The Big Debate: Crypto Wallet Vs Exchange

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cryptowalletvsexchange.png
I was recommending a new crypto exchange recently here in Uganda to a friend and this topic of keeping crypto in crypto wallet vs exchange came up.

He was inquiring if the exchange is legit as he had a prior bad experience with some exchanges! More on this experience later in the post.

If you have been in the crypto space then you should have faced or still facing this dilemma of either keeping your crypto on an exchange or wallet!

In this post, I am going to talk about the advantages and disadvantages of keeping your crypto on either an exchange or wallet.

I have to accept that both have their own merits and demerits and it depends on each person to choose the best option for themselves.

Before we go any further it is better for me to define these two terms so that we move at the same pace.

What is a Crypto Wallet?

I will define it simply as an App that lets a user store his/her cryptocurrency, it is just like the normal wallet only that this time it is digital.

There are also hardware wallets, but in this post, we shall only deal with software wallets(ie App), so I will mostly talk about a crypto-wallet as an App!

Just like a normal everyday wallet, the security of a crypto wallet solely depends on the user.

You are always advised to save the phrase or recovery key whenever you create a new wallet with any of the crypto wallet providers.

This key is sometimes 12 or 24-word phrases and will be used to restore your wallet in case your phone is stolen.

I have many wallets on my phone, but below is a screenshot of my Trust Wallet Airdrop wallet.
cryptotrustwallet.jfif

Advantages of Crypto Wallet

  • High-security level(personal)
  • Ease of access of tokens
  • Long term crypto storage(Hodling)
  • Low transfer fees
  • No KYC Needed

Disadvantages of Crypto Wallet

  1. Lose Keys, crypto lost
  2. Delay in taking profits in a volatile market

Let me hope that in this crypto wallet vs exchange debate you have understood the merits and demerits of a crypto wallet?

The merits so far according to me outweigh the demerits. The demits are also worth looking into as if you lose your password(keys, recovery phrase) then you have lost access to your crypto.

What is a Crypto Exchange

A crypto exchange is basically a website or service where crypto traders can sell or buy digital currency or convert fiat into crypto and vice versa.

All crypto exchanges have wallets created for each user which you can use to receive and store your cryptocurrency or fiat(normal money).

To use the exchange wallet, you should create an account with an exchange company like Binance

Advantages of Exchange

  • Buy and sell crypto instantly taking advantage of volatility
  • Availability of many cryptos
  • Deposit and withdraw Fiat

Disadvantages of Exchange

  1. No total control over your crypto
  2. Prone to hacks
  3. High transfer fees
  4. Regulation concerns
  5. No anonymity

Crypto wallet Vs Exchange

The basic difference between a crypto wallet and exchange is basically the control over the funds.

In an exchange, you do not have personal control over your crypto as the exchange can decide to shut down anytime or even get hacked!

If you have been in the crypto space for a long time, you should have heard that many exchanges have been hacked in the past and that leads to loss of users funds.

The recent one which my friend I was talking about at the start of this post fell victim was Altilly!

I also lost some funds after Altilly was hacked

In this crypto wallet vs exchange debate, exchanges also offer some advantages like being able to trade instantly during volatile markets.

You can easily sell your crypto on an exchange when the market rise insanely as they do sometimes.

In fact, this is the main reason many people love exchanges, the friend I was talking to said that he can easily cash out anytime he sees a price spike.
cryptowalletvsexchange.PNG

I tried telling him about the OG crypto advice of your keys, not your crypto as shown in the screenshot above.

Let me use the example of a personal wallet and a bank to explain further the difference between a crypto wallet vs exchange.

When you have money in your personal wallet, you can decide to use it anytime or anywhere, you can also send anyone any amount as you please!

However, if you have money in the bank, you cease to have total control over it the moment you deposit it there.

The bank now decides on how much you can withdraw(limit) and can even query your source of funds.

So using this analogy in the crypto wallet vs exchange comparison, an exchange is like a bank and a personal wallet is a crypto wallet.

It has to be noted that a crypto exchange acts both as an exchange ie buy and sell crypto and also as a wallet(temporarily) ie store crypto.

Crypto Wallet Vs Exchange Concluding Thoughts.

In summary of this crypto wallet vs crypto debate, the choice of each solely depends on the user.

You can always keep a balance between the two, have some funds on an exchange and some on a crypto wallet.

If you are still new to the crypto space, you can store your crypto on the exchange as you grow your portfolio. As time goes by you can decide to take out some of your assets to a private crypto wallet.

Also if you actively trade, you can also keep your crypto in an exchange to prevent losing time(and fees) in transferring into and from an exchange when you trade.

On the other hand, if you are a long-term investor, then you can buy crypto from an exchange and transfer it away immediately to your private crypto wallet.

The crypto wallet vs exchange debate cannot end, each person just needs to access themselves and see what fits their crypto agenda.

Personally, I have some crypto on exchanges and some on private crypto wallets, I try to maintain a balance.

So for you, which side of the debate do you fall on?
Do you have all your crypto (risked) on exchanges or all of it is on private wallets or do you have a balance like me?

Let me know your opinions in the comments below.

If you found this post informative, then upvote and share it with your friends.

If you have any crypto-related questions feel free to contact me
Twitter on Jarau Moses
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Also if you are East African and want to learn how you can write such posts or anything related to crypto, make sure to read this welcome to Hive East Africa community
Love
Jarau Moses



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