Have you ever wondered what differentiates a “crypto wallet” from an “exchange?” Or you find their similarities extremely confusing? This is for you!
Most people worry about where to store their cryptocurrency after purchasing them. If you’re having trouble deciding which to go with among these two wallet services – crypto wallet or exchange – then there is no better time to be reading this than now. This is designed to help you know how they work and the pros and cons of each.
In response, cryptocurrency wallets exist to help users keep their funds safe and easily accessible. In contrast, cryptocurrency exchanges make it easy to buy and sell the currencies you want with low fees and strong security features.
Here’s a closer look at crypto wallets and exchanges and how these platforms can help you store, send and receive cryptocurrency.
What is a crypto wallet?
A cryptocurrency wallet is basically a software program that lets users store cryptocurrency or digital assets like NFTs (non-fungible tokens). Crypto wallets have private keys (master passwords) that give you access to your cryptocurrencies. These private keys are important since they help secure your crypto coins safely. If you lose your private keys, you lose access to your crypto.
Private keys also enable users to check their balance and send and receive cryptocurrencies quickly. Since your cryptocurrency holdings live in the blockchain, the wallet keeps the information about your public and private keys and the amount of crypto you own. But you need your private keys to access the funds or execute transactions. What you share with others so they can send crypto to you is the wallet address (also referred to as a public key).
Types of crypto wallets
Cryptocurrency wallets come in many forms and can serve diﬀerent purposes. To know which cryptocurrency wallet could be best for your goals, you need to keep reading this.
- Hardware wallet: A hardware wallet (or cold wallet) stores your keys completely oﬄine on a device (such as a USB drive) not connected to the internet. Because they’re oﬄine, hardware wallets are the most secure wallets for keeping your crypto holdings.
- Paper wallets: Information about your public and private keys are printed onto a sheet of paper and stored in a safe place. The problem is paper wallets make it diﬃcult to use your crypto since you can only trade them via the internet.
- Online wallet: Also called software wallets or hot wallets. Keys are stored in an app (mobile or desktop) or other software. This makes it easier to send, receive, and use your crypto. Hot wallets, however, pose a higher hacking risk since they leave your keys connected to the internet. As a result, it is advisable to enable features like two-factor veriﬁcation to enhance your wallet’s security.
You may access an online wallet through crypto exchanges like Binance or CoinBase when you buy crypto. These exchanges oﬀer the simplest way to get involved with crypto by providing a hot wallet to store and access your coins.
Moving to the second part of this guide – crypto exchanges. What are they, and how do you use one?
What is a crypto exchange?
You can think of a cryptocurrency exchange like a stockbroker. It is an online service oﬀering
users the tools to buy and sell digital currency. A crypto exchange makes it easy to buy and sell the currencies you want with low fees and robust security features.
Examples of crypto exchanges popular in the market include Coinbase, Binance, Huobi, Kraken, etc. These platforms are also called centralized exchanges (CEX), meaning they are private
companies oﬀering platforms to trade cryptocurrency. They also control users’ private keys.
In contrast, a decentralized exchange (DEX) is a peer-to-peer marketplace where users transact directly without handing over the management of their cryptocurrency to one central authority or custodian. As a result, users keep control of their wallet’s private keys. Unlike CEXs that
require registration and identiﬁcation (or KYC), DEXs oﬀer users’ complete anonymity.
One leading decentralized exchange where you can obtain HiCoins is Uniswap. In just a few clicks, you can exchange your crypto (e.g., USDT) for hi Dollars seamlessly and at lower fees.
When deciding on the best cryptocurrency exchange to use, consider the following:
- Supported currencies: Thousands of cryptocurrencies exist but not every exchange oﬀers trading in those coins. New coins or altcoins with a very small market cap (an indicator of the market value of a coin) may take time to get listed on popular exchanges.
- Fees: Exchange fees may be ﬁxed but are often a percentage of your trade. There may also be diﬀerent fees depending on which cryptocurrency you trade. Make sure you understand what fees your exchange charges you on your transaction.
- Withdrawal options: It is also essential to understand how your cryptocurrency is stored and whether you can take custody of it by transferring it to your own digital wallets
- Security: The exchange security should be a top priority. Research on the quantity of its assets the exchange keeps oﬄine and other additional security measures such as two-factor authentication.
- Liquidity: If you’re looking to buy, sell, or trade your crypto, choose an exchange with enough trading volume (active trading). This is to ensure your cryptocurrency is relatively liquid, meaning you can sell the crypto when you want.
Should I get a crypto wallet or use an exchange?
Technically, you don’t have to keep your crypto in a cold wallet or get a hot wallet if you plan to buy or sell cryptocurrencies. Many crypto exchanges allow you to store your coins within a wallet on the exchange. Some like Robinhood and PayPal even enable customers to trade crypto within their existing accounts.
Nevertheless, given the security risks of exchanges, it is not advisable to rely on this option alone. After trading, make it a habit to move your crypto into your own wallet.
Get hi wallet and start earning hi Dollars
hi makes it easier to buy and trade hi Dollars, providing various options for our customers. You can swap hi Dollars on DEXs like Uniswap and PankcakeSwap or via CEXs like Binance and receive the funds into your hi wallet. Your hi wallets are the most convenient way to access your crypto on the go. Simply install our app, create an account, and complete the veriﬁcation.