This section will introduce you to all important terms in the crypto sector and help you to navigate the space.

• Blockchain – The basic model in crypto, consisting of a chain made out of blocks filled with transactions.

• Wallet – A wallet for you to hold coins and tokens, where you have the full control.

• Seed Phrase – A phrase of 12 or 24 words, which are used to create and recover (if lost) your wallet. NEVER share this phrase because it gives everyone full control over your funds if they have it. One seed phrase can generate many private keys.

• Private Key – A key only known to you (don’t share to anyone), which is needed to prove ownership of coins and will be used to sign your transactions.

• Public Key – The key which acts as your receiver address, public to everyone, and can be shared freely.

• Hardware Wallet – A physical device used to store your seed phrase and private keys which are needed to access your coins. A lesser known fact is, that the device stores only these two (key and phrase) and not your coins, the coins stay on the blockchain but the means to access and use them will be stored on the device. Hardware wallets guarantee that your seed phrase and private key will never leave that device and are safe against hackers.

• Hot Wallet – A web wallet which does not require any hardware and can be installed right into your browser. It stores seed phrase and private keys in your browser and is not as safe as a hardware wallet.

• Coin – The native currency of a blockchain, which is used for transaction fees.

• Token – A token is a currency of an application residing on a blockchain.

• Gas – Also known as the transaction fee on a blockchain paid in the native currency of the blockchain. Many blockchains have a dynamic fee which adjusts to current network load, the higher the load, the more expansive the fee.

• Consensus – The algorithm that is used to reach a consensus on the blockchain. This is necessary because of the decentralized nature and to avoid malicious actors to get control over the blockchain.

• Proof of Work – The consensus used in Bitcoin, people will be rewarded by computing a difficult problem and creating blocks. The user who solves it first receives the reward and writes his Block onto the blockchain. The computational task will be repeated each block, which would be every 10 minutes in the case of Bitcoin.

• Mempool – A pool on the Bitcoin blockchain which consists of transactions that are not confirmed, basically a waitlist for transactions.

• Miner – A user or group of users who provide computational power to solve a problem on the blockchain to receive a reward.

• Halving – The BTC halving event occurs every 4 years and cuts the miner BTC rewards in half, effectively halving the BTC inflation and lowering supply.

• TPS – Short for transactions per second, which is used as a measurement for the throughput of a blockchain

• Whale – A person with a very big amount of money.

• Tokenomics – These describe the supply and circulation of coins.

There are a lot of different exchanges in the crypto sector and a lot of uncertainty about coin safety, especially after the FTX bankruptcy in 2022. Most smaller exchanges have usually a higher risk of bankruptcy or even cyberattacks which leads to a loss of funds if the exchange can’t recover. The exchanges I trust the most are:

• Kraken – One of the oldest exchanges out there, reliable with (mostly) good fees.

• Coinbase – One of the biggest exchanges out there, if the Coinbase app is number 1 in the App store in downloads, the bull run peak is near.

• KuCoin – Not on the same level as Kraken and Coinbase in terms of volume, but good to buy while offering additional services.

I don’t especially trust Binance, but they are ok too. There is always hate and misinformation about them but looking at their size, it is generally safe to assume that they won’t fail looking at their long history in crypto.

My advice is that you only use exchanges to buy crypto and move them away from the exchange into hardware wallets if you plan to hold them for a longer time. In the case of short term trading, the fees to send coins from and to exchanges would be too high over time, and it would be advised to store only the amount needed for trading on the exchange.

Hardware Wallets are physical devices which store your private keys, which are needed to sign a transaction and delivering proof that you truly own these cryptos. Private keys or seed phrases will never leave your hardware wallet, making them the safest solution out there while still comfortable to use. Only buy them in the official store to avoid any tampering.

The Ledger hardware wallet is the dominant player out there with many smaller competitors, led by Trezor.

Ledger supports the biggest amount of tokens to store which makes it ideal for most people. Recent updates in May 2023 of Ledger led to a lot of misinformation saying that they would not be safe anymore because they plan to introduce the ”Ledger recovery” feature. This would generate a recovery key (not your seed phrase or private key), encrypt it and send it to 3 storage companies. It is an optional service and requires KYC (Know Your Customer) verification. If you don’t use the service, there is nothing to worry about.

Because of the high volatility in the crypto market, emotions can be influenced easily. Some big whales know this and play the market in that way to make profit, this is obviously market manipulation, but possible because of missing regulations. It is important to learn to control your emotions or at least to be able to take a step back. A long term vision will help with that, by knowing the cycles of BTC and the overall crypto market it is easier to endure the volatility. FOMO (Fear of Missing Out) is your worst enemy in crypto and will be increased by looking at social media (Twitter, YouTube, etc.) seeing people push a coin. Most of the time, it is some kind of insider trading or a group trying to push a coin to sell on retail traders.

Here are 3 rules how I solved my FOMO:

• Wait 3 days – If you feel FOMO, wait for 3 days and look if you still want to buy.

• Never buy a green day – If a hard pump occurred, don’t buy into it. Yes you might miss something but if it drops you will be mad at yourself.

• Buy on discount – If you want to buy, wait for drops or set specific buy zones and buy only in those zones. What goes up will come down again.

If your emotions are too strong for that, I like to DCA. Yes, it won’t be the bottom or the best price, but buying constantly at a set day or week you will be able to accumulate a good bag which averages out your bad buys with the good buys. You can improve this with proper chart analysis by only doing DCA after a bigger drop, but don’t make the mistake and hope for a bigger drop and to miss out completely. Doing DCA during the accumulation phase in the bear market is one of the safest ways to make a good profit in crypto. It takes time and is boring and that’s why only few do it constantly. And most will get distracted by memecoin pumps or other shiny things just to buy in later into these previous boring coins at higher prices.

The BTC cycle is tied to the halving of block rewards and occurs roughly every 4 years. It is believed that these events create a lag effect of supply shortage and lead to a bull run and price increase of the crypto market. Because BTC is by far the biggest asset in this space, all altcoins and other currencies are tied to the moves of BTC. A BTC bull run lasts usually 3 years (according to past history), followed by a big crash between 70 and 90%. The first bull run year after the crash year is mostly sideways and shows the recovery of the market, also known as the accumulation phase. The next 2 years will be mostly upwards with small corrections and new all-time highs in comparison to past cycles. Generally speaking, there are three groups of people. Firstly, the ones who believe that BTC will continue this pattern forever and grow in price indefinitely. Then those who say BTC will keep doing that until it reaches a stable adoption and the market cap will be of sufficient size that there won’t be as much volatility as now. And lastly, those who say BTC will die because of its technical limitations.

I tend to position myself in the second group of people, there will obviously a limit of price someday if sufficient adoption is reached, but looking at the technology, we won’t see BTC vanishing anytime soon. There are already BTC scaling solutions offering technology to help with scaling and other projects working on easier accessibility for normal people.

Stablecoins are a way to bind cryptocurrencies to fiat currencies. If we take a USD stablecoin for example, its value will always be close to $1 as long as the users of it trust its value. There are different kinds of stablecoins and how they are backed.

• Fiat backed Stablecoin – Backed by its respective fiat currency, generally in a reserve held by the issuer which would be the company which created the coin.

• Collateralized Stablecoin – Backed by on-chain assets like cryptocurrencies.

• Algorithmic Stablecoin – Backed by no specific asset, smart contracts or other non-specified assets to ensure the value.

These are the most used Stablecoins:

• USDC – Issued by Circle a company linked to Blackrock, experienced a short depeg during the Silicon Valley Bank bankruptcy but recovered quickly. The most, let’s say, trusted stablecoin out there. They provided proof of reserve to show that you could redeem every USDC without breaking the stablecoin.

• USDT – Has links to Justin Sun which is not the most trusted individual in crypto. No proof of reserve, only trust that the fiat peg is given. By far the most used stablecoin because of first mover advantage.

• BUSD – Binance Stablecoin, had recently some problems with US regulations, would not hold it for long.

• DAI – Issued by MAKER DAO, a cryptocurrency project with token ’Maker’. It’s an algorithmic stablecoin; I can’t recommend holding it because it is pegged by smart contracts and collateralized debt.

Terms in tokenomics

• Vesting – This is a term which describes a locking period of coins. It will be done if new projects start or have a funding round to avoid that early investors sell everything right away and crash the coin price.

• Burning – Burning tokens/coins means that these will be sent to a dedicated burn wallet without anyone holding the keys, so they are effectively lost.

• Circulating Supply – The amount of tokens on the market without burned coins or vested coins in public hands.

• Total Supply – The max supply without tokens/coins taken out of circulation by burning.

• Max Supply – The maximum amount of tokens/coins to be ever available.

• Market Cap – Circulation supply multiplied by price per coin.

• Fully diluted market cap – Total supply multiplied by price per coin.

• Trading volume – The amount of volume/money traded in the past 24 hours.

Supply and demand

The correct understanding of actual supply of a coin is not well known in the crypto space; most people just look at the market cap and assume that this would equal the amount of money available in this coin, which is false! As widely known, price is determined by supply and demand and this is the case in crypto too. But the circulating supply is not the actual supply! It’s a bit more complicated because of some specific Blockchain related things like staking and coin locking. To simplify it for now (It will be explained later in detail), tokens can be locked on chain which freezes them for a set amount and taking them out of the supply. But this won’t be tracked in the circulating supply.

As an example we do have a coin that has locked 50% of its supply, this amount is not available on the market and this basically reduces the available supply by half. If it has a market cap of $1 Million and the price doubles the official market cap would be $2 Million, which is misleading. Therefore I use something I call ’Liquid market cap’ (No official term), describing the amount of money actually available. If only 50% are available, then the liquid market cap would equal $500.000 and if the price doubles the liquid market cap would equal $ 1 Million.

This means, the more coins are locked, the lower the amount of money needed to double the price because the possible sell power and the liquid supply is smaller. But this could also act the other way around, if too much coins get unlocked and sold, this will drain liquidity out of the market causing a quick drop.

Good tokenomics are an essential part of a good project for the long term; the effects of good tokenomics are not visible in the short term. In case of tokenomics ’short term’ refers to one full cycle or less. To see the effects of good tokenomics there would be the need for large scale adoption and more demand for a coin in the ecosystem. If the demand keeps rising and the tokenomics are good and favorable the possibility of a supply shocks is greater. A supply shock is an event every coin wants, where the supply on exchanges gets dangerously low that the price skyrockets due to rising demand. But in the short term, we won’t see such event and it was visible in the 2021 bull run, that tokenomics have no big impact on price (YET). Currently the size in market cap of a project is more important to measure room to grow.

Understanding advanced terms

• DEX – Decentralized Exchange, has no centralized authority and every action will be done on chain, costing the specific network fee. There is no KYC or verification to be done.

• CEX – Centralized Exchange, you only need to register and sometimes verify yourself.

• Bridge – A gateway to transfer coins from one blockchain network to another blockchain network costing a gas fee. For example bridging ETH from the Ethereum network to wrapped ETH on the polygon network.

• Layer 1 – The base layer of crypto, normal blockchain like Ethereum or Bitcoin.

• Layer 2 – A scaling solution, to increase the throughput of transactions on the layer 1 chains. To use a layer 2 it is necessary to bridge coins to the layer 2.

• Smart Contract – Similar to a logical computation task in programming but immutable on the blockchain. It needs to be deployed once and other users can interact with a smart contract invoking its logic.

• Block explorer – A block explorer shows the content of a blockchain, it can show every wallet and every transaction on chain to everyone. Useful to monitor whale movements.

• DAG – A Directed Acyclic Graph is a new generation of distributed Ledger (Another term for Blockchain), it’s not a chain of blocks but connects singular transactions in a graph. By not needing to include transactions in a block, the amount of transactions per seconds can be increased dramatically. There are already different kinds of DAGs in use.

• Oracle – Provides data to a blockchain or smart contract because current blockchains are closed networks without access to real world data.

Altcoin sectors

These are the most important sectors of altcoins giving a good overview of the crypto landscape.

• Layer 1 – The infrastructure layer of blockchains providing infrastructure to build upon for other projects.

• Layer 2 – Rollups and scaling solutions for Layer 1 Networks who bring new technology to Layer 1’s without the need to upgrade the Layer 1 itself.

• RWA & Tokenization – Bringing real world assets like bonds, real estate or other physical items on the blockchain. This could transform prior illiquid assets into highly liquid ones and create whole new asset classes.

• Metaverse – From gaming metaverse to business solution metaverse this includes projects that build a metaverse or build services for metaverses.

• AI – Projects who use or offer artificial intelligence services.

• Interoperability – These projects aim to create a more seamless way to interact between blockchains and applications. By interconnecting isolated chains a lot of value could be generated because applications limited to one chain, would be able to interact with every other chain.

• DeFi – Decentralized Finance bringing different solutions and services on the Blockchain to generate revenue for its users. This includes a broad variety of applications given its own chapter later on.

• IoT – Internet-of-Things projects or in a wider sense Economy-of-Things provide an automated interaction between different entities (machines, things, etc.).

• Privacy coins – Projects like Monero or Tornado Cash providing privacy to its users by masking every transaction and offering full anonymity.

• Gaming – There are different kinds of gaming related Blockchain projects from play-to-earn to play-and-earn, sometimes combined with NFTs.

• Oracles – Mostly blockchain agnostic (Not bound to a single blockchain) providing data services for blockchains and applications on the Blockchain.

• DAPPs – Decentralized Apps running fully on blockchain and making use of smart contracts.

Narratives and hype

Altcoins are driven by hype and narratives, a narrative will be caused by a real world announcement or event, which leads to pumps in this specific sector. A good example would be the release of ChatGPT from OpenAI which caused a lot of Artificial Intelligence projects to have a strong pump. But there is a lot of caution needed, these narrative hypes last only a short duration of time and will spawn incredible amounts of pump and dump projects promising to be the next big innovation. If you can see a narrative coming, it is a good time to look out for strong projects in this sector, even the beginning of a narrative is good to have a short term investment but pay attention to take profit or you will get left behind.

The decentralized Finance sector offers high yield and revenue and big financial institutions will want a piece of this, so they are forced to make a move into regulatory compliant DeFi.

DeFi Terms

There are a lot of different ways to earn revenue in the DeFi sector, but it’s not without risk so we will discuss different circumstances of DeFi to keep in mind.

• Liquidity Pools – Providing liquidity to a DEX by holding it either one or two sided. You would choose a liquidity pair of two tokens/coins and either hold one or two of them to lock them into the pool. Most of the revenue will be paid by the exchange fees of the customers.

• Staking – There are two types of staking, for one the network native solutions, where you stake by yourself in the specific network itself. This is only possible if the network has a proof-of-Stake consensus, the risk is almost not existent in this case. The other option would be third party staking, where you lend your tokens to the third party and receive set revenue, mostly set in APY %. By using a third party you open up to more risk because you need to trust this third party.

• Real yield – Real yield platforms like GMX provide lending pools for a DEX which offers leveraged and non-leveraged trading. Real yield will be paid by trading fees and losses of the traders.

• Flash Loans – A weird form of Loan that will be made and instantly repaid.

• RWA – This is a quite new form of DeFi offering decentralized loans for companies in the real world. They will apply for a loan and place collateral in case of default, in return a yield will be paid to the lending pool distributed for its users. This is an easy method for companies who could otherwise not get a loan.

The pitfall of a passive income

DeFi offers tempting passive revenue while holding coins and waiting for the bull run, but there is a catch. If you only jump into DeFi without knowing what you do just to make 5% APY, you risk losing everything! This is not exaggerated in any way but a real threat to your hard earned money, I can’t stress this enough I know people who lost $10k, $40k and even $110k because of greed.

DeFi offers a lot of revenue but these protocols are based on Smart Contracts, this means if the developers of these protocols don’t know what they are doing or don’t pay enough attention it can have devastating consequences. Don’t risk your money on some small revenue, yes it is a good feeling to earn without doing anything, but your goal should not be passive income in the beginning.

So how do we can determine how to stay safe while earning some revenue on our holdings? The safest way to earn revenue is by leveraging native Proof-of-Stake protocols if your coins use these. Another way to earn revenue is by using big DeFi protocols that were audited many times and already run for a long time. The younger and smaller a DeFi protocol is, the more risk comes with it. And never under any circumstances use any third party staking services from lesser known companies where you lose control over your funds. According to analytics tools the overall amount lost due to hacks since recording are currently (May 2023) at $6.5 Billion.

Most people already heard of Memecoins and the incredible stories about ’get rich quick’, but most of them are lies. You need to understand that the market is not regulated in any way and every illegal thing imaginable is doable. Big whales will have multiple wallets to look like many peoples, one small wallet will do the initial buy, later knows as the lucky winner to everyone because of the incredible gains. The market will be manipulated by these whales to attract retail traders and maximize their own profits. There will be front running (If you place an order it will be recorded on the blockchain, they will buy too with higher fees and you will receive a higher price, sometimes 20% or higher because of slippage!). Most people who touch memecoins lose all their money, but you hear only of the lucky one who was actually the whale himself. There will be winners of course, but for someone to win in Memecoins, 1000 others need to lose. For this rule, there are exceptions like the big Memecoins like DOGE and SHIB who pumped and stayed up there, most other memecoins are pump and dump systems. My honest advice, stay away from Memecoins even if it is really tempting, it is only gambling and you need to be really early to make a big profit.

How to safely interact with the blockchain and what to avoid

• Hardware Wallet – There is nothing safer than using a hardware wallet which gives you full control over your coins. So you don’t depend on exchanges to hold your coins and the possibility of them going bankrupt to lose your coins. But it is important to learn about hardware wallets because you are responsible for it and if you lose the keys, your coins are lost for good.

• Interaction with Smart Contracts – If you use any contracts, use a separate wallet to do this and not the main one you hold your coins in. You could do this, but limit this to contracts you fully trust. There are many accidents or hacks due to smart contracts, they could transfer your coins away and you can’t do anything against it. Especially if you want to take advantage of airdrops, always use a separate wallet.

• Seed storage – If you use a hardware or web wallet, you need to store your recovery seed phrase. Always write it down multiple times and store in separate places. Never store unencrypted on any hard drive, and if you want to be extra safe, never copy and paste them, this will store them temporarily in your cache storage and make them vulnerable for hacker attacks.

• Never underestimate hackers – There are extremely smart people in this space, they will outsmart us all, always double check addresses and contracts you use. Even if you copy and paste an address, always double check. Some hackers exploit the Metamask web wallet by sending you 0 funds (An empty transaction) this will save their address as previous interacted. They will mimic an address similar to the one you used previously, this is possible because they brute force create addresses until they got a similar one. If you send funds and don’t pay attention you could accidentally send the coins to them. As I said, they are really smart! Never let your guard down, a person on twitter lost $40k this way.

• Don’t brag about holding cryptos – It is especially dangerous to brag about the coins you hold, because other than funds deposited in a bank, the attacker only needs your seed phrase, which is most likely stored somewhere at your home. Don’t make yourself a target.

• Crypto Twitter – Never listen to anyone saying a coin will pump, there are endless crypto influencer insider groups who will praise a coin so their followers will buy in, and they can exit with a profit. How to spot these people? Look out for people who constantly change up the coin they push and you likely got one of them.

• Buying and selling – From my experience it’s hard to time the bottom or top correctly, so DCA in around the bottom of the bear market and DCA out around the bull run top. Or even better, set specific sell targets and stick to them, don’t get greedy and keep sitting on your coins until the bull run is over and watching your profits vanishing in thin air.

• Never fall in love with a coin – it doesn’t matter how much you like a project, if you don’t sell at the right time you won’t make money. Many people fall in love with a specific coin because of its great performance and buy into the narrative it could go up forever just to watch it drop 70%.

If we look at the current blockchain economy we notice that most chains inhabit a DeFi ecosystem without any adoption or application beyond that. But is DeFi the pinnacle of what blockchain can become? Certainly not, but large scale adoption takes time. Currently most chains are only big DeFi casinos consisting of high yield Ponzi systems, memecoins or NFT rug pulls with only some legit good projects. And that’s what most people hear from media and this leads to the fact that they don’t believe in blockchain technology.

Real world blockchain solutions will dramatically increase efficiency and cost saving in almost every sector when large scale business adoption hits. Big enterprise companies are already exploring and building blockchain solutions, most people will still say that it will be only temporary. Knowing the tech and how blockchain will improve certain areas especially supply chain, finance, proof of ownership, intellectual property, energy and many more, people will use blockchain technology in their everyday life without even knowing it.

Currently in 2023 the opportunity arises to be able to invest in specific blockchain solutions which will act as the future tech infrastructure. There won’t be one winner but multiple blockchains which will interact with each other so every company can use the technology that fits it’s need best. This is certainly not the time to risk this opportunity with memecoins or scams, it is important to focus on real projects with good teams who will build great solutions.

One of the biggest narratives which will drive large scale adoption will be tokenization of real world assets. If all kinds of assets move on blockchains, this would eliminate huge administration costs and could automate a lot of things while proving clear ownership of everything. To address the question of what could be tokenized, the answer is simply everything. We could tokenize real estate, bonds, stocks, cars, debt, mortgages, energy, and other assets like gold, IDs, intellectual property, art and many more. This will open up entirely new markets of previous illiquid assets and make them highly liquid. It is important to keep in mind that this sector is still young but many big companies already testing out possibilities and there is more to come. It will take time but there are big companies estimating a volume of $5 to 16 Trillion to be tokenized by 2030.

There are some really useful tools in crypto, basic ones to search for specific coins and getting all their links to more advanced ones for on-chain analysis.

• CoinMarketcap.com – The most basic version of a tool for searching coins, sometimes outdated data.

• CoinGecko.com – A better more accurate version of CoinMarketCap.

• Dune.com – Advanced Analytics tool with User made dashboards.

• Kyberswap.com – ”Discover”- Section is great to monitor big volume changes on all coins to spot eventual hypes or pumps early.

• app.artemis.xyz/dashboard – Analytics tool for chain comparison on activity between those.

• DeFiLama.com – One of the best sources for everything DeFi. Gives even a good overview of hacked amounts in DeFi (defillama.com/hacks).

• DexCheck.io – Monitoring of whales and big money on chain over different networks.

• Discord – Useful to get a feeling of the community in a specific project/coin.

• Twitter and Telegram – Great for news directly from the team of a coin to stay up to date.