What is the difference between an exchange and a crypto wallet? Is differentiating the two a challenge? Let’s find out!
Many are the people who are worried about storing their cryptos after buying or mining them. If you are wondering which one to select between a crypto wallet and exchange, we have the answer for you. Crypto wallets are designed to help users safely store and access their coins. On the other hand, exchanges are designed to help make buying and selling cryptos easy.
So, here is a closer look at crypto wallet vs exchange to help you make the big decision.
What is a Cryptocurrency Wallet?
This is a software or hardware that allows users to store their digital assets, such as cryptos and non-fungible tokens (NFTs). The wallets come with private keys or master passwords that provide users with access to their coins. If you lose the private keys, it means that the coins are lost.
With the private keys, you can also check your balance, receive, and send your crypto coins. The wallet also comes with a public key, which serves as the main address. This means that if someone wants to send you some coins, what you provide is the public address/keys.
The Main Types of Crypto Wallets
Crypto wallets are many and are designed to serve different purposes. To establish the best wallet for your coins, here are the main categories that you need to know about:
- Hardware wallets: Also referred to as cold wallets, hardware wallets are designed to store cryptos completely offline or away from the internet. They are considered the most secure options for storing cryptos.
- Paper wallet: Information about your private and public keys is printed on paper and then stored safely. To use this wallet, you must have internet access.
- Online wallet/ hot wallets: With this type of wallet, the private keys are stored in an online application. Because they are always online, the risk of hacking is very high and you should enable 2-factor authentication for enhanced security.
What is a Crypto Exchange?
You can liken a crypto exchange to a stockbroker. It is a service that offers users tools to buy or sell their digital assets. They also provide advanced features and charge users low transaction charges.
Some good examples of exchanges include Coinbase and Kraken. The exchanges are also referred to as centralized exchanges (CEX), which means that they are private. When you use the exchanges, you have to create an account that also serves as a wallet for the crypto coins you buy. It is the exchanges that control the private keys and not you.
Decentralized exchanges (DEX) are peer-to-peer platforms that allow users to interact without central management the way it happens with centralized exchanges (CEX). As a result, users are in full control over their private keys. There is total anonymity when using CEX.
One of the top decentralized exchanges is HiCoins. With only a few coins, you are able to exchange your coins for hi Dollars at a very small fee. Here are some of the main factors to consider when selecting an exchange:
- Should support the most popular coins.
- Affordable transaction fees.
- Multiple withdrawal options.
- Top-notch security.
- Should have a high trading volume. This is very important for those looking forward to trading cryptos.
Crypto Wallet vs Exchange: Which One Should You Use?
If you plan to buy and sell your coins, there is no need to keep them in a crypto wallet. An exchange will be a better option. However, storing the coins in exchange is highly risky, and it is a good idea to move them to your crypto wallet after trading.
Get Hi Wallet and Start Earning hi Dollars
hi has simplified the process of buying and trading hi Dollars, offering multiple options for all clients. You can opt to swap hi Dollars on DEX or via CEX and receive the targeted coins through hi wallet. hi wallet is the simplest model to use. All that you need to do is install the hi app, create an account and verify it.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.