Cryptocurrency storage is a significant consideration for both seasoned crypto investors and newcomers. The two main options for storing crypto assets are wallets and exchanges. While crypto exchanges facilitate buying, selling, and trading digital currency like Bitcoin, wallets serve as a personal bank to store your crypto holdings securely. The security implications of wallet and exchange architecture are profound. Wallets give users total control over their private keys, which are necessary to access their cryptocurrency holdings, particularly non-custodial wallets.

what is the difference between exchange and wallet

The main distinction between cryptocurrency exchanges and wallets is found in their features. They keep track of the cryptographic keys required to access and use digital assets on the blockchain. On the other hand, cryptocurrency exchanges serve as markets that make it easier to purchase, sell, and trade cryptocurrencies. Through the connection of buyers and sellers, exchanges allow fiat money to be converted into digital money and vice versa, as well as the trading of one digital currency for another.

Wallet Infrastructure

A crypto exchange wallet is a type of digital wallet provided by cryptocurrency exchanges. These wallets allow users to store, receive, and send crypto assets directly within the exchange’s ecosystem. They are a part of the service portfolio designed for users who trade on the exchange platform.

what is the difference between exchange and wallet

For example, you need to exchange some kind of Ethereum-based tokens (say, ERC-20) within Guarda Wallet. Then it’s necessary to have some ETH as well on your account since the fees are taken by the network in its native currency. The same situation occurs when you manage Tether (USDT) which is built on the Omni Layer protocol of the Bitcoin blockchain and, therefore, requires having BTC in the wallet.

Can I move my assets from a centralized exchange to a self-custody wallet?

Comparable to a digital signature, the private key provides access to digital assets kept on the blockchain. Maintaining the privacy of this key is essential to protecting one’s digital assets. Wallets can use a variety of security-enhancing techniques, such as biometric verification and 2FA, to create additional layers of defence against unwanted access. Decentralized exchanges allow you to trade cryptocurrencies directly with other traders in a peer-to-peer fashion.

  • When it comes to receiving crypto payments, users need to provide their wallet’s public address, which acts like a bank account number, allowing others to send funds to the wallet.
  • They offer the convenience of making transactions directly from the wallet and often include features for managing multiple cryptocurrencies.
  • Additionally, these services have other protection methods, such as PIN code or two-factor authentication.
  • However, be warned, if an exchange fails to take the proper security measures to protect your key, it is quite possible for someone else to gain access to your funds.
  • If an exchange is hacked or goes bankrupt, users could lose their crypto  holdings.

Control and custody represent one of the primary distinctions between crypto wallets and exchanges. While non-custodial wallets (a.k.a. self-custody wallets) grant users full control over their private keys, centralized exchanges hold custody of users’ funds. This disparity in control has significant implications for security and access, as users rely on exchanges to safeguard their assets. A crypto wallet is essentially a digital wallet that allows users to store, manage, and transact digital currencies. Just like you use a physical wallet to keep your cash or credit cards, a crypto wallet keeps track of your digital assets.

How to Сhoose Сrypto Wallets for Specific Use Cases

As you see from the schemes, Scenario 2 (Non-custodial wallet) appears to be more beneficial than Scenario 1 (Custodial exchange) in terms of speed. A crypto exchange is a platform that lets you buy and sell your Bitcoin, Dogecoin, Ether, or other cryptocurrency tokens at fixed prices and with security. Since the exchange is the custodian of your coins, you do not have a private key to sign and approve transactions. Instead, you use their app interface and create a withdrawal, and if the exchange approves, you can get your Bitcoin out of the exchange to whatever destination you want. But if you did not meet the requirements for KYC, the exchange will forbid you from withdrawing your Bitcoin. Centralized exchanges (CEX) are the most common type of crypto exchange.

what is the difference between exchange and wallet

Collecting the fees in percentage allows these platforms to make a fortune on big clients. For that reason, small transactions appear to be more beneficial to make on major cryptocurrency exchanges (Scenario 1). The problem is Operational Crm that in the current stage of market development, we still cannot use Bitcoin, Monero or, say, Dash freely for daily purposes. A basic thing – cryptocurrency storage method – usually becomes a sticking point for the users.


LBM Solutions excels as a leading Blockchain Development Company, offering services in blockchain, software, mobile app, and smart contract development. The first two kinds (maker fee and taker fee) also known as trading fees take part in the exchange process which we’ll explain in the next section. Simply remember that the amounts are usually arbitrary and exceed the network fees several times. This has happened to many people, and the purpose of this story is just to make you aware of the danger of centralized exchanges.

what is the difference between exchange and wallet

If someone steals your private keys (via malware running on your device), they could spend your crypto coin. Also, if you lose the private keys by any other means, you lose all access to your cryptocurrency holdings. And a crypto exchange is where you can do this (and also store your coins), while a wallet is a way in which you can store your investments more securely but won’t be using as actively.

Blockchain Wallets: Your Digital Safe Haven

An XRPL wallet on the other hand is a public account and GateHub offers you the ability to use a public/private key pair to make transactions with this account. GateHub is an online wallet service that can be accessed from multiple devices. While crypto wallet is a program that allows their users to store cryptocurrency, crypto exchange is a service for buying and selling assets or converting fiat into crypto and vice versa. It provides a mobile wallet app that allows users to store, buy, sell, and trade cryptocurrencies. It also offers a cryptocurrency exchange platform where users can buy, sell, and trade cryptocurrencies.

what is the difference between exchange and wallet

However, some people think crypto wallets and exchanges are the same, using them interchangeably when pertaining to a crypto platform in general. Centralised exchanges offer a certain level of dependability and customer assistance because they are run by particular businesses that manage the transactions and retain the users’ money. On the other hand, peer-to-peer trading between users is facilitated by decentralised exchanges, which function without a central authority and can improve control and privacy over digital assets.

Three Types of Crypto Exchanges

As well as the amount, the currency in which the commission should be paid is chosen by the exchange platform. A custody-free wallet can become a great storage solution both for a beginner and an experienced cryptocurrency user. But once you fully understand the advantages of decentralization and privacy, you’ll never want to go back to the traditional model of storing money. Think of these private keys as secret codes that allow you to spend the crypto coin that you hold. After a few minutes, your Bitcoin arrives to your Ledger wallet, now you have managed to secure your Bitcoin, in a safe place, where you do not need anyone’s approval to use.

Enter in your new self-custody address (the one we just created a few steps ago). Ease of use and accessibility vary between wallets and exchanges, catering to different user preferences and requirements. Wallets prioritize security and control, sometimes sacrificing convenience for enhanced protection. Exchanges, on the other hand, prioritize accessibility, offering seamless trading experiences. Nonetheless, many exchanges implement security measures like two-factor authentication, withdrawal whitelists, and insurance against theft.

Categories: FinTech


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