrency:

1. Bitcoin is a bubble and it will crash soon

Every time Bitcoin increases in value, people say the currency is a bubble that’s on the
verge of crashing. Well, bubbles refer to an unsustainable increase in value that’s caused
by heightened speculation about an asset class. Many times, they are a product of
intense optimism surrounding a new tech innovation or wealth creation opportunity.
And while at some point at the beginning, Bitcoin may have been in a bubble, that’s no
longer the case. Bubbles are typically one-off events. They don’t last for decades

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like BTC has, with a user base that grows steadily every year. There have been
occasions where deniers say Bitcoin was dead because of downward cycles. But each
time, it comes back stronger. In 2011, BTC lost about 94% of its value in a bear market.
By 2012, it had rebounded with a 3,600% increase.

2. Bitcoin is too volatile

Bitcoin is indeed volatile, but with good reason. The digital currency has been around
for just over a decade, and it had to grow its valuation from zero to hundreds of billions
of dollars. Additionally, it is an emerging technology with a growing list of
applications, and no one knows exactly how impactful it will become. So, it is
understandable that BTC’s value will fluctuate in tandem with changing perceptions and
opinions about its future viability. Anyway, over the past three years, volatility has
reduced significantly. And it is expected to decline further as the Bitcoin network
approaches mass adoption. However, pending the time that happens, consider this
popular saying in the crypto community, “volatility is the price you pay for outsized
returns.”

3. Gold is a better store of value than BTC

People started using gold as a store of value about 6,000 years ago, and it served them
well for a long time. However, in today’s digital age, gold can no longer be regarded as
an optimal medium to store value. For one, it is not accessible to everyone. It’s also
complicated to transport because of its weight and vulnerability to theft. Furthermore,
gold doesn't retain value nearly as effectively as Bitcoin. Using a 5-year comparison,
gold has increased by 65% while BTC has grown in value by 3,167%*. Nonetheless,
this is not to suggest that all Bitcoin believers do not believe in gold or vice versa. In
fact, while the former has proven to retain value better over its lifecycle, many investors
believe in both assets because of the value-retaining properties they share. *Figures
accurate as of March 2022. Source:

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 Case Bitcoin Charts

4. Bitcoin is anonymous and used by criminals

Since inception, Bitcoin has received, and is still receiving, a lot of bad press for being
used by criminal elements. But the fraction of Bitcoin transactions connected to crime
has never risen above 1%. In fact, for the year 2021, only 0.15% of cryptocurrency
payments were linked to illegal schemes. Meanwhile, trillions in fiat currency are used
every year to finance crime - from terrorism to money laundering, tax evasion,
kidnapping, and government corruption. In 2020 alone, the biggest banks in the world
were fined billions of dollars for illicit activities.

5. 1 BTC is too expensive; I can’t afford it

Because a lot of dollars, pound, and euro transactions are done in units of 1, the same is
often assumed of BTC. So, it’s normal for people to think they need to buy 1 BTC or 10
BTC, but nothing could be farther from the truth. Just like a $1 bill can be broken down
into 100 cents, 1 BTC can be divided into many parts. So, if you have $20, you can just
buy a small portion of Bitcoin.

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 6. Bitcoin transactions are slow and expensive
Yes, the Bitcoin network validates around 500 transactions per minute. It was
designed this way to make the validation process difficult and ensure bad actors
can’t clone BTC transfers and cheat the system. However, the downside is that
only 7 - 10 transactions can be confirmed per second, and high fees are used to
determine which payments get priority. Thankfully, a second layer called the
Lightning Network has been connected to Bitcoin’s blockchain to speed up
transactions and reduce fees. This powerful application makes the blockchain
more scalable, and BTC more viable as a micropayment solution.

7. Bitcoin is susceptible to hacking

There have been reports about users losing their BTC or getting their wallets
broken into, leading to a common misconception that Bitcoin is susceptible to
tampering. This is false. The Bitcoin network has never been hacked, and it is
designed so that it may never be vulnerable to attackers. Centralized exchanges
and crypto platforms that carry user funds may get hacked, causing people to
lose their BTC. But the network itself is resistant to hacking. That’s why it is
advisable to save your funds in private or hardware wallets that aren’t connected
to online marketplaces.

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 8. Why do I need BTC when I can use regular money?
Bitcoin’s most significant utility is as a store of value, and in that regard, regular
money falls short. Because governments can print fiat currency at will, they lose
value every year. Did you know that since 1971, the dollar has lost 85% of its
purchasing power? So, if you’re saving up and investing using fiat, you lose a
fraction of your money every year due to inflation. That’s why the ultra-rich buy
art, real estate, and other hard assets that don’t depreciate steadily. To hedge
against inflation, Bitcoin has a limited supply, and only 21 million BTC can ever be
created. Additionally, its supply has grown in value faster than any other asset,
including gold or landed property.

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 9. Bitcoin isn’t backed by anything, so it can’t have real value
Another widespread criticism of Bitcoin is that it’s completely digital and backed
by nothing, so it can’t be truly valuable. But value itself is an imaginary quality
that people ascribe to things that are useful to them. Humans think money is
valuable because they can make payments with it and exchange it for the things
they need. BTC can also be carried around in a wallet, divided into smaller parts,
exchanged for goods/services, and saved for the future. These properties make it
valuable. On another note, Bitcoin is backed by the energy that’s put into
mining it. Subsequently, it is digital energy and backed by physical energy. So,
does it matter if money is physical or digital? After all, 97% of fiat money is
digital, and exists on hard drives and online ledgers held by banks. This alone
renders the argument that digital money can’t be valuable as void.

10. Bitcoin expends too much energy and contributes to global

warming
Yes, some activities of the Bitcoin network, especially mining, are energy-
intensive, and the high consumption levels contribute to global warming.
However, miners are starting to adjust their setups to account for this. China and
some countries in Europe produce more energy than they can consume, so
miners use the surplus to power their rigs. Similarly, Bitcoin is fueling
investments into renewable energy. And its energy-intensive days
are slowly becoming a thing of the past. A Cambridge University study
reports that 39% of BTC is mined from renewable energy sources, and over
70% of miners use green energy in some form. Miners from the Bitcoin Mining
Council are also teaming up to shift mining towards carbon neutral. The
aspiration is to considerably reduce the carbon footprint from mining operations
in the future.

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11. The government may decide to shut Bitcoin down
This may have been a concern some years ago, but not so much anymore. Firstly,
Bitcoin’s network is decentralized, making it nearly impossible for any government to
shut it down. They can attempt to ban its use within their jurisdictions, and many of
them have already done this. The result wasn’t what they expected, though. While they
banned BTC, many other countries opened their doors to crypto investors, becoming
havens for million-dollar businesses. So, these days, most governments are more
focused on creating their digital currencies or adopting Bitcoin and enjoying some of
the benefits it provides. Colorado is set to become the first US state to accept
cryptocurrencies for state taxes, and California may not be far behind.

12. Bitcoin won’t work as a currency

Many have pointed out that Bitcoin won't work as a currency because of its volatility,
how long it takes to settle payments, and high transaction fees. That’s a fair
characterization. Bitcoin may not be optimal for day-to-day use, but it still offers utility
as a medium of exchange and store of value. After all, gold also can’t be used as a
currency. And despite its downsides in that regard, there's still about $10 trillion
invested in gold. Also, in certain situations, it may work as a means of exchange. On
another note, blockchain technology has already made it possible for innovators to
create cryptocurrencies ideal for daily payments. Furthermore, there are scaling
solutions, like the Lightning Network, working to make BTC transactions faster, cheaper,
and more suitable for micropayments.

13. A better alternative will replace Bitcoin

Here’s a typical school of thought regarding Bitcoin. If there are hundreds of
cryptocurrencies that improve on the weaknesses of BTC, what stops one of them from
replacing it as the most valuable digital currency. Well, Bitcoin had a significant head
start on the altcoins. Additionally, Bitcoin is not a dead technology. Developers on the
network are constantly working on ways to make it more secure and efficient. In 2021,
miners approved an upgrade that will unlock new features on the Bitcoin
blockchain, including smart contract functionality. On another note, to improve on
Bitcoin’s weaknesses, altcoins give up certain attributes that make BTC attractive to
investors. While they have less volatility and transactions may be validated faster,
altcoins do not retain value as much as Bitcoin or have as many network participants
(e.g., miners and validators), making them less decentralized.

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14. Bitcoin is too complex for non-technical users
Yeah, not everyone will understand mining, staking, proof-of-work, or how the
blockchain works. But they don’t need to. These days, anyone can easily open an
exchange account, buy BTC, transfer it to others, or save the coins for as long as they
want. If banks have taught us anything, it’s that people don’t mind not knowing how a
system works, as long as it meets their needs. Of course, unlike banks that shroud their
investment activity in secrecy, there are resources online that explain in detail how
Bitcoin and cryptocurrencies work.

15. Bitcoin doesn’t work without the internet

This is not entirely true because Bitcoin’s nodes can be updated via satellite. However, if
the internet went down, people would indeed be unable to send or receive BTC. They
would also be unable to make online bank transfers, withdraw from ATMs, or pay
with credit/debit cards. If the internet crashes, most sectors will crash with it; and
cryptocurrencies won’t be exempt. The world as we know it will cease to exist. But as
soon as the internet is back up, Bitcoin’s nodes would become active again and
everyone’s wallets would still contain their tokens. This post may not have covered all
the criticisms that have been levied against Bitcoin for the past decade. But the
explanations provided should help you understand the cryptocurrency and its
underlying technology better. They may even have addressed some other myths we
didn’t focus on explicitly.

If you have any lingering doubts, continue reading through the Moon Birdie Academy
and take advantage of the wealth of resources available. You will have the chance to
explore Bitcoin, cryptocurrencies, and blockchain technology in-depth.

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 1.d. What is Ethereum?

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In the class, you’ll learn the following:

 A brief history of Ethereum

 What does Ethereum do?
 Simplified: smart contracts, EVM and decentralized applications
 What the future looks like for Ethereum

Ethereum is a blockchain-based operating system that facilitates the development of

smart contracts and decentralized applications. Its native token, Ether (ETH) is the
second most valuable cryptocurrency after Bitcoin, and it governs operations on the
Ethereum blockchain

A Brief History of Ethereum

As a young programmer, Vitalik Buterin learned about Bitcoin and was immediately
interested in the cryptocurrency and its underlying technology. He became actively
involved in the Bitcoin community, and was the leading writer/co-founder of Bitcoin
Magazine, one of the first recognized crypto magazines. But before long, Buterin
realized Bitcoin had potential use cases that went beyond powering a digital currency.
He believed a framework could be created that made application development
possible on the Bitcoin network. So, he tried to convince other members of the
community about the benefits of developing a scripting language to improve Bitcoin’s
functionality. In 2013, he released a white paper that described the idea he had in mind
and how it would work.
However, when he didn’t get the support he needed, Buterin decided to build a new
platform with the features he envisioned for Bitcoin. And so, in 2015, Ethereum was
born. Backed by a powerful programming language, Ethereum makes it possible for
users to create blockchain-based smart contracts and digital applications. It also
provides functionality to create tokens, or digital currencies, that can be used to

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exchange value within the different applications. The Ethereum network is powered by
the utility token, Ether (ETH).
All actions performed on the platform require computing power, and developers who
want to build on Ethereum must pay in ETH to execute their operations. Conversely,
Ether may be used as a medium of exchange or store of value.

What Does Ethereum Do?

Before Ethereum, programmers who wanted to develop blockchain-based applications

had to build their blockchains from the ground up. This required a deep knowledge of
cryptography, mathematics, and computer engineering. It also meant the development
process would need more time and consume more resources. Ethereum removed that
layer of difficulty by providing all the tools needed to build apps on the blockchain.
Nowadays, innovators don’t need to develop their own distributed ledgers. Instead, they
can leverage Ethereum, develop their projects and deploy them using its blockchain.
Subsequently, the platform makes it possible for anyone to build applications that are:
 Decentralized, so they have no central point of control or failure.
 Secure, so users can’t double-spend tokens or cheat the system, and
 Accessible, so anyone worldwide can use the apps and contribute to their growth.
So, how does Ethereum do this? Here’s a simple analogy to help you understand how it
works: Imagine 10,000 hectares of land, but the entire land is submerged under a lake.
So, property developers would first need to drain away some of the water, then fill up
what’s left with sand before they could build.
One day, a developer said, “enough is enough,” and drained all the water away. Then he
brought in tons of sand and filled the space with it. Like that, the lake becomes a large

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piece of land that anyone can build on. So, people from all over the country came in and
started building apartments and offices. And the developer who made the entire thing
possible charged them a small fee. In turn, they started businesses to make money and
traded amongst themselves.
Before long, the previously water-logged space became a thriving city, flourishing with
trade and opportunity for all. The land is the Ethereum blockchain, the apartments and
offices are the decentralized applications (dApps), and the people who built them are
the programmers. The currency they used for trading and other activities in the city was
Ether.
Now, here’s something else that is interesting about Ethereum: in addition to letting
users build dApps on its platform, it also facilitates the development of blockchain
tokens. So, after building an application, programmers could also create digital
currencies that are native to their apps. This particular functionality has contributed
immensely to the growth of the blockchain and crypto sector, and it has birthed
disruptive new sectors like decentralized finance (DeFi) and non-fungible tokens
(NFTs). While the analogy above simplifies the development process on Ethereum, you
still require an understanding of smart contracts to truly understand the platform. You
also need insight into how smart contacts and the Ethereum Virtual Machine (EVM)
combine to create decentralized applications.

We’ll tackle this in the next section.

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Simplified: Smart Contracts, EVM, and Decentralized Applications

A smart contract is a computer program that contains the terms of a deal and
ensures the agreement is enforced without interference from a central third party.
Here’s an illustration that simplifies it: a business owner wants to create a website and
hires a web developer to get it done. Both parties enter a smart contract that lists five
milestones.
After each stage is complete, the developer submits proof that the work has been done
and automatically gets a portion of their fee. The fifth milestone states that a complete
website is delivered to the business owner, after which the final installment is paid. So,
by the end of the project, both parties get what they agreed on from the start –
everyone is happy. Now, because the entire agreement was locked in a smart contract,
the business owner and the developer don’t need to involve others. Once the proof that
a stage is complete gets submitted, anonymous participants (also called nodes) in the
Ethereum network assess it and ensure it meets the conditions of the contract. The
smart contract executes the corresponding payment for that stage if it does. Because
neither party knows the network participants, the assessment process is fair. Via a smart
contract, value (in the form of money, assets, or services) may be exchanged
between multiple people.
As long as conditions stated beforehand are fulfilled, the computer program ensures
that all parties get their due. Smart contracts are immutable, so they cannot be altered,
and the details remain on the blockchain forever. Ethereum lets users create these types
of agreements on its platform. And developers get to decide what operations they want
their smart contracts to enforce and which applications they want to build. This opens
up a world of possibilities and each developers’ smart contract is only limited by
their imagination and skill level.
Now, about the Ethereum Virtual Machine (EVM). Smart contracts are programmed
using Ethereum’s scripting language, mainly Solidity. However, Solidity is computer
code, like JavaScript or C, and it needs a compiler. Simply put, it requires a mechanism

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that understands and can execute the provided instructions, and this is where the EVM
comes in. The virtual machine lets developers try out smart contracts in a secure testing
environment and verify that everything works as it should. Afterward, the contract is
deployed to the Ethereum main net and the application goes live.

So, in the illustration above, Ethereum Virtual Machine will execute the smart contract
between the two parties. When they complete a stage, the developer submits proof. The
EVM then sends a notification to anonymous participants (nodes) asking them to check
if the pre-conditions for compensation have been met. If they have, a payment is
triggered and the developer moves to the next milestone. Then the process is repeated
all over again until the project is done. The framework that allows the developer to
submit their milestones and get paid automatically by the business owner is a crude
example of a decentralized application. In this case, the dApp may be described as an
escrow payment program that lets the two parties exchange value without involving an
intermediary. Because there is no third party, the entire transaction is completed
without a central point of authority or failure.
This means the business owner can’t bribe or threaten the intermediaries to get them to
rule in his favor. And he can’t decide after the website is complete that he no longer
wants to pay the developer. Alternatively, the developer can’t take a deposit and choose
not to do the work. The smart contract holds them all responsible for the conditions
they agreed to at the start, and it ensures everyone gets a desirable outcome based on
the effort (or value) they contribute. The EVM uses “Gas” as a unit of payment on the
platform. Gas is the fee you have to pay in ETH to deploy a smart contract or
perform any operation on the Ethereum blockchain. Just like fuel is needed to power
your car, the EVM needs gas to function. Ideally, how much you’re required to pay
depends on the amount of resources that nodes expend to complete your task. Of
course, decentralized applications on the Ethereum network are typically more complex
than the illustration. But the general idea is to help you understand how the system
works, and the role of smart contracts and the EVM.

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What the Future Looks Like for Ethereum

Currently, Ethereum is at the forefront of decentralized application development, and it

has facilitated the creation of thousands of dApps. A big part of the decentralized
finance ecosystem, well-known exchanges like Uniswap and Sushiswap, and some of the
biggest NFT platforms are built on the Ethereum blockchain. However, it’s not all rosy.
For some time now, Ethereum has struggled with scalability issues and the platform
can only resolve about 30 transactions per second. This slows down activity and has led
to increased gas fees.

Other smart contract blockchains like Solana, Cardano, Tezos, and Binance Smart Chain
offer a cheaper and faster framework for building decentralized applications. Many of
these smart contract platforms are considered Ethereum competitors, and pose a threat
to the long-term dominance of Ethereum. In response, Ethereum plans to roll out a
series of upgrades, dubbed Ethereum 2.0 or Eth2, in 2022. Ethereum 2.0 is expected to
address three main pain points: the blockchain's scalability, security, and sustainability.

The belief is that Eth2 will increase the network's throughput from 30 to 100,000 per
second, rivaling even centralized payment networks like Visa (50,000 transactions per
second). This will be done by introducing sharding and migrating Ethereum to the
proof-of-stake consensus mechanism.

The network currently uses proof-of-work, which requires more processing power and is
less energy-efficient. So, all in all, the future looks quite promising for Ethereum.
Even while it struggles with scalability issues, it remains the preferred smart contract
blockchain for developers in the crypto sector. And though its most prominent use case
is as an application builder, Ethereum’s digital currency, ETH, remains the second most

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valuable crypto after BTC. Consequently, it has proven effective as a store of value, and
its yearly growth closely mirrors that of Bitcoin. Furthermore, some crypto enthusiasts
argue that Ethereum’s capacity to drive innovation makes it a great investment
asset.

The belief is that the more applications are built on the blockchain, the more users will
demand ETH to pay for gas fees and power the EVM. And this will, in turn, will drive the
price of the token up. Is the logic sound? That’s for you to decide. If you want to buy
some Ethereum and HODL the digital currency, check out this guide that explains the
process in detail. Alternatively, if you’re looking to trade ETH actively, or stake Ether
tokens, we’ve got you covered as well.

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 1.e. What are Altcoins?

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In this class, you’ll learn the following:

 Altcoins and their main classes

 The difference between Layer 1 and 2 blockchains
 The top 10 most interesting altcoins to watch out for
 The use cases of the top altcoins

Alternative coins, typically shortened to “altcoin” is a term used to describe all other
cryptocurrencies apart from Bitcoin. So, any blockchain-based digital currency that’s not
BTC falls under this category. The coins we’ll discuss below share a similarity with the
world’s foremost crypto, yet they are unique in their own ways. They all have
backstories, communities, and features that make them stand out.

Altcoins and the Different Classes

Altcoins can be divided into classes based on their core functions, how their blockchains
work, and how new coins are created. The most prominent of them is Ethereum, and it
facilitates the creation of smart contracts and decentralized applications.
Now, a recurring theme with altcoins is that they all seek to provide use cases that make
them a pivotal part of the cryptocurrency and blockchain sector. In this regard, some
alternative coins can be separated into two core groups: layer 1 and layer 2 projects.
Layer 1 cryptos provide a network for developing other blockchain apps,
networks, and protocols. In essence, they make it possible for other altcoins to be
created on their frameworks.
This use case is similar to Ethereum’s, meaning all layer 1 networks are its competitors.
The most notable ones include Solana, Cardano, Avalanche, and Algorand. Each of them,
including Ethereum, is in a race to provide a platform that solves the scalability
trilemma. They want to create a secure, scalable, and decentralized network.

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However, experts believe only two of these are attainable at once. If your network is
secure and scalable enough to resolve millions of transactions quickly, it has to
compromise on decentralization. And the same goes for the other features; to attain
two, you must give one up. A commonly held viewpoint in the crypto sector is that the
first altcoin to achieve all three simultaneously may overtake Ethereum as the most
valuable alternative cryptocurrency. Ethereum itself hasn’t overcome the trilemma, by
the way. The current platform is decentralized and secure, but it struggles with
scalability. It plans to solve this with the Eth 2.0 rollout in 2022 – by incorporating
sharding and migrating to the proof-of-stake consensus mechanism.

Now, for layer 2 cryptos. These projects seek to improve/extend the functionality of
their layer 1 counterparts. This may be done by increasing transaction speed and
reducing costs. For example, Polygon makes it possible for applications built on
Ethereum to decrease fees and speed up payments by interfacing with its network.
Basically, layer 2 solutions sit on top of layer 1s and solve their biggest problem,
scalability.
So, what happens to layer 2s if Ethereum 2.0 actually solves the network’s throughput
issue? Well, a lot of them have secondary use cases, and a popular one is to improve
interoperability among blockchains and reduce overall computational load. The most
recognized layer 2 cryptos include Polygon, Loopring, and Arbitrum.

Below, we provide a more general classification of altcoins based on what types of

digital currencies they have. But here’s something to keep in mind before proceeding:
the words “token” and “coin” are often used to describe cryptos, but there is a
significant difference between them. Tokens represent a non-cash asset, like an

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ownership share, voting rights within a network, or other special privileges. Tokens are
valuable, but their utility is not strictly to transfer value. Coins, however, represent a
currency. They are cash equivalents and can be used to transfer value or exchanged for
fiat money (dollars, pounds, euro).

Mined coins
These are altcoins brought into existence by mining. A majority of them are
generated through proof-of-work, a process where complex mathematical puzzles are
solved using computers with vast processing capacity. Some of the most popular mined
altcoins include Litecoin (LTC), Monero (XMR), and ZCash (ZEC).

A common alternative to mined coins are premined cryptos, where the total supply is
created beforehand and sold to investors. Common examples in this group are Ripple
(XRP), Cardano (ADA), and Stellar (XLM). Here’s an interesting piece of information: Ether
was released as a pre-mined coin. However, over the years, more ETH has been mined
via proof-of-work.

Stablecoins
Stablecoins are digital currencies whose values are pegged to relatively stable
assets like precious metals, the US dollar, and other cryptos. As a result, their prices are
quite stable, making them suitable for day-to-day payments. Examples include Tether
(USDT), USD Coin (USDC), and Binance Coin (BUSD). Most cryptocurrencies see their
values change multiple times daily, with thousand-dollar swings in some cases. This
volatility may not detract from their utility as a store of value, but it makes them less
than optimal as a payment method. Stablecoins bridge that gap, making it easy for
users to switch between fiat and crypto. Additionally, during downward market
cycles, many traders convert their assets to stablecoins to secure their profits and wait
for good entry points.

Security tokens
Security tokens are similar to ownership shares in a company, and holders buy these
tokens because they believe in the organization's future growth. They are digital
equivalents to traditional stocks and securities. And depending on how many tokens
they own, investors may have voting rights, get a say in the project's future, and earn
dividends. Similarly, the value of their shares rise when the token's price increases and
falls when the price reduces.

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Utility tokens
Utility tokens are used solely to pay for services within a network, and they do not
grant ownership stakes. Their functionality may include paying network fees, redeeming
rewards, or giving special access to holders. People who own these tokens do not earn
dividends or have voting rights. However, a utility token can increase in value if the
underlying platform becomes very popular and demand rises significantly. Common
examples include Filecoin (FIL), Golem (GLM), and Basic Attention Token (BAT).

NOTE: In reality, many utility tokens double as a means of value exchange. So, in
addition to powering activity and transactions on their blockchain, they may also
facilitate payments just like a peer-to-peer currency.

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The Top 10 Most Interesting Altcoins to Watch Out For
We’ve collated a list of the ten most interesting altcoins to watch out for in 2022 and the
immediate future. To build this list, we considered three criteria:
1. The current market valuation of the project
2. How interesting (or promising) its core functions are, and
3. The strength of the project’s community
Subsequently, you can assess how far each project has grown, how impactful their use
cases are for the crypto and traditional business sectors, and if they have a solid
foundation to build on for the future. The belief here is that the more essential a
cryptocurrency and its underlying platform are, the more valuable they’ll be in the
present. Furthermore, these projects are likely to have large communities, and this is a
promising sign for future success. Any conversion about the most promising altcoins
should ideally start with the foremost alternative cryptocurrency, Ethereum But
we’ve explored that topic extensively in another article, and you can find everything you
need to know about Ethereum here.  

For this class, we’ll start with Binance Coin:

1. Binance Coin (BNB)

This altcoin facilitates transactions on the Binance exchange, and it is used to pay for
trading fees. Initially created to serve as a utility token, BNB’s current applications have
gone beyond that. Now, it can be exchanged for other cryptos or fiat, used to make
purchases and payments on select platforms, and it’s the sole currency accepted from
investors on Binance Launchpad. BNB works across the Binance ecosystem, a framework
with over 28.5 million users, that handles over 1.4 million transactions per second,
and oversees a 24-hour trading volume of about 14.95 billion on its exchange.
Unsurprisingly, the coin has seen its value grow consistently since its release in 2017,
and it is the third most valuable altcoin after ETH and USDT. The strength of the

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Binance community is a massive advantage for BNB, providing a good foundation for
steady advancement. BNB’s core function is relatively straightforward, but it is crucial for
a community with millions of users. And the more the company grows, the higher the
demand for the coin, and the more valuable BNB becomes.

2. Ripple (XRP)

Ripple is a digital payment network with a focus on asset exchange and

international remittances. In simple terms, it handles the transfer of money. Here’s
what makes Ripple special: even though it is a decentralized, open-source, and peer-to-
peer network, it interfaces with traditional banks and resolves transactions in dollars,
euros, and yen – as well as in cryptos like Bitcoin, Litecoin, or Ether. Ripple payments
are settled in seconds, and fees are quite low, making it more viable than SWIFT, its
traditional alternative.

The cryptocurrency, XRP, is used on the settlement layer of the network. If a user wants
to transfer some dollars via Ripple, the money is converted to XRP, a small fee is
charged, and the coin is immediately transferred to the recipient. The receiver may
accept the transfer in XRP, fiat, or another cryptocurrency. Transactions on the network
are fast because Ripple uses bank-owned servers to validate payments and account
balances. As a result, many believe the framework is not truly decentralized.

However, XRP continues to remain valuable. This may be because Ripple integrates
quite well with the traditional banking system – the project is partnered up with 300
financial institutions from over 40 countries.

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3. Cardano (ADA)

Cardano is often referred to as a third-generation blockchain because it seeks to

improve on the drawbacks of the Bitcoin and Ethereum networks. The altcoin has use
cases in traceability and identity management. It’s also a layer 1 solution that enables
smart contracts and decentralized applications to be developed on its platform. To
this end, Cardano offers a blockchain that is scalable, decentralized, and interoperable.

However, it has struggled to scale effectively, and providing an interoperable blockchain

has brought up security concerns that Cardano is battling. Yet, it remains a highly
valuable cryptocurrency project. In addition to serving as a utility token, ADA also works
as a means of exchange. And more importantly, investors can stake the coin to run a
node and earn rewards for validating transactions.

There are currently over 500,000 active Cardano addresses, and daily transactions on
the network exceeded 100,000 on average over the past year. Additionally, the project
is working on a layer 2 application to increase transaction speed from about 250 to 1
million per second; getting this right could have a lot of impact on Cardano's adoption
and prospects.

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4. Solana (SOL)

Solana is another layer 1 blockchain and Ethereum competitor. It provides functionality

(NFT) on its platform. With negligible fees and a transaction speed of about 65,000
per second, Solana is believed to have the most scalable network among dApp builders.

This has increased its adoption considerably, and around 300 applications are
operational on the blockchain. SOL has two major functions on Solana. It is used to pay
for transaction fees and smart contract-related activities on the network, and users can
stake SOL to earn rewards. Solana uses a revolutionary approach called proof-of-
history to validate payments and network actions quickly.

The consensus mechanism has been credited for the platform’s scalability, but criticisms
have arisen that it does so at the expense of decentralization. Despite that, the platform
is a favorite of developers and end-users. As of December 2021, Solana had over 2.3
million active addresses, and as long as it remains a highly scalable layer 1 solution, this
number may see steady growth.

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5. Avalanche (AVX)

Avalanche provides layer 1 and layer 2 functionality on its platform. It is smart

contract-capable, and users can build decentralized apps on its blockchain. At the same
time, Avalanche is compatible with the Ethereum Virtual Machine (EVM), meaning
Ethereum smart contracts can be deployed on Avalanche, and dApps native to the
former can create a version on the latter. This is a smart move, as it makes the platform
a viable layer 2 alternative for the thousands of projects hosted on Ethereum.

Here’s something interesting about Avalanche: it attempts to solve the scalability

trilemma by using three blockchains. The individual chains handle different tasks,
thereby reducing the load on the network and keeping it agile. The X-Chain handles
exchange tasks, i.e., the creation and transaction of tokens. The C-Chain is in charge of
smart contracts deployment and the development of dApps, and the Platform Chain, P-
Chain, lets users create layer 1 and layer 2 blockchain networks (called subnets) and
keep track of validators.

AVAX works as a utility token on the platform, and all fees are paid using the crypto.
Additionally, AVAX can be staked for a chance to earn more tokens, and users can
become validators by depositing a fixed amount. Avalanche is reported to have
transaction speeds of 4500 per second, many times faster than Ethereum’s 15.
Subsequently, it has over 300 projects operational on its network, including well-known
platforms like Chainlink and SushiSwap.

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6. Polkadot (DOT)

Polkadot is a platform that connects blockchains, allowing value and data to be sent
across networks (like Bitcoin and Ethereum) that would never be able to interact
otherwise. Additionally, Polkadot aims to be a programmable blockchain like Ethereum,
facilitating the deployment of smart contracts and dApps. It is one of the most exciting
altcoin projects out there, and its interoperability use case was unimaginable just a
couple of years ago.

The platform’s structure incorporates a main blockchain, known as relay chain, and
several other parachains created by users who develop digital applications on the
network. The relay chain to parachain framework helps Polkadot resolve transactions
quickly, with a reported average throughput of 1000 transactions per second.
Polkadot also has a connecting layer, called bridge, that allows its parachains to connect
with external blockchains.

DOT serves as a governance token, giving holders voting rights and a say in the project’s
future. The crypto can also be staked for a chance to secure the network, validate
transactions, and earn rewards.

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7. Polygon (MATIC)

The Polygon network is a layer 2 solution designed to solve Ethereum’s scalability

problem. It runs parallel to the EVM, offering a way to transact faster and pay lower fees
on the platform. Polygon does this by providing a bridge that connects both networks,
allowing it to process payments for Ethereum.

Polygon’s cryptocurrency, MATIC, serves as a utility token on the platform, but it can
also be staked for rewards or to get governance rights. Polygon has a reported
throughput of 7,200 transactions per second, significantly faster than what Ethereum
can attain for now. This has made it a favorite for users that develop smart contracts,
decentralized apps, and NFTs on the Ethereum mainnet.

It is faster and cheaper to deploy apps, mint tokens, and trade NFT by bridging
with Polygon, and MATIC has seen its value grow considerably because of this
relationship. Essentially, Polygon lets Ethereum users enjoy the best of both worlds. They
can leverage the decentralization and security of the latter and not suffer from its
scalability struggles. In 2021, Polygon logged a record 566,516 daily active users,
surpassing Ethereum itself.

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8. NEAR Protocol (NEAR)

NEAR Protocol is attempting to create a layer 1 blockchain that facilitates smart

contracts and dApps. At the same time, it offers a layer 2 solution that interfaces with
Ethereum, letting developers on the network resolve payments faster and pay lower
fees by bridging with its platform.

A sharding technology, called Nightshade, lets NEAR process data more efficiently and
handle thousands of transactions per second. Conversely, NEAR Protocol provides cross-
chain interaction through its Rainbow Bridge and Aurora applications. As a result, tokens
and applications created on Ethereum may be expanded to NEAR’s network, and enjoy
its superior scalability.

The token, NEAR, is used to resolve payments and cover data storage costs on the
platform. It may also be staked for rewards or to gain governance votes.

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9. Chainlink (LINK)

Chainlink is a network of nodes that connect off-blockchain networks to blockchain

smart contracts via oracles, enabling the transfer of data and information. In this
context, oracles are intermediary software that can translate data between real-world
software and decentralized apps.

Simply put, Chainlink connects blockchain programs with off-chain data sources.
Because of this project, developers may write a smart contract that says, “if event 1
happens in the world today, execute event 2 on the blockchain.” There has always been
a need to connect decentralized systems with centralized data sources, but there were
worries that the link would have a point of failure and be unsecured. So, Chainlink
proposed a framework where a network of oracles combine to validate data
transmission, decentralizing the system and removing the risk of bad actors
compromising one oracle acting alone.

The potential use cases made possible by this platform are staggering, and it may end
up solving interoperability between blockchain and traditional data sources. The
cryptocurrency, LINK, acts as a utility token on the network. It can be staked for rewards,
and node operators have to deposit LINK to show their commitment to protecting the
network.

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10. Uniswap (UNI)

Uniswap is a decentralized exchange (DEX) – the biggest on the Ethereum blockchain –

and it lets users trade cryptocurrencies without an intermediary. Unlike centralized
exchanges like Coinbase and Binance, it has no central point of authority.

But here’s what makes the platform really interesting: Uniswap pioneered the
Automated Market Maker (AMM) model. In this system, users supply cryptos to liquidity
pools, and algorithms set market prices based on supply and demand. Why is this
important? Say user A wants to exchange BTC for ADA. A centralized exchange would
use order books to pair them with a user B that seeks to exchange ADA for BTC, and
both parties choose a price point that works for them. But what if there’s no user B to
trade with? Then it is said that the market is not liquid, and user A has to wait.

With the AMM model, liquidity is devoted to different trading pairs, meaning buyers do
not have to wait for a seller on the other side to execute a trade. Instead, mathematical
formulas and smart contracts are used to facilitate the exchange. The formula works
out an optimal price point, and the smart contract executes the transaction. The funds
used to make this exchange possible are sourced from users who earn rewards for
contributing to the liquidity pool.

Decentralized exchanges like Uniswap are vital because they allow users to trade in
safety; funds are never stored with a custodian but transferred peer-to-peer. They are
resistant to government restrictions, anyone in the world can use them, and users can
trade in anonymity. UNI, the cryptocurrency, is a governance token that grants
ownership rights. Holders of the crypto also get voting power and a say in the platform's
future development. Over the years, new DEXs like PancakeSwap, SushiSwap, and

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BurgerSwap have adapted UniSwap’s open-source software to create their
platforms. But with 1.5 million users and daily trading volume consistently trending
above $1 billion, Uniswap remains the biggest decentralized exchange. There you have
it, the most interesting altcoin projects in the crypto industry. They range from Ethereum
competitors to platforms that complement the leading altcoin, as well as other
disruptive blockchain applications that proffer solutions to real-life problems.

This is by no means an exhaustive list, and there are many more altcoins out there
breaking ground and contributing to an interconnected web and a decentralized future.
As blockchain technology approaches mass adoption, we move closer to a world
where exchanging altcoins for services will become a mainstay.

Twenty years ago, few people could have predicted that we’d be using phones to
transfer funds digitally to people thousands of miles away, or that DeFi would make it
possible for people worldwide to access wealth creation opportunities. NFTs came on
the scene a couple of years ago, now everyone wants a piece of them.

This is just a glimpse into how quickly the world changes, and cryptocurrencies are at
the forefront of the biggest changes happening right now.

If you find any of the projects interesting enough to purchase their tokens or coins,
we’ve prepared a guide to put you through the process.

We hope you enjoyed this class; see you in the next one.

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1.f. Cryptocurrencies and the New
Frontiers

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In this class, you’ll learn the following:

 Crypto’s current situation and its new frontiers

 The transformative impact of decentralized finance
 How NFT is changing digital art and asset ownership
 The relationship between Web 3.0 and blockchain technology,
 What does the future hold for Cryptocurrency

Cryptocurrencies were introduced to the world as digital currencies, but they’ve quickly
evolved beyond that. Today, they are driving change across business sectors and
reshaping the global landscape.

Crypto’s Current Situation and its New Frontiers

The crypto sector has surpassed expectations. What started with Bitcoin in 2009 has
become a trillion-dollar industry with millions of users spread worldwide. Some
years ago, Bitcoin was considered a trend that would fail soon. Now, CEOs of Fortune
500 companies are investing millions of dollars and using BTC as a store of value.

We’ve seen this type of growth before. When the internet became mainstream, people
went from doubt to disbelief. Before long, they couldn’t imagine life without it. The
trend is being repeated with Bitcoin, blockchain technology, and the crypto industry.
While some people spend time disparaging the influence of these revolutionary
solutions, many more are quietly joining the ecosystem.

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In 2015, less than 50% of Americans knew about cryptocurrencies. Now, 86% have some
knowledge about it. And a growing number of them own crypto-based assets. But, it’s
important to stay grounded. As much as digital currencies have become mainstream,
there’s still a lot of room for growth. Only a small fraction of the world population
own some crypto, and few merchants accept them as a payment method.

Additionally, while their disruptive impact is being felt in several business sectors, more
industries haven’t adopted cryptocurrencies. There’s still a long way to go, but the tide is
turning fast. Crypto has new frontiers that are moving quickly. These disruptive
applications are growing like wildfire, and the world is starting to take notice. From
DeFi to NFTs and Web 3.0, the revolution begun by Bitcoin now has several points of
attack that are interacting with existing industries and technologies at a devastating
pace.

DeFi is integrating swiftly into the existing financial framework. NFTs have
unprecedented use cases for asset ownership and token creation. And Web 3.0 seeks to
combine everything from artificial intelligence to digital identities and the Internet of
Things. If these concepts sound foreign to you now, they won’t be at the end of this
class. Let’s start with decentralized finance.  

The Transformative Impact of Decentralized Finance

Decentralized finance platforms let users access financial instruments without relying
on banks and brokerages. Instead of depending on third-party service providers for
wealth creation opportunities, consumers get to leverage innovative technologies.

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Through smart contracts and the blockchain, DeFi platforms offer loans, investments,
commodities trading, and so much more.

As expected, this comes with many advantages. Firstly, users avoid the fees and hidden
costs that banks charge for their services. Secondly, transactions are resolved quickly,
and international payments may be completed within minutes. Users also get more
control over their capital and investments. Perhaps most importantly, decentralized
finance opens up the global economy to millions of people marginalized by the
traditional banking system.

These people can create wealth without discrimination, restriction, or regulatory red
tape. All they need to get started on a DeFi platform is an internet-enabled phone.

Just like that, individuals and businesses can take out loans, lend money, earn interest,
and invest in startups. They can buy shares in blue-chip companies, stake tokens on
online platforms, or join a liquidity pool. Of course, to connect with the existing financial
framework, DeFi needed to adapt. But it did so quickly and efficiently.

Stablecoins were invented to solve the volatility issue that may hinder micropayments.
And synthetic tokens were created to allow consumers to profit from traditional bonds,
stocks, and indices. The impact of decentralized finance has been nothing short of
transformative. It has quickly grown to become a billion-dollar industry and a significant
component of the blockchain and cryptocurrency sector.

As DeFi matures, works out its flaws, and becomes more trustworthy, the space should
see increased adoption. This could, in turn, mean more crypto innovation and increased
access to wealth-building opportunities for everyone.

How NFT is Changing Digital Arts and Asset Ownership

Another fast-growing cryptocurrency sector involves non-fungible tokens. NFTs make it
possible to represent real-life items with blockchain tokens. For now, the most
popular use cases for NFTs involve digital art, music files, and game characters. Users
can register items on the blockchain through a process called minting and get a unique
token in return. These tokens prove that the image, video, or file belongs to a specific
person (or group of people) - and they have the right to sell the item. It’s as simple as
that.
Anyone can verify the token’s ownership and see when it was registered. And since the
blockchain is immutable and time-stamped, nobody can change ownership details or
delete the entries. NFTs have changed the digital art space, making it more difficult to
steal and resell digital art. In the coming years, only registered owners may sell artwork

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online. Others can download the file, but to truly own it, they must purchase the token
from the artist, owner, or group of owners.

That’s not all; NFTs enable art owners to earn interest perpetually on a piece. You can
buy a non-fungible token today and sell it at a profit in the future. While selling it, you
can stipulate that you’d like to earn a certain percentage from future sales. Similarly, you
may decide not to sell but to rent it out from time to time. You may also choose to
grant temporary rights to customers who want to leverage your artwork. The
possibilities are almost endless.

Due to its popularity and expansive use cases, the NFT space has exploded massively. A
piece of Beeple art was sold for over $69M, and 30,000 pooled funds to purchase
another NFT for $91.8 million.

However, NFT cuts deeper than digital art. It provides a way to tokenize real assets,
which could be impactful for several business sectors. Drug and food manufacturers
could create NFTs for their products and help customers avoid dangerous fakes and
imitations. Important documents like academic credentials, land deeds, or birth
certificates can be minted as NFTs, ensuring the records can’t be edited and are kept
forever.

Sports teams could capture memorable events as an audio or video file, mint the file as
an NFT, and sell it to fans who want to own a piece of those unforgettable moments.

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Actually, this cuts close to the current use of NFTs. Some of the biggest sports clubs in
the world, including Arsenal, Barcelona, Juventus, and Manchester City, already have fan
tokens. It may not be long before they start working with NFTs.

For now, many people only see NFTs as a way to mint digital assets. However, things
move quickly in the crypto industry. So, keep an eye out for other impactful applications.
With steady growth, here’s a scenario that may be possible in the future: a property
agent tokenizes a block of apartments and sells the tokens to a collection of people.
These people contribute real money and own a piece of the building. Over time, they all
take a percentage of the rent that tenants pay to live in the apartment and earn some
passive income.

Say some years down the line, the building increases in value, and they all decide to sell
– they can do so at a profit. This is just an illustration, but NFT’s underlying technology
makes it plausible.

Next, let’s explore the relationship between cryptocurrencies, Web 3.0, and blockchain
technology.  

The Relationship Between Web 3.0 and Blockchain Technology

Web 3.0 (also called interconnected web) refers to the next step in the evolution of the
internet as we know it. Tech experts believe it could be the most disruptive innovation of
our lifetime, transforming how humans and technologies interact.

On the interconnected web, blockchain technology would combine with artificial

intelligence, the Internet of Things, augmented and virtual reality, 3D printing, and more.

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Networks would be peer-to-peer, there’d be little need for third parties, and data would
belong to people and not corporations.

Tim Berners-Lee, the inventor of the World Wide Web, described some key features of
Web 3.0 in the 90s. The first was decentralization, meaning the web would have no
central point of control, and no one would be able to shut it down. The next was
openness, meaning it would be built on open-source software, with a community of
developers executing and improving the software in public view. Anyone would be able
to contribute to the software, and experimentation is welcome.

Web 3.0 will also be trustless, and users will interact publicly and privately without a
trusted intermediary. For now, the new web is mostly a futuristic concept, and many use
cases are imagined. But here’s something interesting, whenever Web 3.0 becomes
active, it will need a decentralized and open network. It will require a blockchain.

Blockchain technology offers an ideal framework for a secure, open, and trustless
network. There is no central point of failure or a kill switch, and records are time-
stamped and immutable.

Of course, a network like this would require a means to exchange value without
intermediaries. To maintain trust between all participants, there needs to be a way to
complete payments automatically and with no corruptible third parties interfering. This
sounds a lot like the cryptocurrencies in use today. In fact, it’s beginning to look more
and more like blockchain tech and cryptos are laying the groundwork for the next
technological revolution.

The question on many people’s minds now is: will Web 3.0 be the most significant
frontier for cryptocurrencies and blockchain technology? Many signs indicate yes.  

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What Does the Future Hold for Cryptocurrency?

For large parts of this class, it doesn’t feel like we’re talking about cryptos and
blockchain technology. This is a testament to how much the sector has evolved. It also
offers a glimpse into the future of digital currencies. They have been around for over a
decade now, and the industry has amassed about 300 million users. Cryptocurrencies
have undoubtedly been a huge success.
But considering how quickly the new frontiers are evolving and integrating with
traditional business sectors, it seems like crypto is just getting started. With use cases
that include some of the biggest sectors in the world, these disruptive applications are
stretching the limits of what we think possible.
From NFTs and their implications on digital art, asset ownership, supply chains and
more, to DeFi and all of that which it revolutionizes in the world of finance; cryptos are
appearing at the forefront of human and technological advancement.
And that’s not all, the decentralization, openness, and security of blockchain tech means
it may play a significant role in the development of Web 3.0 and the internet of the
future. Can you imagine a world where artificial intelligence, machine learning, the
Internet of Things, AR, VR, and the Metaverse connect seamlessly? A world where
humans can interact with, and own, data in a way we’ve never seen before?

This is what’s possible with blockchain technology. And even though millions of people,
including you, are now part of the crypto community, these future applications suggest
that we are all early adopters. Why? Because we represent 3% of the global
population, and crypto’s frontiers are moving like they’re on a mission to change the
world, not just a tiny percentage of it.

We hope you found this lesson insightful and interesting. For a deeper understanding of
crypto’s frontiers, check out our courses on non-fungible tokens (NFTs), decentralized
finance (DeFi), and decentralized autonomous organizations (DAOs).

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1.g. Frequently Asked Questions (FAQ)
About Using Crypto

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If you’re new to the world of cryptocurrencies, you may have plenty of questions. To
help you get started, we’ve put together some questions that newbies frequently ask
about cryptos. And each question is followed with a short and straightforward
explanation about how digital currencies work and how to make the most of the
opportunities they offer.

1. What’s the point of cryptocurrencies?

Cryptocurrencies were created as an alternative to traditional money. The first crypto,
Bitcoin, was developed as a digital medium of exchange that gave people more power
over their money. Instead of making payments through a third party that charges high
fees and takes too long to settle transactions, cryptos let individuals transfer money
directly to the recipient. The costs are negligible and payments are completed within
minutes.
Read more to learn about the differences between crypto and fiat money.

2. Where can I buy crypto?

Cryptocurrencies are sold on online exchanges. Here’s a guide that explains the steps to
take to buy some coins. But before you open the guide, here are some things to keep in
mind:
 You need some of your local currency to make a purchase.
 Most exchanges accept credit/debit cards.
 You don’t have to buy whole units of a cryptocurrency. For example,
you don’t have to purchase 1 BTC or 1 ETH. You can buy just $100
worth of BTC or any other crypto.
 You can exchange one crypto for another.
 You can switch the coin back to your local currency whenever you want.

3. What cryptocurrency should I buy?

There are several factors to consider before deciding on which cryptocurrency to buy.
The following tips should help:

1. If you need cryptos solely for the purpose of money transfer, you may need a
stablecoin.
2. If you’re trying to invest in cryptocurrencies to make profits, then you should read
this guide on investing strategies.
3. If you want to leverage a coin as a long-term store of value and are considering
BTC, learn more about Bitcoin and its revolutionary technology via this video.
4. If you’re interested in the potential growth of alternative currencies, you’ll find
some exciting altcoin projects in this article.

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All in all, choosing which cryptocurrency to buy depends on your needs and what you
aim to achieve. Nevertheless, to make smart choices, you need to arm yourself with
adequate information.

4. How are cryptocurrencies stored?

Cryptocurrencies are stored in digital wallets or online exchanges/marketplaces. The
major types are custodial and non-custodial wallets.

Custodial wallets – are services provided by third-party companies and online

exchanges like Binance, BitMex, and Blockchain.com. They help users store their crypto
and keep them safe. The downside here is you may not have complete control over your
private key.

Non-custodial wallets – let you retain complete control over your funds. The wallet
exists as software on your phone or computer, and it’s secured with a private key that
you hold exclusively. Examples include Exodus, Electrum, and Wasabi. Cold storage
wallets are also non-custodial.

Cold storage wallets – let you save your crypto assets offline, thereby minimizing the
risk of hacks or online attacks. There are two main types: hardware wallets and paper
wallets. The former often looks like a USB thumb drive, and the latter is a piece of paper
that carries your private key or a QR code that provides access to your funds.

5. Are cryptocurrencies really anonymous?

Yes, cryptocurrencies are anonymous. You don’t need to reveal personal information to
trade them, and your wallet ID is a scrambled piece of code that doesn’t carry your
name. However, cryptocurrency transactions are transparent, even more so than cash
payments.
Any funds transferred on the blockchain can be seen and tracked, and the records can
exist forever. Anyone may see which wallets made a payment and which one received it,
but they won’t know the identities behind the wallets. Please note that this anonymity
only exists within the cryptocurrency ecosystem.

6. Are cryptos really used for illegal activities?

Since it is a medium of exchange, it’s unavoidable that criminal elements will often use
cryptocurrencies the same way they use regular money. However, they don’t use digital
currencies nearly as much as is publicized. As a matter of fact, only 0.15% of crypto
payments in 2021 were linked to criminal activity.

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7. How to earn profits from cryptocurrencies
There are a number of ways to earn returns from cryptocurrencies. Here are some of the
most popular ones:

1. Buy and HODL – Some users buy and hodl crypto for some time, wait for them to
increase in value, then sell at a higher price for a tidy profit.
2. Active trading – Another way to earn returns from crypto is day trading. This
requires speculating on price movement, or buying and selling coins in the short
term for quick gains.
3. Staking – This involves committing some of your cryptos to a blockchain network in a bid to
earn rewards. The coins are then used to protect the network and confirm transactions.
Learn more about staking here.
4. Yield farming – Yield farming is similar to staking, but in this case, the coins are lent out
or used to provide liquidity on decentralized exchanges. Investors may earn transaction fees
or interest for participating. Here’s a guide on yield farming to provide more clarity.
5. Community rewards and airdrops – One way to earn digital currencies without
actively investing is to join online crypto communities and participate in airdrops. This is a
practice where new projects give out free tokens to encourage adoption. You can learn
more about airdrops here.

8. Do I need to pay tax on crypto profits?

This depends on where you live and whether you’re trading cryptocurrencies for yourself
or commercially as a business entity.
For example, some countries (Israel and Bulgaria) treat crypto as a foreign currency; the
US, UK, and Canada classify it as property and may charge capital gains on it; and
Germany sees digital currencies as private money.
Here’s more information about crypto taxation around the world.
9. What can I do to keep my crypto safe?
Usually, your cryptocurrency wallet will be safe if you protect it the same way you do
your mobile banking apps. But here are some crypto-specific tips to keep in mind:

1. Choose a strong password for your wallet, and don’t share it with anyone.
2. Create a dedicated email address for your crypto trading and operations.
3. Use 2FA to add an extra layer of security for your wallet and email account.
4. Avoid text-based 2FA, use providers like Google Authenticator or Authy.
5. Don’t keep large amounts of crypto on exchanges or online marketplaces.

Hardware and paper wallets provide the highest level of security for cryptocurrencies. If
you’re trading or investing vast sums of money, consider getting one and using it as a
vault.

Here’s more on how to keep your cryptos safe.

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10. What happens if I lose my coins?
Cryptocurrency transactions are irreversible, so you must be careful when sending out
funds. If you’re transferring to a wallet, double-check the address. Similarly, guard your
wallet religiously and don’t give anyone access to your coins. If you trade on exchanges
or use online marketplaces often, don’t leave a bulk of your money on those platforms.
These warnings are important because if you lose your coins, you may never get them
back.
However, report the theft officially if your coins were stolen off an exchange or
marketplace. While they may be unable to recover the funds you lost, having a case
number will come in handy in the event of a lawsuit or insurance claim.

11. What are private and public keys?

Your public key is essentially an unhashed version of your wallet address. It may be
shared with people, but note that anyone with the key can see how much you have in
your wallet. They may also view your account activity, including how much you’ve sent
and received and which wallets you’ve interacted with. However, they can’t access your
funds or transfer your coins.

Alternatively, private keys give full access to your funds. And anyone who has it can
clean out your account if they wish to. The key is a 64-character string, and most non-
custodial wallets represent it using a seed phrase. So, essentially, anyone with your seed
phrase has your private key and total control of your funds.

12. What is a seed phrase?

A seed phrase is a 12/24-word key that provides access to your crypto wallet. It may also
be referred to as “mnemonic phrase,” “recovery phrase,” or “backup phrase.” While
setting up a non-custodial wallet, you’ll be given the phrase and asked to store it
somewhere safe.
You won’t need it to unlock your wallet for day-to-day use; there are PINs and biometric
IDs for that. However, if you lose your phone or hardware wallet, the seed phrase lets
you recover your funds.

13. What does DeFi mean?

Decentralized finance, also called DeFi, is a fintech sector based on blockchain
technology and cryptocurrencies. It lets individuals and businesses invest in financial
instruments without relying on banks and brokerages.

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Because of DeFi platforms, people from anywhere in the world can participate in the
global economy and take out loans, lend money, invest in funds, buy securities, stake
tokens, crowdfund a startup, and so much more.

You can learn more about decentralized finance here.

14. What is a smart contract?

A smart contract is a computer program that contains the conditions of an agreement,
and automatically executes when predefined terms are met. It runs on a blockchain, and
it provides a way to enforce agreements without a third party.

Here's an analogy that explains it clearly: a real estate agent wants to sell a building to a
businessman. So, the agent places the property's deed in a blockchain program, with a
condition that the deed be released to the businessman as soon as he makes a
complete payment.

A smart contract is used to secure this arrangement. Subsequently, once the

businessman makes full payment, the deed is automatically released to him wihout
external input. The real estate agent also gets his money, and everybody is happy.

This is just one example of what they can do, for a comprehensive overview of smart
contracts, check out this link.

15. What are stablecoins?

Stablecoins are cryptocurrencies whose values are pegged to regular money, precious
metals, or other cryptocurrencies. As a result, their prices are stable, and 1 unit is always
approximately $1. Stablecoins are optimal for micropayments and as a day-to-day
medium of exchange. Common examples include USDT, USDC, and BUSD.

16. Are NFTs cryptocurrencies?

No. However, non-fungible tokens are created with the same technology used to
develop digital currencies. Both asset classes are registered on the blockchain, but NFTs
are non-fungible, meaning the tokens are unique and can’t be exchanged for another
one. On the other hand, 1 BTC is always 1 BTC.
Learn more about NFTs here.

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17. What is bitcoin dominance?
Bitcoin dominance is the ratio of BTC’s market capitalization compared to the total
market cap of the entire cryptocurrency market. For example, if Bitcoin dominance is at
42%, it means BTC holds 42% of the crypto market share, and the remaining 58% is
shared among the altcoins.

This metric may be used as a trading signal. Some investors believe increasing BTC
dominance may be a sign to buy more Bitcoin, and decreasing indicates it’s time to
focus on altcoins. However, this is just one signal amongst many, and you’d be wise to
do more extensive research.

Here is an article on trading cryptocurrencies you may find useful.

18. Who determines the price of Bitcoin?

No one person determines the price of Bitcoin or any cryptocurrency. Instead, price is
determined by several factors, including supply and demand, market competition, public
perception, news developments, and regulatory updates.

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 2. Trading Strategies

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2.a. Trading Basics

In this class, you’ll learn: 
 The difference between trading and investing
 What determines the price of a crypto asset
 Trading with fundamental and technical analysis
 The difference between long and short trades
 The main types of crypto trading platforms
 Simple trading strategies

In the context of financial markets, trading involves the buying and selling of assets to
earn profits. The assets in question are called financial instruments, and they may be in
the form of stocks, bonds, currency pairs, and cryptocurrency tokens. This class provides
an introduction to trading, especially cryptocurrency tokens and crypto-based assets,
and it offers beginners an overview of the key concepts involved.

The Difference Between Trading and Investing

While investing is a process that focuses on building and holding a strong portfolio,
trading is more transactional, with a focus on achieving frequent profits. In both cases,
the goal is to set aside capital, buy some assets, and earn returns on investment (ROI) at
the end of a given period. A major difference between them, however, is the period. 

An investor is willing to wait for months to earn a sizable return on an asset. On the
other hand, a trader is content to take small profits within a short period. This is
because they plan to repeat the process multiple times, accumulating small returns into
a sizable gain over time. 

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Nearly any financial instrument that has liquidity can be traded. If people are willing to
buy/sell an asset, then traders can leverage this to predict how the asset’s price will
move. In the past, trading was restricted to stocks, futures, and fiat currency pairs (like
EUR/USD). However, with the advent of digital currencies, another instrument became
available to people who seek wealth creation opportunities. 

Unlike traditional trading instruments that have some restrictions, the cryptocurrency
market is open to all. Anyone anywhere can trade or invest in cryptocurrencies, as long
as they have an internet-enabled device. The spreads and commissions are relatively
low, and charts are available to help you analyze how the price of assets may move. You
can pick out crypto assets you think have promise and trade them to make gains
through exchanges. And how much you earn is based on your understanding of trading
strategies, overall skill level, and ability to manage risk.

What Determines the Price of a Crypto Asset

To become a good trader, it’s essential to have background knowledge. And none is
more important than recognizing why the price of an asset may trend upward or
downward. As you probably know already, price is determined by demand and
supply, i.e., the numbers of buyers and sellers available in a particular market. Demand
is generated from buyers and supply, from sellers. 

So, if there are considerably more buyers than sellers, it is said that the asset has a high
demand, causing its price to increase (or trend upward). Conversely, if there are more
sellers than buyers, the asset has a higher supply, causing its price to decrease (or trend
downward).

Market sentiment, news and updates, and platform upgrades also have a direct
impact on a crypto asset’s price. And depending on if they are positive or negative,
they may cause a significant change in the market. Another factor that can affect the
price of a cryptocurrency is how the public perceives the project behind the token. For
example, do people believe the use case is impactful? Does the management team have
the expertise to deliver as promised? Or do they already have a viable product with
customers? These are regarded as fundamental factors, and short-term traders often
focus more on technical indicators than them, but it doesn’t hurt to know these
things. 

There is more nuance to it, but in a nutshell, price may be affected by any action or
occurrence that drives buyers or sellers into a market. As mentioned above, short-
term traders are typically more interested in what happens on the charts. Still, more
often than not, the charts are influenced by the factors listed above.

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 “Bulls vs Bears or buyers vs sellers”

Trading with Fundamental and Technical Analysis

To be profitable, all traders must know how to analyze the assets they want to invest in.
Fundamental and technical analysis provide the scope to estimate whether to buy or
sell, and the optimal time to do so. We already described what fundamental analysis
entails in the section directly above, so we won’t spend much time rehashing it here. But
essentially, it involves factors that determine the intrinsic value of the asset. Check
out this class on fundamental analysis for a deeper exploration. 

Alternatively, technical analysis offers tools to interpret practical behavior in the

market. It’s a study of market trends based on charts, trading indicators, supports and
resistances, and other analytical devices. Being a more mathematical style of analysis, it
tries to estimate how the price of an asset will behave in the future based on how it did
in the past. You can get into the nitty-gritty of technical analysis here. 
It is good practice to have a working knowledge of both technical indicators and
fundamental analysis. If you focus exclusively on one, you only get a partial
perspective of the financial markets. However, working in an integrated manner will
provide you with a complete picture, and is typically more effective for speculating how
price will behave. 

Of course, it won’t always be possible to do a fundamental evaluation alongside

technical analysis while trying to take profits on 30-minute trades – this is quite
impractical. But you may decide to only trade assets with sound fundamentals, at least
as a beginner. This is helpful because they may be easier to analyze, and you are less
likely to fall for coins with no intrinsic value. 

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The Difference Between Long and Short Trades
As a trader, longing and shorting are two terms you’ll hear regularly. They may also be
referred to as ‘opening a long/short position’ or ‘longing/shorting an asset.’ Here is
what long and short trades mean: 

Long trades
You open a long position or go long on an asset when you buy it with the expectation
to sell in the future and make a profit. Long trades are usually initiated when a market
is bullish, i.e., price is in an upward trend and increasing steadily over time. And traders
use the words ‘buy’ and ‘long’ interchangeably. For example, “I am long ETH” means I
own some amount of Ether and I plan to sell it at a later date and at a higher price. 
Say a crypto asset is priced $10 and you buy 100 units at $1,000 with the belief that
price will increase sometime down the line – you’re going long. And if, just as you
speculated, the asset’s price rises to $15, you can sell at $1,500 and make a profit of
$500.
This means your long trade was successful. Alternatively, if you go long on an asset and
the market moves against you, you run the risk of a loss. For instance, a drop in price to
$9 will cost you $100 on your trade.

Short trades
If you can make profits by going long an asset during a bull market, what happens when
there’s a bear market? How do you earn returns when price is in a downward trend and
reducing steadily over time? By initiating short trades or going short. ‘Shorting’ and

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‘selling’ are used interchangeably, and new traders often struggle to understand the
concept, so pay attention. 
When you enter a short position, you do so with the expectation that price will fall. So,
you sell an asset in the present and buy it back at a future time when its price has
reduced. With cryptocurrencies, this is done by borrowing the asset from an exchange.
Then at a later date, you buy it back at a cheaper amount and repay the loan.

Here’s an analogy that simplifies it: your technical and fundamental analysis indicates
that the price of an asset will fall from its current price of $10. So, you borrow 100 units
of the crypto from your exchange platform and sell it immediately, earning $1,000. At
this point, you owe the exchange 100 units of the asset. Say three days later, price drops
to $8 as you expected. Then, you buy the 100 units back at $800 and repay your loan. In
this case, your short trade was successful and you made a $200 gain. 
Conversely, the short trade may fail if the asset’s price doesn’t decrease like you
speculated. For example, if it increases to $13, you still have to repay the 100 units you
borrowed from the exchange. This time, however, you repurchase at $1,300 – ending up
with a $300 loss.

The Main Types of Crypto Trading Platforms

There are two main ways to trade cryptocurrency assets: exchange and CFD trading
platforms. We assess both of them below:

 Exchange platforms
Cryptocurrency exchanges facilitate the buying and selling of crypto assets, and let users
keep the coins on the platform. So, investors can visit these platforms and buy digital
currencies, hold them on the exchange or transfer them to a custodial wallet, and sell
them via the same platform later. 

At the same time, traders can speculate on the price of crypto assets and make short-
term trades on exchanges. To this end, most exchanges provide an integrated
trading window with the technical tools required to analyze the markets.

Please note that trading cryptocurrencies via exchanges requires you to own the assets
themselves. And when you want to divest, you sell the coins. The best of them are quite
advanced, and users can trade spot, margin, and futures. 

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 Trading charts on binance.com (Exchange Platform)

CFD trading platforms

CFD means contracts for difference, and it is a derivative financial instrument that
replicates the performance of an underlying asset. This means you do not buy the
actual cryptocurrency but may invest directly in its price movement. You earn profits or
make losses as if you purchased the coin, but you don’t hold any crypto or need to open
a wallet. 

For example, you can speculate on BTC’s price on a CFD trading platform and predict an
increase. In this case, you take a long position, and if your prediction is correct, you
make a profit. Conversely, you may predict that BTC would undergo a downward trend
and take a short position. And should your speculation turn out to be wrong, you lose
some of your capital.

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Simple Trading Strategies
Now that you know the basics of trading cryptocurrencies, we can introduce you to ways
you can make profits and minimize losses. There’s an entire class on trading strategies,
but before you get started on that, here are some simple techniques to keep in mind: 

 Scalping: involves entering and exiting a position within a few seconds or minutes. The
scalper attempts to take advantage of small fluctuations in an asset’s price, and
they often use technical analysis to estimate how it will move within short time
frames. Because of the speed at which the trades happen, this strategy doesn’t
return huge profits (sometimes 1% or lower). However, scalping is a game of
numbers, and the gains accrue with repetition. 

 Day trading: as the word implies, is the opening and closing of positions within a
daily time frame, i.e., 24 hours. It’s a holdover from legacy financial markets
where trading is only open for a period, and investors close positions at the end
of every trading day. The cryptocurrency markets are available round-the-clock,
so there’s no real need to close positions at a specific time, but some traders
prefer the routine.

Conclusion
Trading involves speculating on the price of assets and earning profits when one
predicts correctly. It can be a profitable venture, but only if you understand fundamental
analysis, master technical indicators, and develop an effective trading strategy. 

This class seeks to introduce you to knowledge that will put you on the right track, and
we hope you had a productive learning experience. In the next one, we’ll introduce
you to technical analysis. 

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 2.b. What is Technical Analysis?

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In this class, you’ll learn about: 

 Line, bar, and candlestick charts

 The different timeframes in technical analysis
 What bullish, bearish, or sideways mean, and
 The Dow Theory

Technical analysis involves using past market data (price action and volume) to predict
how the price of a stock, currency pair, or cryptocurrency token will move in the future.
To become a successful crypto trader, you need to understand technical analysis and
how to apply it in practical situations. Let’s get into it!

Technical analysis requires analyzing an asset by examining its current and past
behavior in terms of price. How price behaves can be plotted on a chart, and it shows
the interaction between supply and demand for the asset in question. The assumption is
that the price of an asset already takes into account all relevant information. Therefore, a
trader only needs to look at the price chart to determine how the asset’s value will
evolve and the most likely direction its price will take. 

Technical analysis uses price action, supports, resistances, and chart patterns. This type
of analysis is usually accompanied by technical indicators such as Moving Average
Convergence Divergence (MACD), Relative Strength Index (RSI), On Balance Volume
(OBV), and so on. Indicators are advanced mathematical and statistical formulas applied
to the prices and volumes of an asset in order to provide traders with additional
information. 

Another aspect to be considered in technical analysis is the liquidity of a market.

Liquidity is a function of trading volume, and it describes how much demand or supply

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exists for an asset (or in a market). It is a widely held belief that the higher the liquidity
of an asset, the more its price action represents the prevalent trend.

Technical Analysis: Line, Bar, and Candlestick Charts

Price charts can be assessed in the three ways highlighted below, with Japanese candles
being the most popular among traders. 

1. Line charts: link the points at which the price closes in each session. Offering only
the closing price of an asset, link charts provide minimal information.

2. Bar charts: signify the minimum, maximum, opening, and closing price of a session.
Therefore, they reflect much more information than line charts. The highest point on a
bar represents the high, and vice versa. The left tab represents the opening price, while
the right represents the closing price.

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3. Japanese candlestick charts: The Japanese candlestick chart provides the same
information as the bar chart, but it is expressed more visually. A candlestick consists of
a body (red if it closes negative and green if it closes positive) and two wicks, one at
each end of the body, representing the session’s minimum and maximum.

The line chart links the closing prices of each session, whereas with the candlestick and
bar charts, each bar and candlestick is a session. A session does not have to be a day. In
this case, it’s the period captured by a candle or bar. For example, when we say that we
are analyzing a weekly chart, we refer to the fact that each candle (or bar) on that chart
represents a week. So, they signify the high, low, opening, and closing price of a week.

The Different Timeframes in Technical Analysis

When evaluating an asset through technical analysis and formulating a hypothesis on
the direction the price will take, it is vital to use charts of different time frames,
especially if the strategy focuses on small intervals. This is necessary because an asset
may be in a short-term uptrend and in a longer-term downtrend. Also, the more time
frames are considered, the more information is gotten about the trend and direction of
the price. 

It is common to monitor 15-minute, 1-hour, 4-hour, 1-day, or 1-week charts for

different purposes. For example, you may observe the underlying trend with the 1-day
and 1-week charts, the recent trend with the 1-hour and 4-hour charts; and accurately
set entry time, stop-loss, and take-profit with the 15-minute chart.

In short, it is helpful to assess how an asset is behaving at different times to make better
decisions. The ideal trade is one in which an asset is synchronized on all time frames.

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 15-minute chart (binance.com)

4-hour chart (binance.com)

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 1-week chart (binance.com)

What Bullish, Bearish, or Sideways Mean

In technical analysis, a trend is the prevailing direction of an asset's price. The
direction may be bullish (upwards), bearish (downwards), or in a range between both
states. During a bullish trend, price rises consistently and traders can make profits by
opening long positions.

For bearish trends, price is in a constant falling mode, and traders can take advantage by
shorting the market. And in a ranging market, there’s no prevalent trend, with price
moving back and forth between support and resistance without breaking through.
When this happens, traders can use swing trading to move with price and take long and
short positions intermittently. 

You can see if the market is bullish, bearish, or in a range by looking at your price charts.
But to predict a trend reversal or continuation, you need technical indicators. For
example, a price oscillator (as shown below) tells you when an asset has been
overbought during an upward trend, signaling an incoming dip – meaning it’s time to
sell. Similarly, it tells you when it has been oversold during a downward trend, signaling
a positive reversal – meaning it’s time to buy.

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In addition to providing signals on trend reversals, these indicators can also highlight
how strong an ongoing trend is. A bull market may be extremely bullish, which may
signify that the upward trajectory may continue for a sustained time. Or it may be
tapering off, meaning a bearish movement may be imminent. In the same vein, a bearish
trend may be strong, neutral, or weak. 

The great thing about technical analysis is that there are many indicators. And if you’re
unsure about the signals you’re getting from the Moving Averages, you can consult the
Price Oscillator, On Balance Volume, or Bollinger Bands. Better still, you can use multiple
displays to combine several indicators and get a clearer overview. 

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The Dow Theory
The Dow Theory, conceptualized by Charles Dow – co-founder of Dow Jones &
Company and founder of the Wall Street Journal – focuses on price and market
movements. It is based on the premise that prices take a direction, either downward or
upward, thus forming a trend. It also postulates a third possible scenario – that price
does not take a precise direction, but rather remains in a sideways trend or a range. The
Dow Theory is based on six fundamental principles:

1. The market reflects everything: this theory suggests that the market has already
taken all available information about an asset into consideration to determine its price.
For example, if there are rumors that a crypto project would sign a billion-dollar
partnership, the market will reflect it before it happens. This means the project's token
will rise in price even before the partnership is officially announced. Also, according to
Dow, if the partnership turns out to be smaller than rumored, the token’s price may dip,
even though a positive news update was just announced.

2. The market has three types of trends: The primary trend is the long-term one
(lasting from months to several years). The secondary trend, of shorter time duration
(lasting between a few weeks and some months), corrects the primary trend. Then there
are tertiary trends that only last for a week (at most, ten days). Usually, tertiary trends
last for hours or 1/2 days. By evaluating these trends, you can find good buying and
selling opportunities. However, while the primary trend is the most important, signals
may emerge when the other two contradict it. A positive primary trend indicates a
market is bullish long-term. But if the secondary and tertiary trends are bearish, this may
be a good sign to buy at a low price. The assumption is that the primary trend will last
longer, and you’ll eventually find opportunities to take profit. 

3. Major trends consist of three phases: 

o The accumulation phase is the beginning of the trend, where the most
informed people start to take a position on an asset. 
o The public participation (or absorption) phase kicks off when the rest of
the market catches on to a growing trend and takes part in buying/selling.
o The distribution phase marks the end of a trend, and many investors who
entered at the previous stages have already exited.

4. Market trends must correlate: in this theory, Dow proposes that primary trends
seen in one market should correlate with the long-term trends seen in other connected
markets. For example, if NFT projects are bullish in the primary trend, then it stands to

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reason that the smart contract frameworks that facilitate the NFT platforms will also be
bullish long-term. 

5. Volume is important: Dow’s postulation on volume is widely shared by traders

around the world today. It says that volume is an essential secondary indicator, and
strong trends always coincide with high trading volume. Subsequently, the higher the
volume, the more the prevalent trend reflects the true state of the market. And price
action when volume is low is unlikely to reflect the true trend of the market. 

6. Trends are valid until there’s a reversal: if an asset is trending in one direction, it
will continue to do so until it completely reverses. This may sound simplistic, but it’s not.
Dow suggests that the primary trend should always be prioritized, and any potential
reversals must be treated with suspicion until it’s confirmed. Traders are often eager to
spot new primary trends. As a result, they misrepresent secondary trends and see them
as the start of a new primary trend. This mistake can be costly, so until a trend has
completely reversed, it should get priority. 

Dow’s theory is not absolute, nothing in trading is, and the concepts outlined above are
open to interpretation based on what’s happening in the market at any point in time.
However, they provide guiding principles you can apply as you use technical analysis to
speculate on price movement. 

Conclusion

In a nutshell, the market is characterized by trends, and indicators help you assess if an
asset is bullish, bearish, or in sideways motion. These technical tools also show when a
trend is about to end and another is about to begin. If you can get a solid grasp of
technical indicators and interpret their signals accurately, you’re well on your way to
becoming a successful crypto trader. 

On a similar note, here’s a critical takeaway from the Dow Theory: your goal should
be to enter every trade in the accumulation phase (or at worst, early during public
participation) and exit at the distribution phase. That way, you make the most of a trend
and take profits just as it’s ending.

We hope you enjoyed this class. In the next one, we’ll go even deeper and discuss the
nitty-gritty of technical indicators and how they work. 

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 2.c. Technical Analysis Advanced

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In this class, you’ll learn the following:

 The importance of momentum

 Moving averages (MA)
 The relative strength index (RSI)
 The moving average convergence divergence (MACD), and
 The Stochastic Oscillator

The technical analysis of a financial asset typically starts from its price. Subsequently, the
trader tries to identify short-term and long-term trends, using resistance, support, and
trend lines to see if the asset is bullish, bearish, or in a range. After carrying out this first
and necessary evaluation, the trader can then proceed to confirm any hypothesis
formed. This confirmation may be done using technical indicators like the RSI,
MACD, and the Stochastic Oscillator.

This class will focus on these technical indicators, highlighting how you can use them to
pinpoint trend continuation or reversal signals, and measure momentum.

The Importance of Momentum

Before we discuss the different indicators and how you can apply them, it’s essential to
discuss an important phenomenon in trading: momentum. Some indicators signify a
prevalent trend and the strength of movement in that direction. So, while analyzing a
bullish trend, there are phases in which price grows at increasing rates and times when,
although it’s still rising, price does so at a decreasing rate. 

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Indeed, price is moving upward in both instances just described, but there’s a notable
difference. In the first case, the price is rising with strong momentum – it is accelerating.
Whereas in the second case, the asset’s price is still growing, but more weakly and with
reduced momentum.

The same can be said about a bearish trend. When price falls, it may do so with strong
momentum, moving downward quickly. Or it may fall at a decreasing rate. So, in
essence, the market is subject to accelerations and decelerations. Therefore, the
movement toward one direction may be more significant based on how much
momentum is on its side (or in the case of trading, how much of the market’s volume
supports it). And it may be less significant otherwise. 

Here’s why this is important: it is rare that a strong positive trend transforms
immediately into a strong negative trend (or vice versa). There are always warnings;
losses of momentum or market volume that tell the trader that a reversal is at hand. And
if you can read these signs well, you can better choose entry and exit points. 

Moving Averages (MA)

One of the most popular and effective indicators is undoubtedly the moving average.
Their fundamental purpose is to reduce how much price is affected by market jitters
(the so-called "noise" of the chart). Simply put, the MA makes a trend more regular and,
therefore, easier to interpret. There are three moving averages: the simple moving
average, the weighted moving average, and the exponential moving average.

The simple moving average (SMA) is the least complicated to calculate. You add up the
closing prices of a number ‘n’ days and divide the result by ‘n’. This is a very
straightforward tool to calculate and use, but it has a slight disadvantage; it gives equal
importance to older and recent price points. As far as the SMA is concerned, the value of
an asset yesterday and ten days ago have a similar bearing on its price today. 

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The weighted moving average (WMA) differs from the simple moving average in that it
gives greater weight to recent values than to remote values. As such, it is calculated by
giving greater weight to the most current prices.

The exponential moving average (EMA) also weighs recent prices more than old ones,
but it does so exponentially instead of gradually as seen in WMA. The EMA is the most
complex to calculate. And while the simple moving average (SMA) is the least
complicated, some traders consider it the most reliable.

The Relative Strength Index (RSI)

J.W. Wilder developed the RSI (Relative Strength Index) in 1978. Even though it’s
decades old, Wilder’s Index is still quite popular, especially among traders on the futures
market. RSI is zero when the average of increases over a specific period is zero, and 100
when the average of reductions is zero. Therefore, its value varies within the range 0 -
100, meaning the RSI is an oscillator indicator, i.e., its values exist between an upper
and lower band. 

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The number of days used for the RSI can vary, but 14 days, the period chosen by Wilder,
is the most utilized time frame. However, traders may adjust the time frame based on
the type of strategy they plan to implement. The faster and shorter the operation, the
shorter the time frame used. 

In trading phases, it gives a sell signal when it’s in the overbought zone (above 70)
and exits the area while prices are still rising (bearish divergence). And it gives a buy
signal when it is in the oversold area (below 30) and exits the area while prices are still
falling (bullish divergence).

The fact that the RSI is in a strongly ‘overbought’ zone in a bullish market or a strongly
‘oversold’ zone in a bearish market confirms the force of the current trend. When the RSI
exits from these extreme bands, it is regarded as a signal of momentum loss; meaning a
correction is imminent.

The Moving Average Convergence Divergence

The MACD (Moving Average Convergence/Divergence) is a momentum indicator
constructed using two moving averages of different speeds. It is based on the
assumption that the distance between the faster and slower moving averages increases
when the market trend is well defined and narrows when the market decelerates. 

When the market enters a phase of congestion, the continuous crossings between the
two averages reduce the difference significantly, passing from positive to negative
values consistently. The phenomenon also applies to the RSI and other momentum
indicators; before we consult them, we need to understand whether we are in a buying
or selling phase from the main indicators. 

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The MACD is the difference between a 26-day and a 12-day exponential moving
average. A 9-day exponential moving average, called a "trigger line," is used to generate
buy or sell signals. According to the rules of crossing averages, there is a buy signal
when the faster one (the trigger line - color orange) cuts the slower one (color blue)
from bottom to top. And when the faster one cuts the slower one from top to bottom,
there is a sell signal.

Since it is not an oscillator, the MACD does not provide fixed ‘overbought’ or ‘oversold’
zones. However, MACD levels far from zero (compared to the maximum extensions of
the past) can identify those zones, which should be interpreted as sell and buy signals
respectively. 

As with the other indicators, divergences can be identified as bullish or bearish when the
MACD has an opposite inclination to price. And the significance of the divergences is
greater the more they occur on extreme levels of ‘overbought’ or ‘oversold.’

Stochastic Oscillator
This oscillator measures the closing price of an asset compared to its price range
over a period of time. The theoretical assumption is that in bullish market phases, the
closing price tends to be very close to the maximum price of the day. And in bearish
market phases, the closing price tends to be very close to the minimum price of the day.
It consists of 2 lines, indicated by the letters %K and %D. 

So, the %D line is the three-day smoothed version (three being the most commonly
used number) of the %K line. The effect of this average is to smoothen the excursions of
K. The %K and %D lines oscillate in the range 0-100. The low end (0-20) is called the
'oversold' range, while the high end (80-100) is called the 'overbought' range. 

The crossing between the two lines gives an additional signal. When the %K line (faster)
cuts the %D line (slower) from bottom to top, there is a buy signal. Conversely, there is
a sell signal when the %K line cuts the %D line from top to bottom. It is even more

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significant if the crossing occurs in the "oversold" or "overbought" range. An interesting
use of the stochastic is the application to the weekly diagram to characterize the
medium-term trend of the market.

There is also a ‘slow’ version of stochastics, now preferred by most traders because it
reduces false signals. This involves replacing the %K line with the %D line, and the %D
line with its three-day moving average. In other words, the new %K line corresponds to
the old %D line, and the new %D line is the three-day moving average of the old %D.
This has the effect of smoothing and slowing down the signals offered to make them
more meaningful at the cost of getting them a little later.

Conclusion
To summarize, technical indicators are used to confirm trends that were highlighted
after a simple technical analysis has been carried out. Say you use your support and
resistance lines to pinpoint a bullish or bearish signal across different time frames. The
indicators described above help you confirm whether your initial hypothesis is right or
wrong. Additionally, they show you when an asset is about to break out or resistance or
dip below support. 
We hope you had a productive learning experience in this class.

In the next one, we’ll discuss trading strategies and how you can apply technical
indicators in real trading scenarios. 

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 2.d. Crypto Trading Strategies

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In this class, you’ll learn the following:

 Trading with the OBV indicator

 Swing trading
 Catch the wave strategy
 Fade the move strategy
 Follow the crowd strategy

There is an abundance of trading strategies that you can utilize to navigate the
cryptocurrency markets and achieve gains. Below, we’ve outlined some great ones for
beginners who are still trying to find their feet. These techniques are pretty easy to
implement, and you can quickly start making trades with them.

Trading With the OBV Indicator

This strategy is highly regarded by traders because On Balance Volume (OBV) acts as a
leading indicator. As such, it may identify a prevalent trend before price actually
increases or decreases, providing ample time to enter a position. The theoretical
explanation behind OBV trading may seem complex at first, but it’s really a simple
comparison technique. And it reduces trading risk notably, so you’ll benefit a lot by
paying attention and understanding how it works. 

The OBV operates under the widely held belief that price follows volume, and by
studying how volume moves in relation to price, one can gain insight into expected
future price movements. For example, if there’s an increase in the relative trading
volume of an asset, its price should increase alongside. If it doesn’t, then that increase is
on its way. The same applies for a decrease in volume and a reduction in price. 

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Another assumption behind the OBV indicator is that institutional investors (also called
smart money) – the traders who actually move the markets – are more active when
trading volume is low. Meanwhile, retail traders are active when volume is high and are
more prone to reactive trading. Anyway, institutional investors are likely to buy an
asset when its price is low and there’s reduced volume. And retailers will probably buy
when price is trending upwards and there’s huge volume in the market. 

But here comes the twist: during a downward trend, it takes some time before enough
smart money enters the market and causes a reversal. So, the big guys will have been
buying for some time before the small guys realize what’s happening. By the time they
do and enter the market, the institutional investors are already taking out their money
and locking in profits. Retailers end up buying the top just as the asset starts a
downward trend. 

OBV helps traders to identify the direction institutional investors are moving in, and
you can plan your next steps accordingly. In practice, it is most effective as a means to
test for breakouts during major lows and reversals at high prices. When analyzing the
trend of the OBV indicator, it’s important to compare it to the price of the asset being
evaluated. In practice, you’ll get the following signals: 

Convergence: occurs when the price of the cryptocurrency and the OBV trendline are
in lockstep. This signals a bullish convergence if price is trending upward, and a bearish
convergence if downward. It means the prevalent trend should continue with no
breakouts, and support and resistance will mostly remain as they are. 

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Divergence: occurs when the OBV indicator is trending away from price. This signals a
bullish or bearish divergence depending on the situation. For example, if the OBV hits a
new high as price struggles with resistance, there’s an incoming breakout above the
resistance – this is bullish divergence. 

Conversely, if the OBV hits a new low under the support area as price hovers around the
same area, this signals a bearish divergence – i.e., price will break through support and
trend downward. 

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There may also be bullish or bearish divergence if price is moving in a different direction
from the OBV indicator. For example, say the price of BTC is rallying above resistance
but OBV is struggling to break through, this signals a bearish divergence, and the rally
will probably fail and price will enter a downward trend. 

Similarly, if price hits a new low but the OBV trendline maintains a level above the
support line, then we have a bullish divergence. This means the sell-off will fail and the
asset’s price will rebound in an upward trend. 

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As you can see, the OBV indicator is a strong tool to utilize when analyzing a
cryptocurrency, and it provides a predictive tool that can be applied based on objective
volume data points. In other words, you can easily record and observe the two most
important data points, price and volume, traded over a given time frame and quickly
identify prevalent trends.  

Swing Trading
Swing trading is a type of short-term market speculation that involves holding a
position for several days – or even weeks. Subsequently, traders can capture price
fluctuations, or swings, in that time frame to make gains. Swing trading is considered a
middle ground between intraday trading (which requires opening and closing several
positions within the same day) and buying & holding (which involves keeping a position
open for months). 

Generally, swing traders prefer 4-hr candlesticks while analyzing the markets, as it gives
them an extensive overview of price across several days. After setting a time frame,
support and resistance levels are highlighted to put the asset’s price in a range. Then
you swing with price and try to catch it in an upward or downward trend – this is
what swing trading is about.

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From the image above, the advantage of a long-term candlestick becomes apparent. If
you capture a solid support and resistance line, price movement may remain in place for
an extended period and any short-term retracements shouldn’t excessively impact your
long-term targets.

Ideally, the target would be to buy at support and sell at resistance. However, every
other trader in the market is looking to do the same. So, the smart move would be to
buy just before price hits the support area and sell before it gets to the resistance line. 

There are several scenarios where swing trading can be implemented, and two of the
most common ones are ‘catch the wave’ and ‘fade the move.’

1. Catch the wave

Catch the wave opportunities are generally identified when a market is trending
upwards. The idea behind this strategy is to capture one big swing in the uptrend. You
may liken this to surfing and trying to catch the big wave instead of settling for the
smaller ones. That big uptrend provides a better chance of success than trying to
capture plenty of small waves.  

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To catch the wave, first ensure that the market is in an uptrend. Then, use the 50-day
moving average (blue line) as support. As you see from the chart above, BTC’s price will
often bounce off the blue line and pump for an extended period. So, wait until it
approaches the line then take a long position.  You may keep the position open for
several days or until you hit your target. However, to protect your capital in case of a
reversal, set a stop-loss at a point just below the moving average line.

2. Fade the move 

This is the opposite of ‘catch the wave,’ and while the scenario also presents during an
uptrend, it involves speculating against the prevalent trend. If you check the image
above, you’ll see points where price retraces for some time before continuing the
uptrend – ‘fade the move’ lets you short the asset and take gains at those points. This
is more dangerous than ‘catch the wave’ because you’re going against the established
trend. But if you get it right, there will be opportunities to earn some profit.

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In the chart above, you can see a nice upswing (blue arrow), a successful attempt by
price to retest that high (long black arrow), and a failed effort to break out (short black
arrow) from what seems to be a resistance point. Now, when some traders see the
successful retest (long black arrow) and the two candlesticks after it, they believe a
breakout is imminent and try to ‘catch the wave.’ But the move is rejected and a
downward trend ensues (thick red dash). 

At this point, some traders are panicking that a reversal is in play and start selling. Some
others would have set stop losses along that red dash, and they get their positions
closed as well. For some time, you get a small window of opportunity to ‘fade the
move’ and benefit from the chaos. Remember, however, that this reversal may be
temporary, so you only have a small time frame to short the asset and take your gains.

Follow the Crowd

Following the crowd is a trading strategy that involves doing what every other person
in the market is doing. It is surprisingly quite effective, and you can earn sizable profits
just by repeating the actions of the majority. For cryptocurrency trading, you can
implement this strategy in two ways. One, track the news and buy a token when there’s
positive news about its underlying project.

For example, if a smart contract development framework announces an upgrade that

will increase transaction speeds and reduce costs, it’s safe to assume the crowd will buy
up its tokens to make gains. Simply, follow that trend and buy, then sell when you hit
your targets. 

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A second way to use this strategy is with technical analysis. You can use indicators like
moving averages and Bollinger bands to identify the direction the masses are heading
and follow their steps. For example, using a 25-day and 50-day exponential moving
average (EMA) as shown below, you can find a prevalent market trend and follow it. As
long as the two lines trend upward, price may continue to pump. 

A benefit of using moving averages is that you also get a warning when the trend is
about to reverse. When price trends above/below an EMA, it may signal an imminent
reversal of an upward or downward trend. 

At the same time, if the 25-day EMA (red) crosses above the 50-day EMA (blue) as
shown below, this a sign that price will trend upward and it’s called a golden cross.
Alternatively, if the 25-day EMA crosses below the 50-day EMA, it may be a signal that a
downward trend is imminent, and it’s called a death cross.

Conclusion
The key to being a successful trader is finding strategies that work for you and
sticking with them. The concepts discussed above are not new, cryptocurrency traders
have been using them for years with good results. And if you take the time to master
them, they will be beneficial for you as well. 

We hope you enjoyed today’s class.

In the next one, we’ll discuss trading with leverage (or margin), the opportunities it
provides to boost your capital significantly, and the dangers involved.

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 2.e. Trading With Leverage

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In this class, you’ll learn the following:
 What is leverage?
 How leverage works
 The pros and cons of trading with leverage
 How to manage the risks of Leveraged Trading

Before we begin this lesson, please understand that trading with leverage is not
meant for beginners or people who don’t have a firm grasp of the basics of trading.
Using leverage can lead to great gains, but it also has the potential to cause huge
losses. Subsequently, this type of trading should only be undertaken by
experienced traders who have done the required due diligence.

What is Leverage?
Leverage trading (also called margin trading) involves using borrowed capital to
trade crypto or other financial assets. And it can increase your buying power
significantly, allowing you to make bigger gains. The “loan” is provided by the
exchange or broker, and even with a small capital, leverage gives you more liquidity
to make trades. For example, a 20X (or 20:1) leverage turns trading funds of $2,000 to
$40,000 – and a 10% increase in an asset’s price gives you $4,000 in profits. 

On the flip side, if the market moves against your position, you can lose all your
capital quickly. Here’s why: during leverage, your original capital (the $2,000) serves as
collateral for the loan. And while you may be trading with a $40K capital, you can only
afford to lose $2K on your position before getting liquidated. At 20X, if the market
moves even 5% in the other direction from the one you chose, you lose the full
collateral amount. 

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How Does Leverage Work?
Let's start with another example. Suppose you want to buy 1,000 units of a
cryptocurrency that costs $1 each, the transaction would cost $1,000. If, after buying it,
the crypto’s price rises to $1.2 per unit, you make a $200 gain. Now, in this scenario, you
have to provide the full amount ($1,000) to make the trade. 

When trading with leverage, however, you can make the same trade with way less than
$1,000. The broker, or crypto exchange, lets you pay a smaller margin calculated based
on which leverage option you chose. On most platforms, you get 5:1 (5X), 10:1 (10X),
or 20:1 (20X), and some let you go as high as 200:1 (200X). Leverage of 5:1 means
you only deposit 20 percent of the amount; 10:1 means you deposit 10 percent, and
20:1 means 5 percent. 

Binance leverage adjustment (binance.com)

So, in the trade above, if you use 10:1 (or 10X) leverage, you only have to deposit $100
in your trading account. Now, when the asset’s price rises to $1.2 and you take profits of
$200, you do so while risking only $100. 

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What happens if you decide to risk the entire $1,000 you did initially but this time you
use 10:1 leverage? Your profit is 10Xed from $200 and you get $2,000. 
As you can see, leverage lets you make outsized gains and increase your profits
significantly. But as mentioned earlier, it is a double-edged sword. Let’s consider an
alternate scenario: instead of the asset’s price rising to $1.2, say it went down to $0.9.
Remember, you’re trading with $10,000 because you boosted your $1,000 with 10X
leverage. 
So, that reduction to $0.9 means you’re down from $10,000 to $9,000 – losing $1,000.
And just like that, you get liquidated and lose the entire $1,000 you started with.
What if it was a normal trade, made without leverage? You use your $1000 to
purchase 1000 units of the crypto. Price reduces to $0.9, so your balance is now $900 –
you’ve lost $100. That’s bad, but definitely not disastrous.
Let’s say you’re sure of your technical analysis, so you leave the position open knowing
price would eventually rebound to the $1.2 range you originally speculated. If you turn
out right, you end up with a tidy $200 profit instead of losing $100. 

Pros and Cons of Trading with Leverage

Leverage can be a powerful tool in the right hands. And if used correctly, it has the
potential to minimize losses and maximize gains. Here are some pros of margin trading: 

Pros of leveraged trading

1. The main benefit of leverage is the capacity it has to multiply your trading
funds, by up to 200 times. As a result, you get more liquidity to open individual
trades without committing all (or a big portion) of your capital. Instead of placing
$1,000 on an asset, you can use $200 on 5X leverage and get similar results – if
you win. 
2. Since you only have to use a small portion of your capital on any particular trade,
the rest can go towards other crypto assets or investment opportunities. In this
way, leverage offers the opportunity to diversify your portfolio without losing
your buying power. And by investing in other assets, there’s more potential for
profits. 
3. Another advantage of trading with leverage is that you can open larger positions
on crypto assets you’re bullish on. Say technical analysis, fundamental analysis,
and current news favor a project to pump significantly, you get a chance to
maximize your gains significantly using leverage. With 5X or 10X leverage, you
can turn a 20% pump into a 100 or 200 percent gain. 

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Cons of leveraged trading
The biggest disadvantage of leverage is how unforgiving it can be. It allows little
margin for error, and the consequences of entering the wrong position may be the
total liquidation of your trading funds. Here some some cons of leveraged trading: 

1. As a trader, you are bound to make mistakes and lose out on trades. Ideally, you
learn from them and become better over time. While trading with leverage,
however, your losses are magnified and may become disastrous if you don’t
manage risk properly.  This is particularly true for beginners; instead of small
losses you’d be able to absorb in your early years as a trader, leverage exposes
you to huge deficits that may discourage you from getting better at crypto
trading. 
2. The crypto market is well-known for its volatility, and even during an uptrend,
price can go down 5% before resuming its upward trajectory. While this quality
may not be ideal, it’s part of what makes crypto trading profitable. As they say,
“volatility is the price you pay for outsized gains.” However, during margin
trading, this rapid change in the value of an asset works against the trader. With a
20X leverage, price only needs to rebound 5% against your position to wipe out
your full trading capital. 
3. The higher your leverage, the less funds you need to set aside for trading. 10X
leverage boosts your $500 to $5,000 – and with 50X, you get $25,000 buying
power from the same amount. The problem, however, is it also increases your
exposure significantly. Say you go long on an asset and price rebounds just 2%
before going on to pump 20%. If you entered that position with 50X, you get
liquidated just because of the minor fall in price. Indeed, if you’d won that trade,
you would have made a 1,000% ROI, but leverage won’t give you that chance.
The margins are tighter and mistakes, costlier.

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How to Manage the Risks of Leveraged Trading
The key to maximizing margin trading is good risk management. Here are some tips to
help you along: 

1. Use as little leverage as possible. You can still boost your liquidity considerably
with 5X, and your exposure is more manageable at this level. A $200 investment
becomes $1,000 trading capital, and a slight price retracement won’t hurt you too
much – as long as you end up winning the trade. 
2. Setting stop-loss orders on your trades can help you reduce how much you lose
while trading with leverage. For example, you may set it such that the position
is closed automatically once price drops by 2%. This way, if you opened the
position with 5X leverage, you’ll only lose 10% of your trading capital. And while
that may not be ideal, it’s still better than losing all your money.
3. The take-profit order can also help you lock in your wins and protect against
retracements. There have been cases where traders open a long position with
leverage, and the asset’s price starts to rise just as speculated. However, instead
of taking profits at 5 or 10%, they decide to ride the wave to the top. Then, price
tanks and they get liquidated. 

Market conditions can turn against you at any point, and the effects are more notable if
you’re trading with leverage. As a result, you need to set up buffers that protect you if
things don’t go as planned. The first is to minimize your use of leverage, the second is to
protect your position with stop-loss, and the last is to lock in wins with take-profit. 

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Conclusion
Given everything we’ve discussed in this class, it must be clear now that leveraged
trading is as effective as it can be dangerous. And the effects are even more
pronounced if you factor in the volatility of the crypto markets. When things go your
way, you can make huge gains and build up your capital exponentially. However the
losses are exponential as well. And the margins for error are slimmer the higher your
leverage.
As a result, we recommend strongly that beginners stay away from leverage – at
least until they become proficient at technical analysis, grow familiar with the
uniqueness of the cryptocurrency markets, and get better at picking the right entry and
exit points. Also, when you decide to trade with leverage, don’t overdo it. Keep your
exposure small, and remember to use stop-loss and take-profit orders to manage
risk optimally.

That’s all for this class, we hope you had a productive learning experience.

In our next class, we’ll discuss common trading mistakes you need to avoid.

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 2.f. 10 Common Trading Mistakes to
Avoid

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In this class, you’ll learn the following:
 Common trading mistakes and how to avoid them
 How to manage your expectations
 The dangers of trading without a plan
 The importance of trusting your judgment, and
 How to manage risk optimally

Buy low, sell high – this is the most significant rule of trading.
If you do this 70% of the time, regardless of what the market throws at you, you will be
successful trading cryptocurrencies. However, certain factors will probably prevent you
from buying and selling at the right time. We know this because thousands of traders
made these mistakes in the past, and many more are making them to date. 

The expectation is that as you proceed in this class, you will remember as many of
these mistakes as possible. Subsequently, when you notice yourself close to making
them during your trading, you recognize the danger ahead and self-correct. If you can
do this, nothing can stop you from finding financial freedom as a crypto trader.

Let’s get into it:

1. Starting on the wrong foot

The first and most common mistake that beginners make is believing trading is an easy
way to make big bucks. As a result, they don’t prepare themselves adequately for the
work ahead and start without a concrete plan. Trading cryptocurrencies requires a lot of
time and dedication, and you need to practice constantly to become proficient at it.
Indeed, trading provides an opportunity to make big bucks, but that only comes after
you’ve honed your skill and mastered the psychological side of it. Furthermore, you

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need a clear trading plan from the start. More than half of the mistakes you’ll learn
about in this class were caused by the lack of a trading plan, or failure to adhere to it. 
 
2. Not trusting your abilities

Despite training for a long time, building up the necessary skills, and having a defined
trading plan, some traders still do not succeed. This is because they harbor doubts
about their ability and prefer to rely on the judgment of others. Those people may be
better-informed than you now, but it wasn’t always so. Many successful traders
started exactly where you are, but they learned to trust their plan and develop
themselves. 

You may not reach this level if you only trade based on other people's
recommendations. As such, it’s essential to develop your skill and prepare yourself
psychologically for the rigors of trading. Your short-term target should be improving
your strategy until it’s mechanical enough to protect you from the market’s uncertainty.
This will only happen when you start trusting yourself. 

3. Failure to calculate risk-reward

Calculating your risk-reward ratio is an integral part of any trading strategy. No trader
gets a positive outcome on all their trades, and you need to prepare your mind for this.
As a rookie, a 50% win rate keeps your portfolio afloat, and if you can outperform
that consistently, you’re on the right track. So, while planning your trades, it’s important
to clearly state your profit target and how much you’re willing to lose to get it. 

For example, you may decide that for every $1000 you trade, you want a $200 profit and
are willing to risk $100 to get it. That’s a risk-reward ratio of 1:2. Subsequently, when
you start a trade, set your stop-loss such that when $100 is lost, the position is closed.
This may seem counter-intuitive, but it protects you from losing a huge percentage of
your capital. If you stick with the risk-reward ratio described above for 10 trades and win
5 times, you end up with a $500 gain. 

When you perfect your strategy and get better at trading, you may increase the ratio to
take more profit or even choose to ride a trend that favors your position. But as a
beginner, you need this to ground yourself and avoid losing too much before you
progress in crypto trading. 

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4. Lack of discipline

It takes a great deal of self-discipline to apply your trading strategy consistently,

especially after suffering a series of losses. But it is during these difficult times that
you need to stick to the plan. The most successful traders can manage their moods
and emotions, and are consistent in their approach to the markets. 

In an experiment conducted a few years ago, an investor/educator provided seminar

participants with a mechanical trading system that had been profitable for the past 20
years. After 12 months, only one of the 117 participants was still using the system in its
original form. Many gave up after their first losses, and others modified or changed the
system. Only one of them had the self-discipline to implement the system as designed
to make a profit. 

5. Holding a negative position for too long

When you open a wrong position, it’s crucial to accept the mistake and take the loss
without dwelling too much on it. Once it becomes clear that your speculation is in the
opposite direction of the market, it’s better to close that trade and study the market. Try
to figure out what went wrong with your initial analysis and see if the charts favor a re-
entry on the new trend. If not, wait for the next optimal entry point. 

Some traders don’t do this; instead, they leave the position open in the hope that a
reversal/continuation that favors their position will occur. Sure, this may happen
depending on the movement of the market. But this is not always a smart move. More
often than not, holding onto a losing position will lead to a more significant loss.

6. Revenge trading

The moments immediately after closing a losing position can be dangerous. As a

beginner, you’ve probably not built the temperament to accept the loss and move on.
Therefore, you may rush into another trade to make back the money you lost. This is
called revenge trading, and you must learn to avoid it. 

The biggest issue with revenge trading is that you’re making a judgment call from a
place of frustration. Subsequently, you are likely to make a mistake or, worse, fail to
carry out proper analysis before opening a new position. If you feel angry after a
particularly painful loss, take some time away from the charts to enter the right frame of
mind and start afresh. 

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7. Overcomplicating market entry

Traders are constantly looking for new ways to find optimal entry points, a trend
indicator that offers better results, or a novel idea that helps them trade better. This
search for the Holy Grail or perfect system is futile and time-consuming. It involves
hours of work and frustration until you realize that there is no such thing as a flawless
strategy. 

This phenomenon is often referred to as analysis paralysis, where traders are so stuck
with indicators, models, strategies, and formulas that they cannot enter the market. The
best trading strategies incorporate clear entry (and exit) signals. And they are made up
of a few, often simple, criteria. Markets are imperfect; some trades will work, and some
won't. Accepting this degree of risk allows you to better apply the entry signals
generated by your trading strategy, keep your approach simple, and have a better
chance of success.

8. Poor risk management

Here’s a strange anomaly in online trading: even if you lose several trades in a row, as
long as your trading strategy has a consistent win rate above 50% (over a large dataset),
those losses won’t hurt you. The trick to this is minimizing your losses with ‘stop loss’
and a sound risk management technique, and making the most of your winning trades.
This is the secret to ending up profitable. 

Now, some traders don’t use stop-loss because they ascribe it to accepting defeat, but
that’s the wrong approach. Stop loss protects your capital from being depleted, and
it’s a helpful tool to enforce discipline while trading. Trading without it is like jumping
from a helicopter without a parachute, but holding an umbrella and hoping you’ll glide
like Mary Poppins. It’s a needless risk with dangerous consequences. 

Trust your trading strategy and the entry/exit points you chose based on technical
analysis. Then, use stop loss to manage your exposure in case your speculation is wrong.
This is good risk management. 

9. Improper use of leverage and margin

Margin trading (also called leverage trading) requires borrowing money from an
exchange to increase your buying power. Say you have a balance of $500 and use 10x
leverage on a trade, your trade will have the exposure of $5,000 as the exchange gives

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you a quick loan.’ If your trade goes well, you stand to earn outsized returns and
boost your capital considerably. 
On the other hand, if the asset doesn’t move as you predicted, you may lose your entire
balance. Here’s how: since you’re now trading with $5,000, your original balance is only
10% of your new trading capital. So, if the asset reduces in value by 10%, you get
liquidated and lose your capital. If you’re interested, here’s an in-depth exploration into
leveraged trading. 

As a beginner, you shouldn’t be playing around with margin trading unless you
completely understand how it works and the consequences of being wrong. If
understood and utilized correctly, leverage can significantly increase returns. Use it
wisely and it will be your friend; use it recklessly and it will be your worst enemy.

10. Trading on the wrong exchange

Trading on the wrong exchange can negatively impact your experience from the start.
For one, they may not have the tools you need to trade optimally. Additionally, some
platforms charge excessively high trading fees – just a few extra % on top of your trades
may count for a lot over time. And to the most critical point, security; choose an
exchange that takes it seriously and ensures the safety of your funds. 

Alternatively, you may open a non-custodial wallet and save your gains there, leaving
only your trading capital on exchanges. If you’re looking for top exchanges for newbie
traders, check out the Top Deals section. You’ll find great platforms with low trading
fees and high signup bonuses.  

Conclusion
Many of the wealthiest people in the world are involved in the traditional financial
markets, and there’s a good reason for that. If you can master trading and investing,
there’s no limit to how much you can earn. With cryptocurrencies, you too have a
unique opportunity to leverage a highly volatile financial market still in its early years. 

This opportunity has enabled traders to achieve massive wealth accumulation, but is
also highly risky for inexperienced traders. Thus, we recommend deeply internalizing the
lessons above so you do not fall for the same mistakes as others commonly do.

We hope you enjoyed this class, and remember to keep the lessons top of mind as you
continue your journey as a cryptocurrency trader.

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 3. DeFi

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3.a. What is DeFi? A Guide to
Decentralized Finance

In this class, you'll learn the following: 
 What decentralization is
 How decentralization works
 What Decentralized Finance (DeFi) is
 Pros and cons of DeFi
 Examples of DeFi

One of the most revolutionary aspects of blockchain technology is that it enables

decentralization. Luckily, this feat does not only apply towards Bitcoin and the creation
of cryptocurrencies. In many industries, modern companies and projects have begun to
embrace decentralization as one of the core pillars of their product. This is because
decentralization opens the gateway to a multitude of new applications and enables
accessibility to all demographics.

One such industry that has harnessed the power of blockchain technology and
decentralization is decentralized finance, otherwise known as DeFi. DeFi protocols
are now one of the most popular applications in the crypto space because of the flexible
and plentiful financial products they offer. Now, before digging deeper into
decentralized finance, let’s start with a refresher on decentralization and how it differs
from centralization.  

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What is decentralization?
If this is your first time hearing about decentralization, it’s useful to learn the
differences between centralization and decentralization. 

Centralization is the enterprise and financial structure most commonly used in today's
world. Fiat currencies such as USD, EUR, JPY, and others are part of the centralized
system as well. By definition, centralization is the concentration of control of an
activity or organization under a single authority. So, when we consider banks and
other financial institutions which are governed by a selected group of individuals, we
quickly understand that these types of institutions are all centralized. 

Regulations and rules govern the whole financial ecosystem in the traditional centralized
setting. Over the course of history, this has proven detrimental to impoverished and
marginalized citizens, as the regulatory oversight in the traditional financial system
usually limits their access to financial products. 

For example, obtaining a mortgage is extremely difficult for anyone with bad credit. If
you had to take out student loans and failed to pay them off in time, you will likely
forever be impacted with less opportunities to use the products of banks and financial
institutions. However, this goes way beyond just a mortgage. Even on an everyday basis,
all wires and transactions have to be verified by bank intermediaries. This has plagued
our financial system with acceptance of the standard that banks control our money
more than we do.

It is worth noting that these regulatory oversights do have positive effects as well. To
track fraud, scams, and protect user funds, banks adhere to anti-money laundering
policies (AML). These policies are by far the most effective regulations to avoid the
exploitation of the banking system, and are beneficial in protecting users from having
their money stolen.

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That sums up how centralization works.

How does decentralization work?

Decentralization is the opposite of centralization. Decentralization enables a system
where people have freedom and control over their funds. In the crypto space,
decentralization allows investors to transfer crypto without waiting for the bank to
approve it, buy and sell digital assets without restrictions, take out loans, lend money,
and a whole lot more. For the first time ever, decentralization has enabled crypto market
participants to participate in all of the applications available to the market without
needing any permission. So, now that individual who could not get a mortgage because
of their student debt can obtain a loan to pay for their house, and their identity never
even needs to be shared with the lender. 

As such, decentralization has opened the door for all types of market participants to
leverage the benefits of blockchain technology with no requirements except for a
cryptocurrency wallet with some funds in it. This system has eliminated the need for
intermediaries and allows investors to take control of their assets. Whereas
centralized companies like Microsoft make decisions based on the ruling of executive
boards, decentralized cryptocurrencies like Uniswap democratize governance by
basing decisions on the ruling of token holders. 

The power of decentralization has been manifested through many applications. Let's
take, for instance, using decentralized exchanges to buy, sell, and swap cryptocurrencies.
When you buy crypto from these decentralized platforms, you only have to link your
crypto wallet to their official website, input the amount and type of crypto you want to

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trade, and you’ll receive the cryptocurrency you paid for. There is no need to go through
a KYC process and no need for a central authority. 

Consider if you were a citizen of Venezuela and wanted to buy a stock trading on the
New York Stock Exchange. Well, this would be very difficult because you will need a
bank account in the US and would have to apply for eligibility to trade US Stocks.
Alternatively, decentralized cryptocurrencies exist around the entire world. They are
not native to a specific region, and therefore they are not subject to specific regulations.
Anyone with a wallet around the world can buy and sell a cryptocurrency on a
decentralized exchange. The same applies to other applications, such as DeFi for lending
and NFT marketplaces. In all of these cases, decentralization enables crypto holders
to have full control over their assets.

Decentralization is also beneficial to blockchain developers. Decentralized, open-

source frameworks allow developers to access and use the codebase of other protocols
to build on top of them. 

It permits the building of apps and projects without seeking the approval of authorities
or requesting permits from the government. In a decentralized system, anyone is free
to build. 

On the technical side, mining new blocks occurs in a decentralized manner. So,
whenever new transactions need to be added to the blockchain, anyone who wishes to
partake in mining can mine new blocks to store the information and receive
compensation for doing so. This is the beauty of decentralization: anyone can partake
without the need for approval. This whole process will depend on the mechanism
used by a blockchain network. For instance, Proof of Work uses computers to mine
while Proof of Stake is done through staking. 

We've mentioned DeFi a couple of times when explaining decentralization above.

Indeed, this development is currently revolutionizing the finance industry because of
certain benefits offered to everyone. To better understand how decentralization works in
the finance industry, let's dig deeper into DeFi. 

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What is DeFi? Decentralization in Finance Industry 
DeFi, also known as decentralized finance, is a blockchain-based financial technology.
Fundamentally rooted in decentralization, DeFi protocols permit anyone to access their
products without permission as long as they connect their crypto wallet to the platform. 

This has enabled a myriad of new financial tools to be accessed by anyone in the
world, and the fierce competition in the DeFi sector is incentivizing new protocols to
become more and more rewarding. Some of the DeFi protocols reward users for
merely using the application or holding tokens. Each DeFi protocol is a crypto project,
with native tokens powering the platform. In most cases, you will get a DeFi project’s
native token as a reward if you stake, lend, or borrow crypto using their application. 

How DeFi works is similar to decentralized exchanges and crypto wallets; there is no
intermediary involved when using the platform. However, unlike these exchanges and
wallets, there are several additional services offered by DeFi protocols. 

DeFi lending platforms

One common example is a lending platform where crypto holders and investors can
lend and borrow cryptocurrencies. When you decide to lend, you allow the platform
to facilitate the lending process and let borrowers use your cryptocurrencies as a loan
in exchange for interest. On the other hand, you'll need to provide adequate
collateral to borrow successfully. More often than not, one will use their
cryptocurrencies or other digital assets as collateral. Some DeFi protocols accept NFTs
and virtual real estate. 

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Now, you may wonder – why would someone borrow cryptocurrencies when they can
sell the digital assets? The answer is that the collateral is only placed on hold, and
borrowers can take it back later on. This means that they are still the owner of the
digital assets they pledge, even if they have used up their borrowed cryptocurrencies. As
long as they can pay what they borrow, they will maintain ownership over their
collateral. 

Take note that DeFi lending has rules about the liquidation of collateralized
cryptocurrencies. So, when the value of your collateral goes below what the lending
platform can tolerate, you may lose your collateral due to the market's volatility.
However, this can be entirely mitigated by monitoring your collateral to make sure it
doesn’t fall below the required amount. 

Pros and Cons of DeFi 

No strict requirements
DeFi has pros and cons, like any other blockchain application in the ecosystem. One of
the good things about DeFi is that it is decentralized. Thus, users have the freedom to
do as they wish without needing permission. There are no other requirements when
lending or borrowing but to meet the necessary collateral. DeFi apps will not ask for
your IDs or proof of income. You don't need a co-borrower to get approved. It doesn’t
matter if you are impoverished or affluent, as long as you have internet access and a
crypto wallet to access the protocols, each person will have the same exposure to
financial products.

More rewards
Another advantage of DeFi is the possibility to earn rewards. Even if you are borrowing,
in some cases you can still earn rewards for merely using the platform for your
financial needs. The same goes for lenders; on top of the interest income you get from
lending your crypto, you also get rewards for using the platform. 

You can pay your loans at any time

With DeFi, you don't have to adhere to specific due dates. You can pay your loans at
any time. This is one reason why some people are switching to decentralized finance.
Unlike traditional finance, where you have monthly due dates, most DeFi protocols have
no such rules. As long as you have collateral and the value doesn't fall below the
protocol threshold, you can enjoy your borrowed cryptocurrencies. 

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Low-interest rates for borrowing, high-interest rates for lending 
With DeFi protocols, you can easily compare offers. Most DeFi apps offer different
options within their platforms. If you can't find your preferred interest rate, you can
switch from one DeFi platform to another to check which product offerings they have.
One thing is guaranteed with DeFi – you will be able to earn higher interest rates
than in the traditional finance sector. 

It is important to note that DeFi gives access to yields that would typically be considered
unprecedented in the traditional financial system. While traditional banks typically pay
you <1% for borrowing your money, DeFi protocols offer yields ranging from 10% all
the way to 100's of percent. 

Entrusting your crypto to others

Besides the advantages, there are also downsides to using DeFi. Since you need to
comply with the collateral requirements, you have to entrust your cryptocurrencies to
the platform and its underlying security. Thus, it is important you choose a reliable
platform that will not steal your cryptocurrencies, and one that is not vulnerable to
technical exploitations. While cases of DeFi protocols being exploited or running away
with funds are quite rare, they are not unprecedented. 

Market's Volatility
When you are transacting on the blockchain, you can't control the volatility of the
market. In the case that the market moves downward, your collateral's value will be
affected. And, when the value isn't enough to cover your loans anymore, some of it will
get liquidated to ensure that the lender is not at risk of losses. Though DeFi has several
advantages, you can't avoid price volatility. 

Conclusion 
Now that you know what DeFi is, you can check out the available platforms on the
blockchain. If you need any services, such as lending, borrowing, building decentralized
apps, or staking, you can always find them on the blockchain through DeFi protocols.
Decentralization becomes a gateway for people who are looking for lower fees while
experiencing firsthand how crypto and blockchain work. And, should you decide to use
decentralized services, make sure you are aware of the pros and cons.

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3.b. Decentralized Exchanges: All You
Need to Know

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In this class, you’ll learn the following: 

 What a decentralized exchange is

 How decentralized exchanges work
 Some of the most popular decentralized exchanges
 What products decentralized exchanges usually offer
Decentralized exchanges (DEXs) have arguably become one of the most significant
applications of blockchain technology. This is because of the manner in which DEX’s
have enabled opportunities for users to trade, earn, sell, and perform other activities all
without needing permission from anyone.

As you recall from our prior class on Centralized Exchanges, traditionally structured
exchanges require KYC and AML policies, and heavily regulate user actions which limits
the amount of activities they can perform. With decentralized exchanges, on the other
hand, user activity is not heavily regulated, and this opens a new world of use cases. 

In this class, we introduce the most significant decentralized exchanges that you should
be aware of and how you can capitalize on them to increase your earnings within the
crypto market. 

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What is a decentralized exchange? 
A decentralized exchange is a platform where you can buy, sell, trade, and swap
cryptocurrencies. Decentralized exchanges like Uniswap and Sushiswap enable peer-
to-peer cryptocurrency trades that execute without the need for order books or
centralized intermediaries.

On these exchanges, there are no merchants or KYC requirements. As long as you have
your crypto wallet with an adequate amount of tokens in it, you can buy and sell crypto
on the exchange. Instead of using merchants to facilitate a purchase or sale, there
are liquidity pools on decentralized exchanges, which are the primary source of funds
that facilitate trades on the platform. These liquidity pools are made up of
cryptocurrency tokens and whenever a buy or sell order is initiated, a decentralized
exchange will rely on the liquidity pool to facilitate the transaction at the current market
price.

The funds in a liquidity pool come from the personal contribution of liquidity
providers. Their incentive to provide this liquidity is that their contribution is rewarded
with transaction costs. Think of it this way, a liquidity provider is lending their Ethereum
tokens to a liquidity pool on a decentralized exchange. When someone goes to swap a
cryptocurrency using Ethereum, they will incur a transaction cost. A percentage of that
transaction cost will be rewarded to the liquidity provider whose funds enabled the
facilitation of the transaction. So, those who choose to provide liquidity get their fair
share of rewards on decentralized exchanges. 

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In the case of centralized exchanges, however, there is an intermediary involved so that
users can easily buy, sell, or convert their cryptocurrencies to fiat currencies. Centralized
exchanges are also custodial, which means that they hold your crypto assets whenever
there are issues between you and a merchant. 

Another recognizable feature of centralized exchanges, for better or worse, is the

implementation of KYC. On one hand, KYC processes enable centralized exchanges to
strengthen their security, limit fraud, and better protect customer funds. On the other
hand, the KYC process sets strict guidelines for which customers are able to access the
exchange and their products, overall hindering the amount of opportunities for
individuals who do not meet the guidelines. 

One last notable feature is that on centralized exchanges, users place their orders, and
P2P merchants bid on the order with the price at which they want to buy or sell the
crypto orders. So, the price follows the merchants' preferences rather than the market.   

Reasons For Using DEXs

So, what are some of the reasons for using a DEX instead of a centralized exchange?
Here are the most common ones:

 You don’t need to go through a KYC/AML process to verify your account: you have quick
access. 
 Transactions are peer-to-peer; nobody can stop them or reverse them.
 Your personal data is less exposed.
 A DEX doesn’t hold your coins; “not your keys, not your crypto”.
 DEXs allow users to participate in DeFi, whereas centralized exchanges don’t.
 The hosting of DEXs is often distributed, decreasing the chance of attacks.

Furthermore, one of the most common reasons to use a DEX is that it allows users to
access a variety of altcoins that centralized exchanges often lack. This is an added
benefit of DEXs, as traders can create any trading pair they want to, given that they
support it with underlying liquidity.

This decentralized nature opens up unprecedented wealth creation opportunities. On

centralized exchanges, the exchange provides liquidity. On DEXs, users can offer their
tokens as liquidity in exchange for a part of the transaction fees. This way, DEXs allow
users to save on costs and earn passive income. Centralized exchanges, on the other
hand, keep the fees for themselves.

Top decentralized exchanges on the market 

Now, you might be wondering how to access decentralized exchanges so that you can
use their services. The blockchain space is continuously evolving, including these

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exchanges. When you use them, you are not only getting access to a platform where
you can buy and sell cryptocurrencies; you also obtain access to participating in
different crypto-related activities, such as yield farming.  Let’s discuss UniSwap,
PancakeSwap, and SushiSwap, among other decentralized exchanges on the market. 

All about Uniswap

UniSwap is one of the largest decentralized exchanges by volume and certainly

one of the best-known. The application has been developed on top of the Ethereum
blockchain, and the native token of the project is UNI. UniSwap V1 was the first DEX-
enabled platform to be released before its third iteration. Later versions (V2 and V3)
have become more efficient and flexible for users, whereas the original version was a bit
more rigid. For instance, V2 has more trading pairs available. The most recent version,
V3, offers improved accuracy and capital efficiency.
How does UniSwap work?

Uniswap is an Automated Market Maker (AMM). As such, UniSwap utilizes an

automated liquidity protocol that rewards users who provide liquidity to the exchange.
These users become liquidity providers (LP) when they contribute their tokens to the
liquidity pool. Once the pool is full enough, users can safely trade their preferred tokens
without the need for someone to bid on their trades. The purchase or sale will
automatically happen as long as there is enough liquidity in the pool. On the other
hand, liquidity providers receive rewards proportional to the amount of liquidity they
provide. This is one way a user can earn from UniSwap, other than trading
cryptocurrencies on the exchange. 

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Things you can do on UniSwap

Aside from buying and selling cryptocurrencies on UniSwap without intermediaries,

there are many other applications available through the decentralized exchange, such
as: 

 Yield farming - Users lend or borrow crypto on a DeFi platform and earn
cryptocurrency in return for their services. Yield farmers who want to increase
their yield output can employ more complex tactics. 
 Voting - You can join the community and become a token holder who can vote
on things that will take the project to the next level. This voting system is usually
known as “governance.” Most decentralized projects employ a governance
voting process to truly decentralize the decision-making within the protocol. 
 Build your decentralized application - UniSwap has a feature where developers
can use the protocol to build their own decentralized applications (dApp). 
 Explore other decentralized apps - Aside from building, there are also
opportunities for UniSwap users to explore the whole ecosystem. Users may find
exciting applications they can enjoy and make money from. 
 Listing trading pairs - Users can list any trading pair as long as there is liquidity
to back it. Not only is it possible to buy and sell, but you can also create a
cryptocurrency yourself and trade it on UniSwap without the need for anyone’s
permission.
 

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All about PancakeSwap 

PancakeSwap, like UniSwap, is a well-known decentralized crypto exchange. Maybe

you’ve heard about its native token CAKE. In contrast to UniSwap, this platform is built
on the Binance Smart Chain and exclusively supports the exchanging of BEP-20 tokens.
BEP-20 is an extension of Ethereum’s ERC-20 and forms the token standard for the
Binance Smart Chain (BSC).

Those who want to stake CAKE tokens can do it on PancakeSwap and Binance. If you’re
more comfortable with using a centralized exchange, then Binance may be a good
alternative for CAKE staking. 

How does PancakeSwap work?

Similar to Uniswap, PancakeSwap is an Automated Market Maker (AMM). The majority

of modern decentralized exchanges employ the AMM method in order to incentivize
liquidity providers and facilitate transactions on the exchange without any need for
intermediaries. You can think of an AMM as a computer program that automates the
process of providing liquidity and facilitating transactions, rather than relying on
companies to do so. If you place a sell order, the transaction will automatically take
place at the market price.

There are several activities that you can do on PancakeSwap, such as:

 PancakeSwap DEX - Like UniSwap, PancakeSwap DEX allows you to choose the
pair you want to trade. Unlike centralized exchanges, users trade pairs since they
exchange against the automated market maker liquidity pools. You can easily use
PancakeSwap DEX by simply choosing from the drop-down list. The platform is

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 user-friendly enough to make trading easier for beginners and experienced
traders. 

The only difference between trading on Uniswap and PancakeSwap is that

UniSwap is only compatible with Ethereum-based ERC 20 tokens while pancake
swap works only with Binance Smart Chain BEP-20 tokens. Therefore, when
deciding which to use, you must first find out if the token is ERC-20 or BEP-20.
          

 Yield Farming - Like UniSwap, PancakeSwap also allows you to stake your tokens
and earn rewards from being a liquidity provider. The process is the same for
both but remember that PancakeSwap works on BSC. So, the pairs will be a little
different. If you wish to swap other pairs that can only be found on ETH-based
decentralized exchanges, using another platform is recommended. 
 Syrup Pools - These pools are recognized for providing reasonable rewards for
users who wish to stake. When users stake on PancakeSwap, they can stake CAKE
and get BEP-20 tokens in return. Like with Yield Farming, there are a lot of pools
to stake in. Users can always choose their preference based on APR and trust in
the underlying projects.
 Lottery - The lottery on PancakeSwap is just like the traditional one.  The only
difference is that you’ll use CAKE to bet and receive CAKE as a reward when you
play. The tokens are collected in a lottery pool, and rewards are taken out from
it. 
 Initial farm offering - This is a new feature on PancakeSwap. This is where the
platform announces new pairs for users to contribute to and earn from by
farming. 
 

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All about SushiSwap 

Next on our list of notable decentralized exchanges is SushiSwap. SushiSwap’s native

token is called SUSHI. SUSHI tokens can be staked on the network as part of a campaign
to attract new users.

How does SushiSwap work? 

SushiSwap is no different from UniSwap and PancakeSwap. It uses an AMM to enable
the trading of cryptocurrencies without the interference of merchants. However,
SushiSwap has more features and services to offer its users. Similar to Uniswap but
differing from PancakeSwap, SushiSwap is an Ethereum based ERC-20 standard
exchange.

Here are some ways you can use SushiSwap: 

 Trading and swapping - SushiSwap is a good decentralized exchange to use as

it provides the same automated service where traders can trade and swap tokens
based on the available market price. The platform is built on Ethereum, so you
can trade pairs that are compatible with the network. 
 Yield farming - You can contribute and earn from farming by simply choosing
the pairs you wish to provide liquidity for and making money based on the APY
you choose. The annual percentage yield is merely the rate of earnings you can
make from providing liquidity, and it’s usually calculated on a per-year basis. So,
the longer you stake, the more money you can gain. 

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  Staking - SushiSwap has a so-called “Sushi Bar” where you can stake xSUSHI.
Here, users can earn their governance rights and at the same time get 0.05% of
all the swaps that take place. 
 Lending and borrowing - In addition, users can also lend and borrow through
SushiSwap. This feature is called the “Kashi Lending and Leverage.” There are
options in terms of lending and borrowing. You can choose based on the interest
rate or yield. It’s indeed an additional way for users to earn more money from this
decentralized exchange. 
 Onsen program - The Onsen program aggregates many different DeFi pairs to
choose from. You can easily earn money from depositing your cryptocurrencies
on the farm of your choice. 
 Miso Auction - Similar to an IDO, Sushi provides the Miso Auction function,
where anyone can auction off tokens before listing them on the DEX. This auction
function incentivizes early adopters of a new token to purchase it at a discounted
price prior to its listing on the DEX.
 
Conclusion 
Depending on your goal as an investor or trader, decentralized exchanges might be a
better choice than centralized exchanges. The main advantage of these platforms is that
they are automated market makers (AMMs), which eliminate the need for bank
accounts, intermediaries, merchants, and peers. As such, they enable permissionless
trading of any compatible cryptocurrency token that has been supported with liquidity.
Truly, the power of decentralization is exemplified on decentralized exchanges. And
aside from trading, there are a bunch of other services too: lending, borrowing,
staking, yield farming, liquidity providing.
On the other hand, when you trade on a decentralized exchange, you are entirely
responsible for your own actions. On a centralized exchange, you might expect that a
scam token or unpromising project will not be available to trade. This is not the case
with decentralized exchanges, as any token can be listed for trading in permissionless
fashion. Therefore, it is extremely important that you do your own due diligence before
purchasing tokens on a decentralized exchange. It is also your own responsibility to
store your tokens safely. 
If you are interested in exploring decentralized exchanges, we encourage you to
investigate those which we mentioned above. When selecting which DEX to use, the
token standard is one of the most important aspects to consider. PancakeSwap is a
good option for people interested in BEP-20 tokens. However, if you’re looking to swap
ERC-20 tokens, you can choose from either UniSwap or SushiSwap. 

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 3.c. How to Set Up Metamask: a
Comprehensive Guide

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In this class, you’ll learn the following:

 What Metamask is
 Why people use it
 How to set up a Metamask wallet
 How to use the advanced features

In our lesson on cryptocurrency wallets, we briefly mentioned Metamask. Founded in

2016 by Consensys, Metamask has become one of the most popular options for
accessing decentralized applications (DApps), websites, and protocols built on the
Ethereum blockchain.

This web wallet is being used by millions of people globally and functions as a bridge
between the traditional internet and the decentralized internet. Whereas people
had to share their private keys to access decentralized applications in the past,
Metamask doesn’t require users to do so; a breakthrough in the cryptocurrency space.

Reasons For Using Metamask

Before you learn how to set up a Metamask wallet, it might be useful to know why so
many investors and traders choose to use Metamask in the first place. The most
important reasons for using Metamask are as follows:

1. It’s free and accessible to everyone

Metamask is free to use, and everyone can access it with one of the browsers
supported by the web wallet. Moreover, the software is open-source; this means that
everyone can have a look at the code. With anyone being able to review the code,
improvements continuously take place.

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2. Ease Of Use
Although some basic knowledge of crypto is required, you don’t have to be a DeFi
expert for using Metamask. The web extension and app are easy to use, and even
beginners will be able to send and receive cryptocurrencies seamlessly. The user
interface is nice-looking and well-organized, making it easy to navigate through the
different features. 

3. Private Keys
With Metamask, users maintain control over their keys. Private keys remain on your
own browser, so you don’t have to worry that the company is storing your private keys
on a remote server. This is in stark contrast to many exchanges like Coinbase; they
generally store users’ keys on their own servers.

4. Hardware Wallets
Adding to security, Metamask users have the possibility of connecting a Trezor or
Ledger hardware wallet with Metamask. You can enjoy the security offered by your
hardware wallet while using Metamask’s user interface to see your coins and tokens.
You sign transactions off on your hardware wallet; for tokens as well as collectibles,
among others.

5. Access To The Ethereum Blockchain

Despite the competition, most decentralized applications are on the Ethereum
blockchain. Metamask gives users access to a plethora of DApps; there is arguably no
better wallet to discover the possibilities DeFi has to offer. After downloading the
extension, users can start to explore the decentralized web right away.  

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How To Set Up A Metamask Wallet

Now that we know why people use metamask, we can look at how to set up a wallet.
Before we start, it’s important to make sure that you are using the most up-to-date
version of a browser supported by Metamask (Chrome, Brave, Firefox, or Edge).
Step 1: Download The Browser Extension

First of all, we need to download the Metamask browser extension. Make sure to only
download directly from the Metamask website and double-check to see whether you’re
using the correct URL(www.metamask.io). This is necessary because fake metamask
extensions with malware are not uncommon.
You can install the web extension by clicking on one of the two download buttons
on the homepage. Alternatively, you can look up Metamask in the web store when
using Chrome. Once you’re in the web store, all you have to do is click on “add to
(browser’s name)’’.

After confirming the installation, you´ll shortly see a download status. When the
download is complete, the extension will appear in the upper-right corner of your
screen. You’ll be redirected to the setup page, after which you’ll have to click on “get
started.”

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Step 2: Create A Wallet

Next, we need to create a new wallet and secrete a recovery phrase. Get a pen and
notebook ready because you’ll need to write down your seed phrase. Click on “create a
wallet’’ to proceed. 

After clicking on “create a wallet’’, Metamask will ask you whether you’d like to share
your data for improvement purposes. If you find privacy important, click “no thanks’’
and move on to “creating a password.” Make sure you create a strong password and
move on to the next part.

On the next page, Metamask will share some information on the importance of seed
phrases. We recommend taking a look at it before moving on. Once you have read the
information and clicked on “next,” you’ll go to the page with your unique seed
phrase.

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Read the information above and next to your seed phrase and click on “click here to
reveal secret words’’ to see your seed phrase. These twelve words will allow you to
regain access to your funds if anything happens to your device. Write your seed
phrase down and store it somewhere safe where only you can find it. 

Metamask will ask you to confirm your secret recovery phrase by selecting the words
you’ve written down in the right order on the next page. Click on “confirm” after you’ve
selected all the words, and Metamask will take you to a final page congratulating you on
creating your seed phrase.

After clicking on “all done,” Metamask will log you in automatically and greet you
with the following screen: 

Here you will see two tabs: “assets” and “activity.” Under the “assets” tab, you will
find a list of all your assets. The “activity” tab will show you your transaction history.
From this screen, you will also be able to buy, send or swap tokens.

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Step 3: Connection with a DApp

Chances are you downloaded Metamask to connect with decentralized applications and
smart contracts, so let’s have a look at how this works in practice. First off, you’ll need to
connect the platform you’re using to your Metamask wallet. Usually, there is a
“connect to wallet’’ button somewhere on the home screen. 

We will use the popular DEX Uniswap as an example in this lesson. Visit the Uniswap
website, launch the app and click on “connect wallet.” 

After clicking on “connect wallet’’, Uniswap will show you a list of supported wallets.
Click on Metamask, and it will start initializing. At this point, a screen will pop up
where you will have to enter your Metamask password.

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After you’ve entered your password, you’ll get another Metamask notification asking
you to select the account you want to use. Select the account and click on “next”; this
will allow the website to see your addresses, balance, activity, and more. 

Click “connect” on the next screen, and Uniswap will start to connect with your
Metamask. Congratulations, your Metamask is now connected to Uniswap and you
can start using Uniswap’s features. More information on Uniswap can be found in the
last lesson.

Advanced Features Now that you have set up your Metamask wallet successfully and
know how to interact with DApps, we can dive into some more advanced features the
web wallet has to offer.

1. Adding Networks

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As you’ve seen above, Metamask automatically connects to the Ethereum mainnet. You
don’t have to use this network; Metamask lets you connect to other networks as
well. Of course, the network you’re looking to use has to be compatible with Ethereum.

To use another network, you have to add it to your wallet. You do so by clicking on
“Ethereum Mainnet’’ and then “add network” as shown below:

On the next page, Metamask asks you to fill in the network details. Make sure that you
get these details from a reputable source; otherwise, you’ll run the risk of adding a scam
chain. Normally, you can find this information on a network’s website.

Here is an example of what the information for a network looks like:

Avalanche

Network Name: Avalanche Network

New RPC URL: https://api.avax.network/ext/bc/C/rpc

ChainID: 43114

Currency Symbol: AVAX

Block Explorer: https://snowtrace.io/

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After you’ve entered the correct information, click on “save,” and the network will now
be available. You can find it by clicking on the drop-down menu on the homepage.

2. Bridging Services

Your Metamask address doesn’t change per network, but you’ll have to transfer
tokens yourself. The process may differ slightly per chain, but generally, you’ll need a
“bridge.”
A few examples of bridging services are:

 Arbitrum
 Polygon
 Optimism
 Avalanche
We’ll use Polygon as an example here since it’s one of the more popular bridges.

After going to the bridge website, select Metamask and enter your password to
unlock. Next, you will need to sign a message to log in to the Polygon wallet.

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Click on the “bridge” option on the next page and select the type of token you want
to deposit by clicking on the drop-down menu. Type in how much you’re transferring
and click on “transfer.” Your coins will arrive in your Metamask wallet on the Polygon
network shortly.

3. Token Support

Have you deposited a coin or token into your account, but it doesn’t show up? No need
to worry. If the token is small or less popular, you need to add support for the asset
yourself. Click on “import token” at the bottom of your wallet’s main page.

Afterward, a new screen pops up, and you’ll have to click on “custom token.” Once there,
you’ll have to enter the token contract address, token symbol, and token decimal.
To find this information, go to the token’s official website. Alternatively, you can look the
token up on https://etherscan.io/tokens.

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Since there are a lot of scams around (fake tokens, for example), make sure that the
source of your information is reputable. Cross-check the information before entering
the details and clicking on “add custom token” to add support for the token.

4. Gas Settings

If you don’t remember what gas fees are, make sure to have another look at our lesson
on Ethereum. Metamask allows you to keep gas fees in check with advanced gas
control. From the wallet’s main page, click on the account icon in the upper-right corner
and then on “settings.”

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Once at settings, go to “advanced” and scroll down until you see “advanced gas
controls.” Turn it on by clicking on the toggle to enable the possibility of changing the
gas fee.

Next time you make a transaction, you’ll be able to change the gas fees by clicking on
“edit.” A screen will pop up where you can change the gas limit, max priority fee, and
max fee.  

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5. Transactions

If for whatever reason, your transaction gets stuck, you can alter pending transactions
on Metamask. To find your pending transactions, go to the main page and look at the
“activity” tab. If you have a pending transaction, you’ll be able to click on the “speed up”
button.

Here, you can submit the transaction again and increase the gas fee. How much
higher you make the gas fee is your decision, but you can view
https://ethgasstation.info/ for live data on the amount of gas currently
recommended. Some people use these gas trackers like Etherscan and ETH Gas Station
to help them decide how much they will increase the gas fee.

The Ethereum heatmap is another useful tool; it shows you when the fees on the
Ethereum network are the lowest. It’s also possible to cancel a transaction by clicking
the “cancel” button on the main page. Keep in mind that this is only possible when
your transaction is still pending.  

6. Hardware Wallet

You can easily connect your hardware wallet to Metamask. If you’re unsure what a
hardware wallet is, make sure to have another look at our “Keeping Crypto Safe” lesson.
From the main page, click on the account icon again but this time go to “connect
hardware wallet”.

Choose your type of hardware wallet, make sure it’s plugged in, and click on “connect."
Choose the account you want your hardware wallet to interact with, and you’ll be
successfully connected. From now on, you’ll plug in your wallet to sign transactions or
messages before making any transactions. 

Conclusion

The decentralized web is full of exciting and innovative apps, and Metamask makes it
easy to access them. In this lesson, you learned what Metamask is, why people use
Metamask, how you can set up a wallet, and how you can use the advanced features
offered by the platform. For using decentralized applications most effectively, it’s
important to have a strategy in place.

We’ll see you in the next lesson where we explore several common DeFi strategies!

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 3.d. DeFi Investment Strategies

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In this class, you’ll learn the following:
 Why DeFi is an attractive financial opportunity
 How the “buy and hold” strategy applies to DeFi
 What DeFi indexes are and how you can use them
 How yield farming can be used to earn high yields
 What liquidity farming adds to yield farming
 How you can earn interest by staking crypto assets

Decentralized Finance (DeFi) is rapidly changing finance as we know it. This financial
revolution has opened the doors to many new opportunities for wealth creation
among crypto market participants. However, as with any type of finance or investing,
there are noteworthy risks, and it is very important to approach this new financial
category with adequate planning.
In a time span of only a couple of years, DeFi has grown into a multi-billion dollar
industry. So, it’s no wonder why many investors are turning their attention to this
segment of the cryptocurrency market. One popular way to gauge the growth rate of
DeFi, known as Total Value Locked (TVL), indicates the growing capital allocation
towards DeFi over time.

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Total value locked in DeFi. Source: defipulse.com

As reflected in the graph above, DeFi is becoming an increasingly large part of many
crypto investors' portfolios. We have shown you how to build a portfolio and
naturally, everyone’s portfolio will look different. The same goes for strategies; yours will
depend largely on your unique time horizon, goals, and risk tolerance.

Nonetheless, there are a few DeFi strategies that have proven effective over time. In
this lesson, we’ll provide an in-depth overview of what these strategies are and how you
can use them to your benefit. Some of these strategies will be similar to the ones
applied to other investing categories. However, the advent of DeFi has also led to the
creation of completely new investing strategies as well.

1. Hodl
We’ve mentioned the “buy & hold,’ or hodl, method when discussing strategies for
crypto in general. However, hodling is also a popular way to approach investing in DeFi.
Since the DeFi space is still in its infancy, investors expect a lot from DeFi-related coins
in terms of future returns, and many DeFi coins still have relatively small market
capitalizations.

Hodlers ignore short-term price action and maintain their positions no matter what
takes place in the market. DeFi coins, in particular, can be quite volatile. That’s why this
strategy requires investors to have enough discipline, conviction, and mental fortitude
to implement it.

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To help you implement this strategy effectively, we have discussed it in detail in our
lesson on investment strategies. Opponents of this strategy argue that it ignores other
opportunities provided in DeFi, such as generating passive income. Fortunately, this
does not have to be the case. Staking, for example, is a DeFi strategy one can apply
to earn passive income while hodling. We’ll get into this more below, but first let’s
discuss investing in DeFi projects and how you can mitigate risks when doing so.

2. Indexes
One way to reduce the risk of the DeFi component of your portfolio is by investing in
an index. This way, you can easily diversify your exposure to DeFi. We can compare
these indexes to ETFs in traditional finance. By investing in ETFs, investors buy a
“basket” of stocks that simply tracks the price of a specific index.

Let's take the tech-focused Nasdaq 100 index as an example. If you buy the Nasdaq 100
ETF, you have instant exposure to all companies included in that index. The only
difference with DeFi indexes is that the underlying assets are cryptocurrencies. These
indexes don’t include all DeFi projects on the market; there are strict criteria.

Here are a few examples of criteria by which projects are chosen:

 Size
 Volatility
 Liquidity
 Usage
 Solvency

These are just a few examples, and it differs per index what criteria are the most
important. However, by having strict criteria, index providers give investors flexibility and
take a lot of research and analysis out of an investor’s hands. There are a variety of
DeFi indexes available, but some of the most prominent are:

 The DeFi Pulse Index (DPI)

 The MetaVerse Index (MVI)
 The Synthetix sDeFi Index (sDeFi)

Depicted below is the composition of the DeFi Pulse Index. As you can see, the index
includes “blue chip” DeFi tokens like Uniswap, Aave, and Maker, and small-cap coins
such as Ren and Balancer. To add one of these indexes to your portfolio, you simply
have to buy an index’s respective token.

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 Composition of the DeFi Pulse Index. Source: Bankless

3. Yield Farming
A popular way to earn passive income in DeFi is by using lending protocols. To
understand how these protocols work, we need to have a look at so-called Automated
Market Makers (AMMs). Thanks to AMMs, cryptocurrencies can be traded automatically
and in a permissionless way. They manage to do so by replacing buyers and sellers with
so-called “liquidity pools.”

Investors who provide liquidity to one of these pools are called “liquidity
providers.” In return for providing liquidity, they receive a reward in the form of a
specific token. These liquidity providers are rewarded because their funds make it
possible for lending, borrowing, or swapping to take place in a market.

Furthermore, all of the above operations, including providing liquidity, lending,

borrowing, and staking are a part of yield farming. The term yield farming itself is used
to describe the action of seeking out the highest yields provided by these opportunities.
Since protocol APY’s vary and often fluctuate, yield farming is the strategy of actively
seeking out the next best opportunity for yield in any of the related Decentralized
Finance categories. 

Some of the most prominent DeFi lending platforms are:

 Compound
 AAVE
 Maker
 Yearn.Finance
 dYdX

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This is a preliminary overview of yield farming, and the subject goes a lot deeper. In our
lesson on liquidity pools and yield farming, we will explain more in-depth what yield
farming is and how you can start earning rewards doing it.

For now, it’s important to take note of the opportunity to earn interest with yield
farming. The interest rates are set by a smart contract and are usually much more
attractive than any interest rates offered by traditional banks. Investors can also earn
interest by lending their coins through companies like Nexo and Celsius.

Since these are companies and not protocols, this way of earning interest by lending is
generally referred to as centralized finance or “CeFi.” These CeFi companies and their
services have a close connection to the world of DeFi, so it’s worth including them.
Below is are the lending rates offered by prominent DeFi protocols and CeFi companies
for March 2022:

Crypto lending interest rates for March 2022. Source: defirate.com

4. Liquidity Mining
Generally considered a subset of yield farming, liquidity mining offers “farmers” an
additional reward in the form of governance tokens. These tokens give beneficiaries
voting rights and play an important role in DeFi environments. Liquidity miners receive
these governance tokens as a reward for providing decentralized exchanges with
liquidity.
The majority of yield farming protocols now give this additional reward to liquidity
providers, and many governance tokens are listed on centralized as well as decentralized
exchanges. Having received the governance tokens, liquidity miners can use the tokens
to explore further opportunities to increase their yield or simply hold on to them.

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Liquidity mining became popular after Compound started rewarding the users of its
platform with its COMP token. At one point, the value of COMP increased so much that
borrowers were actually making money off borrowing. That’s of course an anomaly but
several other governance tokens have performed very well since their inception. A few
other examples of prominent governance tokens are:

 Uniswap (UNI)
 Aave (AAVE)
 Maker (MKR)
 Sushi (SUSHI)
 Synthetix (SNX)

5. Staking
Just like liquidity mining is considered to be a subset of yield farming, yield farming is
a subset of staking. Whereas in PoW consensus mechanisms, miners need expensive
equipment, PoS blockchains allow investors to earn rewards by simply pledging their
tokens as collateral for the network.

We’ll discuss the differences between PoW of PoS more in-depth in a later lesson. When
investors choose to pledge their tokens to the network, these crypto assets act to
validate transactions. As a reward for validating transactions, investors receive so-called
“staking rewards.” How much you earn will depend on the number of coins you stake.

The following are different places where you can choose to stake your crypto:

 Centralized exchanges
 Decentralized exchanges
 Wallets
 Staking-as-a-service platforms
How you choose to stake your crypto-assets will depend on your preference. To help
you learn how to use the above-mentioned ways of staking, we have explained them
through step-by-step guides in our lesson dedicated to staking. Below you will see the
staking process explained simply:

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 Staking explained simply. Source: medium, chorus one .

Conclusion

There are many different approaches to capitalizing on DeFi. Since this nascent segment
of the crypto industry is still developing rapidly, more opportunities will likely arise in
the future. The strategies discussed in this lesson have proven to be effective ways to
earn passive income and achieve capital gains on your crypto.

We will teach you how to apply the strategies mentioned in this lesson with step-
by-step guides throughout this course.

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 4. Earn, Without Selling
Crypto

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4.a. How to Earn Passive Income
Through Crypto Staking

In this class, you’ll learn the following:
 Proof of Stake vs. Proof of Work
 The advantages and risks of staking crypto
 Important staking terms you should know
 A step-by-step guide on how to stake

The crypto industry keeps on expanding, and one of the best advantages of its
development is that people get access to different earning opportunities. While the
most common perception is that a person can only earn from trading or investing in
crypto, advancements in the last two years have introduced many new earning
strategies. One effective way to leverage your crypto investments is to stake them.
If you’ve just heard about “staking” and you’re wondering what it is and how you can
earn from it, here’s a comprehensive guide we made for you.  But before we deep dive
into the step-by-step process of staking, let’s tackle some key points, including what
Proof of Stake and Proof of Work are, the advantages of staking, and where you can
participate in the staking process to earn crypto.   

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What is Proof of Stake? 
To understand the concept of Proof of Stake better, let’s talk about Proof of Work as
well.  Proof of Work and Proof of Stake are consensus mechanisms that verify new
transactions on the blockchain. Once these transactions are verified, they are then
added to the chains of the decentralized ledger. What makes these two mechanisms
different is how they produce new blocks. 
 

(source: durwinho.medium.com)

Proof of Work uses high-tech computers capable of solving mathematical problems in

cryptography. With Proof of Work comes “mining.” Basically, those who use Proof of
Work to verify transactions are also called miners. They mine new blocks in exchange for
crypto rewards based on how powerful their mining equipment is.  On the other hand,
Proof of Stake doesn’t require a person to have high-tech computers or any physical
tools to verify transactions. Instead, it introduces the concept of “staking,” where
validators can stake cryptocurrencies to help verify transactions and get rewards in
exchange for it.  This mechanism aims to solve the energy consumption issues created
by Proof of Work. And regarding rewards, validators get their fair share of the rewards
when they get selected to validate. The rewards will depend on the amount of
cryptocurrency being staked.  

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Why Proof of Stake?
There are several reasons why Proof of Stake (PoS) is better than any other consensus
mechanism on the blockchain.
More eco-friendly than Proof of Work (PoW) First, PoS is more eco-friendly than PoW.
As mentioned earlier, PoW needs computers to mine, which means a great amount of
electricity is consumed. Although Bitcoin mining is fueling investments into renewable
energy, the energy consumption of PoW is still an ongoing issue, and some countries
like China have already raised the alarm regarding the matter. 
An earning opportunity for retail investors Another reason why Proof of Stake is
excellent is because it’s a cheaper way to be a validator. Compared to PoW, where a
validator needs to invest in high-tech tools to mine, PoS allows the chip-in of
cryptocurrencies to meet the minimum requirements of a particular network. For
example, if 32 ETH is required to be a validator on Ethereum, validators can open an
opportunity for retail investors to stake their cryptocurrencies to meet the minimum
amount needed to participate in the staking.
    

Staking on ethereum.org

Low gas fees  When you make transactions on the blockchain, transaction fees are
expected. On Ethereum, these fees are called gas fees. When you transfer
cryptocurrencies or NFTs using the Ethereum network, the cost of gas will depend on
the activities and, furthermore, the “congestion” happening in the network. A gas
tracker is available to users to check the current fees.
Now, you might have heard or experienced paying high gas fees when using the
Ethereum network. The reason why these costs are so high is that the network uses

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PoW. The fees incurred for gas are needed to sustain the mining activities. With PoS,
investors don’t have to worry about gas fees. The transaction fees on PoS networks
are significantly cheaper. Most of the time, users only have to spend a couple of
dollars to process transactions, which is a great advantage. PoS helps investors save
more money. 

PoS Terms You Should Know 

Before we dig deeper into understanding how staking works, let’s define some terms
you might find technical at first. 
Staking pool - a collection of cryptocurrencies staked by investors.
Nodes - an integral part of the blockchain that verifies transactions. Nodes
communicate with each other to pass on information and produce new blocks. 
Validators - node operators that participate in consensus. They are responsible for the
verification of new transactions on the blockchain and keeping these records secure. 
Staking-as-a-service platforms - these are platforms offering staking services only.
They give investors the option to stake multiple cryptocurrencies and accumulate all
their earnings in one place. 
APR - stands for Annual Percentage Rate. The rate of rewards applied to a staking
activity annually. This is the basis for calculating the investor’s prorated rewards during
the staking period. 
Locked-in period/staking period - the period during which the staked cryptocurrencies
can’t be withdrawn. This is the time when stakes are “locked” to allow the network to
use the staked crypto according to its purpose.   

Different kinds of staking 

There are two major kinds of staking:
Regular PoS and Relegated PoS.
In regular PoS, validators participate in staking by using their cryptocurrencies as a
stake. There will be a random selection of who will produce the new block. Once
validators are selected, they will receive their rewards depending on the total rewards
and what their share is. If not selected, validators will not receive rewards.  Delegated
PoS is actually an extension of regular PoS where retail investors participate in staking
through validators. In most cases, validators are institutions that have enough
equipment or experience to participate in staking directly on their chosen networks.
Delegated PoS opens a new door for retail investors to join the activity without
having technical knowledge about staking. 

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How To Start Staking?
By now, you already have an idea of staking in general and why it’s essential in the
whole decentralized system. Let’s deep dive into the general process of staking before
we introduce the platforms where you can actually stake. 

Step 1: Canvas for networks and validators By networks, we mean the existing
blockchain network where you want to stake your crypto. For example, you might want
to research PoS networks such as Cardano, Solana, Avalanche, Ethereum 2.0, and
Tezos. These are a few of the most prominent PoS networks that offer staking rewards
for validators. 
If you’re staking as an individual, you’re most likely to opt for delegated PoS. This
means that you have to research the validators available for you. There are numerous
routes through which you can choose a validator, and some are more technologically
complex than others.
In the latter part of this lesson, you will learn how to stake with crypto exchanges,
decentralized exchanges (DEX), and staking-as-a-service platforms. They all offer
custodial staking options for retail investors without a big minimum crypto
requirement.  Some examples of platforms where you can stake are Binance, Coinbase,
Uniswap, PancakeSwap, Sushiswap, RockX, and Figment Networks. 
When choosing a network and a validator, it is essential to consider the APR and
locked-in period, as these details will inform you about your expected return and how
long you will have to commit your tokens to staking.
Of course, it’s logical to choose the network with the highest APR. You also want to
consider the dimension and reliability of the network.
 

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 Staking on Kraken

Step 2: Choose a crypto wallet to use (if you want to stake on DEX or staking-as-a-
service platforms)
If you use Binance or Coinbase to stake, you can skip this step and jump to the guide
on how to stake with these two platforms. 
Using decentralized exchanges and staking-as-a-service platforms will require you to
have a crypto wallet, such as MetaMask, Trust Wallet, and Ledger. MetaMask and Trust
Wallet are online crypto wallets that you can connect to many blockchain platforms.
These wallets help you manage your cryptocurrencies, including sending, receiving, and
transferring tokens.

So, once you connect your wallet, the staking platform will debit the crypto you stake
from your balance, and once the staking period has elapsed, you will receive your total
staked crypto plus your rewards.  Ledger, on the other hand, is used for cold staking.
Unlike online crypto wallets, Ledger is a hardware wallet where investors can store their
cryptocurrencies offline for maximum protection.
Cold staking doesn’t differ much from regular staking. The only difference is that with
cold staking, the crypto in the hardware wallet is frozen to prevent the holder from
further using it while staking is ongoing. 

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Step 3: Budget your crypto for staking. 
Once you have chosen your networks and validators, budgeting your crypto for staking
is the next step. Let’s say you have decided to stake $500 for a month. Once you have
this budget, you can then convert the fiat currencies into the cryptocurrencies you wish
to stake. 
Suppose you are staking Polkadot and Cardano. You will need a certain number of DOT
and ADA tokens to start staking. If you plan to use crypto exchanges like Binance, it’s
much easier to buy cryptocurrencies since the platform operates as a one-stop shop for
all crypto needs. So, after buying your desired tokens, you can go straight to staking all
within the same platform.

Setting Budget on Kraken

Step 4: Select the locked-in period.  Staking platforms have different lock-in periods.
Generally, centralized exchanges such as Binance or Kraken have no lock-in
periods and allow you to unstake instantaneously.
However, when staking through a DEX or staking-as-a-service platform, usually the
options for lock-in periods are 15 days, 30 days, 60 days, and 90 days. You can check
with the platform once you decide to start staking.  The staking period is also a
determinant factor that will have an impact on the number of rewards you receive for
staking. The longer you stake, the more rewards you can get. If you don’t need your
cryptocurrencies right away, choosing the most extended staking period will give you
the best benefits.

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Step 5: Wait for your rewards! Now that all the steps are completed, the last thing you
have to do is to wait for your rewards. Don’t worry, your staked crypto and rewards will
go back straight to your wallet once the staking period is over. 

How much can you earn from staking? 

Your earnings will depend on the APR, lock-in period, and the number of your
staked cryptocurrencies. The higher the APR is, the higher your profits. The longer the
lock-in period, the more rewards you can receive. The more cryptocurrencies you stake,
the more you can earn.  So, let’s say you stake 5 CAKE at 20% yield per year and you
choose to lock it for 90 days. More or less, you will earn 0.2465 CAKE by the end of 90
days considering that there are 365 days in a year. [5 CAKE x 0.20 x (90/365]. 

A Practical Guide On How You Can Stake With A Crypto Exchange 

This section will guide you through the step-by-step process of staking through a
centralized crypto exchange. Many centralized exchanges offer users the possibility to
stake their crypto and make passive income that way. We’ll focus on Binance and
Coinbase in this guide, as they are two of the most prominent centralized exchanges.  

Staking with Binance

Binance is a popular crypto exchange with lots of earning features for investors. You can
use the platform to invest and trade cryptocurrencies, buy NFTs, participate in providing
liquidity, and, of course, stake your crypto. This platform serves as a one-stop shop for
investors who want to explore the best possibilities in the crypto space. We’ll take you
through the process of staking with Binance step-by-step.

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Step 1: Make sure you go to the official Binance website
(https://www.binance.com/) and log in with your account. If you don’t have an
account yet but are looking to open one, make sure to have a look at our lesson on
opening an exchange account.

Step 2: Once you’re logged in to your account, you’ll see a bunch of tabs at the top of
the screen. We need the “Wallet” tab, where you will find all features related to your
wallet, such as funding and earning. Hover your mouse over “Wallet,” go down the list,
and click on “Earn.”

Step 3: You will be taken to the “Earn” page, where you will find all the different earning
options on the platform. Under “Staking”, you will be able to see the estimated value
of your staked crypto and the last day's profit. Click on “Earn Products” to go to the
next step.

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Step 4: You will be redirected to Binance Earn. You can scroll down the page and
look at the list of cryptocurrencies available for staking. You can also search for your
preferred cryptocurrencies and see if Binance Earn offers them on the platform. Aside
from the tokens, you will also see the product type, estimated yield(APY), and
duration(lock-up period).

Step 5: Once you’ve chosen a token, lock-up period, the type of staking, and your
preferred APY, click the “Stake” button. Here, the acronym “APY” stands for Annual
Percentage Yield, similar to Annual Percentage Rate. Next, Enter the amount of crypto
you want to stake. 

Step 6: Wait for your rewards! But take note that you have to finish the lock-in period
so you can get all your rewards. It is possible to unstake your coins before the lock-
up period ends, but keep in mind that you might lose your rewards this way.

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Staking with Coinbase
Like Binance, Coinbase is a crypto exchange platform that offers several crypto services
to investors. Retail investors can use the platform as a wallet, trading platform, and even
for storing trust funds. Both individuals and businesses can use Coinbase as a gateway
to accessing opportunities in the crypto market. 

Step 1: Make sure you go to the official Coinbase website

(https://www.coinbase.com/) and log in to your account.

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Step 2: On the Coinbase homepage, you’ll see the list of cryptocurrencies on your
watchlist (if you have any on it). Just click on the crypto you want to stake and you
will be redirected to another page.  After clicking on Ethereum, for example, you will see
the “Stake now” button when you scroll down the page. Click on it to start staking.

Step 3: A prompt will appear with information about the APR you will earn, the trade
and transfer restrictions, and the potential risks of staking your ETH. After reading
through the information, click on “I understand” to go ahead or “Learn More” to find out
more about the terms of staking.

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Step 4: You will now be able to enter the amount of ETH you want to stake. Click
on “Continue” and check the information displayed on the preview. After agreeing to
the information shown, click on “Stake Now.” You will then receive a message that your
order is successful or has been submitted. 

A Practical Guide On How You Can Stake With A Staking-As-A-Service Platform

Aside from crypto exchanges, you can also stake with staking-as-a-service platforms.
These platforms are the “validators” pooling investors together to delegate staking.
Here, it’s possible to stake different cryptocurrencies simultaneously. Unlike crypto
exchanges, these platforms focus more on becoming validators rather than offering
other services so that they can partner up with several major networks that can provide
greater profits to investors. 

Staking with RockX

RockX is a staking-as-a-service platform based in Singapore, which has operated in the
Blockchain space since 2019. It offers several cryptos for investors to stake, such as DOT,
ROSE, LUNA, KSM, IOTX, and SOL. The platform takes care of operating validators on
users’ behalf and does so for most top PoS blockchains. They have a 24/7 monitoring
system that makes sure validators are up-to-date and running normally.

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Here’s how you can stake with RockX:

Step 1: Go to the official RockX website(https://www.rockx.com/), click on “staking’’ at

the top of the screen, and scroll down the staking page. Here you will find all the
blockchain networks available for staking. Once you’ve chosen one, click “Start Staking.”

Step 2: You will be redirected to another page where you can click “Start Staking” once
again. After clicking it, you will see a pop-up box where the validator address is
displayed. Click “Start Staking” again to complete this step. 

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Step 3: Since RockX uses a hardware wallet, you might need to connect another
wallet(your Ledger, for example). Say you chose to stake ROSE (Oasis Network). You will
be redirected to the Oasis Wallet from RockX’s official website. Then, sign in using your
Ledger Nano. 

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Step 4: Follow the sign-in instructions and connect your wallet. Once you’re in, go to the
“Staking” tab and choose the validator you want to delegate your tokens to. In this
example, choose RockX and then click “Delegate.” 

Step 5: After connecting your hardware wallet, you will be able to enter the amount of
crypto you want to stake, along with the gas price to check the total amount you need.
After setting the gas price, you will see the fee you have to pay and the gas limit.

Step 6: If everything is okay, make sure to review the transaction. Check the addresses,
the amount, the fee, and the gas limit. If everything is okay, click on “Sign and Submit.”
Now, you’ve successfully delegated your tokens with RockX. After the so-called “unbond
period,” you’ll receive your rewards

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Staking with Figment  
Another staking-as-a-service platform that you can use to delegate staking is Figment.
This platform has been assisting those who want to venture more into Web3. With
Figment, developers can build decentralized apps while crypto holders can explore its
ecosystem. 

Here’s how you can stake with Figment:

Step 1: Go to Figment’s official website(https://www.figment.io/) and click “Stake” on the
menu bar on the home page. From the drop-down menu, choose the network you want
to stake after you’ve scrolled down to “protocols supported.” You can choose any
network you like, but we will take Cardano as an example for this lesson. 

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Step 2: You will be redirected to https://www.figment.io/protocols/cardano, where you
will see all the details about the network. The most important information to look at
here is how often rewards are distributed, if there’s an unbonding period, if slashing(loss
of tokens) occurs, and the inflation. Click “Stake Now.” You will then see the step-by-
step instructions provided by Figment on how you can start staking Cardano. 

Step 3: For the next step, you’ll need to have a Cardano wallet; recommended are either
Yoroi or Daedalus. We will use the latter as an example since it’s Cardano’s official
desktop wallet. The following steps explain how to stake Cardano with Daedalus: 

 Register with https://daedaluswallet.io/.

 Make sure to transfer ADA to your new wallet.
 Go back to your dashboard and go to the “Delegation” tab.
 Select Figment’s staking pool and click “Delegate.”
 Confirm the transactions, and don’t forget to keep additional ADA for the fees.
 Wait for your rewards that will arrive after the staking period!


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Conclusion 
The greatest thing about staking is that anyone can earn a passive income without
having expert knowledge or skills in trading and investing crypto. Of course, aside from
rewards, there are risks and challenges that you need to overcome too, such as the need
to lock your cryptocurrencies, the volatility of the market that can affect the value of
your staked crypto, and potential security risks caused by delegating your crypto to
validators.  Now that you have comprehensive knowledge of how it works, you can start
your staking journey as soon as you can.

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 4.b. DeFi Tools: Liquidity Pools and
Yield Farming

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In this class, you’ll learn: 

 What yield farming is and what liquidity pools are

 The main differences between yield farming and staking
 How to maximize your returns from yield farming
 Step-by-step instructions on how to participate

In terms of maximizing the earning opportunities in the crypto market, yield

farming has been one of the go-to strategies for investors. Like staking your crypto,
yield farming does not require a great deal of technical knowledge but can be a
powerful strategy for those looking to grow their crypto stack. Understanding yield
farming and liquidity staking is a good starting point if you're new to crypto and looking
for ways to earn.  In this class, we'll guide you through the process of yield farming and
providing liquidity. Let's start by defining some technical terms to help you understand
the topic better. 

What is a liquidity pool?

Before you venture into the world of yield farming and liquidity provision, you must first
know what a liquidity pool is.  A liquidity pool is a pool of cryptocurrencies or tokens
that is used to facilitate trades of the assets on a decentralized exchange (DEX).
Anyone who holds a cryptocurrency that trades on a DEX can participate in this
crowdsourcing, and these people are referred to as Liquidity Providers, or LPs for short.
You can think of a liquidity pool as a vault that all of the LPs’ tokens are locked in. With
liquidity pools, users don't need to wait for another party to make transactions. They can
buy or sell cryptocurrencies on a DEX at the price they initiated the trade. 

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What is yield farming? 
Yield farming is the process in which users lend or borrow crypto on a DeFi platform
and earn cryptocurrency in return for their services.  Basically, it is a system where
users or investors provide liquidity to other users through a protocol on decentralized
exchanges to earn rewards. Yield farmers who want to increase their yield output can
employ various tactics. Like crypto staking, yield farming is a preferable earning strategy
since investors don't have to use technical trading knowledge to participate, and it is
also less time-consuming.    

The main differences between yield farming and crypto staking 

Though both systems have similarities in how the rewards are distributed, there are
important differences that can help you decide which is more suitable for you as a user. 

Validators vs. Liquidity providers

In crypto staking, you delegate staking to validators and entrust them with your
cryptocurrencies. While in yield farming, your stake goes straight to the liquidity pool of
the network, and you become a liquidity provider.  Liquidity providers receive "LP
tokens" in exchange for the stakes they provide in the liquidity pool. Here's how it
works: liquidity providers pool their money in a liquidity pool, and they receive a certain
percentage of LP tokens equivalent to their share in the pool. So, if the liquidity pool has
total funds of $1,000 and you contributed 10% of it, you'll receive the 100 LP tokens
right away.

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Single token vs. Trading pairs 
Yield farming will introduce you to many trading pairs–CAKE-BNB, BUSD-BNB, ETH-
USDC, and a lot more. These pairs are created on decentralized platforms to serve as
options for liquidity providers and traders. With a group of new pairs coming in every
day, users are allowed to filter the list by themselves and are able to invest in the
most profitable pairs depending on the parameters they want.

Advanced users in yield farming use a tool called GraphicQL for blockchain inquiry.
Using this tool will help them find the best pair easier.  Crypto staking only deals with a
single token. If you stake, you'll only have to choose from CAKE, BNB, ETH, BTC, ADA,
etc. There are no options to stake trading pairs. 

Custodial vs. non-custodial

LP tokens provide holders access to many benefits and privileges. They can utilize the
token in the whole ecosystem of the network and take control of the assets they stake
despite lending them to the network. So, unlike crypto staking, where validators take
custody of cryptocurrencies, yield farming is non-custodial.   

Advantages and risks of yield farming 

First and foremost, anyone is free to join yield farming. The decentralized system opens
a door for everyone to discover how rewarding it is to be a part of the crypto space.
And, since several decentralized exchanges are available, the options are boundless for
users. The process is also very straightforward–just use your cryptocurrencies, lend
them to the network, and wait for your rewards. 

But as we've said, there are risks as well. The safety of your cryptocurrencies, especially
when you are interacting with new platforms can't always be guaranteed. Although the
nascency of decentralized exchanges doesn't always mean they are prone to cyber
attacks, you need to pay attention to security. In addition, yield farming issues
cryptocurrencies as rewards, which means your earnings are not safe from the volatility
of the crypto market.   

How do rewards work in yield farming?

The rewards in yield farming work the same way as in crypto staking. You must
consider the APY, the number of tokens you contribute to the pool, and the
staking period.

So, if you put 100 tokens for one pair and the pool has 10% APY for one year, you will
earn 10 tokens (100 * 10% ) if you lock your tokens for one year.  Some users prefer to
provide liquidity for 30, 60, or 90 days. Your earnings will be prorated depending on the

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period you choose. So, the basic computation is: your total liquid stake x APY x
n/365 days (n = number of days your tokens are locked.)

(ROI calculator on pancakeswap.finance)

Best practices to maximize your rewards from yield farming

To maximize your token earnings, there are best practices you can consider. Here are
our top three valuable and actionable tips: 

Know what you're getting into - DYOR

Not knowing what you're getting into will bring your finances down. You need to do
research before you start farming. In the crypto space, it's called DYOR (Do Your Own
Research). Check the decentralized exchange you choose to do farming on and research
the pairs. Follow the project’s communities on social media, take a look at the roadmap,
analyze its audits (look for a solid score), and use tools and coin tracking sites like
dexguru. (Search a token pair and press the “DYOR” button.
Check the Total Value Locked 
The Total Value Locked is the measurement of the total amount of cryptocurrencies
locked in a pool on decentralized exchanges. You should look into the TVL to check
whether the DEX ecosystem can give you the expected value. The more TVL there is,

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the bigger the opportunity for yield farmers. It also means that there is enough
liquidity for users on the DEX.

Diversify your pools 

Like any other investment, you wouldn't want to put all your eggs in one basket. If you
can invest in liquidity pools with enough money, try to look for several pools to split
your funds. You can split the money equally between the pools. For example, if you have
$1,000, you can put $250 in four different pools to minimize the risk.

Different
pools on Sushiswap

How to start yield farming? 

After gaining knowledge about yield farming, its advantages and risks, and its best
practices, it's time to learn the step-by-step process of how you can start yield farming
or liquid staking.  In this section, we'll use SushiSwap, PancakeSwap, and Raydium as
examples. Note that you should have a crypto wallet ready before you follow these
instructions. MetaMask and Trust Wallet are the most common wallets you can
use. If you are using Binance and you want to farm on Binance DEX, you don't need to
have a crypto wallet. 

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Yield farming with SushiSwap 

We’ll start our list with SushiSwap:

a leading decentralized protocol with almost $200 billion in total volume. The network
allows users to earn governance rights by staking its xSUSHI token, putting governance
in the hands of its community. You don’t need to have much technical know-how to use
the platform; SushiSwap makes yield farming accessible and offers investors a variety of
pools to choose from.

Step 1: Make sure you go to the official SushiSwap website (https://www.sushi.com/)

and click "Enter App." 

Step 2: Connect your crypto wallet and check if it’s been properly linked to SushiSwap.
You should be able to see your wallet address on the right side corner of the page.
 

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Step 3: To explore the token pairs you want to invest in, hover your mouse over the
“Farm” option at the top of the page and click “All Farms.” There you will see the list of
pools which you can choose from, such as USDC/WETH, BIT/WETH, WBTC/WETH,
ETH/YGG, and WETH/USD. 

Step 4: Choose the pool you want to invest in. Then, add the amount of liquidity you
want to chip in per token. 

Step 5: Click “Enter an amount” and confirm the transactions via your crypto wallet.
Note that you might need to install the extension of your crypto wallet to make the
transactions easier. Before you confirm the transaction, make sure you have enough ETH
in your wallet to pay for the gas fees. The confirmation message will then pop up. Once
you confirm, the transaction will push through.

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Step 6: There will be another pop-up box with the information about how many pool
tokens you will receive in exchange for providing liquidity. Press “Confirm Supply” and
wait for the confirmation message of your position.

As you’ve seen, yield farming with SushiSwap is fairly straightforward, and even
beginners can find their way around the platform. However, SushiSwap is not the only
protocol where you can farm. Let’s have a look at some other prominent platforms yield
farmers use.

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Yield farming with PancakeSwap 

PancakeSwap is one of the most used decentralized crypto exchanges. Its native token is
CAKE. The difference between this platform and SushiSwap is that it is built on Binance
Smart Chain, which allows the swapping of BEP-20 tokens only. Binance takes part in
supporting PancakeSwap by offering CAKE staking on the centralized exchange
platform. PancakeSwap's V2 is also an upgraded version of V1, with added features. 

Step 1: Go to pancakeswap.finance and connect your wallet. Since PancakeSwap is built

on BSC, you might need to add the BSC network on MetaMask and Trust Wallet. Once
your wallet is connected, your wallet address will appear at the top right corner of the
page.

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Step 2: Click “Start earning.” You will be redirected to the “Farms” page where you will
see the list of pairs, such as CAKE-BNB, BUSD-BNB, and 8PAY-BUSD. 

Step 3: Click on the pair you want to contribute liquidity to. Enable the farm feature and
make sure your wallet has enough cryptocurrencies to pay for the amount of liquidity
and gas fees. 

Step 4: Once the farm feature is enabled, you will need to enter the amount you want.
In the screenshot below, you will need both BNB and CAKE. Below this page, you will see
the amount of CAKE per BNB, BNB per CAKE, and the share of the pool. Enter the
amount and confirm your transaction via your crypto wallet. 

Step 5: Wait for your rewards!

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Yield farming with Raydium

Raydium is built on the Solana network–a blockchain technology that promises more
scalability and lower fees than Ethereum. The platform shares liquidity with another
decentralized exchange called Serum. Raydium offers a two-way earning system where
users can provide liquidity, earn its token RAY, and stake RAY to maximize profits. 

Step 1: Go straight to https://raydium.io/farms/ and connect your wallet. On this

decentralized exchange, you need a Solana-based wallet like Phantom. The registration
process is as easy as opening a wallet on MetaMask. Once your Solana-based wallet is
ready, you can connect your wallet to Raydium. You should be able to see your wallet
address at the right corner of the Farms page. 

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Step 2: Choose the pair of tokens you want to stake. After clicking the pair, you will see
a button “Stake LP.” Then, put the amount you want to stake. Confirm the stake and wait
for your rewards!

The process of yield farming works fairly similarly on all of the platforms we’ve
mentioned above, but each one is slightly different and has its pros and cons. Which
platform you choose to use will ultimately depend on your unique preferences.

Conclusion 
Whether you're just beginning in the crypto space or it’s your first time venturing into
yield farming, Yield Farming is a good alternative to crypto trading, that lets your
money grow passively without you needing technical knowledge. However, keep in
mind that the market isn't always green. As you spend more time investing in
cryptocurrencies, you'll experience how market volatility can impact your investments if
you don’t have a solid plan and investing strategy.

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 4.c. A Guide On How You Can Earn
From Promoting Crypto

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In this class, you’ll learn the following: 
 How advertising works in crypto
 Different social media policies for crypto advertisements
 How much you can earn from promoting crypto
 Top crypto advertisements and programs you can try

In this guide, you will find out how to earn by promoting crypto. Many projects
spend a significant part of their budget on marketing and promotions, and you can
benefit from that.

Now that the crypto space has evolved so much, it's easier to advertise a new token on
the market. Social media, influencers, collaborations and paid advertisements are all
effective ways to promote projects in the crypto space. 
From a user's perspective, you can use social media and digital marketing to your own
advantage. And by this, we mean earning money from spreading awareness about
cryptocurrencies. 

In this class, we emphasize some of the key points about crypto advertising or
promotions that can help you earn money without needing to trade or invest in
cryptocurrencies. Let's get started!  

How does crypto advertisement work? 

Crypto advertisements usually work in the form of individuals who promote the
projects, and earn a commission for doing that, regardless of their experience in
trading or investing in cryptocurrencies. 

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Advertisements are all about reaching the right audience with the right messages. By
using people to reach out to others by word of mouth on Social Media and digital
platforms, promotions become effective and cost-efficient. 

So, how does it work exactly? In essence, crypto advertisements involve companies
paying people to spread the word about them. If you have any means to reach an
audience: on social media, your blog, or any other platform, you can earn by partnering
with a crypto project. You don’t have to be a superstar, micro-influencers may also
leverage their audience to earn an additional income.  From referral links, to affiliate
and direct partnerships, you can participate in these programs and earn significantly
by helping projects spread the word about their products.  

Websites like cryptopr.com offers Influencers ways to monetize their audience

How much can you earn by promoting crypto? 

There is no definite figure to show how much you can earn by promoting crypto. There
are many possible ways to increase your earnings. There are also factors that
determine the range of your income. Here are key points to consider when estimating
your crypto earnings: 

Type of promotion
There are several types of promotions. But as an individual, you use your own means
to promote a project. For example, if you're a YouTuber, your type of promotion would

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most likely be mentioning the products in your videos or doing a video review. These
promotions vary in price. The larger of an audience you expose the project to and the
more time you spend discussing it, the more you’ll get paid.

Number of projects/affiliates
In most cases, people who work on crypto promotions don't just promote one project. If
you have an established follower base, expect more projects to reach out to you
for possible collaboration. The more projects you work with, the more compensation
you will get for promoting them. 

Range of compensation
The amount relies on many variables: your experience as a promoter or influencer, your
follower base, your effort to promote the project, and the price you set for yourself. To
get as much as possible, you have to be good at negotiations too. Remember that
crypto projects will propose offers based on their budget. If you're too far from what
they can afford, they might jump to another person who can do the job at their price. 

Type of compensation
Some digital assets are more valuable than others. If you get paid in the project's native
token, there may or may not be a chance for the token to grow in value in the future. It's
riskier to accept cryptocurrencies than stablecoins, and you should be able to
understand the difference. But the growth potential of non-stablecoins is a
significant component as well. So the type of compensation you decide to receive will
also affect the total amount of your earnings. 

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How can you promote a crypto project?

Influencer Marketing
Influencer marketing is a type of promotional activity where a social media influencer
advertises a project using his/her social media platforms. And, it's common not just in
the crypto space but in all industries. Influencers often use YouTube, Instagram,
Facebook, TikTok, Twitter, and podcasts. There are no technical requirements to be
an influencer, as long as you have the platform and audience.

Now that companies are also raising brand awareness online, the need for more social
media users who can connect to consumers is increasing too. And with the existing
demand, you can use the numbers to make something for yourself. If you think that you
are well-versed in social media, it's a good time to explore and deep dive into the
strategies used by influencers to gain followers and eventually land promotional
projects.  Though not everyone is born to be an influencer, you can always leverage the
size of your network to make money. Some strategies you can do are: 

 Reach out to startups and pitch what you can do for their project as an influencer
 Constantly grow your network by collaborating with crypto projects, paid or not
 Shape the conversion by sharing your advocacy with your audience
 Collaborate with other influencers
 Reply to the messages you get from crypto startups
 Be transparent as to what you can do for the project
 Host giveaways through your Youtube, Instagram, or Twitter
 Apply for promotion grants, sometimes they compensate well

And remember, micro-influencers can also be effective; you don’t need millions of
followers on social media. So, don't doubt your ability to do marketing with the few
followers you have.
  
PR and Content Marketing
If you don't have time to make a Youtube video for a crypto project or produce a
podcast exclusively for them, then you can use other platforms to help them market
their crypto projects while getting paid for the work. 

This strategy is the best for bloggers who have established websites already. If your
niche is in the finance, business, or crypto industry, you can make a lot by
promoting crypto projects through written content for them and posting the article
on your website.

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Publicity is essential for new projects, and they often partner with people who have
platforms with enough traffic. So, what some influencers do to obtain promotional
offers with content-related tasks is establish and focus on a few specializations, such
as press releases, guest posts, project highlights, or pure promotional content. 

The same goes for social media promotions. You don't need to make yourself a
project’s "poster child" to advertise crypto products. If your social media accounts are
for business purposes and you want to keep them as professional as possible, then you
can promote crypto content in a more formal way. What you can do is post a review of
the product, help the project disseminate new updates or announcements, or share
comprehensive and short information about the project you are partnering with.   

Conclusion

If you're still doubtful about venturing into cryptocurrencies because you are not a
trader, we hope this class helps you understand that crypto isn't just about trading. It's
possible to earn money from it by promoting crypto projects using your established
network. And, if you aspire to be an influencer and at the same time enter the crypto
market, one of the best strategies to maximize your income is to do promotions. 

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 4.d. Everything You Need To Know
About Airdrops

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In this class, you will learn the following: 
 What crypto airdrops are
 How crypto airdrops work
 How much you can earn from them
 Examples of crypto airdrops
 How you can qualify to join

It’s hard to find anyone who doesn’t like free stuff. Even in the crypto space, those
who don't have that much to invest patiently participate in events with prizes and
giveaways, hoping to win and finally own the digital assets they want. 

Crypto projects have always been generous in terms of giving back to the
community. During the first phase of these projects, giveaways are one of the most
effective ways to encourage investors to look into what they are building. 

Before, giveaways included only spots on the whitelist or free access to other affiliate
projects.  Now that the space has evolved a lot, we have the so-called "airdrops’’. Below
we explain airdrops in-depth and how you can leverage them to earn more from the
crypto market or generate extra income. 

While airdrops are helping projects gain attention from potential investors, keep in mind
that some people will try to scam you through this activity. Legit airdrops will not
require you to pay for anything or connect your wallet to a suspicious website. Be
vigilant as always.   

What are crypto airdrops? 

Crypto airdrops are a new addition to the growing list of crypto terms. But this isn't as
technical as you might think. Crypto airdrops are simply how projects send newly
minted tokens to many different wallet addresses that have interacted with their
platform, usually around the time of the project’s token launch. 

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So, if a crypto project has 10,000 community members and they plan to give airdrops to
20% of their community, then 2,000 wallet addresses will receive the airdrop. The main
reasons behind token airdrops are to reward early users of the protocol, decentralize
the token holders, and get press coverage.

Why are crypto airdrops essential?

Crypto airdrops are essential for both crypto projects and investors.

In terms of crypto projects, airdrops are one strategy for them to increase project
awareness. Projects still building their community use crypto airdrops to incentivize
investors to look into the project. For those with community members already, crypto
airdrops serve as a privilege given to members who have contributed a lot to the
improvement of the project. For instance, investors who are long-term holders of a
project sometimes receive airdrops for holding and believing in the team's long-term
goals. 

Meanwhile, investors benefit from airdrops primarily because the tokens are valuable
digital assets that can be sold or traded. You can either keep the tokens or sell them
right away for profit. Additionally, airdrops might give you additional privileges and
access to the future programs of the crypto project from which you received the airdrop.
It all depends on the utilization of the airdrops.

How do crypto airdrops work? 

The process of a crypto airdrop is straightforward. Usually it starts with an
announcement from the crypto project that they are giving away tokens via an airdrop.
The most challenging part is to get selected; this selection usually happens on the
basis of specific criteria users have to meet. Once the winners are chosen, the project

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will start airdropping the tokens to recipients. The receivers become the official owners
of the airdropped tokens after the transfer. 

The "how-to" process will depend on the instructions of the crypto

project. 

Let's use ZKSwap's crypto airdrop as an example. On their Medium blog, the
project posted complete instructions on participating. Below are the steps included in
their blog post on the airdrop:

1. Add ZKSwap (ZKS) to the Watchlist on CoinMarketCap. Click here to

add ZKS.
2. Follow ZKSwap on Twitter.
3. Join ZKSwap Telegram Channel.
4. [Optional] Try out ZKSwap V3.0 testnet (https://v3.zks.app/) and
connect your ERC-20 wallet. Please make sure you will submit the
same address later.

Disclaimer: Note that this was taken from ZKSwap's December 2021 "We're Giving
Away $60k to CMC Community" Program. The program has ended already, and you
can't participate anymore.

The example above only talked about keeping the token on the participant's watchlist.
Aside from that, other common tasks will only require minimal effort from you.
Examples are: 

 Social media tasks: liking, sharing, tagging friends, and following the accounts of the
social media project. 
 Automatic distribution of airdrops to the chosen community members who have the
project's native token in their wallets. Crypto projects might impose a minimum
requirement to select only members with at least a certain number of tokens in their
wallets. 
 Rewarding token holders through a blockchain snapshot.

With lots of events going on in the crypto space, there could be many more
opportunities to receive airdrops. To stay up to date, you can join crypto project
communities on Discord, Telegram, Twitter, or Instagram as they post the
announcements more frequently on these social media platforms. 

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 Example of requirements for DAO Labs Airdrop (source: airdrop.io)

The value of airdrops and how much you can earn from them

You have received your airdrops, now what?

Airdrops are offered to holders to show how serious crypto projects are in terms of
promoting, expanding, and rewarding their community. Airdrops are definitely
valuable as they provide monetary and non-monetary benefits.

You can put a price on the tokens you receive via airdrops as a monetary benefit. Once
they get into your wallet, you can immediately sell them and profit from the
proceeds. Others may choose to hold the tokens and sell them after some time, but
you can't always guarantee the increase in value since the crypto market is a volatile
space.

One important thing to note here is that you may receive an airdropped token with little
to no liquidity, making it hard to sell it. In cases like this, the cost of selling the token
might actually be higher than the amount you will receive from the sale. Make sure to
take a look at a token’s liquidity and volume.

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The non-monetary benefits of airdrops sometimes include access to exclusive
deals, events, and promotions, qualifying to whitelist spots for future projects, or
receiving more airdrops in the future. The projects themselves will choose these
benefits. If you want to know more about what you can get from receiving the airdrops,
try to stay up to date with information released by the team, or try contacting them (via
Telegram, for example). 

Factors to consider
Take note that the amount you can earn from airdrops will depend on several things,
such as the current value of a crypto project, the number of tokens, and how long you
are going to hold. 

The value of the project is a huge factor in determining how much you can earn.
The better the project, the more you can gain from selling their tokens. It's also possible
to come across new projects with airdrop programs. If you want to know their potential
value, do your research on the project and the people behind them.
Although you can't set the number of tokens you will receive, you can choose to join
several airdrop programs to increase your chances of gaining free tokens. And lastly, if
you opt to hold, you may or may not get the same value due to the market's volatility. 

How do you qualify for crypto airdrops?

To join airdrop giveaways, you must check if you are qualified to participate. In most
cases, airdrops are promotional strategies by crypto projects. So, they have the right to
choose who should join or not. They will set their requirements, and if you meet them,
you will be qualified. 

Here's how you can check if you are eligible to join:

 Find a reputable crypto project that you think has the potential to grow.
 Check their promotions and see if you can find anything related to airdrops.
 Go to their social media sites and check if they have posted the criteria for joining.
 If they haven't posted anything about it yet, follow their accounts and stay tuned for more
announcements in the future. 

It’s worth interacting with protocols you find interesting beforehand, as having done so
can entitle you to be part of potential airdrops down the road. 

You can also follow and frequently check crypto airdrop sites, such as CoinMarketCap,
Airdrops.io, Airdrop Alert, and AirdropKing.io. Ongoing airdrops are posted on these
websites for visibility to those who want to join. 

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Is there a risk with crypto airdrops? 

Like other money-making strategies in the crypto space, airdrops can be risky. Since
airdrops are free, scams are using this opportunity to steal from people who don't
have an idea about how it works. Their strategy is to lead you to a fake airdrop website
where you can connect your crypto wallets. Once you connect, they will then steal your
cryptocurrencies. Or, they'll ask you to pay an amount so you can access the airdrop
giveaways. So, always remember that airdrops are free. 

Moreover, we can't always say that we will gain from receiving airdrops. If the
crypto project you followed didn't become successful or the team pulled the rug, your
airdrops may become worthless. Although there are no monetary losses, the efforts and
time you spend on joining the airdrop campaigns would all go to waste. 

Examples of crypto airdrops 

New and existing crypto projects are utilizing airdrops for effective marketing. One great
example is when LOOKS airdrop from LooksRare was launched to encourage NFT
investors to move from OpenSea to LooksRare. Only those who had more than 3 ETH in
transaction volume on OpenSea were eligible. After they listed their NFTs for sale on
LooksRare, they would receive a number of LOOKS tokens depending on their
transaction volume. For instance, those with more than 3 ETH but less than six could
receive 125 LOOKS, which they could hold or sell. 

Another project that made history with a crypto airdrop is OpenDao–a decentralized
autonomous organization supporting creators and collectors. What made their strategy
remarkable was the fact that they rewarded all NFT creators, enthusiasts, and collectors
trading on OpenSea. The participants didn't have to complete any tasks to claim their
tokens. They could all go to the project's website and manually claim their rewards. 

Another airdrop that can’t be left unmentioned is UniSwap’s airdrop in 2020, which
contributed to the platform’s decentralization. The company behind one of the largest
DEXs airdropped 150 million UNI tokens to people who had interacted with UniSwap

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one way or another. Anyone who had used UniSwap could claim up to 400 UNI tokens;
more than $1000 at the time. That sum of money has grown for users who decided to
hold on to their tokens as the platform grew.  

Conclusion
The crypto space is indeed one of the most rewarding and generous places on the
internet. With airdrops, you can earn money by selling what you receive from crypto
projects. If you believe in the long-term viability of the project, it's possible to earn even
more over time by holding onto an airdrop and not selling immediately.

Now that you've learned about airdrops, it's time to leverage your knowledge and
explore crypto projects and airdrop websites so that you can participate in future
giveaways! 

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 5. NFT

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5.a. What are NFTs?

In this class, you’ll learn the following:

 What NFT really means
 The different types of NFTs
 How to earn from NFTs
 The top NFT marketplaces, and
 Leading NFT projects today

NFTs are taking the world by storm. You’ve probably seen updates from someone
famous on the internet claiming they’d just purchased their first NFT. Perhaps a social
media post from another person telling their success story after selling a digital painting
for thousands of dollars. But what are NFTs, and why do people make such a big deal
about them? How come these art pieces are selling for so much money? Below, you’ll
get answers to these questions and more. Let’s start by explaining what NFT means in
simple terms.

What NFT really means?

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NFT stands for non-fungible token, and it describes a class of digital assets that are
registered on the blockchain. Every NFT has markers that make it unique, and no two
tokens are interchangeable. Because of this attribute, NFTs can be used to represent
real-world items, create digital identities, protect important documents, and significantly
reduce fraud and piracy.

Consider this: at any point in time, 1 BTC will always be the same as another BTC. Two
people can exchange two Bitcoins amongst themselves, and each party would get the
exact same token they provided. This is not the same for NFTs – if you trade one NFT for
another, you get a completely different digital asset.

To help you understand this better, let’s talk about fungibility. Fungibility refers to

the quality of an asset to be exchanged for another of the same kind without a
loss in value. In such a transfer, both traders enjoy equal spending power after the
trade. Suppose you swap one gold bar for another. The value you give and the one you
receive is the same because gold is fungible. The same goes for trading a dollar bill. A
dollar bill is equal to another regardless of serial number or print date. 

A non-fungible token, however, is the opposite. Assets that have been assigned an
NFT – like arts, multimedia files, and collectibles – are unique in every way. To make a
tokenized version of any asset, you have to register (or mint) it on the blockchain.

During this process, the item is marked with identification codes and metadata that
differentiate it from others. And this uniqueness makes it valuable. Here’s an example of
how NFTs work in practice: you’re a digital artist that specializes in beautiful landscape
pictures. In the past, you’ve struggled to find buyers for your work because once you
post them on online marketplaces, people download the image and refuse to pay you.

Then a platform shows up that lets you convert your JPG file to a non-fungible token.
And afterward, you can list your artwork on a marketplace and have potential customers
bid on them. If anyone downloads the picture file, it provides them with no value
because they don’t own the NFT. As a result, they can’t sell your artwork or use them
officially. 

Subsequently, you have complete control over your paintings and may decide to
sell them outrightly, lend them out for temporary use, or sell a percentage stake in
them.

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Now, a great thing about the NFT sector is: you don’t need to be a digital artist to
create value and make money from these platforms. You can buy artwork and resell at
a higher price, or you may tokenize an item you think people will find valuable and
advertise them on NFT platforms. Later on in this class, we’ll shed more light on NFT
trading and provide information on how to earn from the ecosystem.

The different types of NFTs

Currently, the most popular use case for NFTs involves artwork, audio files,

and multimedia collections. However, basically any real-world asset can be
tokenized (i.e. minted into NFTs). Below, we provide insight into the key classes of non-
fungible tokens and how they work:

Pure Art NFTs

We discussed this earlier, so you should already have an understanding of it. Paintings
and art pieces can be minted into NFTs and sold on marketplaces. This provides an
avenue for creatives to express themselves through their work. Artists from all over the
world can sell their creations, just like physical paintings are sold at auctions.
Similarly, these NFTs can be collected, and they accumulate value based on several

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factors – including what the painting may signify, who the artist is, and who bought the
artwork.

Real Estate NFTs

The ownership documents of lands, buildings, apartment blocks, and office space

may be minted into non-fungible tokens. While this is a relatively new sector of
NFTs, there aren’t many assets that are more suitable for tokenization. 

This is because real estate already behaves like a digital asset. Similarly to how users on
an NFT marketplace can view an art piece, borrow it, or purchase temporary rights;
anyone can rent a house, set up a business in a building, or lease a piece of land. But
that doesn’t make the property theirs. Instead, it belongs to the person whose name is
on the deed. Anyway, to create a real estate NFT, the deed has to be registered on the
blockchain and converted into a non-fungible token.

Afterward, the token can be auctioned off, and whoever buys it can take ownership of
the property. Please note that this is not a futuristic analogy – in 2021, a studio flat in
Kyiv was minted as an NFT and sold to an investor via Propy (a real estate company that
leverages blockchain technology).

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PFPs/NFT Avatars
The word “PFPs” originated from the social media terms “picture for proof” or “profile
picture.” While PFPs are commonplace on channels like Twitter and Facebook, they are
now being used in the NFT space to describe avatars used by holders on their social
profiles. PFPs are NFT avatars that are part of a collection, and their value relies on the
overall project.

Music NFTs
Music files may also be tokenized and sold in marketplaces. Artists can mint songs as
NFTs and distribute them directly to fans without depending on third-
party streaming platforms or record labels. This gives them more autonomy over their
creations; they can earn more and collaborate easily with other artists to release
collections. In 2021, a music band called Kings of Leon became the first group to release
their album as an NFT. In addition to giving fans direct access to all the songs in that
collection, they also released a token that lets fans own lifetime access to front-row
seats at their shows. This is another way to use non-fungible tokens to build an exclusive
community.

Domain Name NFT

Domain names are an increasingly popular NFT sector, and they allow users to own
a tokenized version of their domain names on the blockchain. So, if a project wants
to reserve the domain “ethereum.org” on the blockchain, they may buy domain NFTs
and ensure no other project can use the same web address.

NFT Games
NFT games are similar to e-sports but on the blockchain. They are created to reward
players with cryptocurrencies as they play, and NFT games often require players to buy
tokens before they can join. Axie Infinity is one NFT game that has gotten quite popular.
In this game, players need to build a team with 3 Axie NFTs, a token that can be bought
and sold independently. Once the player has acquired a team of three, they can start
playing the game and earning SLPs (the game’s native token). NFT games have different
rules, so the rewards will differ depending on the platform. But what’s great about it is
that you can own NFTs and, at the same time, leverage your ownership and earn extra
tokens.

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To conclude this section, there are many benefits to owning NFTs and participating in
the ecosystem. As with all crypto-related investments, there is a huge potential to make
gains in the space if you know what you are doing. Due to the relative youth of this
sector, you can establish yourself and leverage the wealth creation opportunities
available. NFTs also let users participate in a new and disruptive digital
world. Tokens will play a key role in the Metaverse and Web 3.0, and you can become
one of the first adopters of these transformative technologies. Those who got in during
the early days of Bitcoin and the foremost altcoins are still reaping rewards today. Non-
fungible tokens may be your opportunity to earn outsized returns and build
generational wealth.

How to Earn from NFTs

As we’ve progressed through the class, you have no doubt pinpointed one or two ways
to earn from the NFT sector. To keep things concise, we won’t repeat the “create a
digital art and sell” angle. For a complete overview, you can check out our Guide to
Trading NFTs class. Additionally, we’ll keep this section restricted to use cases that are
currently available to the public. So, with that in mind, here are some ways you can earn
from NFTs: 

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1. Trade NFTs 

Even if you can’t create digital art and do not own any unique assets that can be minted,
you can still make money by buying and selling NFTs. The system is simple: buy low, sell
high. This is similar to how cryptocurrencies are traded, so a bit of speculation will be
required. You’ll have to predict which NFTs have potential and are worth investing in,
and since there are no charts, that’s easier said than done.

Luckily for you, we have a class on Crypto Success Stories, you should find insights there
on how to pick the right projects. 

2. Collect rent and royalties 

When you find the right projects and are waiting for an optimal time to sell, NFTs give
you an opportunity to lend out your artwork for a small percentage. You stand to
earn from 5 to 15 percent of the item’s value, while retaining possession.

Here’s something else to keep in mind: you can actually sell an NFT and reserve the
right to earn from future sales. Say you sold a piece for 2 ETH, with the condition that
you earn 10% off future sales. If the item is sold for 10 ETH down the line, that’s another
1 ETH in your wallet. 

3. Play-to-earn games Like the name says, play-to-earn (P2E) games let users play
games and earn tokens. But the companies that provide these services are smart, so
they ask that you buy an NFT to qualify. In this case, you must conduct proper research
to ensure the in-game tokens you earn are valuable and can be exchanged for money.

Furthermore, you must weigh your initial investment with how much you’re likely to
earn while playing the game. This estimation should include the value of the NFT that
acts as your buy-in; can it be resold at a profit in the future? Mostly, your success on a
P2E platform depends on the success of the platform itself. If it goes mainstream, then
the initial NFT and the in-game tokens may become very valuable quickly. 

4. Stake NFTs Just as you can stake cryptos, you may also stake non-fungible tokens
and earn passive income. However, this is a relatively new space in the NFT sector, so
you need to do some research before actively getting involved. For now, most of the
platforms that let users stake NFTs are play-to-earn gaming communities like Zookeeper
and MOBOX.

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What really makes it promising is the opportunity to earn extra income with minimal
effort. The next question on your mind is probably “how much can I make from all
these?” Well, that depends a lot on your ability to find hidden gems and convert them
into valuable stones. You may also create buzz around your items by posting them on
social media and platforms that let users advertise NFTs. Some artists and traders have
made millions of dollars in the market, and if you play your cards right, you too can earn
handsomely.

The Top NFT Marketplaces

NFT marketplaces are essential as they provide a platform to list, buy, and sell NFTs. To
help you get started trading non-fungible tokens, we’ve listed some of the top
marketplaces you need to check out.

OpenSea 
OpenSea is currently the biggest NFT marketplaces in the space. It’s based on Ethereum,
and most NFTs are minted using this network.
So, in the past, users were subject to slow speeds and high gas fees while creating NFTs
on OpenSea. However, they recently implemented minting through the Polygon
network to reduce costs and speed up the tokenization process.

 LooksRare 
This is another NFT marketplace based on the Ethereum network. Besides listing and
purchasing NFTs on the platform, you can also earn its native token LOOKS. The more

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you trade NFTs using LooksRare, the more LOOKS you get, and users may be allowed to
stake the tokens and earn rewards. 

Solanart 
This marketplace is based on the Solana Network, which means that instead of using
ETH to mint and trade NFTs, you use SOL. Gas fees are cheaper here than on ETH-based
marketplaces.
Paras 
Paras is an NFT marketplace built using the NEAR protocol. The network is not new, but
it’s still gaining traction in the NFT community. More marketplaces are soon to launch
using NEAR because of its cheaper gas fees and other benefits it offers to developers. 

Leading NFT Projects Today 

Once you become a member of the NFT ecosystem, there are some projects you’ll be
hearing about constantly. Here’s a short introduction to the leading NFT
collections: Crypto Punks

Source: opensea.io

This NFT project started minting in 2017 and offered 10,000 pixelated avatars to NFT
investors. In this collection, there are aliens, zombies, and apes. There are also female
and male punk avatars. The value of this collection continues to rise as more people
discover how creative the team behind the project is; it also benefits from being one of
the earliest NFT communities. The entire collection was bought by Yuga Labs, the
creators of Bored Ape Yacht Club (BAYC) in 2022. Bored Ape Yacht Club

Source: opensea.io

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Bored Ape Yacht Club, BAYC for short, is one of the early batches of digital art NFT that
launched in 2021. This collection comprises 10,000 apes, and it has grown to become
one of the most valuable NFT projects. Celebrities like Eminem, Justin Bieber, Snoop
Dogg, and Paris Hilton own Bored Ape NFTs. World Of Women

Source: opensea.io

Recently, the hashtag #WomeninNFT has taken the NFT space by storm. World of
Women is female-led and it became a ranking NFT collection in 2022. The art collection
started minting in June 2021 with the goal to bring more awareness and inclusivity for
women in the NFT space.

Conclusion
The NFT sector has seen an impressive level of growth since its inception. For now,
most participants are focused on the potential it provides around digital arts and media
files. But even in that space, there are enough wealth creation opportunities for all
members of the ecosystem.

Unsurprisingly, an active community has developed around NFTs, with everyone

working towards its growth. Artists worldwide get to showcase their work to a global
audience, and investors who support the artists have a chance to earn multiple returns
on their investment. 

Even though the market is still in its infancy and has enormous growth potential,
it’s already a multi-billion dollar sector. And you can be a part of it. Whether you’re
an artist looking to get paid for your work, an investor looking to make gains by trading
NFTs, or a gamer that wants to earn tokens while having fun; there’s something for
everyone. The important thing is that you take the right steps and make smart decisions.
We hope you enjoyed this class. In the next one, we’ll discuss how to start minting and
trading NFTs.

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 5.b. A Guide to Minting and Trading
NFTs

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In this class, you’ll learn: 

 How NFTs are minted

 How to earn from NFTs
 A step-by-step guide on how to mint NFTs
 How to make profits from NFT trading 
The NFT sector provides an opportunity for anyone to register their assets on the
blockchain and get a non-fungible token in return. Since the first digital files were
minted in 2014, the ecosystem has grown in leaps and bounds. Currently, the most
popular utility for NFTs involves digital art, paintings, and multimedia files, but the
expectation is that the space will evolve into more expansive use cases in the future.  For
now, however, artists and hobbyists can mint their valuables as NFTs, trade them on
marketplaces, and earn a tidy profit. And the gains can be significant; the most
expensive NFT was sold for over $90 million and many other million-dollar sales have
been recorded in the space.  Are you looking to tap into this sector and its wealth-
creation opportunities? Then this guide has everything you need.   

How NFTs are Minted?

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The NFT minting process involves registering a digital file on the blockchain, and
getting a non-fungible token afterward. While the file itself can be replicated, stolen, or
deleted, the NFT carries a record of your ownership forever on the blockchain. And
information stored on these distributed ledgers cannot be edited or deleted.  Think of
it this way, you have a deed/title that says you own a piece of land. But that paper itself
can get damaged or stolen. However, since your ownership of that land is recorded at
your local registry, no one else can lay claim to it. However, unlike local registries, NFT
records stored on the blockchain cannot be tampered with or deleted.

There’s a more technical operation that goes on ‘behind the scenes’ to get your files
minted on the blockchain. It involves assigning a unique digital signature to your assets,
storing the information on data blocks, and adding the blocks to a chain. But to keep
the process user-friendly, NFT platforms only show you a “Mint Now” or “Create”
button.  How to Earn From NFTs  Artists earn from NFTs by minting their digital
artwork and putting it up for sale on marketplaces that cater solely to non-fungible
tokens. However, if you’re not an artist and don’t have any digital files to mint, you can
still make money by buying NFTs and selling them at a higher price.

The key difference between minting and buying is that the former lets you enjoy some
benefits of being an original creator.  This includes having a painting registered in your
name on the blockchain and earning royalties on secondary sales. Some platforms have
it encoded that creators get a royalty, while on others, you have to specify that you’d
like to profit from subsequent sales. On average, creators may get between 5 to 10%
as royalty, and the payment is sent automatically to your wallet once your NFT is
repurchased.  Another way to make money from NFTs is to mint from a collection. For
example, when the BAYC project was launched, you could pick one of the 10,000 Bored
Apes, pay the minting fees, and own the NFT.

However, you won’t get royalties because the art is not your original work. What you
can do is sell the piece and make a tidy profit. 

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When the Bored Apes were first released to the public, you could mint one for about
0.08ETH. Some months later, the cheapest BAYC NFT was valued at nearly 100 ETH –
that’s an increase of almost 125,000%. So, you don’t have to design artwork to make
considerable returns from NFTs, you just need to find promising collections before they
go mainstream.
 
As an artist, NFTs let you put your work in front of a global audience and get paid
for it. For a creative individual, this feeling is unrivaled. Additionally, you can mint as
much as you want, perhaps even create a collection and invite others to mint with you.
This opens up a world of possibilities, and you could be the innovator behind the
next CryptoPunks or Meebits.

By the way, if you need tips on how to create a successful collection, visit this class on
NFT Success Stories where we outline what’s required to build a winning project. 

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How to Mint NFTs: Step-by-step Guide 
Now that you know the fundamentals of non-fungible tokens, including what it means
to mint and how to earn from them, here’s how to mint your first NFT:

Minting on OpenSea

NOTE: Because the platform integrates with the Ethereum blockchain, you need an ETH-
based wallet like MetaMask or Trust Wallet to mint on OpenSea. For Solana-based
marketplaces, you need wallets that support Solana, e.g., Phantom or Solflare. 

Step 1: Visit the OpenSea website and connect your ETH-based wallet to the platform.
Step 2: Click on your profile button, navigate to ‘My Collections’ and ‘Create a
collection.’
Step 3: On the resulting page, click ‘Add Item.’
Step 4: Upload your digital file, and type in a name and description.
Step 5: Next, you’ll be asked to choose which collection folder to store the NFT after
minting. You may select the collection you created in Step 2. 
Step 6: After that, you’ll be asked to provide details like your artwork’s properties
including how the eyes look, the color, artist name, ticker symbol, and so on. 
Step 7: Also, attend to the boxes about Levels, Stats, Unlockable Content, and Explicit
Content. 
Step 8: In the box labeled ‘Supply,’ type in 1 so only one copy of your file will get
minted. 
Step 9: Click Create.  That’s it, you’ve just minted your first NFT. If you want to earn
royalty on secondary purchases, navigate to the ‘Collection’ tab and under ‘Creator
Earnings’, type in what % of future sales you’d like to get; the maximum allowable figure
is 10%. 

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Minting on websites and launchpads

Apart from marketplaces like OpenSea that allow artists to mint their art, you may also
create NFTs on launchpads. However, these are mostly reserved for projects that let
users mint from their collections. Here is how to mint on the Magic Eden Launchpad: 

Step 1: Visit the Magic Eden website and search for the collection you want to mint
from. Be sure to check that you have the right minting date and time. 
Step 2: Connect your wallet.
Step 3: Start by clicking the “Mint Now” button.  It’s as simple as that, and the steps are
similar for other launchpads. Also, if you’re a creator and want to let the general public
mint from your collection, you may submit it to Magic Eden or a similar launchpad. 

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How to Make Profits from NFT Trading? 

NFT trading happens in the secondary markets, and like crypto trading, it involves
buying and selling assets after a short period. For instance, you mint a new artwork
or buy an NFT, then sell it within hours (or a couple of days) for a tidy profit. If done
right, it can be a good source of extra income, and how much you earn will depend
on the number of trades you make, the value of the projects you invest in, and your
target ROI (return on investment).  Here’s how to trade NFTs:

1. Choose a marketplace like OpenSea, LooksRare, Solanart, Magic Eden, Paras, etc.
where NFTs are listed for sale. You don’t have to restrict your activities to only
one of them, you may decide to trade on multiple platforms.
2. Identify collections you think are promising and carry out some research on the
project and its founders. What are their short and long-term plans? Do the NFTs
have utility? Is there inherent value in joining the community?
3. Of course, don’t forget hype and online buzz. These can drive the price of an NFT
up quickly in a short time. Be careful not to be on the wrong side though; the
goal is to buy when hype is low and sell when it’s high. 
4. Here’s another tip: look out for gas fees. The lower they are, the more profits you
can earn while selling. And remember to check for trading volume and market
activity – the more liquidity, the better. 
5. After picking the right project to buy, the next step is to sell it at the right time.
Some traders sell when they reach a target, maybe at 10% profit. And others try

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 to ride the wave and earn as much as possible on each sale. Choose the option
that works best for you, but don’t forget to factor in the risk of a rapid decline.

Conclusion 
Whether you’re minting, investing in, or trading NFTs, you’ll get opportunities to make
good returns. How much you earn will depend on your skill, how well you can pick good
projects, and sometimes, blind luck. However, the longer time you spend in the NFT
space, the better you’ll get at maximizing the available opportunities. 

In our next class, we shine a spotlight on successful NFT collections, and share some
strategies you can implement to find great projects. 

See you there!

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 5.c. NFT Success Stories: Bored Apes,
CryptoPunks, CryptoKitties

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In this class, you’ll learn: 

 How NFT collections become successful

 Some of the most valuable NFT collections
 Strategies you can adopt to build wealth with NFTs

Non-fungible tokens (NFTs) are mainstream now, so this may be difficult to imagine. But
there was a time when only a small minority were familiar with terms like Bored Apes,
CryptoPunks, and Meebits.
Today, these collections are worth millions of dollars, and the biggest celebrities
want to be associated with them. How did this happen? How did NFTs become a
household name from relative obscurity? And what lessons can you take from the rise
of the biggest collections as you try to find wealth creation opportunities in the NFT
space?  You’ll find answers to the questions above (and more) during the course of this
class. 

How Do NFT Collections Become Successful?

All NFT projects have a unique story behind their success, and there’s no single strategy
that works for everyone. However, there are certain attributes that all valuable
collections share, and steps they took to build million-dollar businesses from almost
nothing.  Below, we highlight them, along with tips on how you can adopt these
qualities to attain success. 

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The power of community
Community is considered the fuel that powers the NFT space. When a group of people
share a common interest, it’s easy for them to connect and work together towards
achieving their goals. All successful NFT projects have a strong community behind
them.
The Bored Ape Yacht Club (BAYC), for example, has about 10,000 members supporting
the collection. And these aren’t just virtual members, they’ve hosted several real-life
events and meetups.  If you want to build wealth through NFTs, you need a community.
Look into joining one of the established ones, and if you can’t afford to, start a new one.
Don’t be afraid to start small, all NFT communities did.
The most important thing is to find a group of like-minded people who are willing
to put in the work.

Brand awareness
Brand awareness is another important ingredient for success in the NFT space. It is
essential that the general public knows about a project, its collection, and what they
stand to gain by associating with it. This helps them form a connection with the project,
and the community grows faster as a result.  The most successful NFT collections have a
strong presence on social media, and share regular updates through their online
channels. By building awareness on major platforms like Instagram, Facebook, Twitter,
Medium, Discord, and YouTube, the projects grow a sizable audience on each platform
and increase the ‘buzz’ around their brand. 

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Effective marketing campaigns
Marketing campaigns are a good way to build brand awareness, but it goes beyond
that. The biggest NFT collections leverage all facets of the marketing apparatus,
including influencers, paid adverts, giveaways and airdrops, and email marketing. This is
done to get the word out there and drive organic traffic to their website and online
channels.
Of course, the overarching aim remains to put the collection in front of as many people
as possible, attract long-term holders, and build a strong community. However, top-
quality marketing also signals to the public that the project’s founders have the
necessary expertise to take the collection to the top, motivating more people to invest
in it. 

Long-term plans and execution

Long-term planning and short-term execution help NFT projects keep the attention of
community members. Holders want to see that the founders have plans to make the
collection even more valuable, and in addition to future roadmaps, they want to see
progress in the short term. And while plans may change, the most successful collections
are the ones that have a primary vision and stick to it. 

Partnerships
Bored Ape Yacht Club (BAYC) collaborated with Adidas, VaynerNFT joined forces with
Pepsi and Budweiser, and Superplastic partnered with Gucci. Because of the relative
youth of the NFT space, it is often beneficial to seek out partnerships with established
brands. The leading projects understand this, so they work with recognized companies
that can help them grow faster. 
Partnerships are also impactful because they inspire a crossover between NFT projects
and traditional business sectors. People who wouldn’t typically know about BAYC will
hear about the collection due to its affiliation with Adidas, and may decide to invest in
the project. 

NFT Collections Success Stories 

Now that you have an overview on some of the factors that help NFT projects thrive,
here are the success stories of some of the leading collections: 

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CryptoKitties

Source

CryptoKitties was one of the first projects in the NFT ecosystem. The collection was
launched in 2017 and it allowed crypto enthusiasts to dive into a different blockchain
dimension. It may be popular as a group of avatars, but CryptoKitties goes beyond that,
serving as a game where anyone can breed and exchange digital “cats” through ETH-
based smart contracts.

The interest in this project was so strong that it positively impacted ETH and BTC. The
values of these cryptocurrencies rose, too, along with $12 million in total sales of
digital cats.  According to reports, rare cats from this NFT game were sold at around
$80,000 each.

Unsurprisingly, the media started to pay attention when the game gained traction,
driving even more growth. Aside from retail investors who wanted to enjoy this unique
experience, big institutions like Union Square Ventures and Andreesen Horowitz
invested in further developing CryptoKitties.

CryptoPunks

Source

CryptoPunks was also launched in 2017, and the collection was released some months
before CrptoKitty. It comprises 10,000 pixelated alien portraits with different attributes.

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Some are zombies, apes, and aliens. What’s notable about this project, and partly
responsible for the success of the collection, is its small but passionate community
members.

The most expensive CryptoPunk NFT was sold for $23.7 million in February 2022. 
Holders of CryptoPunk NFTs include celebrities like Jay-Z, Logan Paul, Serena Williams,
and Snoop Dogg. The collection, along with CryptoKittie, basically made non-fungible
tokens mainstream, and the digital collectibles sector was never the same after 2017.
More projects were launched and many of them went on to surpass Punks and Kitties.

Bored Ape Yacht Club

Source

The Bored Ape Yacht Club (BAYC) is a widely popular NFT collection, and it started with
10,000 apes in digital art form. Each ape has different properties that make them unique,
and they differ based on clothing, fur types, accessories, etc. Something they all have in
common is the bored expression on their face. So far, the most expensive Bored Ape
was sold for around $3.59 million. And celebrities like Justin Bieber, Paris Hilton, Jimmy
Fallon, and Eminem own Bored Ape NFTs. 

The BAYC team was very methodical about the release of their collection. It was
reported that they spent months studying other collections and thinking up ways to
launch successfully. The founders also assessed how the Twitter crypto community could
be leveraged to increase interest in their project. After extensive observation and
research, the team came up with the idea of collectibles that provided exclusive
access to a high-end community.

By putting an interesting backstory behind the project, the BAYC team were able to take
over the NFT market in a short period. In March 2022, less than a year after the first
Bored Apes were released, the creators acquired the complete intellectual property to
the CryptoPunks + Meebits collection for an undisclosed sum. 

Axie Infinity

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 Source

Unlike CryptoPunks and BAYC, Axie Infinity provides a different type of excitement to
members of its community. This NFT project is a play-to-earn (P2E) game, and just
like the name says, it lets people earn cryptocurrencies for playing games. However,
before anyone can play, they need to buy three Axie NFTs to build a team.

So, players buy NFTs and join the community, but they’re also rewarded for staying with
P2E games.  Axie Infinity rewards gamers with a token called SLP, and they can be sold
and converted to cash. Instead of creating just digital art like many other projects do,
Axie decided to take a different approach. By doing so, they created a market for their
NFTs, and an incentive to ensure community members remain on the platform.

Launched originally in 2018, the company had a target of 250,000 players at the end of
2021; they ended up 2.9 million.  Because the project launched with an ingenious
strategy, Axie created natural demand for its NFTs and, at the same time, found a
way to reward fervent participants. Any NFT project that can figure a way to do both
has a good chance of success. 

Conclusion 
There you have it, some insight into the successful NFT projects and how their
collections became popular. If you’re looking to invest in the non-fungible token (NFT)
space, now you know what qualities to watch out for before joining a community.

In a similar vein, if you plan to start a project, consider learning from the above.  You
must plan meticulously, hit targets in the short-term, and market aggressively. Most
importantly, you must create value for members of your community, and provide
incentive that ensures they stay locked in/keep coming back. 

We hope you enjoyed this class and find it inspirational as you begin your journey to
create wealth via NFTs.

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 6. Go Deeper: more
theory

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6.a. IDO, IEO, ICO: Explained

In this class, you’ll learn the following: 
 What are ICO, IEO, and IDOs
 How can we manage our risk in such an unsure space?
 How can we tell if a new project is worthy of investment?
 What are some red flags to look for?
 When is it a good time to sell or “take profits”?

Many cryptocurrency enthusiasts are on a never-ending search for their next big
investment with the greatest opportunity for growth. Typically, these opportunities are
created by being an early investor in new companies or projects with innovative tech,
substantial financial backing, and big-name partnerships.  In the crypto world, many of
these early stage investment opportunities are available through ICOs, IEOs, and IDOs.

In this article we will explain the basics of IDO, ICO, and IEO token sales, as well as some
important factors to take into account when choosing what projects are worthy of your
investment.

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ICO - Initial Coin Offering

ICOs or initial coin offerings gained popularity in 2017 as speculators flocked to the
cryptocurrency space with dreams of finding the next Ethereum or Bitcoin. While ICOs
are responsible for the making of many millionaires, they are also responsible for an
even greater number of empty-handed and resentful token holders.

During an ICO, a company or project raises funds by designating a portion of their

future tokens to specific investors who have applied and been approved to participate. 
Unlike an IPO (initial public offering) in the world of stock trading, an ICO is relatively
unregulated. This lack of regulation may lead to greater risk for depositors, as well
as the company’s token being susceptible to potentially catastrophic price
manipulation.

ICOs often do not yet have a token, but award early depositors with promissory notes
for specific amounts of tokens to automatically be distributed after the token’s release
date.  There are many risks involved with cryptocurrency investments in general, but ICO
investments take it up a notch. Here are a few benefits and risks to weigh when
investing into an ICO: Benefits of investing in an ICO:

 As an ICO investor, you are quite literally “front-running” every other buyer,
ever. Meaning, you may potentially acquire a token at a lower price than any
person ever will again.
 The return on investment (ROI) can be absolutely enormous in some cases
 ICO purchasers will be supporting a project they believe in and assisting in the
success of the company, as well as their own portfolio.
 Participating in the right ICO can actually be a very safe and low-risk investment.
 ICO investors are often automatically eligible for future airdrops of tokens from
affiliated companies.

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Risks of investing in an ICO

 ICOs are very easy to make. Any moderately computer savvy individual can
simply design a website, write a whitepaper and make empty promises in order
to gain speculator’s interest.
 The ICO creators can simply shut down a project and run-off with depositor’s
funds, this is known as a rug-pull
 Low liquidity can be a major issue in regards to ICO tokens. When there is no
liquidity or demand for a token, ICO investors may not be able to sell their token,
regardless of token price.
 Since cryptocurrency regulation has yet to gain major traction, the future of ICOs
may be at risk. If a regulatory body decides to label an ICO as a security, it may
lead to volatility in token price.
 Due to lack of regulation or oversight, some ICOs may end up with one individual
owning a majority percentage of total available tokens, thus easily being able to
control the market price upon public release. This typically results in a pump
and dump scenario.
 Individuals that represent the company may not be up to the job. Even if a coin
has a purpose, good funding, and a solid foundation, the people running the
show may not be able to execute their duties effectively. Whether it be through
failed partnerships, poor strategy, or feeble leadership, there is always potential
for failure due to human error.

While investing in an ICO poses a great potential risk, there is also potential for great
reward. Many ICO tokens will increase in value by thousands of percentage points as
they grow and begin to attract new buyers.   

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IEO - Initial Exchange Offering

In an IEO, or initial exchange offering, cryptocurrency companies will partner with a

centralized exchange such as Coinbase, Kraken, Kucoin, etc. Partnering with any type of
centralized exchange brings a sense of legitimacy and the essence of safety for
prospective buyers.  Often, projects that are listed on centralized exchanges will see a
sizable short term spike in token price, which can be yet another draw for potential
buyers.

For many projects, the IEO will occur after the ICO and IDO releases. IEO investments
should be carefully examined, as it’s likely that other investors have had the opportunity
to accumulate these tokens at a much lower token price than that of the original IEO
listing. Benefits of investing in an IEO:

 IEO tokens are already listed on an exchange, so tokens are available

immediately and will likely have a high amount of liquidity, which results in a
lower price impact per purchase order.
 IEOs require less effort to participate in, due to the ease-of-use and
accessibility of a centralized exchange.
 Centralized exchanges have a thorough vetting process for projects that they
partner with and list on their exchange. Since the credibility of both the CEX and
the token are at stake, it’s far less likely that the project’s creators will run-off with
investor’s funds. This is a major factor in the perception of IEOs possessing a
lower risk-to-reward ratio for prospective investors.
 Projects with an IEO listing are able to reduce their marketing budget, as a
majority of the marketing is accomplished by the CEX partner.
 Potentially large token price increases are likely for stronger projects.

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Risks of investing in an IEO:

 Though you are an early investor, you’re still relatively late to the party. Most IEO
token releases have already had an ICO and IDO round.
 IEO prices often fall, or “dump” shortly after IEO premier, due to ICO and IDO
purchasers taking profits on their early investments.
 Just like any early investment in a company, it may take time for an IEO project
to gain traction and bring its vision to fruition. This suggests their token price
might decline for an unknown amount of time.
 Depending on which centralized exchange the IEO is hosted on, the project may
not actually have many people purchasing it. A Coinbase listing is nearly a
guarantee that token price will climb dramatically, while a Gate.io listing may not
have any price impact at all.

IEO token releases are, generally, a great way for speculators to get in early on
projects with good fundamentals and a relatively low risk-to-reward ratio. There is no
telling whether a token’s price will go up or down after their IEO, so it’s best to manage
your risk and have a healthy investment strategy that will help you position for price
moves in either direction. 

IDO - Initial DEX (Decentralized Exchange) Offering

IDOs are an innovative and relatively new method of releasing a token. IDOs leverage
the power of a decentralized exchange to utilize aspects of both ICO and IEO token
offerings.

Like an ICO, early investors are taking a great risk by investing funds into an unproven
project.  Like an IEO, early investors are given some level of confidence through the
DEX’s vetting process and launchpad-based marketing system.

IDOs may lead to a safer and more profitable investment, but there are still many
risks to weigh. How it works: IDO projects will allocate a portion of their token’s total
supply to provide liquidity on a DEX. Liquidity providers will purchase and stake specific
combinations of tokens to create liquidity pools for future buyers to purchase tokens
without suffering a substantial price impact. 

The greater the size of the liquidity pool, the less the price impact per trade. Liquidity
pool contributors are then awarded a percentage of each applicable trade that is made
while they are providing liquidity on the DEX. 

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Benefits of investing through an IDO:

 IDO tokens are vetted similarly to an IEO listing, though not quite as thoroughly
in most cases.
 IDO projects may reduce their overall marketing budget, since the partnering
DEX will offer advertisement and broaden future purchaser expansion via their
specific launchpad.
 Early liquidity pool providers may be greatly rewarded for their contributions
to the IDO.
 Both the DEX and the IDO project have a mutual interest toward the success of a
token, thus increasing the perceived legitimacy of a project.
 Tokens are available for purchase immediately following IDO.
 Like ICOs, IDO projects have a very high profit potential, particularly where
future CEX listings are likely.
 Due to the decentralized nature of an IDO, the risk of interference by regulatory
bodies is lessened. IDO tokens are less likely to be targeted by securities laws
than ICO tokens.
 Unlike a centralized exchange, decentralized exchanges and the DeFi realm in
general can be more difficult to navigate. Difficulty-of-use limits the number of
investors that are capable of purchasing the IDO token. This ensures a lower
price point for buyers that are educated in the navigation of DeFi.

Risks of investing in an IDO:

 Irresponsible token distribution can lead to major price abuse, I.e. These
tokens may have inherent pump and dump potential.
 The quality of a DEX’s vetting process can be questionable, leaving some IDO
listings vulnerable to rug-pull type outcomes.
 IDOs can be highly volatile, and early buyers might seek to sell their tokens as
investors enter the space and ultimately increase the ask price of the token.
 Difficulty-of-use is a barrier to entry that will significantly limit the number of
total depositors capable of contributing to an IDO. This can lead to early token
purchasers to wait long periods of time for new listings or other big news in
order to see substantial growth from their investment. 
 An IDO project’s reputation can be damaged (or bolstered) based on which DEX
platform they choose to release on.

When reviewing IDO investments, it is essential for future investors to do some

meaningful research into the projects themselves. The most legitimate and
successful projects will yield token holders an incredible ROI over the course of time,

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particularly as the projects acquire new listings across different exchanges. The goal of
many IDO investors is to hold their tokens until a CEX release and then take profits as
new buyers enter. This is an important consideration when attempting to time the entry
price of an investment.  

How do we manage our risk in such an unsure space?

Simply, risk should be managed closely in new tokens, in the same way it is managed in
all forms of digital asset investing. The term “risk management” applies broadly to all
investors, but also varies given one's unique investment preferences. Risk management
is the practice and understanding of limiting oneself to a tolerable amount of potential-
loss.
Essentially, one should never invest money that they aren't willing to lose, and
certainly not more than they can afford to lose. This amount of money will vary per
each investor's unique goals and risk tolerance. 
As a general rule of thumb: when investors are practicing good risk management, they
are happy and comfortable with their investment and have no significant emotional
reaction to the ups and down of the market. When investors are practicing poor risk
management, they may begin to demonstrate emotional reactions with each
movement of the market. These investors are likely over-invested and should consider
re-evaluating their strategy and or rebalancing their portfolio.

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How can we tell if a new project is worthy of investment?

When discovering new ICO, IDO or IEO tokens, it’s good to be optimistic, but one
should also be skeptical. Sometimes we become blinded by our own bias, ignoring
logic and getting overly excited by the promises of the project. We may learn of some
new innovative tokenomics that rewards investors for holding, or we may hear that a
token will be listed on coinbase eventually. It’s important to curb these thoughts and
spend our energy doing some genuine, high quality research before purchasing a new-
release token.
Doing your own research (DYOR) is always the best course of action when
contemplating an investment. 

Below we have highlighted a list of questions one should always consider before
investing in an ICO, IEO, or IDO.

1. Who are the developers of the token? Do they have any background in the
crypto space? Where are they from? Are they identifiable? Do you trust in their
ability?
2. What is the use case for the token? Why will people buy this token in the first
place?
3. How many other tokens are doing the same thing as this token? What makes
this one special or better?

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 4. Is the company transparent? Do they host AMAs (“ask me anything” events)? Is
their roadmap/whitepaper of quality and do their goals seem achievable? Are
their treasury details available to the public?
5. What companies or notable people are investing in the token and why?
6. How many total tokens will they have? Are their tokenomics favorable for
investors? Are the company wallets locked for “X” amount of time?
7. Have their token contracts been audited or do they at least plan on doing so? If
so, by whom?
8. Does it sound too good to be true?

If you are satisfied with the answers to all of these questions, it’s likely that you have
found something worthy of your investment. You can feel confident that you have done
diligent research and now have a greater understanding of the project in question.
Whether it be an ICO, IEO, or IDO listing, it’s always important to DYOR.

What are some red flags to look for?

Identifying red flags before making any financial investment into a cryptocurrency can
save you from a great deal of financial heartache. The red flags listed below will help
indicate whether a project is a scam, planning to rug-pull or run-off with investor’s
funds.  

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Red flags to look for before investing:

 Mystery developers - If a developer or CEO of a project is unwilling to identify,

or “doxx” themself publicly.
 Unrealistic promises - When a project makes claims of revolutionizing crypto, or
paying its investors ridiculous percentage yields.
 Low quality roadmap or whitepaper - A company that cannot write a clear and
convincing roadmap or whitepaper is simply not worth an investment.
 Too many twitter or telegram followers - Scam projects will artificially inflate
their number of telegram or twitter followers to trick people into believing that
they have a huge following and social media presence.
 No token contract audits - A lack of audits can suggest that either the project is
avoiding an audit, so they can blame a contract flaw for their rug-pull, this is also
known as a gentleman’s rug-pull, or that they are not willing to invest funds into
contract security. Either way, a token without audits cannot be considered a safe
investment.
 Unnecessary use case - Some scam tokens will create a use case that is unique,
but unnecessary in the big picture. They will lure investors in with promises such
as caring for animals or feeding the homeless and then slowly cash out their
tokens
Though red flags are not always accurate identifiers of a scam, a majority of the time
they are. So, it’s better to play it safe and be conservative in your speculation when
evaluating an ICO, IEO, or IDO opportunity.

When is it a good time to sell or “take profits”?

The hardest part of investing in cryptocurrency is selling or “taking profits” on

your investments. Somewhere along the way, people often become jaded with
unrealistic expectations about how their position will perform. This failure to take profits
can be because of multiple reasons, but most often it’s a result of fear of missing out
on even greater future ROI.  This failure to sell can partially be blamed on the culture
around crypto and the narrators of the space, e.g. youtubers, social media shills, twitter
bots, etc.
When the narrators are shouting things like “HODL, WAGMI, TO THE MOON” it’s easy to
get carried away and buy into their hype. We can admit that it can be fun to dream of
the future where all crypto holders are wealthy, but it simply cannot happen without
taking profits. 
For ICO, IEO and IDO tokens, you can expect a large price increase as the token
nears a date in which it will be listed on a major DEX or CEX. These price increases
are ideal moments to take profit.

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Let’s say hypothetically a project announces that it will be listed to Coinbase on a
specific date. On the days coming up to the Coinbase listing there will usually be a
significant token price increase, and this is usually a good time to sell part of your
position and take some profit. Typically a few days after the listing, the coin will see a
massive sell-off as price normalizes or consolidates before the next run-up. 

A common method for trading ICO coins is to purchase the ICO and then sell when
the price climbs due to a project’s new announcements of listings on CEXs or DEXs. Re-
buying tokens when their price drops, and selling again when there are more
announcements that will create volatility in token price. Though it’s not always perfect,
this is a decent strategy for taking profits and compounding an early investment. 

Conclusion
While there is a potentially amazing opportunity to be had by investing in an ICO, IEO
or IDO, there is also great risk. For every token release success story, there are an even
greater number of failures. By using resources like this guide and continuously learning
more about the space, we are equipping ourselves to realize when we have found “the
one” as well as when we have found yet another failure.

There is the potential to earn life-changing money by being an early investor in

just one of the right ICO, IEO or IDO projects. For those that stay diligent, strategized,
and well thought out, their chances of finding the right one will be higher.

But it is always important to manage risk and never invest more than you can
afford to lose. The best non-financial advice for those looking to invest in any type of
new token release is to re-read this article; Manage your risk, do your own research,
acknowledge red flags, and never forget to take profits.

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 6.b. DAO Explained

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In this class, you’ll learn the following:
 What a DAO is
 How decisions are made in a DAO
 The pros and cons of DAOs
 In what scenarios can DAOs apply best
 Why traditional organizations should be replaced with DAOs
 How to choose which DAO to join

DAO is an acronym that stands for Decentralized Autonomous Organization. As the

world continues to evolve and implement new blockchain based applications, DAOs
have established their potential to revolutionize organizational structures as we know
them.
From governmental organizations to charitable groups, DAOs are becoming the
increasingly popular choice for those looking to create businesses or movements. Due
to their inherent relationship with blockchain technology, DAOs enable organizations to
remain decentralized while offering a high level of transparency, far greater than that of
a traditional company or co-op.   

What is a DAO?
A Decentralized Autonomous Organization, or DAO, is a group of individuals or
entities that each possess stakeholdership in the decisions made by the DAO. As
such, DAOs have no individual leadership. Instead, decisions are examined by the
holders of a DAO’s native token, and implemented when those stakeholders reach
consensus by a majority vote.
The amount of weight that an individual or entity has in the voting process corresponds
to the number of DAO tokens they hold: The greater the number of tokens a member
holds, the greater voting power they have over the DAO.  Members of a DAO are
responsible for creating the rules under which a DAO operates, as well as what
decisions are made to reach a DAO’s goals. Both the rules that govern decision making

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and the decisions themselves are determined by the majority votes within a DAO,
assuming that this is what the DAO has agreed upon previously.
This decentralized process opens up the gates for a revolution of democratic
decision making among the world's organizations.
As the result of a truly democratic process, the decisions made by a DAO are often
much more likely to act in favor of the greater good, rather than in the best interest of a
few decision makers at “the top of the food chain” in traditional companies.  

How does a DAO make decisions?

A DAO’s decision making process will often go as follows:

1. Discussion: Through community discussions on open forums, DAO members will

circulate thoughts, concerns, options and solutions to reach their community
goals.
2. Proposal: Proposals will be made as a result of the community's discussions.
3. Voting: The DAO will then place their votes using the predetermined rules set by
the community.
4. Allocation: The DAO will decide how many tokens they are willing to contribute
to their proposal.

Though this process may vary from DAO to DAO, the lack of hierarchical structure
creates an inclusive environment for all DAO members to have a say in decision
making. By nature, a DAO’s structure will reduce a lot of the noise and uncertainty that is
created in a traditional decision making process.  

The DAO Landscape (source Coin98 Analytics)

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What are the pros and cons of a DAO?
The DAO structure offers members a great deal of benefits. But, there are implications,
both positive and negative, that one should consider before becoming a member of a
DAO. Below we have highlighted the main aspects to consider: 

Positive aspects of a DAO:

 DAOs offer transparency. Whether questioning votes, options, payments or

payouts, all information is stored on the blockchain and available for DAO
members to view.
 It is truly democratic. All DAO members will have a voice when it comes to
decision making and understanding the ideals behind decisions.
 Becoming a member is as simple as purchasing the DAO’s token.
 A true DAO’s assets are not under the control of any individual and therefore
cannot be rug-pulled in the traditional sense.
 DAOs are designed to grow organically and evolve on their own, as these
organizations are structured to be autonomous
 
Negative aspects of DAO:

 A DAO is only as “safe” as the strength of its code. Hackers are frequently
looking for vulnerabilities in every ecosystem and token contract they can find. If
a DAO’s contract is not well audited and a flaw is exploited, a hacker can steal the
community’s funds and end the project altogether. 
 Proposal agreements are not always easy to complete. Based on a DAO’s rules,
it may require “x” amount of votes with “x” percentage of total votes to actually
be counted as complete. If this number of votes isn't reached or the threshold for
approval is too high, then there may be little to no progress with the
development of a DAO.
 DAO members may not agree on everything. A DAO may have a large number of
token holders with a significant amount of voting power in disagreement with
another cohort of token holders. If this happens and the disagreement is
substantial enough, one cohort may decide to sell off their tokens to move to
another project. This may be enough selling pressure to limit the project's
success. 
 The majority vote may not always be the best decision. If the majority of
members in a DAO are ill informed or inexperienced, they may make decisions
that will damage the DAO as a whole, thereby causing investors to lose funds and
damage the DAO’s reputation.

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  If the correct precautionary measures are not taken, a single buyer can potentially
purchase enough of a DAO’s token to dominate any vote and ensure their wishes
are carried out.

In what areas can DAOs be useful?

DAOs can prospectively improve and revolutionize any company, co-op or
organization. However since the application of DAO’s is still nascent, many crypto
market participants regard them as just another opportunity to earn income. This is not
the case; DAOs are extremely versatile and transparent.
They can fill needs for the most simple to the most complex of causes and have the
potential to become the most common type of business structure in the world. Whether
investors are interested in staking rewards, investing towards a specific cause, or would
like to join a community of like-minded individuals, there is, or will be, a DAO for every
community. 
A few examples of how DAOs could be incorporated:
 Homeowner associations - No longer would there be a president with complete
power over the association, nor a treasurer or secretary. All members would vote
for each and every change while eliminating concerns of manipulation.
 Ridesharing services - Imagine a ride sharing service where the vehicle fleet,
repair costs, wages, and benefits would all be paid by a DAO. Essentially a co-op
rideshare service that anyone can own a portion of.

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  Real estate investments - A crowd-funded DAO that purchases rental
properties. All repairs, maintenance, and property management would also be
paid by the DAO. The members would receive a form of passive income in the
form of rental income from the properties. With each additional home purchased,
the total value of the DAO increases.
 Region-based farming - Instead of each individual farmer buying equipment,
water rights, feed, etcetera, an entire town of farmers could come together and
share the costs of farming in total. This would cut overhead costs and reduce risk.
 School Districts - School districts could be co-funded by communities and
governmental funds together. The curriculum and exposure to specific areas of
study could be dictated by the DAO’s votes.

Though these forms of DAOs could do very well in theory, it would take a lot of
careful execution of rule sets to prevent the members’ votes from becoming diluted
by a few highly wealthy individuals. With the right rules in place and enough
participation, any DAO can thrive.   

Why should we replace Traditional organizations?

In a traditional organization, a company is owned and operated by a small group of
individuals, or a single individual, who are entirely responsible for the success and
overall management of the company. This method creates an environment in which
financial risk is taken on by one person, and along with that nearly all of the
reward.
The business owner(s) would need to hire an entire team of individuals simply to
operate the back-end operations of the company and manage its people, then hire
another team of employees to actually operate the business itself. While this will
continue to work for certain types of companies, a large number of new companies will
convert to DAOs.
By converting companies to DAOs, we can eliminate several expensive job positions,
reduce risk, and increase total investment by accessing the capital of a larger group
of people. Of course there are additional benefits, such as community decision
making, higher availability of funds for reinvestment, and overall improvements in
morale and dedication.   

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 Top 10 DAO Tokens in 2022 - source:

How to choose which DAO to join?

There are many different types of DAOs, so choosing just one can be difficult. First-time
buyers should decide what projects they actually believe in, are passionate about,
and what type of ROI they are seeking. It’s the responsibility of the individual to do the
research in order to understand how they are going to participate in a DAO.

Since there is such a wide variety of DAOs, the research portion of the investment will
often take the longest amount of time. The majority of cryptocurrency investors will
search for investment-based DAOs with the greatest financial upside. Though less

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common, some investors choose to contribute to DAOs that focus on causes they are
personally interested in and want to actively participate in, e.g. Climate change,
charitable causes, community revitalization, education, etc. Whether pursuing a DAO
based on node investments, NFT music, DeFi, digital real estate or real-world assets, it’s
important to understand the basic goals of the DAO.

Just like any investment, DAO projects should be carefully vetted to ensure
legitimacy. Spending time in the community chat rooms, verifying contract audits,
reading white papers and checking road-maps are all great ways to get started on
researching any potential DAO investment.

Conclusion

Decentralized Autonomous Organizations are here to stay and will only see more
adoption as cryptocurrency gains more attention in the public eye. It will take some
time to fully restructure existing businesses to adopt and implement DAO ideology, but
it’s certainly on the horizon for many companies we know today.

Due to the non hierarchical nature of a DAO, the DAO’s structure should allow for more
satisfied members when compared to the traditional methods of conducting business
and boosting team morale.

For the survival of some businesses, the DAO structure may be absolutely necessary,
particularly with the introduction of a native token used for overhead and daily
operations.

Companies that do not follow suit will likely struggle and potentially die-off as the new
wave of DAO based business practices take over the working world. Many companies
we know today may resist this change and will fall victim to this revolution as a
result.

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 6.c. Crypto Glossary

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A
is a promotional event where crypto projects distribute
Airdrop:
coins or tokens to members of their community. 
All-time-high (ATH): is the highest price point (or market capitalization) that a cryptocurrency
has reached since its inception (or listing). 

All-time-low (ATL): is the lowest price point (or market capitalization) that a cryptocurrency has
been since its inception (or listing).

Alphanumeric: refers to characters that include letters (alphabets) and numbers.

Altcoin: any other cryptocurrency aside from Bitcoin is referred to as an altcoin.

Annual Percentage Rate (APR): is the interest a person pays for taking out a loan. It is
calculated as a percentage of the capital that was borrowed, charged annually. The higher the
APR of a loan, the more interest you have to pay. 

Annual Percentage Yield (APY): is the rate at which you earn interest on an investment
account, with compound interest included.

Apeing: is when a trader buys a cryptocurrency shortly after it is announced and without proper
research. 

Arbitrage: is a trading practice where users quickly buy and sell tokens between different
markets/exchanges to take advantage of (often minuscule) price differentials. 

ASIC: means application-specific integrated circuit. It’s a device designed solely for
cryptocurrency mining. 

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Ask Price: is the minimum price a seller is willing to accept for a cryptocurrency. This may also
be called offer price. 

Automated Market Maker (AMM): is a system that provides liquidity automatically on

decentralized exchanges. AMM makes it possible for traders to buy/sell cryptocurrencies
without intermediaries.  

B
Bear Market: is a period during which the prices of assets undergo a steady decline. The crypto
market is said to be bearish when prices fall 20% below recent highs, there’s widespread
pessimism, and investor confidence is low.  

Bearish: refers to a state of mind where an investor believes the price of an asset (or the overall
market) will continue to decrease in value. 

BEP-2: is a Binance Chain standard for tokens issued and implemented on the network.

BEP-20: is a Binance Smart Chain token standard that extends Ethereum’s ERC-20

BEP-721: is a Binance Smart Chain token standard that facilitates the creation of non-fungible
tokens (NFTs). It’s often considered an extension of Ethereum’s ERC-721, the most recognized
NFT standard. 

Beta Release: is a pre-release stage where a software (or digital product) is offered to third-
party users or testers. The goal is to put it under real-world strain and find weaknesses or bugs.  

Bid Price: is the price that a buyer is willing to pay for a crypto token or asset.

Bid-Ask Spread: is the difference between the lowest price a seller is willing to accept and the
highest price a buyer is willing to pay for a crypto token or asset.

Bitcoin Dominance: is the ratio of BTC’s market capitalization compared to the total market cap
of the entire cryptocurrency market.

Block: is a file that contains information about transactions that took place during a specific
period. The blockchain is made up of these blocks of data. 

Block Explorer: is a web application that lets users view the details of any transaction made on
a blockchain. 

Block Reward: refers to freshly minted coins awarded to miners for validating transactions and
adding new blocks to the blockchain. 

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Blockchain: is a distributed ledger that contains blocks of information that are stored on a
public database. Blockchains are the underlying technology behind cryptocurrencies like BTC,
and they are responsible for their decentralization, openness, and immutability. 

Blockchain 1.0: refers to the first generation of blockchains that focused on creating digital and
decentralized currencies. 

Blockchain 2.0: is an upgrade on version 1.0, introducing improved security, transparency, and
smart contract functionality. 

Blockchain 3.0: is regarded as the final stage of blockchain development, and it’ll oversee the
mass adoption of blockchain applications in traditional sectors. 

Bounty: refers to a reward that crypto users earn for completing tasks on a project’s platform.

Bubble: is an explosive price behavior, leading to an asset being traded at an amount that far
exceeds its expected value. It mostly results in sharply declining prices when the bubble bursts. 

Bug Bounty: is a reward that cryptos users earn for identifying vulnerabilities or bugs on a
software/platform. 

Bull Market: is a period during which the prices of assets undergo a marked increase. There is
widespread optimism and buying actions during bull markets, and investor confidence is high. 

Bullish: refers to a state of mind where an investor believes the price of an asset (or the overall
market) will continue to increase in value. 

Burn/Burned: is used to describe the action of permanently removing a number of crypto

tokens from circulation. 

C
Candlesticks: refer to a charting technique that shows how the price of an asset changes
during a specific timeframe. It has four key components: opening price, closing price, high, and
low.  

Capital: is a sum of money used primarily to invest in an asset.

Censorship Resistance: is an attribute that ensures no authority can restrict people from using
a platform or joining a network. 

Circulating Supply: is the estimated number of a specific coin/token circulating in the markets
or available in users’ wallets.  

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Cloud Mining: is a mining process where users rent computing power from companies online
and earn rewards for mining cryptocurrencies. 

Coin: is another name for a cryptocurrency. It may also be used to describe a single unit of
crypto.

Cold Storage: is the storing of cryptocurrencies on wallets that are not connected to the
internet. These typically consist of hardware or paper wallets. 

Cold Wallet: is a crypto wallet that’s not connected to the internet.

Consensus Mechanism: is a system that blockchain applications use to validate transactions

and network activity, thereby ensuring the platform’s security. The most common are proof-of-
work (PoW) and proof-of-stake (PoS).

Core Wallet: is a type of cryptocurrency wallet that can carry a full blockchain node and not just
a piece of it. 

Cryptocurrency: is also known as crypto or digital currency. These currencies, and the
blockchain that supports them, are made possible through cryptography. 

Cryptocurrency Pairs: are two crypto assets that can be traded for each other on an exchange.

CryptoPunks: are a collection of non-fungible tokens (NFTs) on the Ethereum network. They
include some of the oldest and most expensive NFTs in the world. 

Custodial Wallets: are crypto wallets hosted on exchanges or third-party platforms. Users have
near-total access to their funds, but the company holds the private keys to these types of
wallets.

D
Day Trading: is the daily buying and selling of assets to make profits on short-term price
movement. 

Decentralization: describes the transfer of authority from a central entity to a distributed

network. For cryptos and blockchain, it refers to the quality of not having a central point of
authority or failure. 

Decentralized Applications (dApps): are digital applications that run on decentralized

networks and have no central point of failure. 

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Decentralized Autonomous Organization (DAO): is a community of users who enter into a
smart contract to accomplish a common goal. This goal could be investing as a group, buying a
company, or donating to charity.

Decentralized Exchange (DEX): is a peer-to-peer exchange that lets buyers and sellers trade
directly without an intermediary. 

Decentralized Finance (DeFi): is a collection of crypto platforms and applications that provide
financial services without relying on banks and brokerages. 

Digital Currency: is another word for cryptocurrencies. It describes a currency that only exists
digitally, unlike traditional/fiat currencies that can be physical. 

Dip: A dip is said to have happened when the crypto markets or a specific coin undergoes a
sharp drop in value/price. 

Dolphin: describes someone who owns a modest amount of cryptocurrencies.

Dump/Dumping: is a sudden sell-off of large quantities of a particular crypto in a short

timeframe. 

DYOR: is an acronym that means Do Your Own Research. It encourages investors to conduct
thorough analysis before investing in a coin/project. 

E
Enterprise Blockchain: is the use of blockchain technology to facilitate or streamline business
processes at scale, e.g., track supply chains or store digital identities. The resulting platform is
tailored to the business organization's needs, and the network may be private or public.  

Enterprise Ethereum Alliance: is a group of companies and organizations whose primary

objective is to develop the Ethereum network and ensure its mass adoption. 

ERC-20: refers to crypto tokens created solely for use on the Ethereum network.

ERC-721: is the token standard for non-fungible tokens (NFTs) minted on Ethereum

Ether (ETH): is the cryptocurrency that powers the Ethereum network.

Exchanges: are platforms that facilitate the trading of cryptos for fiat currency or other
cryptocurrencies. 

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F
Fan Token: is a cryptocurrency that’s provided by sports teams. Fan tokens allow for supporters
to gain exclusive access and enjoy certain rewards/discounts. 

Fear and Greed Index: is a metric that gauges the overall sentiment in the crypto market, and
advises a trader to take an opposite action from the majority. It ranges from extreme fear to
extreme greed. The former is a sign that investors are worried, and it’s regarded as a buying
opportunity. Conversely, the latter is a sign that people are getting greedy, which means that
the market may be correcting soon – this is regarded as a good time to sell. 

Fiat: is also known as fiat currency or regular money. It refers to traditional currencies and legal
tenders backed by a central government. Examples include dollars, euros, and pounds. 

FOMO: is an acronym that means Fear of Missing Out. It refers to the anxiety traders experience
when they see a coin they don’t own increasing in price. FOMO often drives investors to buy
cryptos because they're worried they may miss out on massive gains. 

G
Gas: measures how much computational effort is required to carry out an action on a blockchain
network. Every activity comes with a gas fee, from executing transactions to deploying a smart
contract and launching a decentralized application. 

Genesis Block: is the first block of a cryptocurrency. It is the first block of data processed and
validated from a blockchain. 

Governance Token: is a digital currency that grants holders the right to vote on decisions that
affect a project, its platform, and the entire ecosystem. 

H
Hard Cap: is the maximum number of cryptocurrencies available for sale during a project’s
fundraising or initial coin offering. 

Hardware Wallet: is a wallet that stores a user’s private key and crypto assets in a physical
wallet that may look like a USB stick. 

HODL: is commonly translated to mean Hold On for Dear Life. It describes a strategy where an
investor holds crypto assets for a long time, regardless of how price (or the market) changes in
the short term.  

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I
Immutability: is a feature of blockchains that means information added to a block cannot be
edited or deleted. 

Impermanent Loss: is a risk that liquidity providers take when depositing coins in a pool. A
trader suffers impermanent loss if after placing crypto in a pool, its value increases so much that
it would have been more profitable to hold the coin. 

Initial Coin Offering (ICO): is a crowdfunding event where cryptocurrencies are sold to raise
capital for early-stage projects. 

Interoperability: is also known as cross-chain interoperability, and it describes the ability to

transmit information across different blockchains. 

L
Large Cap: is used to describe crypto projects with market capitalization exceeding $10 billion.

Leveraged Tokens: give investors a leveraged position while trading. It lets them earn more on
trades, but exposes them to bigger losses as well. 

Lightning Network: is a second layer protocol designed to operate on top of the Bitcoin
network. It improves Bitcoin’s scalability, meaning faster transactions and lower fees. 

Liquidity: is the ability of a cryptocurrency to be easily converted to fiat or another crypto. It

may also refer to how easy it is to buy/sell a coin without impacting its market price. 

Liquidity Pool: is a crowdsourced collection of cryptocurrencies used to facilitate peer-to-peer

trading on a decentralized exchange. 

Long: describes a situation where a trader buys a cryptocurrency with the expectation that its
price/value will increase, and it can be resold to make a profit in the future. 

M
Market Capitalization: is the total value of all units of a cryptocurrency in circulation. The figure
is calculated by multiplying the circulating supply of a crypto with its current market price. 

Maximum Supply: is the maximum number of a coin that will ever exist.

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MetaMask: is a digital wallet that lets users send and receive cryptocurrencies. It’s commonly
known for having a version that works as a browser extension. 

Micropayments: are small transactions, often less than a dollar, that are carried out online.

Mid Cap: is used to describe crypto projects with market capitalization between $1 billion and
$10 billion.

Miners: are a group of people who contribute to a blockchain by validating transactions. This is
done by buying, setting up, and maintaining computers with vast processing power that solve
cryptographic puzzles. 

Mining: is a process where transactions are validated on the blockchain. Subsequently, the
transactions are added to blocks, eventually leading to the creation of new cryptocurrencies. 

Mining Pool: is a group of crypto miners that agree to combine their computer’s processing
power to solve the puzzle and share the resulting rewards. 

Mining Reward: is an amount given to miners for validating a complete block of transactions.

Mnemonic Phrase: is a random collection of phrases used to restore access to a crypto wallet.
Also known as seed phrase or recovery phrase. 

Moon: describes a situation where the price of a cryptocurrency is in a prolonged upward trend.
For example, BTC is mooning or BTC is going to the moon.

Moon Birdie: is one of the most reliable and trustworthy sources of cryptocurrency news and
training classes. 

N
Node: A node is a computer that’s connected to a cryptocurrency network and carries a copy of
its blockchain. Nodes also verify transactions or network activity. 

Non-Custodial Wallets: are crypto wallets that let individuals hold their private keys and,
subsequently, full control over their assets. 

Non-Fungible Token (NFT): is a token representing an item registered on a blockchain. NFTs

are mostly connected to digital assets, and have unique features that mean they can’t be
interchanged. 

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O
Off-chain: describes activities or transactions that take place outside a specific blockchain’s
network. 

On-chain: are activities or transactions that take place on a specific blockchain’s network.

Oracle: is a third-party service that connects blockchain networks (or smart contracts) to real-
world data sources and transmits information between them. 

Over-the-Counter (OTC): describes a transaction that is made off an exchange and without an
intermediary. OTC trades may be private and peer-to-peer. 

Overbought: refers to a situation where investors have bought a cryptocurrency excessively. It

may often be followed by a period of selling. 

Oversold: refers to a situation where a cryptocurrency has been sold excessively by investors,
causing it to be traded at a price that may be lower than its intrinsic value. 

P
Paper Wallet: is a paper document that contains a crypto wallet’s private key or recovery
phrase. 

Peer-to-Peer (P2P): describes an interaction/exchange of value between two parties without

the involvement of intermediaries. 

Permissioned Ledger: is a ledger or blockchain with restrictions, such that only people with
access can view or interact with it.

Permissionless: in crypto describes a public blockchain that is immune to censorship or

regulation.

Portfolio: is a collection of crypto assets that an individual investor, a hedge fund, or an

investment company holds. 

Private Key: is a string of characters that provides access to a crypto wallet. Anyone who holds
a wallet’s private key has complete control over its assets. 

Proof-of-Stake (PoS): is a consensus mechanism on the blockchain that works by selecting

validators based on the number (or quality) of tokens they staked. 

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Proof-of-Work (PoW): is a consensus mechanism on the blockchain that uses cryptographic
puzzles to validate transactions and find new blocks. 

R
Recovery Phrase: is a random collection of phrases used to restore access to a crypto wallet.
Also known as seed phrase or mnemonic phrase. 

Resistance Line: is the highest price point of an asset in a specific timeframe.

Roadmap: is a list of the short and long-term goals of a project, and when they aim to attain
them. 

S
Satoshi (SATS): is the smallest unit of Bitcoin. 1 BTC = 100 million SATS.

Satoshi Nakamoto: is the individual or group of people that created Bitcoin; their identity is not
known to the public. 

Security Token: provides holders with an ownership stake in a cryptocurrency project.

Shilling: in crypto refers to the aggressive promotion of a project or coin.

Shitcoin: is used to describe a cryptocurrency with no apparent potential or use case.

Slippage: is a phenomenon where the expected price of a trade slips, causing a marked
difference between the price when the trade was initiated and the price on execution. 

Small Cap: is used to describe crypto projects with market capitalization less than $1 billion.

Smart Contract: is a computer program that facilitates, oversees, and enforces an agreement on
the blockchain without involving a central intermediary. 

Soft Cap: is the minimum amount that a project wants to raise during its initial coin offering
(ICO). 

Solidity: is the scripting/programming language for developing Ethereum smart contracts.

Stablecoin: is a cryptocurrency whose value is pegged against assets with low volatility like fiat,
precious metals, and commodities. As a result, stablecoins typically have less volatility and stable
prices. 

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Staking: describes the act of committing a specific cryptocurrency to support a blockchain,
confirming transactions on the network, and in return for some rewards.  

Staking Pool: lets multiple users combine resources, get more staking power, and earn more
rewards. 

Support Line: is the lowest price point of an asset in a specific timeframe.

Synthetic Asset: may also be referred to as synths. They are cryptocurrency versions of
traditional derivative assets. 

T
Technical Analysis: is the use of past market data (like price movement and trading volume) to
estimate if the price of a crypto asset will trend upward or downward. 

Testnet: is a testing environment where blockchain developers try out their smart contracts and
applications, and ensure they’re working optimally. 

Throughput: is how many actions (or transactions) can be carried out in a specific time frame.
Also known as transaction speed. 

Ticker: is also known as ticker symbol. It is an abbreviation used to denote crypto assets.
Examples include ETH for ether or BTC for Bitcoin. 

Token: is a virtual currency that can be traded as an asset or a utility. It exists on a blockchain,
where it may grant access or rights to people who hold it or serve as a means to store value. 

Total Value Locked (TVL): is the total value of crypto assets deposited (or staked) on a
decentralized finance platform. 

Trustless: refers to a platform that’s designed to work without the involvement of a centralized
authority or intermediary. 

Two-Factor Authentication (2FA): is a method that restricts access and strengthens security by
requiring two forms of verification before a user can sign on to a platform. 

U
Unbanked: refers to people who either have no access to traditional banking services or choose
not to use them. 

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Unpermissioned Ledger: is a public ledger or blockchain that’s open to everybody and not
controlled by any single owner. 

Utility Token: are used to pay for services within a blockchain network.

V
Validator: a person or group of people who validate transaction blocks on a proof-of-stake
network. 

Vesting Period: is a timeframe during which crypto assets sold during an initial coin offering
(ICO) are locked up and restricted from being sold. 

Vitalik Buterin: is the co-founder and one of the creators of Ethereum.

W
Wallet: is a digital application used to store, send, and receive cryptocurrencies.

Wei: is the smallest unit of Ether. 1 ETH = 1,000,000,000,000,000,000 Wei.

Whale: is an investor who holds a large volume of crypto assets, enough to sway the markets
one way or another. 

Whitelist: is a list of identified users or cryptocurrency addresses who have been classified as
trustworthy or cleared to partake in a particular activity (like an ICO). 

Whitepaper: is a document that outlines the concept behind a new project, its technical
information, potential use cases, and developmental roadmap. 

Y
Yield Farming: refers to a system where users invest their tokens on decentralized finance
platforms in exchange for returns. 

YTD: means year to date, and it refers to a period starting from the first day of the year to the
current day. 

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 7. Buying and Selling
Crypto

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7.a. Centralized Exchanges: All You Need
to Know

In this class, you’ll learn the following:
 What centralized exchanges are
 How centralized exchanges work
 What the largest centralized exchanges are
 The pros and cons of centralized exchanges
 The differences between centralized exchanges and DeFi

What are Centralized Exchanges?

During the first years after Bitcoin’s invention, it was fairly complicated to buy and sell
the new digital asset. The first Bitcoin enthusiasts used to contact each other via online
forums to establish trades. Another way people bought and sold crypto was by meeting
each other face-to-face at a mutually agreed upon location, as you can imagine that’s
far from ideal. As Bitcoin and cryptocurrencies gained more traction, however, the first
online crypto exchanges started to spring up. Coinbase, for example, was founded in the
early years of Bitcoin (2012) and is currently one of the biggest exchanges in the world
by volume.
The reason exchanges like Coinbase came into existence is simple: as cryptocurrencies
became more popular, there was a lot of demand for marketplaces through which
you could transact them. The first crypto-enthusiasts consisted mainly of tech-savvy
cyberpunks, but as the adoption of crypto has grown, more and more people who are
less tech-savvy want to buy digital currencies easily and quickly.
Many of these people also either lack the know-how or the motivation to store their
crypto in a private wallet and like the idea of a company storing their crypto.

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Centralized exchanges offer these basic features and functions, but over the years they
have started to introduce many new attributes that we’ll discuss later on in this lesson.

The detailed trading charts (often in a pro version of the exchange) and high liquidity
are just two examples of features that attract many traders and investors to centralized
exchanges. 

How do Centralized Exchanges work?

Signing up for an exchange takes a little bit of work since it’s common nowadays that
centralized exchanges are regulated by the government and fall under supervision.
What this means in practice, is that you’ll have to go through a “know your customer”
(KYC) and “anti-money laundering’’ (AML) process; we’ll explain this in-depth in the next
lesson. After your verification is completed, you can start depositing money onto the
exchange.  By far the most important function of a centralized exchange is to offer
users a “fiat on-ramp” and “fiat off-ramp”.

The former signifies the ability to exchange fiat for crypto and the latter the ability to
sell your crypto and receive fiat. Once you have deposited your fiat on an exchange, you
can set a buy order for any crypto that is available on the exchange you're using. One of
the aspects that make centralized exchanges appealing to people is their user interface.
After you log in, you are often greeted by a nice-looking dashboard (like the Coinbase
one below) which shows you the current crypto prices and an overview of your holdings.
It’s also common for the dashboard to display an overview of your recent transactions.

Coinbase.com

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From the dashboard, you’ll be able to navigate to the other functions the exchange has
to offer. When you buy a cryptocurrency, the exchange functions as a third-party that
facilitates the trade between you and the seller.
The majority of crypto transactions go through centralized exchanges, explaining the
high volume and liquidity.

The largest Centralized Exchanges 

There are hundreds of centralized exchanges available nowadays, so choosing a good
and reliable exchange might often seem overwhelming to newcomers. With that in
mind, we have established a list of some of the most well-known and reputable
exchanges to consider. 

1. Coinbase
As mentioned earlier, Coinbase was one of the first kids on the block. Operating out of
the United States, the exchange quickly became one of the biggest exchanges
worldwide. Coinbase is well-known for its ease of use and is widely considered to be
best for people looking for convenience.
Other noteworthy benefits Coinbase offers their customers are insurance and a wide
selection of cryptocurrencies, among others. Adding to the company’s credibility,
Coinbase debuted on the Nasdaq in 2021.
This made it the first cryptocurrency exchange to list on a U.S. stock market.  On the
downside, the fees on Coinbase are quite high, especially compared to other
exchanges and the fee structure is confusing. People who appreciate the convenience of
Coinbase and place a trade once in a while probably won’t be bothered by this too
much. If you’re an active trader, however, this might be a dealbreaker.

2. Binance
CEO Changpeng Zhao founded Binance in China in 2017 and it took the world by storm
in the years to follow. It is now the biggest exchange by volume according to
Coinmarketcap and is used by people from all around the world.
Binance has attracted millions of active users due to its low trading fees, fast trades, and
the sheer number of cryptocurrencies available on the platform. The popular exchange
also offers OTC trading, allowing traders to directly trade with one another. This makes
the platform a good fit for active traders, but it might be a tad overwhelming for
people new to the space.
The website isn´t very transparent and some information might prove difficult to find.
On top of that, the only customer service is by e-mail and chat, so it might take a while
until you get a response to your query. One important thing to note is that Binance
banned Americans from its main platform in 2019 and launched daughter company
Binance.US to cater to U.S. traders. The selection of cryptocurrencies on Binance.US is a

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bit more limited and it is not available in every state. Binance is no stranger to
regulatory issues or controversy and this might continue to haunt the company for
the foreseeable future.

The top five centralized exchanges on coinmarketcap.com

3. FTX
Founded in 2019, FTX is a relatively new exchange that has grown into one of the largest
players in the industry in just a couple of years. FTX has over 130 cryptocurrencies
available on its platform and supports 10 fiat currencies. It offers users a neat feature
that allows them  to easily swap coins and fiat currencies.
The Bermuda-based company is mostly known for allowing users to trade with
margin. However, they reduced the leverage limit after being met with criticism. Trading
with leverage is risky but can also be very rewarding. It is therefore that the platform is
mainly used by active traders looking for a quick buck and less so by long-term
investors. The lack of live chat support can be a drawback for people who are new to
FTX or crypto in general and the withdrawal fee of $75 is hefty.
FTX also operates its subsidiary FTX.US, which caters to U.S. traders and falls under U.S.
regulation.

4. Kraken
Just like FTX and Binance , Kraken operates out of the United States and was founded
only a few years after Bitcoin first saw the light of day. The platform has a large selection
of cryptocurrencies and 130 trading pairs.
Active traders will appreciate Kraken’s Pro Service with its low fees and advanced
tools. For beginners, Kraken offers tools, products, and informational resources to help
them get off to a good start. While fees on Kraken’s Pro Service are low, fees for entry-
level traders are higher.
This, combined with an advanced interface, makes Kraken more attractive to active
traders. U.S. traders should note that Kraken has limited options for funding their
account and New York and Washington residents will have to find another exchange.

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5. KuCoin
The Seychelles-based exchange KuCoin was launched in 2017 and has gained a lot of
popularity since then. It is popular because of its low fees, wide selection of coins, and
good customer service.
The exchange is well-known for listing many early-stage coins and tokens that have yet
to prove themselves. U.S. traders will have to look somewhere else as KuCoin is currently
not licensed to operate in the United States. Another con of KuCoin is the limited
amount of informational resources for beginners and the limited payment methods. All
in all, KuCoin is an exchange that is more suited to seasoned investors than
beginners.

Honorable Mentions The five exchanges listed above are the five of the most popular
exchanges globally, but there are a few other exchanges worthy of mentioning before
we move on. 

Huobi
Huobi is one of the most popular exchanges in Asia and was founded in China in 2013.
After China’s crackdown on crypto, Huobi left the country and the company now has
offices in Japan, Korea, the U.S., and Hong Kong.
Huobi is one of the few crypto exchanges that is publicly listed (on the Hong Kong
Stock Exchange, to be precise), although many others have plans to follow Huobi’s
example. The exchange is lauded for its good customer service, pleasant user interface,
and exceptional security practices. On top of that, the fees are low and there is a wide
availability of coins. A drawback is that some parts of the exchange can be a bit
overwhelming or confusing at times.

ByBit
Known for its margin trading and wide selection of derivatives, ByBit is especially
popular with active and/or professional traders. With ByBit, traders can get leverage up

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to 100x and open long as well as short positions. The platform offers an intuitive trading
terminal that’s full of useful features. 

A downside of ByBit is the fact that the exchange isn’t regulated, so you can not
expect your funds to be insured as is the case with Coinbase, for example. Also, people
frequently “get burned” trading with high leverage, but we can’t blame the exchange for
that. Keep in mind that ByBit is not available in the U.S. and U.K.

Bitpanda
Bitpanda is widely considered to be one of the best exchanges in Europe and they
have quickly grown their user base to over 2 million people. The Vienna-based company
was founded in 2014 and enjoys a good reputation among European crypto-enthusiasts.
The Austrians have also ventured into stocks, commodities, and ETFs, all available on the
exchange.
On the downside, Bitpanda charges relatively high fees compared to other crypto
exchanges and some market pairs experience low trading volumes. The platform is very
beginner-friendly but lacks the advanced features that seasoned traders might be
looking for.

The benefits of using a Centralized Exchange

As a crypto trader or investor, it isn’t necessary to use a centralized exchange,
decentralized exchanges (DEXs) are popular alternatives. However, there are a few
important advantages that centralized exchanges (often) have over their decentralized
counterparts: 

 Ease of Use (DEXs often require more technical know-how)

 Fiat-to-crypto (DEXs are only for cryptocurrencies; no fiat on/off ramps)
 Customer Service (DEXs provide little or no customer support)
 Liquidity (DEXs suffer from low volume more often)
 Insurance (not all centralized exchanges offer this, but DEXs certainly don’t)
 Recovery (on centralized exchanges, recovery of funds is possible)
 Storage (a centralized exchange stores your crypto on your behalf)

The drawbacks of using a Centralized Exchange

There are, however, also certain drawbacks that come with using a centralized
exchange.  Often these are the reasons why people choose to use a DEX instead:

 Exchanges store crypto on your behalf (the private key is usually on their server)
 Security (centralized exchanges are considered to be less secure)

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The differences between Centralized Exchanges and DEXs
We’ve already discussed some of the differences between DEXs and centralized
exchanges in the last section but we’ll dive a little deeper into the differences right here. 

DEXs are an integral component of Decentralized Finance (DeFi) and the following
projects are just some examples of popular DEXs:

 Uniswap
 Pancakeswap
 Sushiswap

As the name suggests, the main difference is that DEXs are decentralized. With DEXs,
there are no intermediaries at all: transactions are peer-to-peer. The banks, payment
gateways, and other institutions that function as intermediaries for centralized
exchanges are completely replaced by a blockchain. We’ll go deeper into this subject in
the dedicated DeFI section. 

Conclusion:
Even though there are reasons to use a decentralized exchange, the vast majority of
traders and investors still prefer a centralized exchange like Coinbase or Binance. 
Moreover, people generally don’t mind giving up a little bit of privacy and the custody
of their coins in exchange for convenience and customer service. In the end, it all
depends on an investor’s unique preferences. The first step, of course, is to open an
account; continue to the next lesson to find out how.

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 7.b. How to Open an Account on a
Centralized Exchange

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In this class, you’ll learn the following: 

 The KYC process on crypto platforms

 The top crypto exchanges
 Step-by-step guides on opening a crypto exchange account.

If you attended the last class, then you've probably learned of the many crypto
exchanges available on the market. So, what happens next? How do you interact with
these platforms to invest, trade, and utilize their comprehensive charting tools?  To
maximize the features offered by exchanges, you'll need to create an account first.
This class will provide step-by-step instructions on how to set it up. We’ll start with
something you’ll run into at the verification stage: KYC. 

What is KYC?

KYC stands for Know Your Customer, and if you have a bank account, you've likely
gone through the KYC verification process. However, unlike regular banks and their
centralized systems, most platforms in the crypto market are decentralized. So, there are

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fewer restrictions and users have more freedom to access financial instruments.  Many
crypto applications don't require proof of identity or income, and connecting your wallet
is often the only requirement needed. As you open cryptocurrency wallets and join
decentralized finance (DeFi) platforms, you'll start to notice how different they are from
banks and traditional financial institutions. 

However, some crypto-based solutions will insist on KYC verification. Centralized

exchanges like Coinbase, Binance, and Kraken require this process as a security measure
on their platforms. And KYC helps them keep their environments (and user funds)
safe. The verification process on crypto exchanges is pretty straightforward. You'll need
a form of identification that carries the same details you provided while registering
with the exchange.

So, your name, address, and birthday should match your information. If there are no
issues, your account should get verified shortly after you submit a request – some
platforms do it immediately and others may take a few days. 

The Top Crypto Exchanges

Recognized crypto exchanges like Coinbase, Binance, Kraken, KuCoin, and FTX have a
proven history of security and success, making them more reliable than other lesser-
known exchanges. But how do you know which platform is the best for you? The answer
to this may depend on personal preferences, what you need an exchange for, and which
platforms operate in your region.  Anyway, here's a summary of crypto exchanges with
their pros and cons to help you choose wisely: 

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Exchange Fees Application Unique Features
Hefty fees; trading fees up Insurance, 100+
to 0.50%; 3.99% purchase Available as a cryptocurrencies to trade,
Coinbase fees through credit cards; web platform Coinbase card, several crypto
wallet fees and wire transfer and mobile app services like NFTs, lending,
fees. staking, etc. 
Purchase and  trading fees
of up to 0.10%; 3.5% Available as a Comprehensive charting system,
Binance purchase fees through web platform plenty of crypto services, 600+
credit cards; wire transfer and mobile app cryptocurrencies to trade.
fees.
Available as a Supports 300+ cryptocurrencies
Taker fee of 0.07%; maker
FTX web platform and 10 fiat currencies, alongside
fee of 0.02%
and mobile app several other crypto services.
Available as a
Taker fee of 0.26%; maker Supports 150+ cryptocurrencies,
Kraken web platform
fee of 0.16% along with other services. 
and mobile app
Available as a
Supports 600+ cryptocurrencies,
KuCoin Maker fees of up to 0.10% web platform
along with other services. 
and mobile app

If you want to buy cryptocurrencies without opening an exchange account, platforms

like Nexo and Revolut provide easy ways to do so. Nexo is a leading crypto-lending
solution that lets users buy & store coins with credit/debit cards, earn returns on them,
and take out crypto-backed loans. Revolut, on the other hand, is a popular traditional
finance app. However, it incorporates crypto assets, and users on the platform can
seamlessly convert fiat to crypto and vice versa. We discuss how to buy cryptocurrency
via Nexo and Revolut in How to Buy and Sell Crypto.

Step-by-step guide on opening a crypto exchange account

Here are some general notes to keep in mind before we get into the specifics of each
platform. Firstly, all centralized exchanges will require a standard ID (passport or
driver’s license). Some of them may ask for extra information like proof of residence,
social security number (for US residents), and employer details.

You may also be asked to submit a selfie and undergo a photo verification process.
Furthermore, only people 18 years or older can open an account on the centralized
exchanges featured below. 

With that in mind, let’s get started:

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Opening an account on Coinbase
Here’s a step-by-step guide on creating an account on Coinbase:
Step 1: Create an account by visiting the Coinbase website or downloading their
Android or iOS apps. 
Step 2: Fill in your details and choose a strong password you can easily recall.
Step 3: Next, check your email for a message from ‘no-reply@coinbase.com’ or other
valid Coinbase addresses. Never open links in emails from non-valid addresses.
Step 4: Click the link in the message to validate your email address, phone number, and
add your personal information. 
Step 5: The final step is KYC verification. You can find more details about what to expect
and how Coinbase handles your data here.

NOTE: If you’re using a desktop device, ensure you have the latest version of Google
Chrome before you get started. 

PS: Once your documents are verified, you’ll be notified immediately. If the attempt
fails, wait for 30 minutes then try again. Also, clear the browser cache and restart the
browser before your next attempt.  Once you’ve successfully verified your identity, you
can start trading, exchanging, and staking cryptocurrencies on the platform. 

Opening an account on Binance

Like Coinbase, registering on Binance is free. Here's how you can do it:
Step 1: Register by visiting the Binance website or downloading their mobile or desktop
apps. Use your email and phone number to register. 
Step 2: Then, submit your details and start the verification process.

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Step 3: To get verified on Binance, you need to upload a picture of your ID as well as a
selfie. 
Step 4: After sending the selfie, you’ll also be asked to validate it using a front-facing
camera. You’ll find more on Binance’s verification process here.
Step 5: Even if you started KYC on a desktop device, it’s advisable to complete the selfie
part with your phone. To make this transition easy, Binance provides a QR code you can
scan to continue on the mobile app.  Binance may take up to 10 days before sending
confirmation that your account has been verified. However, this is the maximum
duration. Some users get a positive response within minutes and for some, it takes
days.  After your account has been confirmed and validated, you can buy, sell, and store
cryptos on the platform. You may also trade spot and futures, and for non-traders,
Binance offers opportunities to earn passive income. They include Binance Earn, Flexible
Savings, Locked Staking, Liquid Swap, Launchpool, and many more. 

Opening an account on FTX

FTX has a simple registration process too. Here are the steps you need to follow to
create an account:
Step 1: Head to the FTX website and choose "Register."
Step 2: Fill out the form, provide your personal details, and choose a strong password.
Step 3: Once registration is successful, head to the Account Settings page and set up
2FA. You’ll need it every time you log in or try to withdraw. 

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Step 4: Next up is ‘Identity Verification.’ FTX has 3 tiers for individual customers. Tier 1
users are unverified and restricted to exploring the website. For tier 2, you can submit
personal information (with no ID) and use the platform with a $2,000 limit. Tier 3
involves complete verification, and there’s no limit on trading or withdrawals.

Learn more about verification on FTX here(FTX User Guide: How to setup an FTX account &
individual KYC registration – FTX Exchange). FTX may verify your account once you’re done with
the process. But if not, you’ll get a response within 1 to 3 days. 

Opening an account on Kraken

Here's a step-by-step guide on setting up an account on Kraken.

 
Step 1: Head to the Kraken website to start the registration process.
Step 2: Click "Create an account" and provide your email, username, and password.
Step 3: Once you’ve submitted the necessary information, it’s time to verify your
account. 
Step 4: Kraken has 4 verification levels and how much KYC is needed is based on which
level you want. Starter and Express only require basic information, while Intermediate
and Pro are pretty extensive. Learn more here.
Step 5: Residents of the US and South Africa may need photo verification. The former
may also need to submit their social security number.
Step 6: During verification, some Kraken users struggle to update their address or
upload documents. If faced with a similar situation, here’s how to resolve it.  Kraken
customers with Starter and Intermediate level accounts get verified in under 5 minutes,
while Pro users get a response in 5 days or less. 

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Opening an account with KuCoin

Here’s how you can open an account on KuCoin:

Step 1: Visit the KuCoin website to start the account setup process.
Step 2: There’s a small difference while setting up on KuCoin. You can either sign up
with a phone or email address, and once you enter the details, you need to click “send
code” straightaway. It’s only after entering the code that you can choose a password.

NOTE: Only users from these countries can register with a phone number, others
must use email.

Step 3: Once you have the account set up, navigate to Security Settings. KuCoin
provides some options to increase your account security. You may set up Google
Verification, phone and email authentication, and a trading password. 
Step 4: KuCoin has two verification levels: KYC1 and KYC2. The first level is easy and it
only requires your name and ID information. You should get a response back within
hours. 
Step 5: After getting verified for the first level, you can start the advanced KYC. This
requires a picture with you holding your ID card in one hand and a handwritten note in
the other. Find more details about it here.  It may take a few days to get verified for
KYC2. If the process is successful, your daily withdrawal limit is increased to 200 BTC.
You’d also be able to make trades of 100K USDT daily and enjoy up to 100X leverage. 

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Conclusion 

There you have it, the steps required to create an account on a centralized exchange. If
you want to explore the platforms further and get an overview of what each one
offers and which platform would best serve your needs, check out the class on
Centralized Exchanges. 
Alternatively, if you’re not comfortable with the KYC process and would like to explore
an alternative that affords you more privacy, learn more about Decentralized Exchanges.
We hope you enjoyed this class! In the next one, we’ll discuss how to buy (and sell)
your first crypto.

We’ll also introduce platforms like Nexo and Revolut that simplify the buying process for
users who don’t want to open exchange accounts. 

See you there!

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 7.c.How To Buy And Sell
Cryptocurrencies

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In this class, you'll learn the following: 

 How to buy and sell crypto via Coinbase

 How to buy and sell crypto via Binance
 How to buy and sell crypto via Revolut
 How to buy and sell crypto via Nexo

After learning how to open an exchange account, you're now ready to buy your first
cryptocurrency. This buying and selling could be for short-term trading, long-term
investing, or both. So, before we proceed, let's quickly clarify how trading and investing
differ. 

Traders seek to earn profits by taking advantage of the rise and fall in the price of
cryptocurrency assets. They enter and exit positions over short durations, and
attempt to take small but frequent profits. Subsequently, they hope to accumulate the
small gains into a big enough profit over time. 

Investors, on the other hand, attempt to profit from an asset by buying and holding
it over a long duration. They ignore short-term price fluctuations with the belief that
over time, the asset’s price will rise enough for them to earn considerable returns. In
cryptocurrency jargon, long-term investing is also known as “HODLING.” HODL is an
acronym for “Hold On (for) Dear Life,” and it’s used to reflect a crypto investor’s
resolve to hold onto an asset over long periods.

Whether you plan to be a trader or an investor, the first step is to buy cryptocurrencies.
The four platforms we’re about to highlight provide different ways to do so. 

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Please note there are other valid exchanges apart from the two we featured below. You
can check the lesson on Centralized Exchanges to learn about Kraken, FTX, KuCoin,
Huobi, and many others.

Anyway, while Coinbase, and Binance are full-on exchanges and the two most
recognized, Nexo is a lending platform that offers crypto-backed loans and a means to
earn interest on crypto assets. In the same vein, Revolut is an online banking application
that lets users make and receive payments in fiat, but also provides an easy way to
buy, hold, and earn returns from digital currencies.

The goal of this class is to introduce you to the full range of opportunities available to
all kinds of users in the cryptocurrency space, including details about how each platform
offers different yet interesting ways to buy crypto assets and earn returns from them.   

How to Buy and Sell Cryptocurrencies Using Coinbase

Coinbase is one of the biggest centralized exchanges in the crypto market, listing
over 150 coins with daily trading volume in millions of dollars. The platform stands out
for its user-friendly interface, and how easy it is to make one-time or recurring
purchases. However, the convenience comes with comparatively high trading and
transaction fees. If you want to pay less fees, Coinbase has a Pro platform, but it’s not
so beginner friendly. 

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Furthermore, Pro is better suited for users who want to trade actively while the standard
website is adequate for investors. In addition to buying and selling cryptocurrencies,
Coinbase provides other related services, like Coinbase Card, a debit card that lets
you pay with crypto at merchants that accept Visa. With every purchase, users stand to
earn 4% cashback. 

Anyway, here’s how to buy your first crypto on Coinbase:

Step 1: Log in to your Coinbase account. If you don’t have one, visit the How to
Open an Exchange Account class.
Step 2: Go to the top right side of the screen and click on ‘Buy or Sell.’
Step 3: Select the token you want to purchase under the ‘Buy’ tab.
Step 4: Enter the desired amount in either crypto or your country's currency.
Step 5: Choose a form of payment.
Step 6: To complete your purchase, click ‘Preview Buy.’
Step 7: If all the information presented is accurate, click the ‘Buy’ button to finalize your
transaction. Your account should get updated immediately.

The process to sell cryptocurrencies is not very different from this. Using a web browser,
navigate to ‘Assets.’ On this page, you’ll see a list of assets you own. If you’re trying to
sell a crypto, you have to first convert it to fiat. After the conversion, you can withdraw
to a debit card or bank account.   

How to Buy and Sell Cryptocurrencies Using Binance

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Binance is the leading centralized exchange by trading volume, processing about 6X
more transactions than Coinbase, its closest competitor. The platform also lists over 600
coins, and it has one of the most robust ecosystems in the crypto space. The Binance
exchange is known for its low fees and extensive discount options, making it possible to
buy crypto with negligible charges.
Users regard Binance highly and the exchange is well-recognized for its topnotch
security.  Due to the range of features available on the platform, newcomers may
take some time to get used to the exchange and the advanced functionality it carries.

Aside from buying and selling cryptos, Binance also provides several ways to earn
returns, including a Crypto Savings Account, Staking, Liquidity Farming, and many
more. There’s also a Binance Visa Card that lets you pay with cryptocurrencies globally. 
However, buying and selling cryptocurrencies on the platform is very simple, and the
entire process may be completed in about 5 steps.

Here’s how to buy crypto assets on Binance:

Step 1: Log in to your Binance account. If you don’t have one, visit the How to Open an
Exchange Account class.
Step 2: Right on the homepage, you’ll see a yellow button that says ‘Buy Now.’ Click on
it. You should see a page with ‘Buy’ and ‘Sell’ at the top.
Step 3: Under the ‘Buy’, select a fiat currency and enter an amount.
Step 4: Next, choose the cryptocurrency you want to buy. Then click ‘Continue.’
Step 5: You’ll be led to a page and asked to choose a payment method. The available
options may include ‘Visa/Mastercards’ and ‘P2P Payment Methods.’ Select your
preferred option and ‘Continue.’ 
Step 6: Finalize your payment to complete the transaction. If you paid with a card, the
cryptocurrency will be deposited into your account instantly. 

NOTE: The ‘P2P Payment’ option will lead you to a  page where you can transfer fiat to
another user and get crypto deposited to your account. However, Binance acts as an
escrow, so your money is safe. 

The process to withdraw from Binance is very similar to the above. From Step 2, select
‘Sell’ and choose which asset you want to sell from your portfolio. Type in the amount in
crypto or fiat then ‘Continue.’ On the next page, choose whether you want the deposit
on your card, or if you want to get a bank transfer via the P2P method. If you withdraw
to a card, you should be credited within 5 - 10 minutes.

NOTE: If you want to buy cryptocurrencies but would prefer a similar experience to
using a mobile banking application, Nexo and Revolut may be ideal for you. Keep in

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mind, however, that you’ll be missing out on some of the features that exchanges offer.  

How to Buy and Sell Cryptocurrencies Using Revolut

Revolut is a mobile banking application, well-recognized in Europe and the United

States, with over 15 million users. In reality, this is not a crypto platform, it’s focused
mostly on fiat and services around dollars, pounds, and other traditional currencies.
However, you can buy and save digital currencies on the mobile app, and Revolut prides
itself as “the easiest way to buy and sell crypto.” And in truth, this claim is mostly
valid. The platform is super intuitive, and if you can find your way around your bank app,
then you can buy crypto on Revolut. 

It’s important to note, though, that you can only buy about 50+ coins via the platform.
And you can’t transfer your assets to a crypto wallet. If you buy and store digital
currencies on Revolut, the only way to get your capital back is to convert back to fiat
and withdraw in your local currency. So, it is not an exchange, and you don’t really buy
coins. 

What Revolut does essentially, is provide a quick and easy way to convert from fiat to
crypto, and vice-versa. For users who want to dip their toes into cryptocurrencies
without learning how to use an exchange platform, Revolut lets you do it from a mobile
banking app. 
Here ‘s how to buy cryptocurrencies on Revolut:  To buy cryptocurrencies immediately,
here are the steps: 

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Step 1: Log in to Revolut.
Step 2: Navigate to the ‘Wealth’ tab, choose ‘Crypto’ and select ‘invest.’
Step 3: Select the crypto you want to buy, then click the ‘+Buy’ button.
Step 4: The next page will show you two options: ‘Market Order’ and ‘Recurring Order.’
For a one-time purchase, choose the former. If you want to schedule future purchases,
select the latter. 
Step 5: If you choose ‘Market Order,’ the next screen will show you a window where you
can enter how much fiat you want to convert to crypto. Click ‘Buy now’ to complete the
transaction. 

That’s it. Your wallet is updated immediately with your crypto purchase. To sell your
crypto, just navigate to the ‘Crypto’ and select ‘-Sell’. It’s as simple as that.    

How to Buy and Sell Cryptocurrencies Using Nexo

Nexo is essentially a lending platform that lets users take out loans using their crypto
portfolio as collateral. Depending on how much is in your wallet, Nexo provides up to
$2 million in low-interest loans. The major advantage here is you don’t need to sell
your crypto for liquidity, you can just save it on Nexo and get credit at an APR of 6.9%
or more. There’s also a savings account feature where users earn 6 – 12% interest. 

Additionally, you can quickly buy cryptocurrencies on Nexo using a credit or debit card.
If you’ve never bought crypto before, this platform is an excellent place to start. The
process is very easy, and you can open an account and buy some crypto within minutes.
However, you are restricted only to a handful of coins (20+ instead of the 500+

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available on Binance). You also don’t get the extensive trading tools available on
standard exchanges. If you don’t plan to trade your coins in the short-term, Nexo may
be a good option.  

Here's how to get started with buying and selling crypto on Nexo:
Step 1: Visit the Nexo website and log in using your account details. Create an account
if you don’ have one. 
Step 2: Select "Credit/Debit Card" from the "Add Funds" option on the Dashboard.
Step 3: To begin, choose the token you want to purchase and enter the amount you like
to pay.
Step 4: Enter the information for your credit or debit card.
Step 5: Once you've completed the transaction, you're done!

The same process applies to selling cryptocurrencies. Just log in on Nexo, select the
token you want to sell, and confirm the transaction. 

Conclusion 
As you can see, buying and selling cryptocurrencies is now easier than ever. You can
convert from fiat to crypto and back within minutes, and without any complications.

If you want the complete trading experience, there’s a wealth of options to pick
from, and exchanges like Binance and Coinbase let you buy coins easily and trade
using powerful charting tools.  Alternatively, if you need a platform that you're already
familiar with (or has the same layout with your bank app),
Revolut offers a simple way to dabble in cryptos. Then there’s Nexo, a crypto-based
lending app that offers ways to maximize your coins. In the end, whatever medium you
choose, you’d have bought your first unit of cryptocurrency and on your way to
maximizing the financial possibilities available through cryptos. That’s all we have for
you in this class.

In the next one, we’ll be discussing something very important: How to Keep Your
Crypto Safe.

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 7.d.Keeping Crypto Safe

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In this class, you’ll learn the following:

 What crypto wallets are

 The different types of crypto wallets
 What features crypto wallets usually offer
 What the most popular wallets are
 What to look for in a crypto wallet

What Are Crypto Wallets?

In the last lessons we discussed cryptocurrency exchanges and we mentioned that one
of the reasons people use them is to store their crypto. Even though crypto exchanges
tend to be much more secure than they used to be, you are still putting your crypto at
risk by leaving them on an exchange. Since cryptocurrency exchanges store significant
amounts of crypto on their users´ behalf, it comes as no surprise that they are popular
targets for hackers.

The threats are not only external though, as it has happened before that owners of
exchanges disappeared together with their customers´ money. Luckily, cryptocurrency
investors have the possibility of storing their crypto in a wallet. There are many different
types of crypto wallets and modern versions have a lot more features than the first ones
to come to the market.

However, what all of them have in common is the most important function of a
wallet: storing your private and public keys.  Both keys are long strings of letters and
numbers but they are used for different purposes. A private key gives you access to your
funds and lets you sign off on transactions. A public key, however, is open to the public
and is used to receive funds.

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A wallet encrypts your private key and is non-custodial, meaning that it gives you full
control over your assets.

The Different Types of Crypto Wallets

Whereas the first wallets were clunky and required technical know-how, wallets on the
market today tend to be much more user-friendly and intuitive. We can divide crypto
wallets into two broad categories: “hot” and “cold” wallets. 

Hot Wallets
Hot wallets, also known as software wallets, are connected to the internet and can be
further divided into three subcategories: web wallets, mobile wallets, and desktop
wallets. As the name suggests, desktop wallets have to be downloaded onto a desktop
or laptop and are therefore considered to be the most secure type of hot wallet. Web
wallets, on the other hand, are more vulnerable to attack since you can access them only
through an app or a web browser. Mobile wallets are smartphone apps that are
available in the app store and let you easily store crypto on your phone. Some phones
have a built-in crypto wallet. The main reason many people use hot wallets is the
convenience: they are easy to use and have a smooth interface. They normally don’t
require much technical know-how. On the downside, they are generally considered to
be less secure than cold wallets for reasons we will get into now. Some examples of
hot wallets are:

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  Metamask (web wallet and mobile wallet)
 Blockchain.com (web wallet)
 Exodus (desktop and mobile wallet)
 Jaxx (desktop and mobile wallet)

Cold Wallets
Unlike hot wallets, cold wallets are not connected to the internet. This makes them
less vulnerable to attack by hackers and that’s why they are generally considered to be
the most secure type of crypto wallet. We can split cold wallets into two subcategories:
hardware wallets and paper wallets.
A hardware wallet is a small device that looks like a USB Flash Drive. The device
stores your private key, ensuring maximum security. To send or receive crypto, the
device is temporarily connected to the internet through a cable or Bluetooth. Thanks to
companies like Ledger and Trezor, hardware wallets have become more user-friendly
over the years.  It’s also possible to write your public and private keys on a piece of
paper and hide it somewhere safe. This is called a paper wallet and this type of wallet is
considered to be the most secure of all.

Since paper can easily get destroyed by water or fire, people sometimes engrave their
private keys on stainless steel. People mainly use cold wallets because of the high level
of security they offer, making them ideal for storing larger amounts of crypto. The
downside of using a hardware wallet, however, is that it takes time and effort to
access your funds. A device first has to be connected to a phone or a pc to use the
funds you store on it.  Some examples of cold wallets are:

 Nano Ledger X
 Trezor Model T
 BC Vault ONE

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Cryptocurrency Wallet Features
No matter how many features a wallet offers its users, storing and encrypting private
keys to keep your crypto safe remains its most important function. However, modern
wallets often come with a wide range of neat and useful features that are worth
exploring. Below are some of the most common:

o Transacting - a basic feature that allows users to send and receive crypto quickly
and easily.
o Exchange / Swap - a popular feature that allows users to exchange or swap
crypto without having to leave the wallet.
o Customer Service - A feature especially helpful to beginners. As wallets can
sometimes be complicated to use, good customer service is not an unnecessary
luxury.
o Custom Transaction Fees - Fees for sending crypto can be quite expensive.
Some wallets allow their users to set custom transaction fees. Keep in mind that a
lower fee usually means it will take longer for a transaction to go through.

o Staking - Holding your coins in a certain wallet is often all you have to do to receive
staking rewards. Some wallets will require users to “lock up” their coins for a certain
period..

o Lending - Another way users can create a passive income stream with their crypto.
Some wallets allow users to earn interest on their crypto by lending it out.

Most Popular Wallets

Which wallet is best for you depends on what you’re looking for and how much
experience you have with crypto. Below are some of the best cryptocurrency wallets on
the market today. We will go over the ups and downs for each and discuss who they are
best suited for.

1. Nano Ledger X

The hardware devices made by Ledger are the most popular on the market. The Nano
Ledger X is the company’s newest device, and it has a reputation for being highly

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secure and user-friendly. It supports a wide variety of crypto assets and allows users to
hold up to 100 cryptocurrencies on the device at once. 
By connecting your device to Ledger’s own Ledger Live software you can easily manage
your portfolio and make transactions. If you’re looking to make passive income while
storing your crypto safely, the Nano Ledger X is worth considering as it allows users to
stake certain coins through Ledger Live.
The chips in the Ledger devices are highly secure and the stainless steel cover makes
them durable.  The navigation could be a bit better as the screen is quite small and the
device has only two buttons. Although the Nano Ledger X might be a bit complicated
to use at the beginning, its state-of-the-art chip, smooth integration with Ledger Live,
and staking capabilities make it an attractive wallet for people who have some
experience with crypto and are looking for affordability and security.

2. Exodus

Exodus is one of the most popular desktop wallets available and if you prefer a mobile
wallet, they’ve got that covered too. The great user interface, live charts, and clear
portfolio data make Exodus very suitable for beginners. This is especially true if you
consider the fact that they have 24/7 customer support.  Using the built-in exchange on
the Exodus wallet, users can store and exchange north of 100 coins. The security
tools offered by Exodus ensure optimal safety for users. Given its compatibility with the
Trezor hardware wallet, users can keep their crypto as safe as possible while still
enjoying Exodus’ features.  On the downside, Exodus doesn’t offer 2-Factor-
Authentication (2FA), which could be a security concern. All in all, Exodus is suitable for
people looking for an easy-to-use and intuitive web or mobile wallet that offers great
features. It’s not the best, however, for people who are looking for maximum security as
Exodus lacks some important security features.

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3. Trust Wallet

Almost everyone has a mobile phone nowadays, so it’s no surprise that mobile wallets
have been rapidly gaining in popularity. With more than 10 million users, the Binance-
owned Trust Wallet is one of the most popular ones out there.

It’s easy to create a wallet and users can buy crypto directly with a credit card if they
wish to do so. Some other features Trust wallet has to offer are the built-in exchange,
lending, staking, NFTs, and DApps. All of this makes Trust a great wallet for DeFi
enthusiasts and people who want to seamlessly create a wallet that gives them access
to a wide variety of coins.

For beginners, all the features Trust wallet offers might make it a bit overwhelming and
a more simple mobile wallet like Bread Wallet might be a better option.
Also, mobile wallets like Trust are far less secure than hardware wallets or even
desktop wallets, so people who value security over convenience might want to look
somewhere else.

4. Trezor Model T

Another hardware wallet, the Trezor Model T is known for its top-notch security, and
the firmware is constantly updated. It’s generally considered to be the safest way to

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store your crypto as it’s incredibly difficult to hack. Another plus is the coin support: the
Trezor Model T supports over 1600.
The wallet is fairly easy to set up and the built-in color touchscreen gives it a premium
feel and look. Something that sets the Trezor Model T apart is the fact that it is open-
source, adding to the security.
All of that comes with a price though: the Model T is one of the most expensive
hardware wallets on the market. There is hardly a better choice than the Trezor Model T
for people who prioritize security over anything else and are willing to pay for it.
Although it’s relatively easy to use, its close competitor Nano Ledger X offers slightly
more convenience and is more affordable.

5. MetaMask

Metamask is a web wallet that allows users to access the Ethereum Blockchain through
their browser or mobile phone. It can be seen as a gateway to decentralized
applications on the Ethereum network.
Although it is easy to use, it does require some basic knowledge about crypto. In our
lesson dedicated to setting up a Metamask wallet, we’ll show you step-by-step how to
use the wallet. 
Metamask has made many people familiar with the crypto space and its possibilities;
millions of people use it every month. It lets people dive into the world of crypto
through one wallet; practically all Ethereum applications are possible to access using
Metamask. Being a hot wallet, MetaMask doesn't offer the same security practices as a
hardware wallet. It is, however, possible to connect your hardware wallet with
Metamask.  

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Honorable Mentions The wallets mentioned above are some of the most reputable and
popular ones in the industry, but there are many more. Below are a few more prominent
wallets:

Hot Wallets:

 Bread Wallet (mobile wallet)

 Electrum (desktop wallet)
 Atomic (desktop and mobile wallet)

Cold Wallets:

 BC Vault (hardware wallet)

 KeepKeey (hardware wallet)
 Coldcard (hardware wallet)

What to Look For in a Wallet

Finally, to help you choose the right wallet for you, we’ll look at some of the most
important aspects to keep in mind when choosing a cryptocurrency wallet:

 Coin Support - Before downloading or buying a wallet, make sure that it offers
the coins you are interested in. Usually, this information can be found on the
wallet’s website.

 Credibility - Since we’re talking about storing your money, using a wallet that’s
credible is paramount. Browse the web to find out more about a wallet’s track
record and reputation. Are there any red flags such as hacks and data breaches?

 User Experience - Wallets are not made equally and some are much easier to
use than others. Check out user reviews to see what other people have to say or
download the (hot) wallet of your liking and try it out.

 Security - The primary reason for using a wallet is to keep assets secure and
there are a few important things to look at before downloading or buying a
wallet. Check if all necessary security tools (such as 2FA) are available. Make sure
private keys aren’t stored on a company server. See if the hot wallet you’re
considering is compatible with a hardware wallet. 

 Customer Service - As mentioned earlier, customer support can come in handy

when you’re running into trouble. Check if a wallet has this available, either in the
form of a live chat, phone number, or email address.

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  Exchange - A built-in exchange and/or a swap function have become
indispensable for many people using a wallet. Taking crypto out of a wallet,
sending it to an exchange, and making the trade before sending it back is
cumbersome.

With so many different cryptocurrency wallets around, it’s hard not to get overwhelmed.
After reading this article, however, you know what types of wallets are available and
what features they offer. You now know what the most popular wallets are and what you
should look for in a wallet.

Safely storing your crypto is just the beginning of your crypto journey; move on to the
next lessons to learn how to make the most out of your crypto.

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 8.Investing Strategies

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8.a. An introduction to Cryptocurrency
Investment Strategies

In this class, you’ll learn the following:

 What investment strategies are

 Why investment strategies are important
 The benefits and challenges of long-term investing
 What the buy & hold strategy is
 What dollar-cost averaging is
Investment Strategies
Just like investing in stocks, real estate, or any other traditional asset class, investing in
crypto requires a well-thought-out plan. Formulating an investment strategy can seem
overwhelming sometimes, but it doesn’t have to be. By asking yourself the questions
below, you’ll get off to a great start. 

An investment strategy is not much more than a set of agreements you make with
yourself. What your portfolio will look like depends on a couple of important questions
you have to ask yourself beforehand:

1. How much risk am I willing to take?

How much risk you can or want to take will largely depend on your time horizon.
By time horizon we simply mean how much time you have left to invest until you retire.
If you are in your early twenties and still have decades of employment ahead of you, you

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can allow yourself to take a bit more risk than someone who is older and approaching
retirement.
The logic behind this is that you still have plenty of time to make your money back if
you are young and lose money due to a risky investment. If you’re closer to retirement,
however, you don’t have that luxury and you’ll allocate more money to safer assets.  In
traditional finance, this means that younger people allocate more money to stocks and
less to bonds. As you get older, you’d slowly start to allocate more money to bonds and
less to stocks. Commodities and real estate are also common components of investors’
portfolios.
Bitcoin, and cryptocurrency, in general, are, slowly but surely, changing everything
when it comes to portfolio allocation. Bonds have been “dead money” for a while
now, and crypto outperforming stocks has become more of a fact than an exception
over the last decade. As a result, more and more institutions and private investors have
started to allocate part of their portfolios to crypto.  Similar to a traditional investment
portfolio, you can also build up a crypto portfolio according to your own “risk
tolerance”.
New, small-cap coins, for example, are generally considered to be much riskier than
Bitcoin or Ethereum, but the potential of exceptionally high returns appeals to many
investors. To diversify, many crypto investors have a variety of coins in their portfolio,
which we will get into later.

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2. How much money do I want to invest?

It’s important to consider how much money you want to invest before you start.
Most investors and traders start with a small amount of money, just to dip their toes in
the water and experiment with purchasing crypto. This is a great way to get comfortable
with crypto and get to know the ecosystem around it.

As with all types of investing, the following rule of thumb applies: never invest more
than you can afford to lose. Using this method, new crypto investors can experience
and get used to the impact of crypto’s volatility with a limited effect on their
portfolios. Once investors feel comfortable enough with crypto to invest a larger sum of
money, they usually spread out their purchases over time to minimize risk.

This way, they avoid the possibility of buying in at the top with most of their money.
These are, however, different ways to approach this. The most common strategies for
investing, some of which we will take a closer look at in the following lessons, are as
follows:

 Buy & Hold (purchase an asset and hold onto it for a long time)

 Dollar-cost averaging (buying set amounts of an asset on a periodical basis)

 Momentum strategy (using trends to decide when to buy or sell)

 Barbell strategy (allocate a large part of a portfolio to defensive assets and a

small part very aggressively)

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3. What is my goal with investing?

To have any success with investing, it is essential to know what your goal is. If, for
example, your goal is to (partially) build a retirement fund and you have a long time
horizon, you can afford to take more risk. You don’t have to take money out of the
market anytime soon, making it possible to sit out any short-term volatility.  If your goal
is of a more short-term nature (buying a house in a couple of years, for example), you’d
be better off sticking to less risky investments. For mid-term goals (five to ten years), a
balanced portfolio of risky investments and more stable, safer investments would be
appropriate. Once you have identified your goals, you can start to formulate an answer
to the following questions:

 When am I planning to buy?

 When am I planning to sell?
We will discuss these questions more in-depth in the following lessons. For now, it’s
important to remember that without a strategy an investor is much more vulnerable
to making decisions based on emotions rather than reason. Below you can find
some of the most easy  and efficient strategies:  Long-term Investing There are
different ways you can approach investing in crypto, but a common investment
strategy is to buy Bitcoin and/or other cryptocurrencies and hold on to your
investments for a long time(years or even decades). Before we discuss this further, we
have to go over some important crypto jargon:

 Hodling: holding on to investments for a long time

 Stacking sats: accumulating Bitcoin by purchasing small amounts over time
 A Satoshi (or sat): 0.00000001 BTC, the smallest possible unit of Bitcoin

Buy & Hold

With that out of the way, we can dive deeper into a few common ways of approaching
investing for the long term. The strategy of buying into an asset and holding onto it
for a long time is appropriately called the “buy & hold” strategy. The idea behind it
is fairly simple; an investor buys a certain amount of Bitcoin (or another cryptocurrency)
intending to hold onto it for at least 4 years (one bitcoin cycle). In the cryptocurrency
space, this is also called “hodling.” It’s not 100% certain, but it probably came to be
after an early Bitcoin adopter made a spelling mistake. Later on, the acronym came to
stand for “hold on for dear life.” Many die-hard believers in Bitcoin adopted the strategy
and have been holding on to their coins for years now. It’s a great strategy for investors
who believe in the future potential of Bitcoin and/or cryptocurrency in general.

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Bitcoin’s price action over the last decade. Source: coingecko.com

The main advantage of this strategy is that it cuts out the emotional aspect of
investing; whatever happens to the market, you hold on to your coins. Whether we’re in
a bull market and everything is flying high or we’re in a long, difficult bear market, your
coins are staying put.  Anyone who has adopted this strategy over the last decade has
seen handsome returns(as seen below).

To give you an example; if you had invested $1000 on the first of March 2011 and held
onto it, you’d have had $37,779,055.89 on the first of March 2022(adjusted for
inflation). 

Another thing you’ll see when you look at the chart above is that hodling is not
necessarily an easy strategy to follow. To do it successfully, you have to be able to
stomach the violent swings of the crypto market. Months in which the market drops
by 60 to 80% have occurred in the past and not everybody can resist the urge to panic
sell. It is worth noting here, however, that Bitcoin’s volatility has declined as more
capital and institutional investors have entered the cryptocurrency market.

Simply holding on to coins isn’t as easy as it sounds; many investors fail to do so

successfully. Often, people panic sell when the market is going through a rough patch or
when crypto gets negative news coverage. One way to (partially) circumvent this
problem is by not obsessively checking the crypto prices, which we know can be difficult
when you have a large sum of money invested.

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Dollar-cost Averaging

The buy and hold strategy is great for people who have a large sum of money available
to invest in the market at once, but what if you don’t? Well, it’s possible to build up a
position over time by buying small amounts of Bitcoin each month or each week, for
example.  Usually, investors who follow this strategy invest a set amount of money on
a periodical basis, with no regard for the price at the moment of purchase.
Following this strategy, your average purchase price will be close to the average price of
Bitcoin over a certain period. That makes DCA a good investment strategy for navigating
the volatility within the cryptocurrency space.

A $100 monthly investment in Bitcoin over 9 years(2013-2022)

This strategy also takes the emotional aspect out of investing as the amount of money
and the date of purchase are set. Some exchanges or services make this easy for you
by offering “savings plans”(naming differs per exchange) that automatically buy crypto
at a set time on a customer’s behalf.

It’s also an option to throw in a large amount of money all at once at the beginning,
follow the buy and hold strategy, and subsequently use dollar-cost averaging to add to
your position over time. To give an example; if you had bought $100 worth of Bitcoin
every month for the last 9 years (2013-2022), you’d have had $1,035,535 worth of
Bitcoin with a total investment of just $10,900. 

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Keep in mind that the examples we gave in this lesson include years like 2011 and 2013
that saw explosive growth for Bitcoin. Although Bitcoin has matured a lot since then and
is generally more stable now, it is still showing great year-on-year returns compared to
other asset classes.

Conclusion

Having a strategy in place will make investing less daunting than it may seem at first. In
this lesson, we’ve explained to you what investment strategies are, why they matter and
what you have to look out for.

Strategies like buy & hold and DCA have proven effective, but they are no silver bullets.
You'll need to know how to build a portfolio, find valuable projects and use fundamental
analysis.

We will go over all of this throughout the rest of this section, including some common
investing mistakes and must-know tips.

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 8.b.How To Build A Portfolio

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In this class, you’ll learn the following:

 What the different types of cryptocurrencies are

 Why market capitalization matters
 How to diversify a crypto portfolio

As we have seen in the previous section, the composition of your portfolio will largely
depend on your unique situation. However, to build a portfolio, it’s useful to know what
the building blocks are. With around 15.000 cryptocurrencies and a rapidly evolving
industry, it can sometimes be complicated to keep track. 

However, there are several simple and effective ways we can diversify a
cryptocurrency portfolio.

In this lesson, we’ll look at the different types of cryptocurrencies to consider and why
the market cap of coins and tokens is relevant for diversification. Combining these
factors, we’ll give you some concrete examples of common cryptocurrency portfolios.
Below are the most common categories of cryptocurrencies to invest in.

We’ll give you a short description of each category and discuss what role they can play
in diversifying a portfolio. With some examples for each:

1. Bitcoin
Because of its significance and history, investors consider Bitcoin to be a category of its
own in the world of cryptocurrency. After all, Bitcoin was the first and it is still the largest
crypto by market cap. Over time, more and more investors have started to view

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Bitcoin as a great store of value and a digital version of gold.  For the reasons
mentioned above, most crypto portfolios are overweight Bitcoin, meaning that investors
allocate the largest part of their portfolio to Bitcoin. It’s common for investors to
allocate about 60 to 80% of their portfolio to Bitcoin and allocate the remaining
funds to smaller, more risky coins. Alternatively, some investors choose to allocate the
largest part of their portfolio to Ethereum instead of Bitcoin, often with Bitcoin as the
second-biggest position. 

BTC-Focused Crypto Portfolio Example

Bitcoin has matured a lot since its inception, and it’s by far the most stable and secure
of the crypto assets, leaving aside stable coins. Market data indicates that Bitcoin tends
to hold up better than most other coins during rough times. It's unlikely that Bitcoin will
do a 100x or 1000x, but the prospects for the oldest cryptocurrency still look great,
according to many market pundits.  Ark Invest’s Cathie Wood, for example, predicts the
Bitcoin price to hit $500k by 2026.
Former Goldman Sachs Hedge Fund Manager Raoul Paul is even more bullish; in 2020,
he predicted a price rise to $1 million within five years. We’re not there yet, but if
Bitcoin’s adoption continues as it has over the last decade, these prices might become
reality sooner than we think.

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2. Protocol Tokens
Protocol tokens are also known as layer 1 or base level tokens and, in simple words,
form the foundation on which applications are built. For Bitcoin, safety is a top
priority, so more functionality has taken a backseat. This can be explained by the fact
that more functionalities can lead to more security vulnerabilities. Other projects,
however, have made it their mission to make as many useful applications as possible.
The second-largest cryptocurrency and most prominent altcoin, Ethereum, is a protocol
token as well. With a market cap of almost $400 billion, ETH is a relatively stable altcoin.
At the same time, however, investors and market pundits alike still expect significant
gains from Vitalik Buterin’s invention. ARK’s Cathie Wood, for example, predicted at
the beginning of 2022 that ETH’s market cap would reach $20 trillion in 10 years. 

That’s still a long way to go, but a huge number of decentralized

applications(DApps) and smart contracts are running on Ethereum as we speak.
Many developers are actively working on upgrades, and Ethereum 2.0 is just around the
corner. This upgrade would improve Ethereum’s scalability and security. In addition,
Ethereum is switching from PoW to PoS, giving investors the possibility to make passive
income by staking their ETH. For years, the crypto community has been discussing a
possible “flippening” where Ethereum would take the number one spot in the
cryptocurrency market.
So, it’s no wonder that Buterin's invention is the second-largest holding in many
portfolios as investors look for exposure to this promising part of the market.  However,
Ethereum has started to face more competition from other high-flying protocol tokens.

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This competition is generally a good thing, and there is space for more than one
winner.
Some popular competitors are:

 Cardano
 Solana
 Avalanche
 Polkadot
 Algorand

As Ethereum is still the largest and most used protocol token, it’s very common for
investors to have it as their second-largest holding (behind Bitcoin). Usually, that means
about 20 percent, with another 10 percent or so allocated to other protocol tokens
(often big names in the top 10).  However, it’s worth noting that a growing number of
investors have an ETH-focused portfolio, with Bitcoin in second place. Even though
this is more aggressive than having a Bitcoin-focused portfolio, it’s still more secure and
stable than a portfolio composed of many other altcoins. Many investors expect higher
returns for Ethereum while appreciating its relative stability at the same time.

SECOND CHART

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3. Application Tokens
In the last section, we went over base layer tokens, which are the operating systems. On
top of these operating systems run decentralized applications.
A DApp often has its own token and anybody can buy or sell these on exchanges.
What really gave prominence to the application tokens was the ICO (initial coin offering)
hype in 2017. The vast majority of ICOs launched on Ethereum, but some of them chose
other layer ones to build their project on. Even though most of these projects failed,
some of them became a success and are still in existence with sometimes market caps in
the hundreds of millions of dollars. 

Many application tokens that have proven to have real utility and a viable business
can be found in the decentralized finance(DeFi) space and include names like:

 UniSwap
 Aave
 Compound
 Decentraland
 Chainlink

We’ll discuss DeFi in-depth in an upcoming lesson, but for the sake of portfolio structure
we couldn’t leave it out. As we’ve mentioned, many application tokens have failed, but
investors who got into projects like UniSwap or Aave early on have seen handsome
returns. This is generally considered to be a more risky part of the market and
investors usually allocate 10 to 20 percent of their portfolio to it.

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4. Stable Coins
As the name suggests, stable coins don’t experience the same volatility that other
cryptocurrencies do. They are usually backed by a national currency, such as the USD
or the EUR. They can, however, also be backed by other collateral like gold or oil. The
largest stable coins on the market are USD-collateralized, meaning they maintain a USD
currency reserve.

The most prominent stable coins on the market are:

 Tether (USDT)
 USD Coin (USDC)
 Binance USD (BUSD)
 TerraUSD (UST)
 Dai (DAI)

Offering price stability, investors and traders commonly hold part of their portfolio
in stable coins as liquidity. Having liquidity available means you can quickly seize
opportunities when they arise; buying the dip when a coin on your watchlist has fallen
out of favor temporarily, for example. In situations like these, stable coins allow you to
enter a position quickly; you simply exchange or swap your stable coin for the coin you
want to buy. It works the other way around as well. After taking profits, you can simply
store the money in a stable coin. The price stability ensures you will hold on to your

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profits, and you don’t have to sell your coin for fiat. In both cases, you stay in crypto and
don’t need fiat.

Another reason investors hold stable coins in their portfolios is to stabilize them; the
larger the allocation to stable coins, the less volatility.  Another benefit of stable coins is
that the staking rewards on them are usually quite high. Investors can stake their
coins through smart contracts or on centralized exchanges.

We’ll explain this in-depth in our article on staking. Another option is to lend out your
stable coins with a lending service. In return, you will receive daily, monthly, or yearly
interest. Size Matters However, these are not the only aspects to keep in mind when
building up a portfolio.

Another important aspect to look at is the market cap of a coin. The market
capitalization is the most common way for investors to derive a cryptocurrency’s
total value. You can measure the market cap by multiplying the number of coins
circulating by the price of each coin. Coins with a bigger market cap tend to be more
stable and safe investments, while coins with a smaller market cap are usually very
volatile and risky.

We can split coins up into four categories here:

1. Large-caps
Cryptocurrencies with a large market cap such as Bitcoin and Ethereum fall into this
category. Bitcoin’s market cap is by far the largest and broadly speaking we can say that
the top 10 coins by market cap are large-cap coins. Although there is no official number,
large-cap coins usually have a market capitalization of $10 billion or more. 

Given the fact that the crypto market is still in its infancy and hypes come and go, it’s
not unusual for a small or mid-cap coin to quickly rise to the top and become a large-
cap coin.

Of course, the opposite is also possible. The reputable rating company Weiss Ratings
has created a large-cap crypto index, which includes the following cryptocurrencies:

 Bitcoin
 Ethereum
 Ripple
 Binance
 Cardano
 Polkadot

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 Large-Cap Crypto Index by weissratings.com

Keep in mind that the cryptocurrency industry evolves rapidly and to stay up-to-date
with the market it’s best to keep a close eye on websites that track cryptocurrency
prices. Some of the most reputable around are:

 Coinmarketcap
 Coingecko
 Coinpaprika
Although it’s not a rule, cryptocurrencies with a larger market cap have usually been
around longer and have proven themselves. This is why they are generally considered
to be safer, more stable investments. That’s why it’s common for crypto investors to
allocate 80% or more of their funds to large-cap coins.

2. Mid-cap
Mid-cap coins, sometimes also called medium-cap coins, generally have a market cap
of somewhere between $1 to $10 billion and are considered to be well-established in
the space. Unlike most large-caps, however, mid-cap coins are often still expected to
show fast growth in the near to mid-term future. Popular coins like Tezos and Cosmos
fall into this category.
Some other prominent mid-caps are:

 VeChain
 NEAR Protocol
 Fantom
 Cosmos
 Algorand
 Polygon

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 Mid-Cap Crypto Index by weissratings.com

Given the promise of high rewards, many investors allocate part of their portfolio to
mid-cap coins. The high risk that comes with investing in this part of the market makes
that investors usually allocate a smaller portion of their funds to mid-cap coins; it’s
common to allocate about 15% to trusted, mid-cap cryptocurrencies. 

3. Small-cap

Small-cap cryptocurrencies are coins and tokens with a market cap not exceeding $1
billion. These cryptocurrencies are generally considered to be much riskier than their
large-cap and small-cap peers as they are usually quite new and lack a track record.
Small-caps often don’t have a lot of resources and many of them fail.  However, there
are some gems and if you do your research well you might be able to get in early on a
great project. Given the very risky nature of these coins and tokens, investors usually
allocate only up to around 5% of their crypto portfolio to small-cap coins. Weiss Ratings
has also created a Small-Cap Crypto Index, with some of the most prominent names in
the list being:

 NEM
 Ontology
 Nano
 Digibyte
 Lisk

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 Small-Cap Crypto Index by weissratings.com

4. Micro-cap
One degree below small-cap, we have another category of cryptocurrencies called
micro-caps. These projects usually have a market cap of under $50 million and are
considered to be the riskiest category of cryptocurrencies. These coins and tokens are
often very early-stage, and it’s hard to come by any information or data to do quality
research. This makes them very speculative investments with the potential of
significant upside.

On the other hand, however, there’s a lot of downside risk as many of these small
projects fail. Micro-caps are hard to find since they normally don’t make the news, so
investors really have to scour the market. Even harder is to find high-quality ones that
underpin a promising innovation and might deliver attractive returns for investors. 
Many new projects raise money by way of ICOs, IEOs, or IDOs. Launchpads are also
great places to look for early-stage projects. Micro-cap investors actively follow these
offerings and try to get in on promising projects as early as possible.

In our lesson on ICOs, IEOs, and IDOs, we’ll explain to you in detail what these offerings
entail. Given the huge volatility and risks that come with investing in micro-caps,
investors usually don’t allocate more than 1% of their portfolios to this part of the
market. It should be noted that micro-caps, like small-caps, are best suited for people
who aren’t afraid of taking risks and have some money available to play around with.
The chance a micro-cap investment goes south is significantly bigger than the chance
that it succeeds.

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Maximum Number Of Coins
In the next lessons, we’ll discuss the importance of diversifying your portfolio. However,
the maximum number of coins to hold in your portfolio is also important to consider.

A general rule of thumb is not to hold more than ten coins in your portfolio. If you
hold more than ten coins, you might lose the overview of your portfolio as it’s difficult
to keep track of all of them. Also, if you have invested a small sum of money, you might
risk spreading yourself too thinly. 

Conclusion
Everyone’s portfolio will look different. However, with the information we have given
you in this lesson, you’ll be in a great position to build a strong, well-diversified
portfolio. You now know what types of coins you could add and why it’s important to
look at their market cap. In the next lessons, we’ll dive deeper into methods of
selecting quality projects and ways to invest in them safely.

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 8.c. How to Find Projects With Long-
Term Value

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In this class, you’ll learn the following:

 Why utility is crucial for creating long-term value

 The role scarcity plays in valuing a project
 The importance of a project’s perceived value

We briefly mentioned a couple of important aspects to look at when researching

cryptocurrency projects in “Investment Strategies”. In this lesson, we’ll dive a little bit
deeper into those. Whether you’re investing for the long-term through “buy & hold’” or
for the short-term, without actual value a cryptocurrency project is unlikely to
generate any significant returns.

Unlike traditional companies, cryptocurrencies don’t have cash flow, profit margins, or
revenue. This makes methods and ratios used for valuing stocks in the traditional
markets useless when it comes to cryptocurrencies. Luckily, there are other things we
can look at to determine whether a project has long-term value or not. 

1. Is There Any Utility?

Simply put, a coin has to be useful; there has to be at least one use case for a project.
With use-case, we mean the function of a coin and the way it is used in a specific
blockchain network. This is best explained with an example, so let’s take a coin most of
us will be familiar with.
The second-largest cryptocurrency by market cap is Ether(ETH), the native
cryptocurrency of the Ethereum blockchain. This blockchain has seen a lot of success, in
part due to the applications which have been built on top of it(think of smart contracts,
for example). 

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ETH plays a crucial role here since anyone who wants to develop an application on
Ethereum or run a command needs to have ETH to do so. The token is used to pay
for the computing power that is necessary for running programs on the Ethereum
network. It is often referred to as the “fuel” of the Ethereum network and without it,
operations on the network can’t be facilitated.

All of this is what makes ETH so valuable and explains its solid second place in the
cryptocurrency market by market cap, only behind Bitcoin.
  

Ether’s price chart. Source: Coingecko.com

Looking at the utility of coins, it’s also important to look at how this utility can increase
in the future. ETH, for example, sees its value increasing due to the growing popularity
of the  Ethereum blockchain. With higher value comes greater demand, in turn leading
to higher prices(see below).

All in all, there is a strong connection between a coin’s value and its utility.

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To give you an idea of what to look at when researching a coin’s (potential) utility, we
can distinguish between different types of tokens and the utility they offer:

These tokens allow holders to vote and create proposals on

Governance
Tokens
the protocol’s future as well as the possibility of receiving
dividend payments.
These tokens allow holders to further secure the network by
Staking Tokens validating transactions and receiving staking rewards in
return.
Transactional These tokens function as a medium of exchange and unit of
Tokens account.
These tokens support decentralized applications built on a
Platform Tokens
blockchain.
These tokens represent ownership of a physical or digital
Security Tokens
asset.
These tokens are integral parts of protocols and allow users
Utility Tokens
to access services of said protocol.

Remember that investing in a cryptocurrency project that has no utility is just

speculating. Studies have shown that the vast majority of cryptocurrencies have no
utility at all, so it’s incredibly important to separate the wheat from the chaff.

2. Is The Asset Scarce?

As we’ve discussed at the beginning of this course, if something isn’t scarce it most
likely won’t be very valuable. We don’t use seashells as currency or investment,
because it’s not difficult to go to the beach and collect many of them. Scarcity simply
means that something has a finite nature. The driving factor behind an increase in
the long-term value of an asset is its fixed supply.
More demand will increase the price of the asset as the supply doesn’t grow or slowly
grows. To quickly revisit the last section, utility is the main driver behind greater
demand. 

Let’s look at some examples of scarce assets. With gold, we know more or less how
much of the precious metal is extracted from the ground each year. Going back from
analog gold to digital gold, we know there will only ever be 21 million bitcoins. As
Bitcoin adoption grows and its inflation rate dips, the value of each bitcoin goes up. 

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Some other coins with a limited supply include:

 Litecoin (84,000,000)
 XRP(100,000,000,000)
 ADA (45,000,000,000)
 Chainlink (1,000,000,000)
 Algorand (10,000,000,000)

As you can see, the max supply can vary wildly from project to project. Another
important aspect to look at here is what the circulating supply of a coin is. Bitcoin’s
circulating supply, for example, is already at 19 million(90%). If a coin has a low
circulating supply, the price might experience downward pressure due to new coins
flooding the market.
Some coins destroy part of the supply in something that is called “burning”. The
intended result is an increase in the value of the remaining coins. Usually, a coinburn is
announced by the team behind a project in advance.

3. What Do People Perceive Its Value To be?

You can find a project that ticks all the boxes; it has utility, it is scarce and it has a good
team behind it. Still, the price doesn’t move or even goes downwards, investors simply
don’t seem that interested in it. See, for a cryptocurrency to be valuable, the market
has to see it that way. There are a few ways projects can achieve perceived value,
mostly related to their development:

 Accomplish Milestones (can usually be found in the whitepaper)

 Attain partnerships with reputable companies (Stellar and IBM, for example)
 Successfully launching (beta) software (the protocol, for example)

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You can also check the roadmap on a project’s website and see if they are on schedule;
do they deliver as promised? If a project is accomplishing milestones, attaining big
partnerships, and successfully launching the software, you can expect the market to
acknowledge its value.

Example of a crypto roadmap: source medium.com

Another way to gauge the perceived value of a project is by checking out its
community; cryptocurrency projects usually have a social media presence. There are
usually links to social media pages on a project’s website, but active cryptocurrency
projects are usually present on:

 Twitter
 Facebook
 Reddit
 Youtube
 Telegram

Channels and pages with many active members are a good indication of high
perceived value. Another way to keep tabs on the market and find out how valuable
investors perceive projects to be is by keeping up with the crypto market in general, by
joining our Telegram group and signing up to our newsletter, for example.

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Conclusion
It is easier to hold on to projects when you believe that they will be worth more in
the future. We have shown you how to discover projects that have bright prospects
due to their long-term value. You now know why the utility of a project is crucial to
long-term success, why an asset’s scarcity matters, and why you should not overlook
the perceived value.

In the next lesson, we will use fundamental analysis to discover more about a project's
intrinsic value and prospects.

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 8.d. What is Fundamental Analysis?

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In this class, you’ll learn the following:

 What fundamental analysis is

 How it is used in traditional markets
 How it can be applied to crypto
 The different metrics to consider

Fundamental Analysis
There are two ways investors can analyze an investment to find out whether it’s an
attractive opportunity or something to avoid: technical analysis and fundamental
analysis. In this lesson, we’ll take a closer look at fundamental analysis, what it looks like
in traditional markets, and how it applies to crypto.

In the traditional markets, investors have a variety of tools at their disposal to

fundamentally analyze a stock and find out whether it’s an attractive buy. Companies
have cash flows, profit margins, revenues, and many other metrics which can be
applied to value the company. By looking at economic factors as well as financial factors,
investors try to get an idea of the intrinsic value of a potential investment.

If the intrinsic value is below the current price of a security, it’s considered to be
undervalued and thus potentially an attractive investment. Fundamental analysis differs
from technical analysis in the sense that technical analysis looks at the historical price
patterns and ignores fundamentals. Fundamental analysts in the traditional markets look
at macroeconomic factors (the economy, the industry) as well as microeconomic
factors (management, for example).

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The following data points are some of the most important to look at for fundamental
analysis:
  Profits
  Margins
  ROI (return on equity)
  Revenue

The data points listed above aren’t hard to find; investors can find them in a company’s
financial reports. Investors look at a company’s balance sheet, income statement, and
statement of cash flows to see whether a company’s quantitative fundamentals are
sound.
A few examples of qualitative fundamental questions investors try to answer are:

 What is the business model?

 Does the business have a competitive advantage?
 How is the management?
 How’s the relationship between management and stakeholders?

These questions usually come with a list of sub-questions and thorough fundamental
analysis is usually quite time-consuming. By combining qualitative fundamentals with
quantitative ones, investors try to get a good picture of a company’s value. It’s not
uncommon for analysts to use technical analysis to complement their fundamental
analysis.

Fundamental Analysis For Cryptocurrencies

So, now we know how fundamental analysis applies to traditional markets. Some
questions from the first section can also be applied to cryptocurrency projects, with a

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little tweaking. However, crypto is a different beast and cryptocurrencies lack earnings,
margins, revenues, and so on. As a consequence, we can not use traditional ratios to
calculate a cryptocurrency’s intrinsic value.

Luckily, there are plenty of factors we can look at to fundamentally analyze

cryptocurrency projects. Asking the questions listed below will help you do some solid
fundamental research on cryptocurrency projects. We can split the questions up into
three different categories: project metrics, financial metrics, and on-chain data.
Using project metrics, we try to determine the quality of a project; we look at the team,
whitepaper, roadmap, etc.

Financial metrics are concerned with how an asset is trading, what its price was in the
past, and what the volume and liquidity look like. On-chain metrics are unique to crypto
and look at blockchain data. There are many websites that make it easy for investors to
look up and interpret this data. Project Metrics

1. How Is The Project Developing?

One of the most important things to look at regarding a project’s development is the
roadmap, which can normally be found on a project’s website. Looking at the roadmap,
you can see what the team’s plans are for achieving future success. Is the roadmap full
of exciting promises? That can be either a good or a bad sign. It shows a team’s
ambition, but make sure to check out whether a team has actually delivered upon
promises made in the past. Have they released what they promised to release? If so,
that’s a good sign.

Another important document to look at here is the whitepaper, which explains in detail
what it is a project set out to do.

Polkadot 2021 Roadmap. Source: @polkadex

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2. What Market Is The Project Targeting?

The size of a (potential) market is crucial as it can make or break a project. A big market
sounds good in theory but is probably oversaturated with many other projects
offering the same or similar solutions. So much competition can drastically decrease the
chance of any serious adoption unless a project has a great competitive advantage.
That’s why many projects aim for a smaller, niche market.

Although the market is smaller, the chance of adoption might be much higher if
the project offers a new, exciting solution. As an investor, your task is to find out
whether there is real demand for a project’s solution in the target market.  

3. Does The Project Have A Competitive Advantage?

To build on the last question; a competitive advantage is necessary to beat the
competition. To find out whether a project can successfully fight off competitors, make
a comparison; this will show you a project’s relative strengths and weaknesses. Is there
anything that sets the project apart and makes it unique? That’s a good sign, especially
if it’s hard to copy or recreate.

Ethereum’s Competitive Advantage (source cryptocorenews.com)

 
4. What Do The Tokenomics Look Like?
As we have discussed in the last lesson, utility is crucial for a cryptocurrency. Often this
utility comes from the role a cryptocurrency plays in the ecosystem around it; this is
also called tokenomics. This is important for the future price since tokenomics controls
the demand and high demand drives up the price. Apart from the current situation, also

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look at what the team has planned to improve the tokenomics of a coin in the future.
The most important factors tokenomics looks at are as follows:

 The circulating supply (number of coins that exist)

 The token inflation (number of coins that will be created and when)
 Ownership (How many coins does the team have, for example)
 Burned, lost, or deleted coins (or somehow unusable otherwise)
 
5.  Does The Project Have Any Prominent Partners?
One way crypto investors assign value to a project is by looking at whether there are any
significant partnerships with big companies or other (popular) projects. A partnership
with a well-known company, for example, can give a project more credibility. Make
sure, however, to check what the partnership entails; they are often hyped up to
create a buzz around a project.

Cardano’s Partnership with PWC (source thecoinrepublic.com)

 
6. What Is A Project’s Use Case?

Use-case is a term that is thrown around a lot in the cryptocurrency space and for good
reasons. Many projects are hyped tremendously for short periods, leading to masses of
people fomoing in. This usually ends in losses because people often forget to stop for a
moment and think about why they’re buying something.  Ask yourself whether a
cryptocurrency has a real use case.
Does it play an important role within a blockchain ecosystem or could the
blockchain do without it? In the long run, this will determine the real value of a
cryptocurrency and subsequently its price.  

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7. What’s The Team Like?
One of the most important aspects to look at when determining the value and
legitimacy of a cryptocurrency project is the team behind it. Usually, this information
can be found on a project’s website. Make sure to dig a little deeper though; it has
happened before that teams behind “cryptocurrency projects” turned out to be
completely fake.
Reputable teams will have links to their members’ Linkedin accounts, Twitter
profiles, and the like. Check them out and see how much engagement and how many
followers they have to get an idea of their authenticity. If a project claims that there are
some prominent people involved in it, make sure to verify this yourself. If you’re certain
a team is credible, then it’s time to evaluate the quality of the team.
Find out how much experience the team members have; how’s their track record? Past
failures or, even worse, scams or obvious red flags. This can tell you a lot about the
future of a project. Some teams are great at marketing, but good marketing alone
doesn’t make for a great project.

Part of the team of Energy Web Token (source: energyweb.org)

 

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8.  Does The Project Have An Active Community?
To get a good idea of a project’s future success, look at its community. Some of the
most successful cryptocurrencies to date have had big, active communities. How
numerous a community is can be a good indication of how popular a project’s ideas and
functions are.
A large community means it can spread far; necessary for the success of a project.
Communities or, in other words, fan bases can be found on a variety of social media
platforms. Most communities have a Reddit page, Telegram channel, and/or Facebook
group. Look at the number of members or followers and how active they are. Twitter, or
“crypto Twitter”, is also a popular place for discussing different cryptocurrency projects. 

Financial Metrics

1. What Is The Price History?

To see whether a cryptocurrency has any longevity, check out its price history.
Established coins or tokens which have held on to their value for a long time,
especially compared to competitors, have a higher chance of being around in the
future as well.  The downside here is that these coins are already mainstream, mature
projects that most likely won’t show a 100x or 1000x anymore.

To find projects that still hold potential for such explosive gains, the trick is to find ones
that haven’t reached this stage yet but could do so in the future.

Solana price history (source coinmarketcap.com)

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2.   Is There Any Significant Volume and Liquidity?
A cryptocurrency won’t deliver any significant returns without liquidity and volume. In
simple words, liquidity means how easy or difficult it is to buy or sell an asset. If
liquidity is low, trading costs can be high and you might even move an asset’s price with
a big order. The volume shows us how much an asset is traded during a specific period.
If the average volume of a cryptocurrency is high, this might be a sign of high demand.
Huge upswings or downswings usually come along with high volume.

A cryptocurrency’s volume can be found on price tracking websites such as

coinmarketcap.  
 

Top 10 Cryptocurrency by volume in the last 24h in $ (source: coinmarketcap.com)

3. Market Capitalization
To calculate the market capitalization of a coin, you can use the following equation: the
price of a coin multiplied by its circulating supply. Price tracking websites usually
show you the market cap, so there’s no need to learn this by heart.

Market capitalization is important as it is often seen as a reflection of a network’s value. 

Projects with a big market cap often have longevity and strong infrastructure; think of
Bitcoin and Ethereum, first choices for long-term investments.

Since those projects are already relatively stable and mature, some investors scour the
market for promising coins with a lower market capitalization because they might still
deliver exceptional returns.

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 Top 10 Cryptocurrency by market cap (source: coinmarketcap.com)

4. Supply
Regarding the supply of a coin or token, there are a few different things to look at. The
maximum supply, for example, of Bitcoin is 21 million; meaning that there will never be
more than 21 million bitcoins.
The circulating supply of bitcoin is around 19 million, meaning that 19 million bitcoins
are in circulation and publicly accessible.  Keep in mind that millions of these are actually
lost or locked up in wallets, so publicly accessible is a relative term.

Finally, it’s important to look at a coin’s rate of inflation to see how many units of a
coin are created over time. A low inflation rate means high demand might increase a
coin’s value. A high inflation rate, on the other hand, decreases the relative value of your
position over time as more coins or tokens come into circulation. Some arguments in
favor of a high inflation rate are that it might incentivize the use and adoption of a coin
or token.
On-chain Data On-chain data is a key metric to consider. It includes information about
all the transactions on a particular Blockchain and the data recorded on the blocks -
which in the case of public blockchains, are available for everyone to see.

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 BTC On-Chain Data by chainanalysis.co

 1. What Do The Transactions Look Like?

On-chain data can give a good insight into a blockchain’s transactions. Those
transactions, in turn, can tell us a lot about the state of a network. By looking at the
number of transactions over a given period, we can get a good idea of how active a
network is and how the activity fluctuates over time. 

The data also shows us the transaction value; the value that’s transacted in a specific
period. Let’s say we have 20 transactions of $100 in a day. That would make the daily
transaction value(or volume) $2.000. Lastly, we look at the fees people are paying for the
transactions; this can give us a good indication of the demand for a coin or token.

Bitcoin’s Transactions Data (source theblockcrypto.com)

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2. Are There Many Active Addresses?

There are different ways of measuring how many active blockchain addresses there are.
One method is to add up all of the sending and receiving addresses during specific
periods. By looking at the fluctuating activity over different periods, analysts can get a
good idea of the interest in a coin or token. Tracking all of the unique active addresses
together over time is another way to approach this.

Bitcoin’s Active Addresses Data (source theblockcrypto.com)

3. Is The Hash rate High?

We’ll go deeper into the Proof-of-Work (PoW) and Proof-of-Stake (PoS) mechanisms in
a future lesson, but for fundamental analysis, we can not skip the hash rate. In a PoW
network like Bitcoin, miners contribute computational power to solve mathematical
equations.
If we combine all of the computational power, we get the hash rate.  A high hash
rate makes a network secure and indicates many miners are in the market. A low hash
rate, however, tells us that securing the network is not profitable anymore; miners go
offline and the network becomes less secure.

Bitcoin’s Hash Rate Data (source theblockcrypto.com)

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4. What Is The Amount Staked?

After PoW, PoS is the most widely used mechanism and it has been gaining in
popularity. With PoS, users validate transactions by locking up their coins, more on
this later. To estimate the interest in a cryptocurrency, we can study the total amount
staked.

Many people staking their coins is a good signal; investors want to receive the coin or
token as a reward and probably expect future price rises.

Conclusion

The cryptocurrency space is full of promising, innovative projects that are looking to
disrupt the financial world as we know it. However, many of these projects will fail, and
it’s not easy to pick out the winners. In this lesson, we taught you what project metrics,
financial metrics, and on-chain data to look at to use fundamental analysis most
effectively and improve your chances of finding great projects. 

Even though fundamental analysis is incredibly useful for crypto as well as traditional
markets, it’s not the only way to analyze a cryptocurrency. Further ahead in this course,
you’ll learn what technical analysis is and how you can best use it to your advantage.

First, we’ll go over some typical investing mistakes, and we’ll finish this section of the
course with a few must-know tips. 

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 8.e. How To Avoid Common Mistakes in
The Cryptocurrency Market

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In this lesson, you’ll learn the following:

 Rules to safely invest in crypto

 Common investing mistakes to avoid

However promising the cryptocurrency market is, it remains speculative and volatile. We
can never eliminate the risks, but there are several ways we can try to minimize them.
The following pieces of advice will help you along the way:

1. Understand The Risk

Before you start investing in crypto, you have to understand the nature of the market.
That way, the volatility won’t come as a surprise and you won’t panic sell at the
worst possible moment. The cryptocurrency market is still in its infancy and offers
therefore ample opportunity, but that’s a double-edged sword.  The 10x, 100x or
1000x gains you have seen people post about have often come with a fair bit of risk.
Now, there’s nothing wrong with taking a bit of risk, but it’s crucially important to know
whether you can afford to take the risk.  Here are a few tips to help you get off to a
good start:

 Start small
 Only invest money you can afford to lose
 Have an emergency fund in place
 Pay off debt first

If you follow the tips above, you’ll have a solid financial foundation. This means you
won’t have to sell your crypto in the middle of a crash because you have to pay your
rent.

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2. Have A Plan In Place
Every investor is different and that’s why it’s important to identify your unique
investor profile. Are you more conservative and risk-averse or are you willing to take
on risks to have a chance at exceptional returns? Either way, your investor profile will
determine what strategy and plan best suits you.

There are several reasons for having a plan in place. First of all, you won’t be tempted as
much to sell during market downturns if you have a solid strategy to rely on. Secondly,
you’ll be less likely to fomo into any projects after they’ve been hyped up. If something
doesn’t fit into your strategy, you won’t feel bad about passing on it. 

Examples of different investor profiles. Source: dbs.com.sg

3. Invest In Something You understand

The famous investor Warren Buffet once said: “stay within your circle of competence.”
To put it simply, invest in projects you have a solid understanding of. This will give
you a lot more confidence in your investment and you’ll be less likely to panic sell when
the price drops. When you’re convinced of the value of something, you will be able to sit

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tight during bad times. If you want to understand a project, you have to do your
research well.
In our lesson on fundamental analysis, we’ve laid out precisely how you can analyze a
cryptocurrency project to find out whether it offers any long-term value. By researching
interesting projects diligently, you’ll get a better understanding of them. Focus on
projects that happen to specialize in solutions for the market you work in, for example.
You’ll have an idea of how high the demand is or how much competition there is from
other projects.

Most of all, make sure you can explain to yourself why you invested in something.

4. Choose The Right Exchange

Exchanges come in all shapes and sizes but not every exchange is right for you. If
you’re just starting, choosing an exchange that’s famous for its 100x leverage and in-
depth trading data might not be what you’re looking for. Instead, look for an exchange
that is famous for its user-friendliness, clear dashboard, and top-notch customer
service. Some exchanges offer features especially aimed at beginners. Informational
resources that help them navigate the platform are an example. 

Some of the exchanges we’ve mentioned in our lesson on centralized exchanges offer
this and more handy features. One of those features is the possibility of earning crypto
by learning about the cryptocurrencies on their platform. Also, the insurance offered by
some large, regulated exchanges might give you the peace of mind you’re looking for. 

Top 10 Centralized Crypto Exchanges (source coinmarketcap.com)

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5. Consider Using A Wallet
Although exchanges have come a long way, the safest way to store your crypto is still
by using a wallet. For smaller amounts of money, using a quality desktop wallet or
even keeping it on a reputable, secure exchange isn’t a big problem. As your investment
grows into a large sum of money, however, a cold wallet becomes a necessity. As cold
wallets aren’t connected to the internet, they are generally considered to be the most
secure type of wallet.
Becoming your own bank and taking full responsibility for your money takes some
getting used to. Luckily, wallet companies like Ledger offer their customers guides,
shows, podcasts, and sometimes even an academy on how to use the device.  Since
there are many different types of wallets available to crypto holders nowadays, it can be
difficult to choose the right one for you.
That’s why we’ve explained the pros and cons of each in our lesson on keeping crypto
safe. 

6. Check The Address Again

Whether you´re sending crypto from an exchange to a wallet or the other way around,
make sure you double-check if you´re sending it to the right address. Keep in mind
that cryptocurrency transfers cannot be stopped and you won't get a refund after
accidentally sending money to the wrong address.
One way to approach this is by checking the first three letters and numbers of an
address and the last three and seeing if they match with the recipient’s address. If you
want to be really sure, however, just check the whole address two or three times. Still
hesitant?
Try sending a small amount of money first and see if it arrives. If it arrives without
any problems, you’ll feel more comfortable sending larger amounts. Another point of
attention here is the name of a coin. Make sure you’re sending USDC to a USDC address
and not a USDT one, for example. Sending Litecoin to a Ripple address will result in lost
coins.
Always double-check the name of a coin or token before clicking send. Luckily,
many exchanges and wallets have features in place to help you mitigate this risk by
checking the validity of an address.

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 Example of crypto address on Binance (source: binance.com)

7. Take All Security Measures

Unfortunately, investors often make it all too easy for hackers. Especially when it comes
to digital assets, taking all possible security measures is crucial for protecting your
wealth.
Here are a few tips to help you keep your crypto safe:

 Avoid using public wifi when logging into exchanges or wallets

 Make sure your connection is secure and private
 Use a quality antivirus program
 Only download secure and verified apps
 Download desktop wallets directly from the wallet’s website
 Buy hardware wallets directly from the company’s website
 Always activate two-factor authentication
 Use a strong and unique password
 Always keep seed phrases, private keys, and passwords to yourself
 Write your seed phrase down and keep it in a safe place off your computer
 Always use the most up-to-date software on your devices

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8. Beware Of Scams
In our lesson on how to avoid scams, we’ll discuss in-depth what types of scams there
are and how to avoid them. For now, it’s important to be aware of them. A rule of
thumb is that if something looks too good to be true, then it probably is.
If anyone promises you the world, be wary of their intentions. Always do your due
diligence and use reputable, trustworthy exchanges and wallets. Always check the URL
of the exchange or web wallet you’re using to be sure you’re not about to log in to a
fake website.
Don’t click on any suspicious links or download any suspicious attachments;
phishing attacks through e-mail and social media are common. Pay attention to
computer security; a high-quality antivirus software program will help you fight off
malware. 

Common mistakes to avoid

The advice above will go a long way in helping you invest safely in crypto but there are a
few more commonplace mistakes we want to warn you about:

o Buying Coins Because They’re “Cheap”

Many (new) traders and investors jump into coins with a low price tag. When hordes of
new investors joined the cryptocurrency space in 2017, people bought coins that were
only a few dollars or a few cents en masse. Unsurprisingly, many of these same people
have left the market after experiencing large losses.

If a coin has a low price, it doesn’t automatically mean that it’s a bargain. There’s
usually a reason why these coins or tokens have such a low price. Coins can often
appear cheap because of their large circulating supply. Don’t be fooled by the
impression that a coin is “cheap” just because it’s only worth a few cents.

Look at a coin’s price in relation to the market capitalization to get a better

understanding of its valuation.

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 Shiba Inu price: looks cheap but it is actually ranked #15 by market capitalization (source
coinmarketcap.com)
 

o Going All-In On One Coin Or Token

Betting the whole farm on one promising coin or token is tempting for many. The 100x
or even 1000x returns are what attracted most crypto investors to this young market.
However, many crypto projects are likely to fail and the chance that you chose the one
that will moon is, unfortunately, quite small. Therefore, it’s paramount to spread out
the risk by diversifying your portfolio.  Diversification is a great way to mitigate the
risk; if one part of your portfolio is doing badly, another part might be doing well. If
you’re risk-averse but still want a chance at exceptional returns, allocate the majority of
your portfolio to more conservative, stable assets and a smaller part to promising small-
caps. 

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 o Storing Everything In One Wallet

There are many trustworthy, secure wallets available but any wallet or exchange can run
into problems; either external or internal. If you happen to have all your crypto stored
on that one particular wallet or exchange, you might lose your funds. That’s why it is,
especially with large sums of money, recommended to maintain several wallets.

Conclusion

Investing in the cryptocurrency market undeniably comes with a certain degree of risk.
However, these risks can be minimized by following the tips and avoiding the
mistakes we have gone over in this lesson. For some more must-know investing tips,
head on to the next lesson. 

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 8.f. Must-know Investing Tips

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In this class, you’ll learn the following:

 Why doing your own research is important

 Why diversification is important
 Why overtrading can be counterproductive
 Why it’s important to set investment goals
 Why having a long-term mindset is important 

The cryptocurrency market is full of opportunities and promising projects. Investing in

this market, however, doesn’t come without risk. These risks are usually higher when
greed gets the most of us. Luckily, there are ways to keep emotions out of investing,
helping you make rational decisions. To help you get off to a good start, we have
outlined a few of the most important investing tips:  

1. Diversify
The crypto market is incredibly volatile and the future of many projects is still highly
uncertain. Keeping all your crypto eggs in one basket can be a painful mistake and it is
therefore highly recommended to diversify among a variety of projects. We already
discussed the components of a possible crypto portfolio, but the most important is not
to rely on a single project. 
If the one project you bet all your money on fails, you’re out of luck. If your whole
portfolio is made up of micro-cap coins, it will suffer extra hard during a market
downturn. By only allocating money to large-cap coins, however, you will certainly miss
out on any explosive gains in the micro-cap segment.  For these reasons, it’s common
for investors to own a combination of conservative (Bitcoin, ETH, etc) and risky
(micro-cap, small-cap) projects in their portfolio.

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Of course, how much risk you take depends on your risk appetite and time horizon.
Portfolios of 100% Bitcoin are not uncommon, however, as the largest cryptocurrency is
widely regarded as a store of value and safe haven.

2. Set Goals
The cryptocurrency market is still a very volatile place and price swings of 20% or more
in a single day are not uncommon. With the strategies we’ve mentioned before, the
volatility won’t intimidate you as much. However, especially if you’re invested in
(small) altcoins, it’s recommended to have price targets in mind. Small-cap and
micro-cap coins often rise sharply in a short period, followed by an even bigger drop.

This is often the result of a short-lived hype, think of Shiba Inu for example. There are
moments when certain projects are in the limelight, sometimes leading to exceptional
returns. When the attention disappears, however, green candles often make room for
red ones. Before you buy any speculative coin, set a sell target and stick to it. We
know this isn’t easy, as greed usually gets the best of us when everything is running up.

Also, figure out under what conditions you would sell a coin; it can sometimes be
necessary. It’s better to cut losses early than hold on to a bad investment that just
continues to lose you money. Some examples of when you might consider selling your
position are:

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  When the price drops below a certain level
 When the project fails to deliver on their promises
 When you want to take profits on a (short-term) position

Of course, you don’t have to necessarily sell all of your position; one option is to leave
a so-called “moon bag”. This means you don’t sell 100% of your position but rather
leave a little sum if you think the project still has potential. If the project’s potential is
realized, the small “bag” you left can still go to the moon.  

3. Don’t Overtrade

A lack of strategy often leads to “overtrading”, meaning that investors or traders try
to increase their chances of profit by trading a lot. This process is also called “churning”
and usually leads to unfavorable results; the market is not a casino after all. Another
thing to keep in mind is that with each trade you burn money on transaction fees and in
certain countries also taxes.

A simple solution to this problem is to develop a strategy and follow it diligently.

What that plan will look like will depend on aspects we’ve discussed at the beginning of
this lesson. The idea behind an investment strategy is that it helps you control your
emotions and make decisions based on analysis and reason.

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4. Have A Long-Term Mindset

After you have done some solid fundamental analysis and invested in a project, it might
still take a long time for things to play out how you’ve envisioned them. To quote
the legendary investor Benjamin Graham: “in the short run, a market is a voting machine,
but in the long run it is a weighing machine.’’ In the short run, anything can happen and
the price might experience wild swings.

Let’s say your analysis is right, however, and you did find a fundamentally great project
that’s massively undervalued. In this case, you can compare the asset’s price to a ball
that someone is holding underwater: it will go up eventually. The question is “when”
rather than “if” but as an investor, you need to be patient enough to sit out the ride
that takes an asset to its intrinsic value.

5. Do Your Own Research

A friend might have told you about a new, great project that will surely make you rich if
you get in now. Investing in cryptocurrency, or any other financial instrument for that
matter, because a friend or family member told you about it, is a recipe for disaster. The
same goes for following the crowd; usually, it doesn't end well. Certain coins and tokens
have their brief moment of hype when everybody is talking about them and everyone
seems to be getting in. We understand that the urge to follow suit is hard to resist, but
many of these hyped-up cryptocurrencies become a bubble just waiting to burst.

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Instead, make sure to do your due diligence for buying any asset. Look up as much
information as you can about a project and ask yourself the following questions:

 Is the project legit? (who is behind it, are there any big partnerships, how is
it financed)
 Is the promotion aggressive and sensational? (high chance it’s a pump-and-
dump scheme)
 Does the coin or token offer any utility? (what are the goals and ambitions?)

We have discussed researching a project more in-depth in our lesson on fundamental

analysis, but these questions will go a long way when looking at a potential investment. 
 

Conclusion

Over the short term, the crypto market can show wild swings up and down. Over the
long term, however, the market has delivered great returns for investors willing to sit out
the volatility. In this lesson, we’ve shown you why great research, diversification,
calculated trades, setting goals, and having a long-term mindset are all important to
investment success.

Throughout this course, we will teach you in detail how to use these factors to your
benefit.

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