Differences Between wallets and exchanges.
As novices, most especially in the field of cryptocurrencies, some common words, terms or phrase are often seem to be confusing. So, it is wise to see through the marked differences.
Keep calm your fears as this article reveals to you all you need to know about crypto wallets and exchanges.
A Wallets is basically a program or a digital place where investors or traders stores up their cryptocurrencies. It is something similar to our local bank account but with a difference that the money stored up in the bank is fiat (Fiat money) and that stored up in a wallet is digital (that is digital money) that is being controlled directly by the owner and not by a third-party, bank or the government.
A wallet actually does not really store up your cryptocurrencies; your cryptocurrencies depends on both a private key and a public key.
There are basically two types of wallets namely;
Hot wallets :
These are simply wallets that work with constant internet connection (that is online). we find the Online ones that are a service provided by a web page that is responsible for the private key of the same, those of Computer that work with a software provided for each cryptocurrency and whose management's duty is fully in the hands of the individual who owns the wallet.
Cold wallets :
These type of wallets work without constant internet connection (that is offline). It is seen to be much more secured when compared to the Hot wallets because it operates without a constant interest access. It's advisable to store up your digital money or funds that will not be used oftenly or for those that don't want to run the risk of being hacked, altered or something.
An Exchange is seen to be an authorized and authentic website, environment, foundation or platform in which an investor trade or exchange their fiat money for digital money or cryptocurrencies and vice versa paying the prices made in the market at that instant time and constantly looking for ways to obtain the highest feasible profitability by keeping in accordance to the principle of free demand and offer.
This is due to the fact that an exchange involves people who buy currencies and others who sells them,; this is the shows that it's not just a person or individual that does this, but an environment or platform that helps bring about this exchange and makes available security and self assurance to it's users or traders to make sure that all transactions made is fruition.
Differences Between A Wallet and An Exchange In Terms of Operation (Functions and Fees)
Basically, the major difference is quite easy, a wallet is made to store up and have total control of the cryptocurrencies that belong to a person or trader, while an Exchange is used to make financial transactions; that is to exchange the currencies for other cryptocurrencies or even fiat money.
Key Differences Between A Wallet and An other Exchange.
When you really want to keep your cryptocurrencies safe and secure, you will find a wallet to be very helpful than an exchange. Wallets have the following features:
Ease with accessibility.
Long term storage.
High security, especially when the wallet is a cold type.
It does not allow for direc cryptocurrencies transaction
In the case of some online wallets (hot wallets) is allowed to carry out swap operations but the fees are high.
In the case of crypto storage devices, they are quite expensive, and in the case of some offline wallets (cold wallets) they are difficult to use.
Examples of Wallets is Trust wallet.
Although, you will need to add some form of a back up system due to the fact that wallets are prone to failure most especially when they are stored in an external storage or external drive or flash.
A lot persons usually compare a wallet to an exchange, but they are actually easy to differentiate, despite having similar roles. In a wallet you are totally in control of your wallet, but an exchange is a website or service.
It has the following features:
Trading of cryptocurrencies.
Selling of cryptocurrencies.
Buying of cryptocurrencies.
Coverting fiat currency to cryptocurrencies.
Converting cryptocurrencies to fiat currency.
They have level of security compared to wallets.
Their interfaces are generally user-friendly, so they have easy accessibility and easy usage.
They have an internal wallet that gives permission to immediate trading.
Examples of Exchanges includes Binance, Coinbase, Poloniex, FTX, MetaMask, BitMEX, Kraken and so on.
It sounds so logical to just simply handle an exchange and a wallet, however it is advisable to for traders or investors to have and handle more than just a n exchange and a wallet but multiple accounts.
When considering the issue of security it is a smart to understand that the more distributed and diversified your money is the better the security. This is just a simple common proverb that talks about not keeping all eggs in a particular basket. The more distributed your money is the better and safer it is ; because it reduces the risk of you losing your money or cryptocurrencies to hacker, alterations, loss of password or a crash in an Exchange whatsoever.
Meanwhile, not all Exchanges allow the functionality of all kinds of Cryptocurrencies. Just to be clear there are some specialized cryptocurrencies that are only found in some particular exchanges. It is up to an investor or trader to look carefully into which exchanges are more convenient to handle. There are some particular exchanges that have very low volume in some kind of tokens.
What is better, Wallets or Exchanges?
Both the wallets and exchanges are important as each other; but knowing which is better depends on an individual's needs or intention with that cryptocurrency. If you intend to keep your cryptocurrencies safe and secure, then a wallet is seen to be much more secure (most especially the cold wallets) and preferable in such case. Although, you may want to bring a backup system because wallets are likely prone to failure most especially when theyvare kept on an external storage or flash.
On the other hand, if your intention with your cryptocurrencies is to trade with them (that is buying and selling) then an Exchange is most suitable for this operation. Most persons that uses an exchange wallet made that choice out of a matter of convenience.
The exchange wallet is carefully and neatly made whole into the trading (buying and selling) operations. These exchange wallets are very simple to make use of, especially if you frequently plan to make use of the exchange services.
Although, with the exchange wallets being good, it not recommended to store up your cryptocurrencies in there because you will put to risk your security because your private key will remain in such an exchange and if by chance the exchange disappears or comes to an end all of sudden, you would lose complete access to all your cryptocurrencies with no means of retrieval until the exchange is back online.
So, it all depends on what you want ; if your operations are majorly based on trading; buying and selling an Exchange or Exchange wallet would be recommended but if it is just majorly based on storing up your cryptocurrencies a Wallet is recommended most the cold type of wallet.
How to create a Wallet account.
Trust wallet is known to be a very popular and secure wallet that stores and swaps cryptocurrencies. This is a step guide in creating an account in Trust wallet.
Firstly, you need to download the Trust wallet app from the Play store (Android devices) or App store (IOS devices).
Sencondly, after you must have downloaded the app successfully, launch the application and wait patiently until you see a page like this below
Select the "Create a new wallet" tab, after which you will be directed to another page in other to create your new wallet.
You will be given 12 phrases in which you must copy down in the right order. These phrases are like your gateway in accessing your wallet ; this recovery phrases must be kept safe; best still, it's preferable to back it up. (screenshots are not available due to security reasons).
At the next step, you will be asked to repeat the given phrases in the right order, after that is done, you are good to go. You have successfully opened a wallet account.
How To Create an Exchange account on Coinbase.
Firstly go to coinbase official website address www.coinbase.com and click on sign up.
After that's done, you will be asked to provide your first name, last name, your email address and a strong password, accept their terms and conditions or policies and click "create".
After which a verification link will be be sent to your email inbox in which you will use to verify your email address. When the email is successfully verified, then your account is good to go.