If you are just starting with cryptocurrency trading, you need to know the difference between wallet and exchange. Both of them are great means to help you in trading by making faster transactions on a peer-to-peer basis. Exchange and wallets are used not only for Bitcoin but for other cryptocurrencies as well, which is why you should have both operating simultaneously. But one question which keeps arising is whether these services are safe to use or not.
Bitcoins and altcoins are both mined through an extensive process which is why their value is significant. Any security breaches on the service provider’s part can cause a significant loss for the investor. In this article, we will get to know about the basic features of crypto wallets and exchanges. We will also try to answer which one is safer.
What is a Cryptocurrency Exchange?
A cryptocurrency exchange is a platform that allows you to buy and sell any cryptocurrency like Bitcoin, ether, or dogecoin at fixed rates. A distinguishing feature of exchange is that you can convert fiat currency into a cryptocurrency and vice versa to make the transactions to and from your bank account.
The exchange service also offers high compatibility with affiliated bank accounts. Using an exchange platform makes the entire process extremely easy, which would otherwise have required painstaking efforts to agree on a specific price before the transaction. Learn more through jt.org.
How to Keep it Safe?
An exchange is typically designed to be safer than a wallet, but still, it may be vulnerable if you are not clear about your security policies. Here are some common ways that will help you keep the crypto exchange account safe.
- Begin by researching the different platforms available and choose one which offers the best service. Different platforms for different facilities have a checklist of security options and choose accordingly.
- You should be ready for the off chance that your account will be targeted. Mitigating with this idea in mind will help you keep the cryptocurrency safe. Ideally, you can operate multiple accounts at once in relation to different cryptocurrencies, which will protect some of your digital assets if one account is attacked. Always have multiple accounts if investing in multiple cryptocurrencies and have two-factor authentication in place.
- Your private key is your access to your exchange account and can make anyone steal your digital assets. A private key is an alphanumeric code that you need to memorize rather than write on a notes app. Try not to write it on your mobile phone because third parties can access it. Either memorize it or keep it behind a firewall that the hackers cannot access.
What is a Crypto Wallet?
On the other hand, A crypto wallet is the main function of storing the crypto coins that you have bought or mined. Crypto wallets are known for being a safe medium to store required amounts of coins through the use of private keys. Since crypto functions on the digital platform, the private keys are the only source to make online storage feasible and secure.
All the transactions related to a particular currency are stored on the blockchain. The security of a crypto wallet is directly dependent on how safe a user is keeping their private keys. A private key is just as important as your ATM pin. If you lose access to your private key, your digital assets become vulnerable to fraud.
How To Keep it Safe?
Cryptocurrency wallets are the points that make your digital assets very vulnerable. Even though these service providers offer utmost security, there are still privacy breaches that can impact the safety of the transactions and steal your assets. Here are some standard methods through which you can keep your cryptocurrency safe while using a wallet:
- Hot wallets are mostly used by users when they are going to engage in a transaction immediately or in a short period of time. Experts do not advise storing digital assets in hot wallets for a longer period of time because they are more vulnerable to cyber-attacks. Many platforms offer a code wallet facility, which means that the cryptocurrency will be safe from any malicious activity is because code wallets are not connected to the internet.
You can easily transfer the coins from the cold to the hot wallet when you need to make a transaction.
- Protecting your network is an important way in which you can make secure transactions. Experts recommend whitelisting certain IP addresses so that the system will automatically block any other sources trying to connect during the transaction. You can also use VPN services so that an attacker cannot access your location.
- If you want to be extra safe, you can invest in different wallet platforms and use only one of them for regular transactions. Keeping different wallets for different cryptocurrencies will also help diversify your portfolio and make management more effortless.
- Your phone or computer should be secure at all times, so invest in a good antivirus. Keep changing the password regularly because it adds another critical layer of protection to your crypto wallet.
Which is Safer?
Both crypto exchanges and wallets are vulnerable to attacks. You can prevent security breaches through some safety practices. Crypto wallets are typically more vulnerable to attacks, especially if the coins are stored in a hot wallet. Exchanges are only safe as long as you take care of the network you are browsing through and do not give anyone access to the private key.
To conclude, an exchange offers the buying and selling feature along with coin storage facilities. A wallet, on the other hand, offers storage services but typically is not as much used as an exchange is. The wallet on exchanges has different functions, so the same service provider offers both of these services separately. Both of these platforms require some vigilance on the user’s path to ensure the complete safety of the transactions and the digital assets.