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What is the difference between a cryptocurrency exchange and a wallet?

This question difference between a cryptocurrency exchange and a wallet pop up often, and we will explain it.
What is the difference between a cryptocurrency exchange and a wallet?

What Is A Cryptocurrency Wallet?

Сryptocurrency wallet

Cryptocurrency is an online form of currency that enables you to quickly and easily purchase anything from online sites with zero fees.

That's because cryptocurrency is not tied to just one country or company, which can make it more foolproof and safe. To purchase items online, the owner of a cryptocurrency chooses a cryptocurrency wallet. The wallet acts as a bank account of sorts, but there are subtle differences.

Simply put, it is the setting that you will use to save and send your coins. Like a bank account, you enter private information into the site to set up your wallet with whichever storage system you prefer, storage systems include things like cloud-based wallets or HD hardware wallets.

A cryptocurrency wallet is very straightforward in terms of managing it and getting everything set up. All you have to do is transfer the exact amount of money that you'd like to show as available in your virtual account from one of your credit cards or over from your traditional bank account into the virtual account on the webpage where your wallet exists.

The idea is pretty simple; make sure that everything shows up in your virtual "bank" and free space will be granted for future transactions. Easy as pie!

Types Of Wallet

  1. Physical Wallet

    Physical crypto wallets or also called cold wallets are the most basic and one of the highest-security types of cryptocurrency wallets. These are physical devices that store your private key offline, meaning they are not connected to an intro internet.

  2. Digital Wallet

    Digital wallets facilitate the storage, send and receipt of cryptocurrency to an account address- typically a long string of numbers and letters different from your credit card number or phone number. Setting up a digital wallet is easy and can be done by opening a wallet app on your home screen on your smart phone, tablet, or by downloading an application from Google Play Store or Apple’s app store. Opting for a digital wallet offers many benefits like easy withdrawals, obtaining coins via in-app purchase, and receiving alerts when payments arrive in its account address.

  3. Desktop Wallet

    Generally any Bitcoins stored online on exchanges would count as desktop wallet crypto because they need internet connectivity even if they are offline at the time and location receiving funds. A desktop wallet provides somewhat more security than are paper wallets because desktop w solders could never get hacked due to hoses wireless connection but unlike cold wallets they do have limited storage capacity space.

What Is A Wallet Address? 

Wallet address

When you create a bitcoin address, the wallet generates an alphanumeric key pair, also known as your private key and public key or your crypto wallet address. The "public" part of this process is assigning a 26-35 character string of letters and numbers. They are in the unique format of they begin with an ‘1’ (number one) but the length of the rest of the digits varies.

The "private" part of this process is assigning a 256-bit hexadecimal number that they know by keeping it invisibly protected on their device(s) or by storing it in various encrypted storage media.

What Is A Cryptocurrency Exchange

Some people think that a cryptocurrency exchange is like an auction house that sells this valuable resource.

A cryptocurrency exchange is more like a large counter that operates on the pool of interest and demand, in order to sell, buy or trade cryptocurrencies.

A cryptocurrency exchange can be said to be a middleman between traders who want to buy or sell their assets. In the finance world; there are asset exchanges such as exchanges for currency, futures contracts and derivatives. The financial world uses these exchanges to facilitate trades so as to avoid the risks of counterparties not following through on traditional dealings.

Regardless of whether it is an individual trading bitcoin, an ICO launching their own token, or a venture capital investor taking advantage of a crypto-crowdsale (ICO), they will need someone they can transact with who will represent them on the exchanges.

Generally speaking, one can purchase tokens via currency conversion or by exchanging other coins (i.e Bitcoin) directly for ICO token through an auction-type style process which lines up buyers and sellers together in order to buy tokens at determined prices set by the sellers themselves.

Crypto exchange or crypto wallet?

A cryptocurrency exchange is a digital marketplace where you can buy, sell and trade cryptocurrency.

These exchanges provide public access to cryptocurrency that can be traded with other users. Trading parties are usually based on the order book format, where those that want to buy a cryptocurrency place an orders at the bid price at which they are willing to trade and those who want to sell a cryptocurrency place an order at the ask price for which they are willing to trade their crypto.

A matching engine sets the probabilities of possible trades occurring while sharply limiting slippages. The effect is that trades are usually almost instant with payments being made for each transaction on either side from seller to buyer or vice versa immediately upon agreement.

Crypto Wallet is used as a currency wallet. It let's you access your cryptocurrencies securely in one place. With all your private keys generated right on the app without need to carry anything extra hardware like card, usb etc.

A crypto exchange is used for trading cryptocurrencies like Bitcoin or Litecoin, whereas a crypto wallet provides secure storage of your cryptocurrencies.

A crypto exchange has more typically the order book format and allows the trading of popular cryptocurrencies like Bitcoin or Litecoin. Cryptocurrencies on these exchanges can be traded with other users. A crypto wallet is used as a currency wallet to access secure storage for cryptocurrencies. With this wallet you can create private keys generated only on the app, making it unnecessary to carry anything extra like a card or usb with you.

So, You need both.