As a newcomer whose interest in cryptocurrency has only recently been piqued, either due to the hype surrounding the technology over the last decade or the potential for 10x, 100x gains in a short period, you're likely to buy your first cryptocurrency on a crypto exchange.
While a cryptocurrency exchange is required to trade cryptocurrencies, it also functions as a medium of storage for your digital assets, similar to crypto wallets. On the other hand, crypto exchange and wallet are two terms that are frequently used interchangeably, particularly among newbies who are unaware of the distinction between the two crucial crypto tools.
A crypto exchange and a crypto wallet are both essential components of the crypto ecosystem, with the two tools serving distinct functions. However, these roles can be quite confusing, and you will most likely encounter them when beginning your journey into the crypto space.
Therefore, what is the major difference between a crypto exchange and a wallet? Are there any similarities between them? Which is best to store cryptocurrency?
This article will cover what you need to know about cryptocurrency exchanges and wallets, their differences, and which you should use to store your cryptocurrency securely. Let's get started!
Crypto Exchange vs. Crypto Wallet: Primary Purpose
A cryptocurrency exchange is an online platform where you can buy, sell, swap, and trade various cryptocurrencies. Crypto exchanges act as intermediaries, allowing you to convert your domestic fiat currency into digital currency and vice versa. Crypto exchanges are designed to assist you in observing crypto market changes and monitoring the price movement of any asset.
The crypto exchange has two primary categories: centralized and decentralized exchange. A crypto exchange is classified as either a Centralized Exchange (CEX) or a Decentralized Exchange (DEX). The primary distinction between the two is that CEXs facilitate trading through an order book, whereas DEXs are peer-to-peer (P2P) exchanges where buyers and sellers directly exchange crypto assets.
On the other hand, crypto wallets are software or hardware that employs blockchain technology to securely administer, transmit, and manage cryptocurrency, allowing you to access all of your digital assets in a single location.
Unlike a traditional wallet, which stores bills, crypto wallets only store digital assets such as crypto assets and non-fungible tokens (NFTs) and the keys associated with blockchain transactions.
The crypto wallet does not actually hold the crypto assets but rather the private keys to the crypto assets that exist on a blockchain network. As a result, consider a crypto wallet to be the key holder for your crypto assets held on blockchain networks.
Crypto wallets are classified into two types: custodial and non-custodial wallets. A custodial wallet is also called a centralized wallet because a third party manages it, and the wallet authority holds your private keys. In contrast, a non-custodial wallet places the responsibility of protecting your private keys in your hands. As a result, you are your own bank, safeguarding your assets and conducting transactions without the assistance of a third party.
Crypto Exchange vs. Crypto Wallet: Differences
The primary distinction between a crypto exchange and a wallet is that the exchange's primary purpose is to facilitate crypto trading, while the wallet's primary purpose is to store your digital assets.
While cryptocurrencies can be stored in both exchanges and wallets, what distinguishes them is how you control your funds. As a result, when you use a crypto wallet, you have complete control over the use and transfer of funds, and you keep all necessary passwords and private keys. Hence, a crypto wallet provides you with complete control over your private keys and full ownership of the cryptocurrency stored in the wallet, with no one else having access to your digital assets or private keys.
On the contrary, when you store your cryptocurrency on exchanges, you give the exchange's authority control over your private keys and funds. Without private keys, you are not the true owner of your digital assets; instead, you allow a third party to control what you can do with your assets. However, crypto exchanges provide easier access to your funds through a more familiar username and password configuration, allowing you to trade seamlessly on the exchange. Therefore, the popular "Not your keys, not your coins" saying are peculiar to crypto exchange.
Another major difference between a cryptocurrency exchange and a wallet is in cryptocurrency trading. In terms of trading, crypto exchanges outperform crypto wallets because exchanges primarily facilitate the buying, selling, and swapping of cryptocurrency, particularly using fiat currencies, without having to worry about fiat-to-crypto conversion or vice versa, security, backup, or account management because the exchange handles everything.
Crypto Exchange vs. Wallet: Similarities
Given their primary purpose, both crypto exchange and wallet perform the same function of sending, receiving, and storing your cryptocurrency. As a result, a crypto exchange and a wallet can be considered crypto storage methods, as both use wallet addresses to receive cryptocurrency for storage.
On the other hand, recent crypto wallets perform more than just storage functions, as they are frequently multi-featured tools for managing digital assets. As a result, they compete with exchange platforms in terms of functionality. Several advanced wallets now provide services similar to exchanges, such as instant swaps and fiat-to-crypto conversion.
Crypto Exchange vs. Wallet: Which is Preferable?
So, here comes the big question of which you should use between a crypto exchange and a crypto wallet. Frankly, there's no straightforward answer to this as they both have distinct functions, as explained.
However, because you do not have complete control over your asset and private key with a crypto exchange and must rely on them, some risks are associated with storing your asset on a crypto exchange. For example, since crypto exchanges control a large amount of cryptocurrency, they are a target for mismanagement, hacking, scams, and other types of internet threats that could limit your access and use of your funds.
On the contrary, using a crypto wallet is a safer option because you have control over your asset and private key and are solely responsible for keeping your funds safe. However, crypto wallets are not without risk, as you can lose all of your funds if your private key is compromised, which can happen due to computer failure, forgetting, or losing access to the private keys.
So, deciding between a crypto exchange and a wallet is usually influenced by various factors. A crypto exchange, for example, is a good choice if you want to trade your assets actively. However, a crypto wallet is the best option if you want to keep your cryptocurrency for a long time.
And, because modern crypto wallets are multi-featured wallets that allow you to manage your digital assets while also providing services similar to exchanges, such as instant swaps and fiat-to-crypto conversion, using a crypto wallet is the best option for storing your cryptocurrency because it provides both security and control.
The Best Of Both Worlds
Multi-featured wallets allow you to enjoy top crypto exchange features like instant swaps, fiat-to-crypto conversion, observing crypto market changes, and monitoring cryptocurrency price movements while also performing its primary function of securely storing your cryptocurrency, giving you the best of both worlds. As a result, a crypto wallet that checks all the boxes of a multi-featured wallet is Cwallet.
Cwallet is a one-of-a-kind crypto wallet that combines custodial and non-custodial features. It is an integrated on-chain and off-chain wallet that allows you to manage and trade 800+ crypto assets in one place with security, convenience, and flexibility.
Cwallet lets you enjoy the benefits of both worlds in a single app, whether you prefer a custodial or non-custodial wallet. As a result, with a single button, you can easily switch between custodial and non-custodial wallet options within the app. More importantly, you can transfer your crypto assets at any time from Cwallet's custodial wallet to the non-custodial wallet without incurring any gas fees.
Why Choose Cwallet?
Cwallet meets the complex crypto needs of individuals and businesses through various features such as the tip code, airdrop game, giveaway tool, mobile refills, bulk payment, request invoice, payment button, and so on. It is more than just a cryptocurrency wallet where users can send and receive funds, buy and sell, or hold and swap cryptocurrency.
- Real-time asset value information,
- The most recent and lowest transaction rate,
- A giveaway tool that allows anyone to create a giveaway with their choice of rules and regulations,
- An exclusive bot that allows users to send/receive tips and airdrops and set up referral programs on several social networks, including Telegram and Discord.
Cwallet is unique because there are no transaction fees, allowing you to maximize your profits.
- No Deposit Fees
- No Internal swap fees
- No Internal/ External withdrawal fees
- The lowest network and gas limit allows you to pay the lowest network fees.
Cwallet is an interactive multi-functional cryptocurrency wallet that lowers the entry barrier for crypto usage. You can create a Cwallet account in one click using your Twitter, Telegram, or Discord accounts and immediately get access to deposit, withdraw, tip, and even earn by playing airdrop games.
Cwallet is the only wallet you'll ever need for almost all your cryptocurrency needs.
Why wait any longer? Download the Cwallet App today to gain access to over 800 cryptocurrencies across 50 networks and start your cryptocurrency journey.