When I first started getting familiar with crypto I was shocked about the number of new terms and concepts I had to memorize and understand. A lot of questions came up to my mind and it was difficult to differentiate between priority information and just the tons of content I could acquire with a bit more time. In this article, I will walk you through the essential theoretical points that will allow you to start with crypto salaries or become a crypto freelancer.
What is a wallet?
It can be a software program or a physical device. In any case, it will enable you to store your crypto and send/receive transactions. A wallet comprises your addresses and two key pairs: public and private keys.
It is like the password to your online bank. A private key must not be shared with other people because by doing that you give them full access to initiate transactions.
It is like your bank account number. You will give this to your employer when you want to receive money from him.
It is a group of numbers and letters randomly generated that derivate from the public key. You can create as many addresses as you need. For example, the first Bitcoin address ever looks like this: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa.
Once you have your wallet you will be ready to do two things:
Receive money: In order to send crypto or other tokens to another user, you will need their public key or their address. These can often come in the form of a QR code.
Send money: If you want to receive money you can just share your public key with the issuer.
Types of crypto wallets
You can classify your wallets regarding their connectivity in hot and cold. Hot wallets are connected to the internet and therefore less secure, but they are usually more user-friendly. An example of a hot wallet is Metamask. A cold wallet, on the contrary, is offline. This characteristic provides the wallet with more security and it is perfect for bigger amounts or long-term holdings. An example of a cold wallet is Ledger nano x. If you are looking for something you can set up fast and use for your daily transaction, it is more convenient to use hot wallets.
Another way to classify wallets is based on the location of the storage:
Hardware wallets: These are devices that can look similar to a USB-stick and individually handle your address and keys. It doesn't have a battery in itself so you will need a computer to access it. Its price goes from 70 to 200 euros.
Paper wallets: It is a printed QR code. It is impossible to hack but it has other flaws such as having to generate a private key, the characters can fade over time, or not being able to send partial funds.
Desktop wallets: It consists of software you can download to your computer to keep your cryptos. They are connected to the internet so you will need an antivirus and they are considered hot wallets as you can see in Figure 1. An example of this wallet is Exodus.
Mobile wallets: A really convenient option is mobile wallets since you can always have them accessible on your smartphone. They are practical for daily operations but also riskier since you have them on you all day.
Web wallets: You can access this type of wallet via your internet browser. These are considered custodial wallets since you are trusting a third party holds your private key and funds. The most common custodian wallets are web-based exchange wallets. They are the less secure.
Now that we have an overview, let's jump into paying your first crypto salary. You can start with a pilot program. Ask your company how many people would be interested in getting paid partially or fully in crypto. Talk with your employees about the payment conditions and reflect them in the contract. What type of cryptocurrency do they want to receive? Bitcoin, Ether, or stablecoins that are less volatile? Another important point is making your employees aware of the tax implications of receiving their salary in crypto.
Send the agreed crypto - Case Study
Charly is the CEO of Computers 3000 GmbH and wants to pay his employee Max in crypto. The quantity agreed is 1500€ in bitcoin.
Charly opens his mobile wallet and checks it contains the necessary funds. At the moment the exchange rate is 0.000040 so he needs 0,0653 BTC.
In his wallet, he has other tokens such as ETH, ADA, and SOL. He selects bitcoin and presses “send”.
Now he scans the public address of Max which he got in a QR code.
He types the desired amount and double-checks the address since the transfer is irreversible.
He clicks “send”.
This procedure is the same for all cryptocurrencies so once you learn it you can apply it for different payments. Even when you want to transfer money between your wallets it is the same modus operandi. If this is your first time doing this type of transaction it can be useful to do testing with a small amount of money.
Each country has different legislation regarding blockchain accounting and it is important that you check the situation at the end of the year. For example, in Germany, if you are a fixed-salary employee you can only receive around 10% of your salary in crypto but if you are a freelancer is easier. With basenode.io you can have access to transaction reports and balance reports among others which will simplify this process.
The concepts we reviewed today are some of the tools that will guide you in the journey of being in control of your assets. Once you create your first wallet, you can easily connect it to basenode.io. Crypto salaries are growing in popularity and the amount of talent you can attract to your company will be connected to salary conditions.
At basenode.io, our mission is to eliminate the gap between traditional accounting and blockchain-based accounting. basenode.io is the easy-to-use accounting solution for digital assets that offers seamless crypto invoicing and portfolio tracking. We provide a self-explanatory user interface with a clean and modern look, that naturally supports your workflow. We support the most popular networks like Bitcoin, Bitcoin Lightning, Ethereum, Binance Smart Chain, Polygon, Ronin Chain and more.
Carmen Rodriguez is the executive assistant at basenode.io and community manager. Before, she worked in educational entrepreneurship for one year. Besides her degree in business administration, she holds a master's in social innovation. You can contact her via LinkedIn.