if you have ever involved yourself in the cryptocurrency world or deeply searched about how to buy-sell, trade, or invest in cryptocurrency, then you might have heard terms like
cryptocurrency wallet and exchanges.
Although the crypto world and terms used in it is almost uncountable. Yet it becomes important for everybody to know the basics at least especially if you are planning to get yourself in the crypto world.
Now let’s come back to the terms Crypto Wallet and Crypto Exchange. Both of these are a medium through which crypto customers/users connect with their digital assets or cryptocurrencies. But these are not the same actually, there is a huge difference between a crypto wallet and a crypto exchange.
So in this article, we are going to understand the difference between wallet and exchange, how they work and what is suggested by the prestigious financial institutions.
Let’s get started with the meanings-
A Crypto wallet is a program that allows its users/customers/investors to store their cryptocurrency in it. Now, the investors have two options to store their digital currency- a hot wallet or a cold wallet. Remember, the hot crypto wallet remains online and the cold crypto wallet stays offline.
Most investors/ traders prefer to store their crypto coins and tokens in cold crypto wallets or hardware wallets. It is so because a cold wallet or offline cryptocurrency wallet is safer than a hot cryptocurrency wallet. Hacking and other security risks are also lesser in it.
Some of the best cold/hardware wallets available in the market these days are-
2.Ledger Nano S
3.Trezor Model T
6.Ledger Nano X
7.Cool Wallet pro
Benefits of investing through crypto wallets
- Safety and security
Cryptocurrency wallets are highly secured to use. All the data, information, and details of investors are completely protected and encrypted. It means you can transact a variety of digital assets or cryptocurrencies through a wallet privately. And no other visitors can see your details unless you don't want to.
Crypto wallets are designed in a way that even a very beginner can store coins in them simply, quickly, and safely. You just need to sign in the process and you will get a unique ID and password that will be encrypted.
- Easily accessible
Crypto wallets are easily accessible to any and everybody having a mobile phone/ computer and internet connection. Also, there is no need to follow the taboo of the North-South divide as it is accessible and available for every cryptocurrency devotee.
- Storability in crypto wallets
You would be amazed to hear that you can store your digital assets or cryptocurrencies for the long term through crypto-wallets. While you may face price fluctuation many times because the value of coins can be increased or decreased as per the market demand.
Still, investing and holding digital assets through crypto wallets is always a great option.
- Less transaction cost
You can complete the process of depositing/withdrawing or sending/receiving digital currency at a low transaction cost through crypto-wallets. Not only this, you can transact multiple cryptocurrencies through it. Also, investors/ traders can go for international transactions with fewer charges/fees.
There are hundreds of benefits of storing crypto coins and tokens via crypto wallets. Now, let’s have a look at a cryptocurrency exchange.
Crypto exchange is a platform or website through which you can buy-sell, trade, or invest in digital assets or cryptocurrencies. These platforms are specifically designed to exchange various types of digital currencies like; bitcoin, Ethereum, litecoin, dogecoin, etc. The best thing is you can interexchange cryptocurrencies via crypto exchange.
For instance, you can buy bitcoin from the coins of Ethereum.
Now only getting words from here and there is not enough, you need to understand wallet and exchange more proficiently so that you can decide which one is good to adopt.
Exchange platforms can be any website or digital program which provides services like investing, buying-selling, trading, depositing, and withdrawing crypto coins and tokens. You need to know that crypto exchanges (websites) have wallets in which their users can store their coins and transact. You can get your wallet on crypto exchange platforms just by signing in to your exchange account. The market rate or value of crypto exchanges fluctuates like the stock exchange.
Why would people choose Crypto Exchange?
Investors or buyers prefer to go for crypto exchange because it is simple and secure to use. It is also available for international transactions. It provides the service of buying, selling, and trading digital assets to multiple computer networks.
The best part of crypto exchange is it always has a vast list of options for its users. That’s why most people perceive the crypto exchange as a digital bank body.
For instance, there is an exchange platform, CoinCRED which trades with gander coin, bitcoin, Ethereum, tether, Binance coin, and USD coin. Now, the customers of CoinCRED have an option to invest in any of the digital assets from the above list.
Moreover, exchange platforms provide details of users, hot updates on the crypto market, and portfolios to their users on their websites/ applications. Its users can log in to their wallets just by processing the sign-in. Also, there is a dedicated team deployed for the investors, traders, and buyers of cryptocurrency for 24/7 help.
Here I am mentioning some major differences between crypto wallets and crypto exchanges-
- Cryptocurrency wallet is a program through which investors can only store their digital currencies.
- Whereas, a crypto exchange is a website/platform on which one can buy-sell, and deposit-withdraw cryptocurrencies. Through the crypto exchange, transforming fiat currency into digital currency can also be done.
- While owning a wallet, you have complete authority on the use and transfer of your cryptocurrencies. It is all upto you, when and where to transfer the currencies. It means somehow, you are the sole proprietor of your crypto wallet.
- In contrast, when you trade in digital assets through exchanges, you lose your sole proprietorship. As you will also have to follow the regulations of exchanges.
- Crypto wallet does not include some e-commerce features like buying, selling, or trading.
- On the other hand, you can sell your crypto, buy it or trade it at anytime through a crypto exchange platform.
- Sometimes it may be inconvenient to deal with wallet backups, data securing, and wallet management.
- Whereas, you do not need to be panicked about backing up and securing the exchange platforms because that is the responsibility of exchange management.
So, these are the major differences between a crypto wallet and crypto exchange. You need to know both tools of digital assets for your better future decision.
Your success and failure completely depend on a skill to recognise the right tool (cryptocurrency wallet/cryptocurrency exchange) at the right time. That is why it becomes important for every crypto enthusiast to distinguish crypto wallets and exchanges.