Is It Better to Keep Crypto in a Wallet or Exchange
Cyber security is one of the most talked-about topics today, and rightfully so, as not only we are highly dependent on technology, but there is just so much sensitive data stored in clouds. All this means that a life without the Internet is simply not just not optional for us, as it’s not possible, at least not in a way that we are used to and prefer. Of course, all of this further leads to being skeptical about new features, things, and even technological advances and waiting until some respected source verifies its legitimacy, and that, well, let’s just say that it can take some time. Now, this is precisely what happened to cryptos when they first appeared, with one tremendous difference, a really small number of people really understood the overall meaning, functioning, and what’s perhaps even more important, the overall potential of digital coins, and that made everything even more complicating.
Even now, after more than a decade has passed, we still have those that you simply cannot convince that cryptos are a thing of the future. So, when you have such an obstacle in the very beginning, everything else is much more challenging, and going into specifics is even tougher to do. Above all that, mistakes are also something we all make, and yes, there were some regarding cryptos too, but just think about security breaches that Facebook had, and yet, it’s still globally popular and used. On the other hand, some progress is certainly made in this area, as yes, today, much more people invest or are willing to invest in cryptos, but this leads us to the next challenge, which coin to invest in, and how to do it.
Crypto wallets or exchanges?
There are many exchange and trading platforms to choose from, and every single one of them has different rules and regulations and, of course, fees. Besides that, even if you are an experienced crypto trader, the next logical question is about the overall security of these platforms and wallets. That is why the cold wallet maintains the best possible type of wallet as it provides the best level of safety. Now, even this type of wallet has certain disadvantages, just like a hot wallet or keeping your cryptos on the exchange platform have. So, since this is something that troubles so many, let’s place our focus on that now and provide a precise answer on which is better, to keep your coins in a wallet or exchange.
We can simply explain these wallets like regular ones but for storing and keeping cryptos instead of fiat money. Since cryptos are digital money, they cannot be stored in a traditional wallet we all have, so crypto wallets are programs that we use to keep them. These programs are protected with private keys, and you cannot make a transaction without entering them, and besides that, the whole thing operates in a way that has many layers of security in terms of lines of code and cryptography. We can compare these private keys to passwords, so it is pretty obvious that it is crucial to be careful with them and keep them hidden from other people. If someone steals our private key, they will have access to our account and all funds in it, and we can lose everything in a few minutes, including access to our own account. Luckily, there are many security layers besides private keys, which are added to keep our funds safe all the time. It’s similar to passwords, and the only difference here is that once you lose your private key, the overall damage the thief, or in this case hacker, can cause is much larger, and regaining it is much more difficult, unlike retrieving a password.
There are two types of crypto wallets, and, as we have already mentioned, they are known as hot ones and cold ones. The main difference between- them is that cold ones do not need an internet connection all the time, and they are usually small devices similar to a USB that we can take with us. On the other hand, the hot ones are just a program installed on the computer, and they are always connected to the internet. Cold ones also need an internet connection to perform the transaction, but they do not store private keys online like the hot ones, which is the reason why they are considered much safer. Hot wallets can be found in different forms, and we have those downloaded on our computer, ones that use cloud technology, and they can be used from every device, and those that are made like an app on our phones.
Every transaction is recorded and stored in blockchain, so we can easily have insight into transactions whenever we want. Thanks to the blockchain, we can easily monitor our balance, which is always important when it comes to money, regardless of whether we are talking about fiat or crypto money.
When it comes to crypto exchanges, they represent platforms that you can use to trade cryptos or use fiat currencies to buy them. By using these platforms, you can buy and sell any crypto or convert fiat currency into one of them. Because of that, they also have wallets that you use to store those funds, but they are not a good option for a longer period. These platforms work online, and the main purpose of their wallets is to have a safe place to keep cryptos and fiat money while trading, not to store them for a long time.
It is crucial to find a reliable platform in order to keep your money safe and secure and to have various trading options, but it can be pretty challenging because new ones appear every day. Because of that, it is always a good idea to choose the one with a great reputation.