Cryptocurrency exchange and wallets are essential tools to maximize one’s crypto journey. Both offer distinct services that will help a crypto holder secure and grow their funds, you might be wondering if you need one or both.
Let’s take a look at how crypto exchanges and wallets function and learn why both are important in your journey to crypto success.
What is a Crypto Exchange?
Crypto exchanges are websites where one can buy, sell, and trade different cryptocurrencies under one platform. They act as middlemen between buyers and sellers, facilitating transactions on their behalf and charging appropriate fees for their services.
Exchanges come in two major forms: centralized and decentralized exchanges. Coinstore, P2B, and KoinBX are examples of centralized exchanges, where a single entity owns and operates the exchange and manages the transactions and funds of each user. Uniswap and Sushiswap are decentralized exchanges or DEX, platforms that allow for peer-to-peer transfers with no central governing authority overseeing transactions.
What is a Crypto Wallet?
Crypto wallets function like the wallets that hold your cash and credit cards, only that they store your cryptocurrency instead. More specifically, it keeps a record of your private keys – a specific alphanumerical code associated with your crypto funds.
Just like exchanges, crypto wallets also come in several forms: hardware wallets, software wallets, and paper wallets.
- Hardware wallets are physical devices that take the form of thumb drives that store your private keys. They’re mostly offline until you connect them to a computer or laptop, preventing unwanted access and hacking.
- Online wallets like the Ijara DAO app are downloadable applications that allow instantaneous access to funds and have different levels of security.
- Paper wallets are usually printed QR codes that provide access to private keys once scanned and opened.
Pro tip: when using your wallet to receive crypto, make sure you’re giving the correct wallet address to ensure you’ll get the funds. Most wallets have a ‘copy’ feature, and it’s best to use it, as blockchain transactions are irreversible once executed.
Main Differences Between Crypto Exchanges and Crypto Wallets
Three main factors differentiate exchanges and wallets, namely:
- Function – crypto exchanges are primarily for trading crypto; wallets are for storing and managing digital assets
- Security – crypto wallets typically have higher levels of security and protection compared to exchanges, especially when using hardware wallets
- Level of control – users have more personal control over their crypto funds when using wallets, while users give control over their funds to exchanges during transactions.
It’s a Matter of Coexistence
Crypto exchanges and wallets are vital for a healthy crypto trading environment, with one offering a place to trade digital assets while the other is a place to keep them. Crypto traders must learn how to efficiently work on these platforms to make the most out of their crypto assets.
