Crypto Wallets Vs Exchanges: Where Is Better to Store Your Crypto?
Where you store your crypto will have an impact on almost every aspect of your experience as a crypto holder. In this article, we’ll explore the key differences between a crypto wallet vs an exchange to help you understand which crypto storage option is right for you.
- What is the difference between a crypto wallet and an exchange wallet?
- Why does it matter where I store my crypto?
- Crypto wallets vs exchanges: Why use an exchange for storage?
- Why might a personal crypto wallet be better than an exchange?
- Personal wallets vs exchange wallets: Which comes out on top?
- Store your crypto securely and earn interest up to 11% at MyConstant
If you’re like most people, you probably wouldn’t trust most places to hold your USD besides a bank, so why trust any wallet with your crypto?
In 2019, 370.7 million USD in crypto was stolen. This statistic covers theft from exchanges alone. When you include theft from private wallets, the figure is closer to 1.7 billion USD.
Security is a growing concern with crypto wallets along with other factors like high transfer fees between wallets and losses from simply losing wallet keys.
Read on to learn the difference between storing your coins crypto wallet and exchanges and what you need to know to make an informed decision about where to store your crypto.
What is the difference between a crypto wallet and an exchange wallet?
Exchanges can store your crypto such as qtum coin on your behalf. You give up an element of control over your money in exchange for the ability to store many coins in one place and trade them freely.
When you deposit on an exchange, you also shift a portion of the responsibility to the platform. If you are hacked and it is not your fault, for example, some exchanges will compensate for your losses.
However, you don’t own the crypto on an exchange. Any coins you leave can be converted to liquidity or investment for them to facilitate trades. And while some exchanges promise compensation for losses often this is little more than a handshake agreement.
A crypto wallet, on the other hand, gives you complete control of your crypto. You can store your crypto on hardware or software and become your own bank. There is no need for a middle man.
Why does it matter where I store my crypto?
Where you store your crypto has an impact on:
- How easily you can access your funds.
- What happens if you lose your wallet code.
- How many people are involved and who you trust with your private information.
- What security measures and insurance are in place should you fall victim to hackers or cyber theft.
- How much research you need to do before you can feel confident storing your crypto.
In the next section, we’ll outline some of the key benefits and limitations of storing your crypto in a crypto wallet vs on an exchange.
Crypto wallets vs exchanges: Why use an exchange for storage?
A cryptocurrency exchange allows you to trade cryptocurrencies for other cryptos in one place. When you invest in crypto using an exchange, you can create an exchange wallet to store your coins.
In 2020, the most popular exchange platforms include BlockFi, Gemini, Binance, and Coinbase.
Pros of storing your crypto in an exchange
- Some exchange platforms have an insurance policy that protects your crypto against cyber-attacks. This means if your crypto is stolen and it was not your fault, you may be entitled to compensation from the platform.
- As long as you have your wallet code, you can easily access your crypto from any online computer. No hardware is required to access your funds.
- If you lose your wallet code to a personal wallet there is no chance of recovery. In an exchange, there are steps you can take to recover your account.
- When you store your coins on an exchange, you can easily trade your crypto with other coins on the exchange without paying pricey gas and transfer fees.
Cons of storing your crypto in an exchange
- When you store your coins on an exchange, you don’t own your crypto. If the platform goes bust, you will likely lose most of your assets.
- Storing your crypto such as fet coin on an exchange requires a great deal of trust. The exchange employees have access to your private keys and although unlikely, there is always the possibility a rogue employee might run off with your data and crypto.
- You are not in charge of your money. Exchanges follow their own laws and regulations. This means the terms of your storage could change at any time and there is nothing you can do about it.
Why might a personal crypto wallet be better than an exchange?
The most popular alternative to storing your crypto in an exchange wallet is to store it in a personal crypto wallet. Hot wallets enable you to store your crypto online whereas cold wallets allow you to store your crypto offline via hardware. Either way, you own your crypto.
Pros of storing your crypto in a personal crypto wallet
- When you store your coins such as enjin coin in a personal wallet, you are in control of your crypto. You do not have to trust anyone with any of your information. There is no middle man and no trust required. Your crypto is in your hands and your hands only.
- Having more control over your crypto can mean higher security. When you store your crypto offline in a cold wallet, your crypto never goes online. Your crypto is safe from cyber hackers as they would need access to both your private keys AND your physical wallet to access your funds.
Cons of storing your crypto in a personal crypto wallet
- If you lose your passphrase or fall prey to a cyberattack, your crypto is not insured. You and only you are responsible for your crypto which means you cannot expect compensation from anybody else.
- If you store your crypto offline such as harmony crypto in a cold wallet, you need physical access to your device to be able to access your crypto. This means that you cannot access your crypto from any computer and losing your wallet means losing your crypto.
- Personal wallets leave your crypto idle when it could be earning interest.
Personal wallets vs exchange wallets: Which comes out on top?
Crypto wallets and exchange wallets each have their advantages and disadvantages. Ultimately, your preference will likely come down to the amount of control you want to have over your crypto.
If you want to keep your crypto safe and easy to access AND earn interest on your crypto, we may have a solution for you with peer to peer lending for bad credit.
Store your crypto securely and earn interest up to 11% at MyConstant
Unlike exchanges, we’re designed to be non-custodial, protecting your investments by sending the majority of funds to our U.S.-registered trust partner, Prime Trust. They use a mixture of hot and cold wallets to ensure your crypto is as safe as possible and accessible too.
Not only do we do everything we can to keep your cryptocurrency safe, but we also offer interest up to 11% on BTC, ETH, and BNB with one of the best p2p. Try finding THAT on an exchange.
Interested in online storage options outside of the exchange or a personal wallet for over 70 different cryptos? Want better crypto loan options for your idle funds? Sign-up for a free account today and see how you could be doing more with your money.
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