Let's be real. You're in crypto, right? You are living a decade ahead of your time, possibly even partially out of the established system. But are you really master of the pilot? Or are you better positioning yourself to avoid the painful regretful misstep that can potentially derail you? I’m not referring to swings in the market, I’m referring to fundamental, unnecessary bitcoin wallet disasters that are nevertheless still alarmingly prevalent. And as we approach 2025, with more eyes—and hackers—on the space, these blunders are totally unacceptable.

Custodial Comfort Equals Financial Control?

The myth I see the most that pans around out there, particularly with new folks, is that custodial wallets are “easier” and thus “safer.” Easier, maybe. Safer? Absolutely not. Think of it like this: your Bitcoin is your digital gold. Would you put your gold in a third party vault, with them holding the only key? More likely not, unless they’re the Swiss National Bank. Even then, you'd be nervous, right?

In many ways, custodial wallets are the banks of the crypto world. They hold your private keys. They control your Bitcoin. Yet in as much as they provide convenience, they do so at the cost of a single point of failure. If they are hacked, go bankrupt, or just lose faith in you having your Bitcoin (yes, this has occurred!), then you’re out of luck.

You lose everything. Poof. Gone. Remember Mt. Gox? QuadrigaCX? History repeats itself.

The solution: Own your keys. Embrace non-custodial wallets. It adds an additional five minutes to configure. Spending that time upfront would prevent a lifetime of disappointment.

Look, I get it, it’s easy to want to simply dump your bitcoin into the large exchanges like Binance or Coinbase. As always, don’t forget the golden rule – not your keys, not your coins.

Hardware Wallets? Treat them like Fort Knox!

Fine, so you’ve slept in and decided custodial wallets are off the table. So you went out and purchased a hardware wallet – excellent first step! However, just owning a Ledger (or any other hardware wallet) is not a special defense. You have to use it correctly.

I write a lot about this one, because I see even the most simple and basic errors with their hardware wallets all the time—especially at hackathons. They then scrawl their seed phrase on a Post-it note and affix it to their computer screen. They continue to use the same PIN code that they did with their ATM card. They download firmware updates from shady websites.

A compromised seed phrase is game over. A weak PIN is an open invitation. Fake firmware can steal your keys. It would be the equivalent of installing the most elaborate security system in your home, but still leaving the front door open.

Treat your hardware wallet like Fort Knox. Keep your seed phrase offline, in a very secure place, and even better, several such places. Use a strong, unique PIN code. Download firmware updates only from the official Ledger website (or the official site of your hardware wallet of choice). Verify the authenticity of your device. So take paranoia and make it your best friend, because it’ll protect you along the crypto frontier.

For a first step, consider keeping your seed phrase as safely guarded as you would your first born child! Protect it with your life.

Outdated Wallets = Digital Dinosaurs

The Bitcoin world moves fast. New features, new security threats, new vulnerabilities are an ever-present reality. This is the crypto equivalent of driving a car with bald tires onto a Formula 1 racetrack. You stand little to no chance of winning and nearly 100% chance of going down in flames.

I’m really talking about wallets that have not been updated in years. These wallets are not compatible with current, state of the art Bitcoin protocols and have no ongoing source code maintenance from the individuals who created them. These wallets are sitting ducks for hackers.

You expose yourself to known vulnerabilities that have already been patched in newer wallets. You are unable to take advantage of these security updates and desired features. You become an easy target.

Keep your wallet updated. If your wallet’s developer has stopped maintaining it, get a new wallet. There are a passel of other good, actively supported wallets as well. Don't be a digital dinosaur. Embrace the evolution.

Phishing is Still a Thing. Seriously?

To be frank, I’m at a loss about how people are still getting hooked on phishing scams. It's 2024. After all, we’ve been fighting phishing emails for over 20 years. People are still clicking on phishing links and putting in their seed phrases on fraudulent websites. They give scammers access to their private keys.

These scammers are getting more sophisticated. They’re generating very realistic deep fake websites that appear exactly the same as authorized wallet hardware manufacturers. Suddenly, they’re receiving emails that look like they came from Ledger (or the wallet of your choice). They’re employing deep social engineering to manipulate you into making poor choices.

The consequence: You lose your Bitcoin. The scammers vanish into the digital ether. You're left feeling foolish and broke.

Be skeptical. Always. Always inspect the URL before submitting any personal data. Don’t click links in emails from senders you don’t recognize. Enable two-factor authentication (2FA) on your wallet. If it looks like a good deal, it isn’t.

Ignoring Multi-Factor Authentication (MFA)

Failure to use MFA is equivalent to leaving your home door open and the car keys in the car. You are literally asking people to rob you blind. So it’s a good idea to make sure MFA is available and activated on your wallet. So if someone does steal your password, they will not get very far. They won’t be able to get into your account without a second factor, such as a code from your phone.

Far too many people give up at this step – assuming it’s just too much trouble. They prioritize convenience over security. That's a recipe for disaster.

A compromised password leads to a compromised wallet. You lose your Bitcoin.

Enable MFA on every account that supports it, especially your Bitcoin wallet. Make sure you use unique passwords that are difficult to guess. Using a password manager can help you create unique passwords and store them safely. Don't be lazy; protect yourself.

Learning to use Bitcoin is more than just purchasing it and owning it. It requires taking responsibility for its security. Avoid these five money missteps, and you’ll be one step closer to owning your financial life. Don't learn the hard way. The price is too high.