Not Your Keys, Not Your Coins!

Welcome to your in-depth primer about the crypto craze.

A "heads up" before you start FoolProof's crypto module:

Even the smartest young person is prone to disaster when they jump into the crypto maze.

We're talking major financial loss due to risky investments, scams and hacks.

Add in some Altcoin vs. Token vs. Stablecoin? Blockchain, Decentralized Finance (DeFi), Mining, or Smart Contracts? How about Non-Fungible Tokens (NFT) and digital collectives?

We'll give you a 30,000 foot view here, but to really get in the know on crypto, you probably need to work through our full 45-minute module.

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A currency, according to Investopedia, is "a medium of exchange for goods and services" or "a system of money".

Cryptocurrencies are digital currencies that are mainly traded online between people in a "peer-to-peer" economic system. Cryptos can sometimes also be used to pay for things online.

And there's a variety of cryptos...

Coin vs altcoin

Thousands of cryptos exist, and different versions come and go continuously. You have Bitcoin, of course, but any crypto that is not Bitcoin, is considered an "altcoin", an alternative to Bitcoin. Just to name a few well-known ones: you have Ethereum, Binance Coin, Tether, Dogecoin and Polkadot.

Every crypto has a certain value, that can easily range from $0.0005 to $5k for a coin specifically. And the value of a crypto changes constantly and rapidly (for most cryptos).


Tokens are generally cryptos that are "under development," and potential investors (who are willing to take a greater risk for potentially greater gain) may use an established crypto they own (like Ethereum or Bitcoin) to invest in a token, a new to-be-developed crypto. This is called an "Initial Coin Offering", or ICO for short.

After enough seed money is collected, a token usually develops their own blockchain platform. After the blockchain platform is created, the token becomes a coin. Investors getting in this game hope to gain on their investment after the new token/coin becomes popular.

Anyway, ICO's receive many warnings from experts and market regulators, as there are many investment risks associated.


A few different cryptos have set values. For instance, Tether is pegged to the US Dollar, and values fluctuate very closely around the $1 mark. These cryptos are called stablecoins, and their purpose is to provide stability on the cryptocurrency market.

Stablecoins potentially could be used as a good digital currency, a real usable tender (form of payment), in our American economy. Most stablecoins are under strict supervision by the NY State Department of Financial Services, where $1,000 in their safe is actually 1,000 tokens released for sale. That said, it is more likely that governments will develop their own (stable)coin, like Europe developing a digital version of the EURO, or the recent talks about the US doing the same.


They can easily gain or lose a couple hundred dollars in value, literally in a few short hours.

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But before you get into crypto, what do you know about investing, period?

Do your research and homework, starting with this article on learning how to invest.

That said, a couple of key investing rules you should stick to, always:


Develop an "Investing Budget & Strategy."

A good rule to follow: Don't ever invest more than you're willing and can afford to lose!


Turn off your emotions before you dive in.


Take stock warnings seriously.

If this is too vague, refer to this MarketWatch article for extra info.


Learn proper investing skills, starting with a few mock programs.


Be wary of (f)influencers.

They have a different agenda, and generally are out to make money. Do your own research into any potential investment, always.


Simply put—blockchain is software that is a lot like a ledger. Think of blockchain as a book or spreadsheet where transactions are recorded.

People make their own computers—called nodes—accessible for these transactions.

Every time a transaction is recorded by a miner, that person wants to be compensated and will charge a small fee, a miner fee (or "gas" for Ethereum). These fees can range and vary quite a bit, so research different cost and fees properly before diving in.


Bitcoin, the first crypto, was created out of unhappiness with the banking system right at the start of the financial crisis and bank bailouts of 2008.

The creators wanted to find a way to send money over the internet by providing an alternative payment system that would operate free of central control, but otherwise be used just like traditional currencies.

This is the fundamental idea behind DeFi, decentralized finance: an independent financial system that theoretically does not rely on intermediaries such as government agencies or central banks, other banks, brokers, or exchanges to transfer money and services from one party to another.

The result? Transfer fees are eliminated.

Statue of Satoshi Nakamoto,
supposedly the creator of Bitcoin.

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Major downsides to crypto?


At FoolProof, we're not the only ones who think that...

Check out the *warning message* Investopedia has on EVERY crypto-related article on their website:

"Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs.

​ Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein."

What does that tell you...?



Check out these examples:

Pump & dump schemes...

Crypto "rug pull" scams...

Celebrities and crypto...



If you start searching the web for crypto, you'll get thousands of hits on sites and services trying to get you to open an account and/or download their app or wallet.

So, how do you know what information is reliable and who can you trust? It's hard to see the forest for the trees.

Before you can start collecting your cryptos, you'll need a platform to buy your cryptos, and a wallet to store them in. Finding the right solutions for this is a form of rocket science in itself!

Here are 3 places where cryptos can be bought, sold, and/or traded.

Crypto brokers

Crypto brokers are companies that offer a marketplace where you can buy and sell cryptocurrencies, but you can't trade them. Therefore, the cryptos you buy will be deposited directly into your personal crypto wallet. Brokers also enable you to buy or sell just a partial piece of a crypto coin.

A broker is kind of a middle man between the investor and the crypto market. Thus, the focus of brokers is to make it easy to buy and sell cryptos.

Good to know: In the U.S., brokers who convert crypto to fiat currency, such as U.S. dollars, must also be licensed to operate.

Two caveats around brokers:

1. Brokers set their price around cryptos, and that price doesn't necessarily follow the live market value of a coin or token.

2. Brokers can drop unpopular coins from their platform (you'd know if you read the fine print before signing up for their service). If you happen to have some money invested in a dropped coin, you probably lose your invested money.

Crypto exchanges

Crypto exchanges are different from brokers. There are different kinds of exchanges but generally they are online platforms that enable users to buy, sell, trade, and store different types of cryptos. These transactions happen peer-to-peer, which means they go directly from customer to customer not through an intermediary such as a broker.

Buying crypto in peer-to-peer (P2P) sales

Crypto brokers and exchanges match crypto buyers and sellers anonymously. There are some P2P exchange services that provide a more direct connection between users. After creating an account, users can post requests to buy or sell crypto, including information about payment methods and prices. Users then browse through listings of buy and sell offers, choosing the trading partners with whom they wish to transact.

You'll realize P2P sale may be a good idea after we compare centralized vs. decentralized exchanges next... ;)

Exchanges can be centralized, or decentralized.

What's the difference, and why should you care?


These exchanges are private platforms, where people trade their cryptos to one another (peer-to-peer). They are pretty safe exchanges because they require "Know Your Customer" (KYC) registration and identification, and you can better keep track of your crypto and transactions. They're the easier and safer way for beginners to start investing in crypto.


These exchanges require no registration or identification, and any person or organization can trade their crypto here and use it in any way they want. This may make it cheaper to trade but also less safe (and legal). Flashing stop sign! Always remember decentralized exchanges are riskier than centralized exchanges.

Risky, like so...

When you're ready to dive in, which service or wallet do you choose?

You've got a variety of wallets. And they can be hot or cold, custodial, or non-custodial, etcetera. Let's check 'em out...

Online wallets

You access an online wallet via a web-based portal. These portals let you connect without having to install software on your device. Most online cryptocurrency wallets are integrated into an exchange or brokerage platform.

The advantage of online wallets is that they are pretty multi-purpose: You can sell, buy and trade multiple cryptos, and at the same time store them on the platform. This makes crypto exchanges and integrated online wallets easy for beginners.

Online wallets are considered "hot wallets": They're always connected to the internet. Hot wallets are generally an easier and quicker way to spend and trade your cryptos, but they are more likely to be hacked, too.

Desktop and mobile wallets

For a desktop wallet, you'll need to download a software program. For a mobile wallet, you download an app. You then have to login to your wallet using a password along with multi-factor authentication (if you're smart).

Desktop and mobile wallets are generally hot wallets (connected), but many offer "cold storage" options, away from the internet. The advantage of cold storage wallets, is that they are not connected to the internet, making them safe from hackers. There may be additional charges for cold storage options (more on this in cost and fees later).

Hardware wallets

A hardware wallet is much like a USB stick/flash drive or external hard drive. You access this wallet with a pin code. Hardware wallets are considered "cold wallets" also.

Paper wallets

Together with the hardware wallet, a paper wallet is considered very safe as they are disconnected from the internet and therefore cannot be hacked.

First you create an "address" for your wallet online. For Bitcoin, is used. The website automatically creates the address for you. For other crypto you'll have to do a web-search for the right address creator (whatever you do, make sure it is a reliable source!).

Next, go offline (this bit is important for safety), and print off the address and private keys to store in a safe or other secure hiding spot. You then buy your crypto on a web-based exchange, and send them to your generated address. For access to your cryptos, you'll need to access a desktop program or mobile app.


Remember that crypto transactions are made through the blockchain network using complex algorithms and calculations. Your cryptos are part of this "logbook," and in order to have access to your cryptos and these exchanges, you need crypto keys.

Consider these keys an impossible-to-guess password. These private keys—typically a sequential (following the same order) string of 12, 18 or 24 words that are displayed after you set up your crypto wallet—Crypto keys are known only by the owner (you), as they grant access to crypto (your money!). Keys prove that the cryptos are yours. Hence the name of this module, "not your keys, not your coins!"

The difference is found in non-custodial vs custodial wallets.

Comparing custodial vs non-custodial wallets gets a little tricky.

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There are very little guarantees in the crypto world, unfortunately. We can't make that more positive.

What we CAN do, is arm you with the knowledge to make wise crypto and financial decisions.

Like, is your crypto wallet insured?

Other Wallet Compatibility Options You Should Consider:

# of cryptos

These exchanges are private platforms, where people trade their cryptos to one another (peer-to-peer). They are pretty safe exchanges because they require "Know Your Customer" (KYC) registration and identification, and you can better keep track of your crypto and transactions. They're the easier and safer way for beginners to start investing in crypto.

Speed and volume

Exchange services and wallets have different storage sizes. If you plan on trading a lot, make sure you get the service or wallet that supports your needs. Also take in account that trading volume can be lower between exchanges and that some may have lower transaction speeds than others.


Recently, there has been a lot of talk about using crypto coins in 3D environments where you, as a user, can frolic around with an avatar and play games or engage in other activities. This is called "the metaverse," and it may require a specific wallet. Big tip: "Playing around" in the metaverse with a nifty wallet may sound like fun and games, but remember nothing in the crypto universe is a game.

User-friendliness & support

Cryptos can be hard to fully comprehend. When starting out, it's important to choose a wallet and/or exchange that you can grasp.

Having a wallet that is decentralized and that has 500+ coin options may make it really hard for you to understand what is happening to you—and make it highly likely that you will make a trading error that will cost you big time.

If you make a mistake, or even have a question or two, not having support options or only having email support isn't good. Makes sense?

And then there are Non-fungible tokens (NFT's) and digital collectables:

Even though collecting baseball cards is of all times and ages, digital collectables are becoming more and more popular.

NFT's are non-tradable tokens that represent a specific tangible object, such as art or those baseball cards, but are specific digital objects such as the first tweet, a meme or digital artwork or even a domain name.

Do you want your wallet to be able to hold NFTs and digital collectables? If you wish to own the first tweet, for example, your wallet needs to be NFT compatible.

Some services may charge extra for this, just so you know. And Coinbase has a marketplace specifically for NFTs.

Big warning with NFTs!

A ton of NFTs offered on the internet are fake—as much as 90%, according to 2022 Vice research! And if that is not bad enough, if you do get your hands on a valid NFT, most are based on hype and sellers are just trying to make an easy dime. Be really thorough in your research before purchasing any NFT.

What cryptos could a crypto newbie begin with?

We're nearing the end of this module!

But there are still a ton of crypto matters that we didn't discuss...

Like comparing crypto values through the market cap, crypto ATM's, Crypto IRA's, Smart Contracts and a galore of other scams and hacks happening around cryptos.

If you want to dive in even deeper, head to FoolProof's full module on cryptos. Apply for a free account and get started here.

That said, we'll leave you with two fun topics...

Crypto's and taxes:

Believe it or not, when you get into cryptos, the chance is likely that you have to report about certain transactions and any profits or loss on your tax return!

Rules around this are changing, but here's what you currently need to know:

Recent developments around crypto and blockchain:

While most cryptos still work with the whole blockchain network, there are a few that are changing the process.

Ethereum merged their blockchain to use a "proof-of-stake" mechanism, confirming transaction through randomly selected validators rather than blocks, eliminating energy-intensive mining.

Other cryptos, like Stellar's Lumen (XLM) altcoin, use a consensus mechanism called a "Federated Byzantine Agreement", which allows transactions to be processed instantly. The "nodes" (the computers forming an endpoint in the block chain) work independently.

This last development makes it possible to send money "on top" of a crypto currencies blockchain, so participants can send, receive or transact payments instantly.

CashApp is integrating the functionality of this new trading process—and others are talking about ways to make crypto trading much faster and cheaper—though they still charge when you buy or sell now.

To wrap things up:

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You Made It to the End... What's Next?

When you are done with this section, choose another module topic below to learn more.

Be a Healthy Skeptic


Money & You


Basic Budgeting


Advanced Budgeting


All About Credit


Debt Management






Impulse Buying


Value of Education