[article 1/3 on crypto wallets]
Most people don’t have a crypto wallet; they have a crypto purse.
When my wife swaps out her purse for a new one, I’m always amazed by what is there. It’s not uncommon to see four tubes of almost empty ChapStick, a stethoscope, toothpaste, and baby wipes (even though we don’t have babies anymore).
When I talk to random people about what crypto they own, it’s a very similar feeling; they own a random collection of items they picked up along the way. Typically, they bought whatever was in the headlines the week they decided to see what this crypto thing was all about.
It doesn’t matter what type of wallet or purse you have if you carry around a bunch of junk, but what if you are protecting items of value? Your purse may suddenly find itself locked and handcuffed to your wrist.
As a reader of this newsletter your crypto wallet will soon have value, so let’s set up our wallets the proper way from the beginning.
You will need three wallets to control your own money and keep it safe from governmental predators. You don’t need them all today, but this is the optimal setup to experience the best digital assets have to offer.
The three categories of wallets are: 1) You might screw me, 2) You can’t screw me, and 3) I’m going to screw you. This article is the first in a three-part series on setting up all three categories of wallets, the same three I use regularly.
First, let’s review the three categories and why you need them.
#1: You Might Screw Me
One of the primary challenges of cryptocurrency is getting your boring-ass dollars out of your bank account and onto the blockchain. Moving your money to greener pastures requires a wallet that plays nice with traditional banks and digital assets.
For a wallet to play nice with banks, it must be a bank or at least a half-assed bank. This means it is subject to the full lineup of US regulatory agencies.
The good news is that we can quickly get money from our bank account into crypto. This wallet can also provide traditional banking services should we need them, potentially eliminating our old-school bank down the road.
The downside about this wallet is that it ultimately answers to the regulators and can freeze or take your funds. With this wallet, you might get screwed; we only use it to bring money into and out of the crypto world.
[Listen to a quick story about selling my RV]
#2: You Can’t Screw Me
Once you have real assets in crypto, it’s time to protect your wealth from the government, hackers, and even yourself.
A bank-friendly wallet is necessary to convert your money to crypto, but you don’t need them to store it for you. At this point, move your funds into a self-custodial wallet (more on that in part 2).
As the name implies, you have custody of your assets rather than Goliath National Bank. Nobody can freeze, seize, or another word that rhymes your assets from you. They are yours and you aren’t going to share.
#3: I’m Going to Screw You
While the first two wallets are critical for the future of your finances, they are still defensive. Cryptocurrency isn’t about playing defense; it’s about learning to type with one hand so you can flip off the world with the other.
In traditional finance, we take what they give us and like it. In crypto, we take what we want and don’t apologize. The risks are higher, and the rewards are more significant in this world. You need to understand the rules even if you don’t want to play this game.
This wallet will help you understand the future of finance. You don’t need to risk much, but the education from $100 lost on crypto will significantly increase your investment over time.
Coinbase
I opened my “You Might Screw Me” wallet at Coinbase in 2015 and bought one Bitcoin at $235. I didn’t understand Bitcoin, and I understood even less about Coinbase. Luckily, I guessed right on both.
I like Coinbase for several reasons:
They are a Crypto OG and have been around since 2012
They are a regulated financial institution registered with the New York State Department of Financial Services
Coinbase is committed to the principles of crypto, building decentralized solutions whenever possible
What I currently use Coinbase for:
Transferring money from my bank account to buy crypto
Sending crypto to one of my other crypto wallets
Daily spending, using the Coinbase debit card
Rewards, like 1%-2% of spending, returned in Bitcoin
You can also direct deposit a paycheck into Coinbase, and bill pay is on the roadmap. For a regulated financial institution, Coinbase is as good as it gets.
There may be better providers, but Coinbase has been good to me. It’s a lot like prom night: you dance with the one you brought, and you may or may not get screwed.
If you are new to crypto, open a Coinbase account and move a few bucks in, I’ll show you what to do with it.
If you have already experimented with crypto and are toting around a digital wallet, purse, or fannypack, hang tight. We’ll clean those up shortly, assuming my wife didn’t throw away the baby wipes.