Club75: Distinction Between a Decentralized Wallet and an centralized Exchange
Hello everyone, I welcome you all to my blog. I made this post extra special to mark the end of this month. These past two weeks have been really favourable to me and I want to thank this community for rekindling my moral to continue steeming. This month started on a bad note as I was robbed and lost my phone but today I am safe, sound and steeming happily with you all. For today's mini crypto lesson, we would be learning about cryptocurrency wallets and cryptocurrency exchanges. I would try my best to touch other aspects of wallets and exchanges so sit back and enjoy the post
Now when we hear the word Wallet, the first thing that comes to mind is a physical portable foldable bag where we store our Identity cards, credit/debit cards and our money. Now I want to let you know that thanks to Technology, these wallets have also been made digital and so has the currencies. Now we can store digital currencies in digital wallets. Digital wallets can store various currencies both cryptocurrencies and even digital fiat currencies but in this post our focus is on cryptocurrencies so we would be looking at crypto wallets.
What are Crypto Wallets?
These are digital applications/sites where we can store our cryptocurrencies. As there various varieties of cryptocurrencies i.e NFTs and normal tokens/coins, crypto wallets for each variety are available to us. Some wallets even store both NFTs and normal tokens. Crypto Wallets can also be stored in both hardware and software. The hardware component that stores crypto currencies are known as hard wallets. Some of them look like flash drives and they help store cryptocurrencies offline. If you want to access them then you plug them to your computer and access your crypto assets. Some crypto wallets are token specific like Tronlink pro who only allows TRX tokens to be store on the wallet.
Crypto Wallets can be decentralized or centralized. When looking at the centralized crypto wallets, they are usually observed to come with centralized exchanges (e.g Huobi, Binance) because they come with in-built crypto wallets and since they are centralized, we just need a password to access them. Centralized wallets hold our private keys for us hence they have partial control over our cryptocurrencies. They can choose to freeze our wallets and the assets in them and we won't be able to do or challenge them hence they are centralized. All we need to access our currencies on centralized wallets are the passwords we set when creating our account with them.
When looking at the decentralized crypto wallets (e.g trust wallet, token pocket), we have complete control over our assets and we get to hold our private keys and not share them with anyone (e.g Steemit Wallet). These private keys are used to perform important actions on the wallet like sending assets from wallet A to wallet B. Storing private keys are not always easy as ones device can be hacked and his assets can be compromised if he/she stores them on their device so technology provided us with an offline way to store these keys and they are called keycards. Just like the keycards used in advanced hotels, keycards are also used in storing private keys.
What are Exchanges?
Exchanges can be considered from two angles, as a process and as a body. We would be looking at exchange as a body in this post. Now exchanges are bodies/institutions charged with the responsibility of changing currency from one form to another. You could say you use exchanges to buy and sell currencies for other currencies. It can be from one fiat currency to another but here we would be looking at crypto exchanges.
Crypto Exchanges are basically sites where one can buy or sell crypto currencies in exchange for fiat or other cryptocurrencies. Here one can trade their ether for Bitcoin and trade their Bitcoin from pounds or Euros. Not all crypto exchanges support the use of fiat currencies. In cases like this one can buy a stable crypto currency (currencies pegged to the dollar). Exchanges can be centralized and decentralized also.
Centralized exchanges (e.g roqqu, Binance, Huobi pro) are exchanges which are under the control of a major body. They have the authority to freeze our assets and even block our account. They usually come with in-built wallets for the currencies they trade.
Decentralized exchanges (e.g SunSwap, Just swap, UniSwap) are exchanges where people have control over their assets and make decisions by themselves on what to do with these assets. Here one can swap one crypto currency for another without the involvement of a third party.
We will be differenciating them on the basis of wallets being solely decentralized and separate from integrated wallets in centralized exchanges.
| Decentralized Wallets | Centralized Exchanges |
|---|---|
| Users have complete control over the assets in the wallet. I.e they are decentralized | They are exercise partial control over their users assets. |
| Their main purpose is to store our assets. | Their main purpose is to buy and sell currencies but also have some wallet functions. |
| They allow their users hold the private keys to their account. | They hold their users keys and make decisions on their behalf. |
| Examples include Tron link pro, token pocket, trust wallet. | Examples include Coinbase, Binance, Roqqu. |
I hope you all enjoyed the post and learnt alot. I'm sure y'all can get more differences from my explanation earlier. I happen to know all this through the past research on this platform. Thanks to technology for bringing about cryptocurrencies and thanks for cryptocurrencies for bringing about these amazing innovations through technology. Thanks for reading.
There is so much to learn from your post. You have discussed the differences in many beautiful ways. I understand from your post that you have a lot of talent in this regard.
Well explain article most user even me at time hey confused between the different between Decentralized Wallet and an centralized Exchange but you made it clear. Thank you sir
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We have already learned these through classes decentralized.We should all gain knowledge about exchange
@tron-fan-club Thank you very much.
Without this Inspiring post many won't know the difference between an exchange and a wallet
I myself was under the misconception that they were more similar.
It's really unfair users have less control over Thier privacy on a centralised wallet