How to store crypto that aren’t supported by Ledger
21st November 2022 |
Over the last two weeks the crypto markets have been in a tailspin.
We wrote to you last fortnight about the FTX.com implosion. It was and continues to be an absolutely astounding story of corporate mismanagement. When the guy who helped disassemble Enron comes in and says he’s never seen anything as bad as FTX… well that’s something.
We didn’t think that the exchange would completely collapse. We were wrong, and it did.
There is always a certain amount of risk in a crypto-exchange. This is because of the sheer volatility of so many cryptos. An exchange makes a very small amount from every transaction that is carried out. In the crypto world, those transactions swing far more in value than they do in other markets.
As a crypto-exchange, FTX was a company. It was not “crypto”. It was a major player in the industry, but it was not the industry.
Here is what really matters:
FTX will go down in a long line of major failures that shook the crypto world to its core. Ultimately, though, it did not kill and will not kill crypto as the commentators in the mainstream media may suggest.
The knock-on effect of FTX though has brought a lot of other organisations to their knees. We’ve seen hedge funds that are now teetering on the brink of extinction because (unbelievably) they held client assets on the exchange!
We’ve also seen crypto lender and yield company BlockFi halt withdrawals and effectively close its doors. For a long time BlockFi was one of the most exciting upstarts in crypto. It was able to offer huge yields on stablecoins and crypto.
In fact, for a while we covered them as one of the ways in which you could generate extra yield in this space. But then earlier this year, rumours started to flow around that it too was on shaky ground. The Crypto Winter was biting it hard, but the company said that things were fine.
We weren’t so sure. To be on the safe side, we sent out an alert on 27 June that said you should remove your assets from BlockFi and self-custody them.
This seems to have been prescient, as anyone still with assets on BlockFi is stuck right now without a clear direction forward. We’re also looking at the other platforms, Nexo and YouHodler, to determine if they too are at risk.
What is always a smart measure, though, is to withdraw your assets and self-custody. Foregoing an extra yield on your crypto assets is better than not having any crypto assets at all.
We empathise with anyone that’s been caught up in FTX and the flow-on effects to other platforms, and even to the crypto market which has been rocked hard. Nevertheless, the FTX episode is a reminder of the risks in crypto when you keep your assets in a platform or exchange.
This level of risk is something that personally I don’t like. From experience, you only need to learn once the pain of losing crypto on an exchange to make sure it never happens again.
I may sound like a broken record on this, but the best way to custody your assets in crypto is to do it yourself. Now, we’ve written about this extensively. However, I also understand that it is challenging still for a lot of people.
Also, my inbox over the last two weeks indicates that it’s a pertinent time to remind everyone about the importance of self-custody.
We’ve written a piece on this in Exponential Investor, which is free for anyone to read. You can see that here. If you know people who don’t subscribe to our work, they can see it too.
However, knowing what self-custody is, is one thing, then figuring out how to do it with your holdings is another.
For instance, I’ve got several emails this last week asking about crypto and how to self-custody them when there isn’t support for them via Ledger or Trezor (the two major crypto hardware device manufacturers).
There are a few important steps to take if you do go to the Ledger or Trezor site, search in their supported assets section and find that the crypto you’re looking for isn’t there.
The most important thing to know is what blockchain does your crypto exist on?
What a lot of people don’t realise is their crypto may be an ERC20 or BSC20 token thereby existing (respectively) on the Ethereum and Binance Smart Chain blockchains.
Self-custody in practice
There are many thousands of crypto out there. Now suppose – taking just one name at random – that you want to hold NuCypher. When you go to Ledger, you will find that NuCypher is not a supported asset.
So, how do you self-custody it?
Well first off if you’ve invested in it, then you should know that it’s an ERC20 token. Ethereum Request for Comment (ERC) 20 is an implemented token standard on Ethereum’s blockchain.
If something is an ERC20 token then you can store it using an Ethereum compatible wallet, such as an Ethereum wallet on your Ledger. What you need to do, though, is use an interface like MetaMask to connect to your Ethereum wallet to manage your ERC20 tokens.
The good thing is you can connect your Ledger device to something like MetaMask to do this.
So, while Ledger might not support it directly, the fact it’s an Ethereum standard token (ERC20) means you can just add it to any Ethereum wallet.
This same methodology applies to something that’s a BSC20 token. That’s the Binance Smart Chain token standard applied to the Binance Smart Chain. So, if your crypto is a BSC20 token you can store it on any compatible Binance Smart Chain wallet – again like MetaMask.
Now you might send your crypto to your address, and then open an interface like MetaMask, only to find the crypto doesn’t appear!
That can be terrifying. However, what you need to do is make sure you’ve added the token to MetaMask, so that it will show up. There’s a great guide on adding custom tokens to MetaMask here from ConsenSys.
While I’ve highlighted here Ethereum and BSC as two token standards, the reality is that many blockchains have tokens that exist on their blockchain. Solana, Tezos, Tron … these are just some of the examples of blockchains which have token standards. Wherever there are token standards, you can store cryptos in the native wallets for those blockchains.
This leads me to another point, if you don’t know what blockchain your token exists on, then you should question your investment in the first place.
Having said that, if you find that you’ve got a crypto that exists on its own native blockchain (not an ERC or BSC or another token standard) that isn’t supported by Ledger or Trezor…then what?
The good news is that most cryptos that are novel standalone blockchains will have their own native wallets too. The first visit should be to the crypto’s website, to see what wallet or applications they have or recommend for self-custody.
Often it will mean downloading a desktop wallet, that will still provide you with a seed phrase or private key, that gives you full control of the crypto. It will also provide you with an address for you to send the crypto to.
While Ledger and Trezor are great and do cover a lot of the crypto markets, the fact is they don’t cover all the crypto markets. But that doesn’t mean you can’t self-custody. You’ve just got to know some of the basics, like token standards, alternative wallet interfaces, and the way to download native wallets.
Do this a few times and you’ll find that it becomes second nature.
However, here is another “broken record” warning:
When transferring to new wallets for the first time, make sure to send a test transaction first (just a small amount) to ensure everything works as it should. That way you will eliminate the potential for user error and you’ll get along just fine.
Crypto to know
Below is our “Crypto to know” list, where you’ll find several cryptos that we think you should be taking the time to learn and understand.
They each form an important part of the burgeoning crypto ecosystem.
Several of these cryptos are doing very different things relative to others.
What’s key is every crypto has its own use cases, its own guiding principles, and its own potential.
Each is to be judged and assessed on its own merits.
Our aim here is to help you understand these cryptos and the wider crypto world.
These aren’t specific recommendations, but a guide to help you learn and build your confidence in operating in this space.
We will add more names to this list over time. However, if you’re new to the world of crypto, these are the names where we think you should look at to start your education and learning.
We’ve also added links to each.
The links are to what we believe, in each case, is the best resource for learning about that particular crypto.
“Crypto to Know” watchlist
- Bitcoin – it/wiki/Main_Page
- Ethereum – ethereum.org/en/what-is-ethereum
- IOTA – docs.iota.org
- Tezos – tezos.com/learn/getting-started/
- Filecoin – docs.filecoin.io
- Cosmos – v1.cosmos.network/intro
- Binance – binance.com/en/about & research.binance.com/en/projects/bnb
- Solana – docs.solana.com/introduction
- Secret Network – scrt.network/about/about-secret-network
Until next time…
Sam Volkering
Editor, Sam Volkering’s Crypto Network
