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October 4, 2022

Crypto Wallet Vs. Exchange

Crypto Wallet Vs. Exchange

As a newbie cryptocurrency investor, it can be challenging to learn the ropes. With a library of new terminology to grasp, an overwhelming selection of platforms to choose from, and technology you’re unfamiliar with.

One of the first hurdles you have to get across is actually buying crypto, with most people having the crypto wallet vs. exchange debate very early on.

The purpose of this article is to make that hurdle a little easier to overcome. We’re going to have the crypto wallet vs. exchange discussion, giving you everything needed to make the choice that’s best for you.

Let’s get to it.

What is A Crypto Wallet?

Much like a real-life wallet and cash – a crypto wallet is meant for securely storing your cryptocurrency. But that’s the most basic explanation anyone has ever given, so let’s dive deeper.

There are two main types of crypto wallets – hot and cold. The most popular, especially among new retail investors is a hot wallet. It is named hot because it’s always online and active. The owner only needs to open an app and sign in to have access to their crypto portfolio.

On the other hand, a cold storage crypto wallet is more popular among seasoned investors with large portfolios. Cold storage refers to a crypto wallet that is held offline, usually on a physical device. As it’s offline, it’s more secure.

In addition to storing cryptocurrency and other digital assets, some crypto wallets enable you to purchase crypto too.

What is A Crypto Exchange?

The core purpose of a crypto exchange is to buy and sell cryptocurrency. They also provide the function to convert crypto to fiat currency and vice-versa. Think of a cryptocurrency exchange much like the stock or forex markets. There are charts to monitor and analyze, and you can trade based on your analysis.

Whatsmore, whenever someone signs up for an exchange, a hot crypto exchange wallet is created for them. However, although the account is in your name, the wallet isn’t yours. At no point are you given the private keys, meaning you won’t be able to access the wallet should the exchange go down.

Benefits of Using A Crypto Wallet

When deciding whether to use a crypto wallet or exchange, it’s important to weigh-up the pros and cons. The benefits of using a crypto wallet depend on which type of wallet you decide to use. However, the major generic benefits included:

Additional Security

Upon creation of the wallet, you are provided with the private keys needed to access the crypto and digital assets stored inside. Without the keys, no one can get in, making it easier for you to prevent hacks.

Access To Funds

Your access to your crypto portfolio isn’t dependent on the status of an exchange. It has been known for some exchanges to stop people from withdrawing funds when the market is volatile. If you use a wallet, you don’t have this issue.

Holding Assets for Long Term

If you plan to store assets long-term, a crypto wallet is beneficial as it isn’t impacted by exchanges. You can access the funds whenever you want or need to without the worry of an exchange being down.

Concerns about Using A Crypto Wallet

As a newbie, it can be a burden to take on the responsibility of a crypto wallet. No matter what, you’ll need to use an exchange to purchase crypto, so the easy option is to use their wallet services, to begin with.

It can be overbearing by adding another new platform into the mix before you own any crypto. It opens the opportunity for making mistakes, such as sending crypto to the wrong wallet address.

Furthermore, it becomes entirely your responsibility to store your private keys, ensuring you can always retain access and ownership of your wallet.

Benefits of Using A Crypto Exchange Wallet

When using a crypto exchange wallet – you are guaranteed access to buying, selling, and swapping cryptocurrencies. This instant usability for a newbie crypto investor is a must. It makes the process less confusing.

Furthermore, you can convert fiat currency into crypto, which every first-time buyer needs to do to kickstart their portfolio.

Concerns about Using A Crypto Exchange Wallet

The major worry of using a crypto exchange wallet is not retaining ownership of the private keys. Essentially, leaving crypto on an exchange means you don’t rightfully own it. As you don’t have full access, should anything go wrong with the exchange, you can’t get to your portfolio and secure it.

In Summary – Crypto Wallet vs. Exchange

As a new investor, to get your small portfolio off the ground, an exchange will serve its purpose. However, as you become more familiar with the technology, it’s recommended to start using a secure crypto wallet, such as Escrypto.

Being able to claim full ownership of your wallet, have control of private keys, and be able to access and move funds at will is crucial for security and usability. When the time comes that your crypto portfolio is at a value you can’t afford to lose. We suggest securing most of it in an offline cold crypto wallet, making it impossible to hack.

Check out Escrypto, and protect your crypto with the most secure retail investor's crypto wallet.

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