Crypto Wallet vs Exchange: Which is Better for You?

Image by RDNE on Pexels.

Most people worry about where to store their cryptocurrency after purchasing them. So, cryptocurrency wallets exist to help users keep their funds safe and easily accessible.

In contrast, cryptocurrency exchanges make it easy to buy and sell the currencies you want. They charge low fees and offer strong security features to protect your assets.

If you’re trying to decide between these two wallet services, it helps to know how they work and the pros and cons of each.

Here’s a closer look at crypto wallets and exchanges and how these platforms can help you store and trade cryptocurrency.

What is a Crypto Wallet?

A cryptocurrency wallet is basically a software program that lets users store cryptocurrency or digital assets like NFTs (non-fungible tokens). Crypto wallets have private keys (master passwords) that give you access to your cryptocurrencies. These private keys are important since they help secure your crypto coins safely. If you lose your private keys, you lose access to your crypto.

Private keys also enable users to check their balance and send and receive cryptocurrencies easily. Since your cryptocurrency holdings live in the blockchain, the wallet keeps the information about your public and private keys and the amount of crypto you own.

But you need your private keys to access the funds or execute transactions. What you share with others so they can send crypto to you is the wallet address (also called a public key).

Types of Crypto Wallets

Cryptocurrency wallets come in many forms and can serve different purposes. Keep reading to learn which cryptocurrency wallet is best for your goals.

• Hardware wallet: A hardware wallet (or cold wallet) stores your keys completely offline on a device (such as a USB drive) not connected to the Internet. Because they’re offline, hardware wallets are the most secure wallets for keeping your crypto holdings.
• Paper wallets: Information about your public and private keys are printed onto a sheet of paper and stored in a safe place. The problem is paper wallets make it difficult to use your crypto since you can only trade them online.
• Online wallet: Also called software wallets or hot wallets. Keys are stored in an app (mobile or desktop) or other software. This makes it easier to send, receive, and use your crypto. Hot wallets, however, pose a higher hacking risk since they leave your keys connected to the Internet. As a result, it is advisable to enable features like two-factor verification to enhance your wallet’s security.

You may access an online wallet when you buy crypto through crypto exchanges like Binance or Coinbase. These exchanges offer the simplest way to get involved with crypto by providing a hot wallet to store and access your coins.

That brings us to the second part of this guide – crypto exchanges. What are they, and how do you use one?

What is a Crypto Exchange?

You can think of a cryptocurrency exchange as a stockbroker. It is an online service offering users the tools to buy and sell digital currency. A crypto exchange makes it easy to buy and sell the currencies you want with low fees and robust security features.

Examples of crypto exchanges popular in the market include Coinbase, Binance, Huobi, Kraken, etc. These platforms are also called centralized exchanges (CEX), meaning they are private companies offering platforms to trade cryptocurrency. They also control users’ private keys.

In contrast, a decentralized exchange (DEX) is a peer-to-peer marketplace where users transact directly without handing over the management of their cryptocurrency to one central authority or custodian. As a result, users keep control of their wallet's private keys. Unlike CEXs that require registration and identification (or KYC), DEXs offer users complete anonymity.

One leading decentralized exchange where you can obtain HiCoins is Uniswap. In just a few clicks, you can exchange your crypto (e.g. USDT) for HiCoins seamlessly and at lower fees.

When choosing the best cryptocurrency exchange for your needs, consider the following:

• Supported currencies: Thousands of cryptocurrencies exist, but not every exchange offers trading in those coins. New coins or altcoins with a very small market cap (an indicator of the market value of a coin) may take time to get listed on popular exchanges.
• Fees:: Exchange fees may be fixed but are often a percentage of your trade. There may also be different fees depending on which cryptocurrency you trade. Make sure you understand what fees your exchange charges you on your transaction.
• Withdrawal options It is also essential to understand how your cryptocurrency is stored and whether you can take custody of it by transferring it to your own digital wallet.
• Security: The exchange’s security should be a top priority. Look into how much of its assets the exchange keeps offline and other additional security measures such as two-factor authentication.
• Liquidity: If you’re looking to buy, sell, or trade your crypto, choose an exchange with enough trading volume (active trading). This is to ensure your cryptocurrency is relatively liquid, meaning you can sell the crypto when you want.

Should I Get a Crypto Wallet Or Use An Exchange?

Technically, you don’t have to keep your crypto in a cold wallet or get a hot wallet if you plan to buy or sell cryptocurrencies. Many crypto exchanges allow you to store your coins within a wallet on the exchange. Some, like Robinhood and PayPal, even enable customers to trade crypto within their existing accounts.

Nevertheless, given the security risks of exchanges, it is not advisable to rely on this option alone. After trading, make it a habit to move your crypto into your own wallet.

Trade on Any Exchange With Refonte Infini Crypto Bot

Refonte Infini makes it easier to automate your crypto trading and earn steady profits. You can trade with our Scientific Trading Bot on Uniswap and Pankcakeswap or via CEXs like Binance or Kucoin and receive your profits in your exchange wallet.