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5 Mistakes Algorand Users Make
Last Reviewed: November 2023
New to Algorand and enjoying the best blockchain on the market? Lovely! Enjoy your stay and make sure to educate yourself using AlgoDaddy's Algorand guides to benefit the most out of the ecosystem. This specific articles covers the most common mistakes Algorand users make, and which can be avoided.
Read through these five mistakes carefully and make sure you're not accidently doing any of them. It might save your hard-earned ALGOs and USD!
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1. Not Participating in Governance
At the moment the absolute safest way to earn interest or yield on your ALGO is by participating in the Algorand Foundations official Algorand Governance Program. For the past year the APY have been around 8-10%, and even though it's slowly decreasing the effort required is minimal (voting on proposed implementations). Best of all - it's as safe as they come since your ALGO never even leaves your wallet. If you're ALGO is not participating in DeFi, then make sure you participate in the Governance Program!
2. Storing Your ALGO on an Exchange
In the light of recent events, namely the collapse of the cryptocurrency exchange FTX, the warning echoes clearer than ever - Do NOT store your ALGO on the exchange. Exchanges can go bankrupt or scam you of your crypto coins. The old saying goes - Not your keys, not your coin. Meaning, you do not actually own your crypto if you don't have access to the private key (which you don't on an exchange).You can use the exchange to buy your ALGO and then immediately transfer them to your software or hardware wallet.
Nonetheless, nowadays the Pera Algo Wallet even offers the possibility to buy ALGO straight through the wallet. No middle man needed!
3. Not Using the Algorand Ecosystem
Get the most out of the Algorand blockchain by letting your ALGO participate in ecosystem and it's Decentralized Finance (DeFi). You can lend or loan ALGO for leveraging or participate in Algorand Governance through AlgoFi for extra rewards. Additionally, there are automated market makers using liquidity pools (such as Tinyman) where you can trade all your favorite ASAs (however read the next point first!). There are also dApps where you can stake your ALGO or ASAs for additional rewards. There are even games on Algorand!
4. Buying ASAs without DYOR
ASA stands for Algorand Standard Asset, which is more or less a fancy way of saying "custom token minted on the Algorand blockchain". Anyone can mint an ASA and you should be wary of low-liquiditiy tokens being promoted on social media (like Twitter and Reddit). Tread carefully even if the liquidity pool is in the couple thousands of USD (which can in some ways artificially be inflated) and the ASA (or project) has an 'official webpage'.
There have been very dedicated scams in the past where it really does seem like a serious project, but ending with gullible users having their wallets drained or investments lost. You see, the token creator can essentially drain all the ALGO from the ALGO-ASA liquidity pool since they usually have any extraordinary amount of the ASA they minted. So with that said, do your own research before investing in any ASA.
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| Image by master1305 on Freepik |
5. Sharing Your Private Key
Often enough just mentioning the fact you own crypto on social media will cause your inbox to become full of messages offering to "help you out" or maybe promising benefits such as "good ways to get x% return on your crypto" or something similar. These are fraudulent crypto scammers. The conversation usually ends if you having to either connect your wallet to some shady place (don't do that) or them asking for you to share your private keys (DO NOT DO THAT).
The term private key pretty much says it all - it's supposed to be private. Store it somewhere very safe. I.e. avoid pasting it to unsecured notes on the phone, never take a picture of it, don't keep it on a piece of paper anyone else can access. Anyone with access to your 25-word seed phrase also have access to all your crypto. You don't want to make this mistake, not even once.
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Avoid the above mentioned 5 mistakes Algorand users make for the best possible experience on Algorand. It's the best blockchain out there.
