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Crypto Savings Safety Checklist

A comprehensive safety checklist to review before earning yield on crypto. Make sure you understand the risks and are prepared.

4 min read
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TL;DR

Before earning yield on cryptocurrency, review this checklist. If you can't check all items, consider learning more or using a traditional savings account instead.

Pre-Deposit Checklist

Understanding Risks

  • I understand crypto yield is NOT FDIC insured - Unlike bank deposits, there's no government insurance
  • I understand smart contract risk - Code could have bugs (though major protocols are audited)
  • I understand protocol risk - The protocol could fail or be hacked (rare, but possible)
  • I understand I'm responsible - No customer service to call if something goes wrong
  • I understand rates can change - APY goes up and down based on market conditions

Wallet Security

  • I have a secure wallet - Using MetaMask, Coinbase Wallet, or hardware wallet
  • I've written down my recovery phrase - Stored in a safe place (not on my computer)
  • I've tested my recovery phrase - Made sure I can restore my wallet if needed
  • I never share my private keys - No one should ever ask for these
  • I use a hardware wallet for large amounts - For $10,000+, use a hardware wallet

Knowledge & Preparation

  • I know how to withdraw - I've tested withdrawing a small amount first
  • I understand the protocol - I've read about how it works
  • I know which network to use - Base, Ethereum, etc.
  • I know how to check current rates - Before depositing
  • I've read the protocol's documentation - Understand how it works

Amount & Strategy

  • I'm starting small - Testing with $100-500 first
  • I can afford to lose this - Not putting in money I need for essentials
  • I'm using stablecoins - USDC or DAI, not volatile crypto
  • I'm using a reputable protocol - Aave, Compound, or Spark
  • I have an exit plan - Know when and how I'll withdraw

Post-Deposit Monitoring

Regular Checks

  • I check rates weekly - Make sure they haven't dropped too low
  • I monitor protocol health - Check for any security incidents
  • I verify my balance - Make sure my funds are still there
  • I test withdrawal periodically - Ensure I can still withdraw

Red Flags to Watch For

If you see any of these, consider withdrawing:

  • ❌ Protocol announces a security incident
  • ❌ Rates drop to near zero (might indicate problems)
  • ❌ TVL drops dramatically (people withdrawing)
  • ❌ Protocol pauses withdrawals (major red flag)
  • ❌ You can't access the protocol (could be a hack)

What to Do If Something Goes Wrong

Scenario 1: Can't Withdraw

  1. Check the protocol's official channels - Twitter, Discord, website
  2. Look for announcements - They'll explain what's happening
  3. Don't panic - Most issues are temporary
  4. Follow official instructions - Don't trust DMs or unofficial sources

Scenario 2: Rates Dropped to Zero

  1. Check if it's temporary - Sometimes rates are low during low demand
  2. Compare with other protocols - See if rates are better elsewhere
  3. Withdraw if needed - You can always move to another protocol

Scenario 3: You Think You've Been Scammed

  1. Stop all transactions immediately
  2. Document everything - Screenshots, transaction hashes
  3. Report to the protocol - If it's a protocol issue
  4. Report to authorities - If you've lost significant funds

When NOT to Use Crypto Yield

You should probably stick with a traditional savings account if:

  • ❌ You can't afford to lose the money
  • ❌ You need FDIC insurance
  • ❌ You're not comfortable with technology
  • ❌ You don't understand the risks
  • ❌ You can't check all items on this checklist

There's nothing wrong with using a bank savings account. Crypto yield is for people who:

  • Understand the risks
  • Are comfortable with technology
  • Want higher returns (and accept higher risk)
  • Have money they can afford to lose

Resources

Remember

The most important rule: Never invest more than you can afford to lose. Crypto yield can be a great way to earn more on your savings, but it's not without risk. Always prioritize safety over returns.

If you're unsure about anything, take your time. Learn more, start smaller, and only proceed when you're comfortable.