The cryptocurrency industry is a very broad and diverse one as numerous platforms and solutions exist to help users with their daily obligations. There is a lot to do all the time when you are a crypto trader so naturally people need a place and a way to do it. Among the services that an average enthusiast needs the most are certainly crypto exchanges. An exchange is a platform that acts as a one-stop destination for all a trader or an investor may need to do in this industry. From learning new things about something and following the latest developments to actually buying and selling currencies, these platforms are capable of doing it all. For these reasons, they have become quite popular in the last several years as more and more people become involved with digital currencies.
Safeguarding the Assets
Another reason why they are so widespread and commonly used is the fact that it is possible to store crypto assets on exchanges. Each account comes with its own wallet to store one’s assets in. However, this is not really the safest option when it comes to safekeeping your digital currencies. Other types of electric wallets or e-wallets are much safer and for many reasons. Although both act as the same type of solution, regular crypto wallets are still safer than exchanges and in this article, we tell you why. Read on to learn about the most important reasons this is the case, and make sure to check out AndroidHeadlines for more information about all things related to the cryptocurrency industry.
In order to understand why wallets are safer than exchanges, you first have to know the basics about wallets and the different types that are available for the users. Using cryptocurrency during your regular daily activities in trading and investing needs to be easy and straightforward. On top of that, there should be enough security in the mix so that nobody could access it and steal the assets inside of it. Monitoring the balance while making transfers is still the thing that a wallet should optimally offer to the users so it is what everyone focuses on the most. It is always prevalent for the assets to be stored somewhere where only the owner can get to them.
1. Wallets are for Storing and Safekeeping
Now, the majority of crypto wallets are actually software programs that safely keep the public key and the private key you need whenever there is a transaction to be made. Receiving and sending the funds cannot be done without it. Both of the keys are needed if a transaction is to be completed. There are three different options when it comes to software wallets. First up, there are those that can be downloaded onto a computer and used as a type of software. Secondly, there are cloud wallets that can be accessed from anywhere and that keep the private keys online, making them more vulnerable. Finally, there are phone app wallets that are quite popular because you can use them on the go and not just when you are home.
2. Exchanges are for doing he work
Now, the main difference between crypto wallets and crypto exchanges is in their actual purpose. The purpose of an exchange is not to keep nor store the crypto assets. It is meant for doing the business side of things, mainly giving the users a place where they can buy, sell, or exchange different virtual currencies for traditional money. Just like the name suggests, an exchange is a platform for exchanging assets. Three types of exchanges exist. The first are brokers, websites that allow the users to buy cryptos at prices that brokers have set. Trading platforms are web services that help buyers and sellers connect with each other in order to do business and make transactions. Finally, direct trading exchanges allow for person to person (peer to peer, P2P) trading and have no fixed market prices since the sellers dictate the rates.
3. Wallets are meant for it
Now that it is clearer what and why each of these two things does, it should become a bit clearer why wallets are safer than exchanges. An electronic wallet that gives you a place to store all of your assets is developed for this exact purpose. On the other hand, exchanges are places to go when you need to access the wallet and do the work. They rely on third parties if they themselves have some sort of a wallet included in the deal, which never guarantees that your cryptos will be as safe as they need to be. Using each thing for exactly what it is meant to be used is always the best solution. Why risk being hacked or otherwise taken advantage off when there is already everything you need readily available for each aspect of the industry?
4. Going cold is the best option
Lastly, we have to touch on the topic of cold crypto wallets. As mentioned earlier, hot wallets are the virtual kind that act as software, clouds, and phone apps. The cold wallets on the other hand are hardware based and include no internet. This is the ultimate form of security and the best way to maximize the potential of a wallet. They sacrifice convenience for the absolute maximum security. Nobody can really access them nor hack into them since they are a piece of hardware similar to USB drives. Numerous different models exist, big and small, more or less secure with smarter protection, and capable of other modern solutions. The safest of them all are the so-called paper wallets. This is literally a piece of paper onto which a user writes the keys. They exist nowhere else but there and when the user needs to complete a transaction. There is no internet involved so they are safe, but you could still lose this piece of paper and ruin your chances at trading and investing. Most crypto enthusiasts agree that the best course of action is to have a few different wallets, both hot and cold.