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How not to Get “Rekt” in Crypto

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Crypto can be full of confusing jargon. Much of the terminology can leave you puzzled, especially if you are new to the space. Getting “Rekt” means losing all your assets in crypto. From the beginning of the year, many have lost their hard-earned funds in DeFi. If you are a newbie, it is not a great idea to rush into protocols when the price is going up due to fear of missing out (FOMO). In fact, savvy investors do the opposite.

Avoid scams


There have been many scams around LUNA recently. You may have received tokens like L UNC or LUNA and other variations to your Ethereum wallet. These are scams. You need to be very careful not to fall for such scams. The only way to get the new LUNA coin is to get it sent to your wallet. You don’t need to do anything or approve anything.

Unstable prices


Also, major NFT projects have all fallen in price in the last weeks. We have also had many days of super low volume on Open Sea. The silver lining here is that Solano NFT volume is actually beating Ethereum now on some days. NFTs remain far out on the spectrum of risk in crypto. With so much macro fear, it is unsurprising that people don’t want to spend half a million on a monkey picture. That being said, NFTs are not going anywhere, although we may see further capitulation on NFT collections. Most experts predict the floor price of blue chip NFTs dropping significantly. Imagine picking up a Crypto Punk for 30ETH.

In sharing about due diligence in DeFi protocols:

  1. Understand the source of the yield
  2. Stick to trusted DeFi protocols
  3. Have an idea of basic Wikinomics
  4. Do not give out your seed phrase
  5. Use leverage sparingly, if at all

Understand the source of the yield


When you take part in DeFi protocols, it is important to know where the yield is from. Some yields are incentivized for a short time. These inflationary yields are not sustainable. Be sure to do your research, especially if the returns look too good to be true. Having done this, you also need to put in money you can afford to lose. To benefit, you need to have a long-term mindset because crypto is very volatile.

Stick to trusted Defi Protocols


Be sure to work only with established and audited protocols that have reputable teams. This reduces the risk of bugs or hacks. There are tools such as DeFi Llama which help to curate a list of top protocols.

Crypto

Understand basic Wikinomics


Wikinomics is got from the two words token and economics. It encompasses the elements that make a cryptocurrency valuable and attractive to investors. It considers things like how limited is the supply, how the tokens are issued and distributed, and so on.

When making an investment decision on a DeFi project or crypto, Wikinomics is an important concept to consider as a project with smart, well-designed incentives has the potential to do well and succeed in the long run than a project whose incentives are not well-designed. Over time, well-designed platforms get high demand as new investors flock to the project. This increases the price. On the other hand, founders and developers need to carefully design the Wikinomics of their projects to attract investment and stay successful in the long run.

Do not give out your seed phrase
One term you may have seen is “seed phrase.” A seed phrase is a group of words generated randomly by your wallet for security purposes. With a seed phrase, you can regain access to your wallet in case you lose your phone or device. With this phrase, you can set up a new wallet on another device and gain access to your crypto. Do not give out your seed phrase to anyone.

Use leverage sparingly, if at all
Leverage leads to possible liquidation and requires oversight. If you need to use leverage, be careful and conservative. If possible, use stablecoins as collateral because they are relatively stable.

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