Investing in cryptocurrency is quite complex especially for beginners. Terms that are thrown here and there may seem similar. And if no guidance or research is carried out, individuals can find themselves making costly mistakes. Cryptocurrency investors have to choose between a wallet and exchange. But what exactly is the difference between the two? Let’s see below.
What is Cryptocurrency Wallet?
A cryptocurrency wallet refers to a program that allows an investor to store all their cryptocurrency. People can either opt for hot a hot wallet or a cold wallet. While a hot wallet stays online, a cold wallet stays offline. Most people prefer cold wallets since they are safer from hacking and other security risks.
While you can store your cryptocurrency in a wallet, you don’t have complete control of the wallet since your currency relies on both private and public key. To access your currency, both of these keys are required.
The main advantages of a cryptocurrency wallet include:
- High-security level
- Ease of access
- Long term crypto storage
What is Cryptocurrency Exchange?
A cryptocurrency exchange refers to a website or service where one can sell or buy digital currency or convert fiat currency into digital currency. Market rates in a crypto exchange fluctuate in a similar way to the stock exchange. Exchanges have wallets, mostly web-hosted wallets on the website. To access your wallet, you must create an exchange account and sign in.
What is the importance of an exchange?
An exchange allows easy access to all crypto account information. Details such as balances make it easier to sell crypto as well as make trades. Most people describe an exchange as a digital bank.
The only con of an exchange is the issue of security. If a person loses access to the exchange, then they would access to the crypto.
Is Coinbase an exchange or a wallet?
Coinbase is an exchange. Coinbase holds the private keys. As such, if a person loses their Coinbase account, they cannot access the cryptocurrency.
Should I keep my bitcoin on an exchange or in a wallet?
The decision to store Bitcoin on an exchange or in a wallet is purely a personal choice. However, storing your Bitcoin on an exchange could see you lose all your digital currency if the exchange is hacked or if the owners traded the currency and ran off. The only advantage you get by storing your currency on an exchange is a convenient experience since you never have to worry about backing up or securing your platform. With a wallet, you get to store your digital currency without relying on anyone else. However, you will have to deal with issues such as backing up, securing and managing your wallet.
Is Binance a wallet or exchange?
Binance is an exchange. It offers trading in over 500 digital currencies including Bitcoin, Litecoin, Ethereum and Binance Coin among others. The exchange also provides crypto wallets for its traders.
Should you leave Crypto on exchange?
No. You should not leave your cryptocurrency on an exchange. If you do, your exchange could be hacked and the coins stolen. However, it is safe to store crypto that is actively trading. But if holding, it is not safe.
Similarities between Cryptocurrency wallet vs Exchange
- Both are platforms for storing and accessing digital currency
Differences between Cryptocurrency wallet vs Exchange
Definition
A cryptocurrency wallet refers to a program that allows an investor to store all their cryptocurrency. On the other hand, a cryptocurrency exchange refers to a website or service where one can sell or buy digital currency or convert fiat currency into digital currency.
Control over the private key
A cryptocurrency wallet allows full control over your private key. On the other hand, a cryptocurrency exchange does not allow full access to your private key.
Other features
Cryptocurrency wallets do not offer features such as selling, buying or trading. On the other hand, exchanges also offer selling, buying and trading.
Cryptocurrency wallet vs Cryptocurrency exchange
Summary of Cryptocurrency wallet vs Cryptocurrency exchange
A cryptocurrency wallet refers to a program that allows an investor to store all their cryptocurrency. On the other hand, a cryptocurrency exchange refers to a website or service where one can sell or buy digital currency or convert fiat currency into digital currency. Whether you decide to store your Bitcoin on an exchange or in a wallet is purely a personal choice. However, storing your digital currency on an exchange could see you lose all your digital currency if the exchange is hacked or if the owners traded the currency and ran off. Also, storing your digital currency will have you dealing with issues such as backing up, securing and managing your wallet. Before opting for a wallet vs. exchange, always evaluate the risks.