Club5050- Cryptocurrency Exchanges And Wallets.
Hi everyone.
Today I want to talk about wallets and exchange platforms. Most traders and investors sometimes mix these two terms but before I start explaining the difference between these two terms, I will like to explain each of them before stating their differences.
A wallet as we all know is anything that helps us store our funds. In relation to cryptocurremcies, wallets are storage softwares that investors use to keep their assets. Wallets are meant to keep assets safe and protect them from being stolen.
However, wallets are categorize into two main forms, cold and hot wallet.
Cold Wallet: Cold wallet is a form of wallet that is usually offline and is less exposed to hackers.
Hot Wallet: This is the Wallet most traders use to keep their assets. It is an online wallet.
Wallets grant access to its clients with a diverse sort of focal points. For example, with a mobile wallet , there is an alternative of finishing deposits through QR codes.
However, with the foremost secure wallet which is a hardware wallet, there are charges for working this wallet. The fee is not constant, it changes as time goes on.
It goes with this high charges due to its high security in protecting assets from being disappearing.
Exchange platforms are platforms that allow investors and traders to trade in crypto assets. Exchanges facilitates the trading of crypto assets for other assets. Due to that, they serve as an intermediary between traders and generate income through transaction charges and commissions.
With exchange you can trade and offer crypto assets from the live market. There are wallets in exchange platforms which you can use in marking up on ur trades.
However, exchange platforms are business platforms that encourage the swapping of assets from a coin to another with a little fee. Exchange platforms allows its clients to form a profile and again grant them access to their account anytime they want to. Examples of exchange platforms are, Binance, Coinbase and many more.
Exchange platforms are also into two different forms, we have the centralized exchange platforms and decentralized exchange platforms.
Centralized Exchange: Centralized exchange platforms serve as an intermediary between traders. Centralized exchanges are controlled by authorities due to that they are more reliable.
Most cryptocurrency transactions go through centralized exchange. Examples of centralized exchange platforms are; Coinbase, GDAX, Kraken, Gemini and many others.
Decentralized Exchanges: This type of exchange make its clients to carry out peer to peer transactions with no intermediary being involved. Decentralized exchanges are preferred by some investors due to the problems of centralized exchanges.
Meanwhile decentralized exchanges doesn’t accept the trading of fiat currency for crypto assets. Examples of decentralized exchange platforms are; AirSwap, Barterdex, Blocknet and many more.
Below are some of the differences between wallets and exchanges
Swapping and trading of crypto assets are done using exchange platforms but wallets are use to keep crypto assets.
Crypto assets can stored on exchange platforms for a short period of time while wallets stores crypto assets for a longer period of time.
Exchange platforms has low security whilst wallets are highly secured.
Exchange platforms are centralized with a central body managing all the activities going on in the platform but wallet is decentralized in nature because is has no central body managing it.
To consider which one is better whether an exchange or a wallet, you need to look at how the two works and their security level.
With respect to how the two works, exchange platforms are made to serve two different purposes at the same time. Because of that is can be seen that an exchange is much better than a wallet due to its ability of serving the purpose of trading and keeping of assets.
An investor can perform a trade by purchasing his desired crypto assets and then hold it in the same exchange platform at the same time. This feature of an exchange makes it better than a wallet when it comes to how they work.
With regards to the security of the two, wallets offers more security than exchange which makes it much better than exchange with regards to security.
A crypto wallet basically works with its keys. So if you find yourself with the keys meaning you own the wallet by then. So to prevent yourself from losing your assets and being independent of your assets then you need to get yourself a wallet.
Looking at all these, as an investor or a trader I don’t think it is necessary to pick one over the other but to rather use these two simultaneously.
I am agree with you and this is the main advantage of exchange over wallet. Ingormative post based on features of exchange and wallet. Thanks
It my pleasure
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