The 2 most common things that people are confused about are crypto exchanges vs wallets.
It’s no secret that crypto has been on a rollercoaster ride for the past few months. It can be a confusing one with all of the new terminology and different types of currencies.
With recent events, it is more important than ever to make sure you’re keeping your crypto safe and secure.
Which is better: using an exchange or a wallet? We’re going to take a look at both options in detail.
To help you make the decision…
Crypto Exchange vs Wallet: A Look into Both
What are Crypto Exchanges?
Crypto exchanges are online platforms where you can buy, sell or trade cryptocurrencies.
Exchanges offer the advantage of being able to convert one cryptocurrency into another via a simple and straightforward process that is usually completed in minutes, as opposed to sending coins across different blockchains which could take hours when using other methods.
Well, it’s not necessarily safe for crypto storage – many exchanges have been hacked over the years.
With the millions worth of digital currencies stolen from poorly-secured user accounts.
Furthermore, some users’ experiences with hacking on an exchange will be completely out of their control (e.g., leaving funds at risk due to poor security measures by the company).
Using an exchange puts your private keys in a centralized location for hackers to access if they gain access to the exchange, whereas a wallet is more secure in that you have complete control over your own private keys.
The good side of Crypto exchanges outweighs the negative side though.
These Crypto Exchanges are the reason why we all can buy and trade Bitcoin from our smartphones.
From any internet-enabled device, anywhere in the world.
Crypto exchanges are like the stock exchanges for crypto, and they’re a great way to both invest in cryptocurrencies as well as trade them with other currencies.
Crypto Wallets: What are they?
Crypto wallets are digital storage systems that allow you to store your cryptocurrencies.
These crypto wallets act as password-protected virtual vaults and give users access to their public or private keys.
A crypto wallet is made up of two parts: the client-side, which holds the user’s secrets; and the server-side (also called “backend”), where transactions with other entities on blockchain happen.
The crypto wallet can be either hot or cold depending on how it stores its secret data.
Hot wallets run like an app on your device while cold ones keep passwords offline for increased security measures.
Cold wallets also offer more anonymity than using any type of internet connection, such as mobile networks or Wi-Fi hotspots because they require a physical connection to see the transaction.
Of course, hot wallets are much faster and easier as they require only a username and password for access, while cold wallets require a physical device to sign transactions.
Users can also use the two types in tandem as an exchange, for example, where a hot wallet is used during day-to-day operations and a cold wallet is only accessed when needed.
This way you have some of your crypto assets accessible all the time without compromising security measures on most of them.
Cryptocurrency wallets help protect your wallet from being hacked and are the easiest to use.
For example, if you lose access to your crypto wallet then it will be extremely difficult or impossible for a hacker who gains control of that system to transfer any assets out without first getting hold of your private key.
However, this also means that anyone with physical possession of these devices can steal all funds on them.
Cryptocurrency wallets offer two-factor authentication which is seen as an added security measure when compared to one password alone in traditional banking systems because it requires something else (like a code sent via text message) before they can gain access.
Examples of Cryptocurrency Exchanges
There are over 300 crypto exchanges listed on CoinMarketCap.
Below we list the most popular exchanges to buy, trade, and sell your coins and tokens:
1). Coinbase crypto exchange
Coinbase is a US-based crypto exchange that allows you to buy, sell and trade Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC), and other crypto coins.
The Coinbase smartphone app on iOS or Android also includes price tracking for these coins.
It is possible to purchase cryptocurrencies via bank transfer and cards via Coinbase as fiat money.
There’s also Coinbase Pro which is best suited for experts and professionals.
2). Binance crypto exchange
Binance is currently the world’s largest crypto-to-crypto exchange.
This means that you can only buy or sell cryptocurrencies with other coins, and not in fiat money like USD.
This is my favorite exchange for buying altcoins.
Binance is user-friendly for beginners and also offers a lot of trading features that can be developed to suit the needs of more in-depth traders.
If you are not a U.S. resident and looking to go in-depth into the crypto space, Binance is a great place to do so.
3). KuCoin crypto exchange
KuCoin is my favorite crypto exchange for discovering the next crypto coin and token gem in the market.
They list great projects ranging from very young to very established and offer a very smooth transaction for its users.
One of the good things about KuCoin exchange is that it has a very robust security system in place to protect the users and their funds.
KuCoin offers an Android app that allows you to trade on the go, which is great for people who want crypto but don’t have time or just hate trading off of computers.
4). Gemini crypto exchange
Gemini is a crypto exchange that has been around for quite some time and it’s really beginner-friendly.
It still offers in-depth trading features but the interface is very simple, which makes it easy to start investing from day one.
The downside of Gemini is the withdrawal limits on new accounts at $500 per 24 hours and also its more limited selection of coins available to trade.
If you’re looking for something with lower fees without as many restrictions I would recommend Binance or KuCoin exchanges.
There are definitely pros & cons when comparing these three different types of platforms where crypto can be stored: wallets, crypto exchanges, and now hardware wallets too! The best solution depends entirely on your needs as an individual user so we
5). Kraken crypto exchange
Kraken exchange is one of the most popular and well-known crypto exchanges in the market.
With Kraken, it’s easy to deposit funds and start trading crypto right away but this is also the biggest downside of using Kraken.
While it’s easy to trade coins with no limits, you don’t have any way to store them safely on their platform so they are vulnerable until you withdraw your currency back into a wallet or another exchange that offers wallets for storage.
6). Coinmama exchange
Coinmama is known for its simplicity.
With Coinmama crypto exchange, you can purchase crypto with a credit card, by wire transfer, as well as through Apple Pay.
The upside is that it’s very easy to buy and sell coins on their platform without dealing with complex procedures or verification, so if your main goal is just buying crypto then this might be what you’re looking for.
Other Crypto exchanges worth mentioning are:
Examples of Cryptocurrency Wallets
Like we mentioned earlier, there are two types of crypto wallets:
- Hot wallet
- Cold wallet
Lets take a look at their individual examples.
Examples of hot Crypto wallets are:
- Trust wallet
Trust Wallet is one crypto wallet that can be used for storing your cryptocurrency.
It’s a mobile-based application with an interface that has been simplified to get people started in the world of crypto transactions, sending and receiving payments from other users quickly and easily.
They offer both private key storage (which you need to back up) or recovery phrases if you don’t want it on your phone, plus they also have integration so you can pay just by scanning the QR code of another user’s address.
- Metamask wallet
Metamask is a browser extension that provides an interface to Ethereum’s Dapps.
It can be used as a hot wallet and also swapping cryptos.
It makes it easier for users to interact with, or even moderate operations on the blockchain by adding functionality such as: creating transactions for smart contracts; signing messages cryptographically (to prove ownership of accounts); and more.
- Exodus wallet
Exodus wallet lets you store many digital assets including crypto coins like Bitcoin, Litecoin Ethereum, and other altcoins.
Exodus supports more than 25 languages so you can access it even if English is not your first language.
It has a beautiful UI with an intuitive design which makes it easy for newbies to use as well as advanced users who know their stuff.
It also provides real-time charts on the home page and wallet screens that will let you track market data such as prices of crypto coins or fiat currencies, mining pools (so you could manage/track earnings) among other features.
MyEtherWallet is also another hot wallet where you can store your coins.
It is mostly useful when you need to access your Ethereum wallet from another device as it allows you to create an account or use one that already exists on the browser of your choice (without downloading anything).
Examples of Cold/Hardware Crypto wallets are:
- Trezor wallet
Trezor is a hardware crypto wallet that stores your private keys offline.
This guarantees that hackers will not be able to steal or misuse them.
Trezor hardware wallet provides advanced security for handling Bitcoin and other cryptocurrencies’ private keys.
Unlike traditional cold storage methods, Trezor makes secure payments without exposing your private keys to a potentially compromised computer
It has an intuitive design and comes with two screens, one of which displays data such as the price in fiat currencies for crypto coins, mining pools (so you could manage/track earnings) among other features.
- Ledger Nano (X and S)
The Ledger Nano is a hardware crypto wallet that was designed to be slim and compact.
This makes it very easy to carry around and use on the go, even in places where you can’t connect your computer (like coffee shops).
It comes with a small OLED display that allows users to check their balance without having to access their PC or smartphone app.
Bother Ledger Nano X and S provides the highest level of security for your crypto assets so you can always be sure that your crypto investments are safe.
Why Hardware Wallet is Better than its Software Counterpart?
A Hardware Wallet is a physical device that stores your cryptocurrency.
It typically connects to the Internet via USB and sits on your desk, in which you can access it at any time as long as you have an internet connection.
A hardware wallet will provide additional protection by encrypting the private keys of its users with each transaction for further security purposes.
If someone gains access to your computer or has control over any other device used with your hardware wallet, they won’t be able to touch anything without entering an encryption password first.
However, for a software wallet, there is no such protection.
A software wallet can be installed on your device, but the private keys are stored online and in many cases not encrypted as well.
It also means that if someone gains access to your computer or any other device used with this type of wallet, they will gain control over all cryptocurrency holdings.
Crypto Exchange vs Wallet: Which is Best for Buying and Trading?
Obviously, the best service for buying, trading, and selling your cryptocurrency coins and tokens is an exchange.
Crypto exchanges make it easier for both newbies and experts to get into crypto trading.
These exchanges are a matching service where buyers and sellers trade cryptocurrencies with each other, so it’s an indirect way of trading.
The effects are similar to those of stock exchanges in the real world: supply and demand.
Exchanges provide traders with chart data for them to analyze the market sentiment as well as historical price patterns or trends that may have led up to a particular movement in prices or altcoins being traded at these different times.
Crypto Exchange vs Wallet: Which is Safer for Storing and Saving your Coins?
On the other hand, (hardware) wallets are safer because they’re physically disconnected from internet access making them harder to hack than exchanging platforms where cybercriminals can find loopholes in systems connected online.
Wallets also provide better security since only transactions are carried out through distributed nodes instead of centralized servers.
Crypto wallets are just the best for storing and saving your coins.
You can store Bitcoin, Ethereum, Cardano, Dash, Ripple – or any other cryptocurrency you may have in a wallet that is easy to set up on your computer or mobile device.
The downside of wallets is that:
Crypto wallets are not designed to be used as a crypto exchange, so you can’t trade in your crypto coins or tokens for other cryptocurrencies at the current time on most wallets.
However, to some point, you can swap only a few coins. BUT not as seamless as the way it is on exchanges.
It is important to note that crypto exchanges are not meant for long-term storage and they should only be used to trade, buy or sell cryptocurrency.
Exchanges have been hacked in the past and many investors have lost their funds because of this.
My top recommended exchanges are:
You can lose your cryptocurrencies if you do not store them securely on a hardware wallet like Trezor, Ledger Nano S, or another reputable one like those listed above.
For safer and long term holdings (months, years), use hardware/offline wallets like:
- Trezor here (highly recommended)
- Ledger Nano here
For short-term holdings, swapping, and trading use online software wallets like:
- Trustwallet here (highly recommended)
Crypto wallets offer more security but may come with some downsides such as being less user friendly and having limited options than crypto exchange platforms; also, it’s crucial that you know how to secure your private key so no third party has access.
Hope this guide on crypto exchange vs wallet was helpful, feel free to comment and ask any questions below.