Will You Keep Your Crypto Assets in a Wallet or on an Exchange? (Task 2 from @gbenga)
Crypto assets are coins and tokens that uses cryptographic technology and blockchain. Crypto assets have value and a price and at such it needs to be stored in a safe place but then were is better to keep crypto assets, In wallet or in exchanges?
There are two types of wallets, the Hot wallet and the cold wallet. Both wallet are used to store crypto assets. When it comes to the Hot wallets, they are wallets that are connected to the internet while cold wallets do not need the internet to function. When it comes to hot wallets, we have software wallets like the desktop wallet, online wallet, and the mobile wallet. Exchanges on the other hand can be decentralized and centralized exchnages. For the decentralized exchange, your coins still remain in your wallet while for centralized exchanges, crypto assets are kept in the custody of the exchange.
For me, I will prefer to keep my coins in an exchange. I am not saying this is the logical thing for everyone and since the task is a debate to see people's view, then we can decide to pick either sides of the coin and I am picking the side of the exchanges in this post.
There are a lot of disadvantages when it comes to holding coins in wallet, and few include attacks or loss of wallet as a result of virus or malicious scripts, Lossing of hardware wallet, Lossing private keys, and so on, but this isn't the same with exchanges.
Security
First, exchanges spend a lot of more on security as there are responsible for so many coins in millions and billions of dollars. Security is one thing that most exchanges spend their funds on because a hack on a exchange will make the news than a hack on 1000 personal wallet. Looking at this risk, exchanges prefer to spend lots of money to make sure their security are unbridgeable.
Passive Income
Staking for passive money is another reason why coins should be kept in exchange. One of the basic rules of investing is do not have your money sit in your wallet. Sincerely, having your coin in your wallet is like having it doing nothing so instead, you could stake them in exchanges or MMAs to provide liquidity while getting dividend as income. Exchanges like Binance, Huobi, Okex, Poloniex and so on allow staking of coins to get rewards.
Insurance
Insurance of big exchanges for crypto if hacked. if a person losses their crypto in their wallet, there is nothing that can be done to it but if coins are hacked in big crypto exchanges, then you will be 80% assured that your funds can get back to you as the exchanges have funds which serves as insurance for cases like this.
Final Note
On a final note, traders are known to keep their crypto asset on exchanges as this will help reduce the fees for transfering in and out of the exchange to their wallet. I should say that keeping crypto assets in exchanges is as safe as keeping it in wallet.
Thanks for Reading
@frederickbangs, you have made a very interesting argument on this and i must say that your points are very valid from security, insurance, easy to trade, fees for transfers from wallet to exchange and back.
Thanks a lot for joining my second class. I must confess that i enjoyed your post.
Thank you also for putting out an interesting topic, keep working intelligently.