What is the difference between Digital Currency exchange and Wallet?

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Since 2009, digital currencies are continuously transforming and have emerged with new opportunities for both businesses and individuals. Due to the anonymity factor and having a decentralized nature, cryptocurrencies have gained global attraction as well as developed a good reputation. However, the fact has to be kept in mind that this market is highly volatile, thus, the price can go high at one moment, and simultaneously can fall on the next point.  Other than this, as cryptocurrency is becoming mainstream, digital crypto money exchanges and platforms are coming up with various services and payment gateways to assist investors to become part of the cryptocurrency ecosystem. 

What is the difference between digital currency exchange and wallet? However, both of them are essential components of cryptocurrency trading, whether one has to buy or sell digital cryptocurrencies. But both of these things fill different parts of the crypto regime. 

Understanding the Basics of Cryptocurrency Exchanges

Like stock exchanges or brokerages, cryptocurrency exchanges and platforms work the same, they help buyers and sellers to initiate cryptocurrency transactions or trading. Furthermore, now investors can also buy crypto with fiat gateways as fiat to digital cryptocurrency trading services are becoming mainstream as well as a catalyst for cryptocurrency rapid adoption. However, to carry out transactions or to register on the platform, the customers need to undergo customer identification procedures by providing a set of government-generated identity documents along with financial information. Once the user becomes a verified client they can place orders, buy or sell cryptocurrency from the provided payment options. In addition to this, the investors can also make payments through various payment options, for instance, bank wires, bank transfers, credit/debit cards, money orders, fiat currency, and gift cards.

Types of Cryptocurrency Exchanges

Centralized Cryptocurrency Exchanges

Centralized digital crypto money exchanges work the same as conventional stock or fiat to digital currency exchange services. However, the cryptocurrency investors whether they are sellers or buyers as the middle party to interact with each other. Moreover, in the cryptocurrency world, the word centralized refers to putting your funds into someone else’s hands while trusting blindly.  But on another hand, they offer high market liquidity.

Decentralized Cryptocurrency Exchanges

Other than centralized, there is another kind of cryptocurrency exchange known as decentralized exchanges, which is truly maintaining the ideology of the crypto regime as it ensures decentralized nature along with the anonymity of the transactions. In this, the investors’ money is not in the hands of the middleman. In addition to this, it’s considered a digital trading platform where two parties meet and initiate sale/purchase activities seamlessly. Moreover, more generalizing this concept, this is also considered peer-to-peer (P2P)  trading platforms. Unlike centralized exchanges, decentralized exchanges are not vulnerable to hacks or data breaches but hold low market liquidity.

Insight of Cryptocurrency Wallets and its Types

In order to become part of the cryptocurrency ecosystem and initiate trading digital crypto money, wallets are an essential component. Like conventional wallets, digital asset wallets help to store and hold cryptocurrencies, on the other hand, it also secures the transaction data. Moreover, other than cryptocurrencies, primary and private keys are also stored. To meet the increasing demand of the investors, custom, as well as basic digital currency wallets, are developed that are all set to help investors across the world.

Hot Wallets and Cold Wallets

Hot wallets are the type of wallets that require an internet connection in order to access and further initiate trading activities. However, hot wallets can be easily begotten from the internet, Coinbase wallet is one of the best emerging ones. On another hand, cold wallets are referred to as wallets that don’t require an internet question and can be accessible in offline mode. As these wallets are not placed over the net, hence there is less chance of getting hacked, unlike hard wallets.

Software Wallets

Another significant type of wallet is a software wallet which is actually an application or computer software that is to be installed into the computer or any smart device. In this web-based wallets are also getting popular as they can be accessed instantly over the internet.

Mobile Wallets

Mobile wallets are quite similar to the software wallets that are specifically developed for smartphones. These kinds of wallets come up with user-friendly interfaces therefore any kind of user can easily use and initiate trading activities.

Paper Wallets

Like cold wallets, a paper wallet is also considered an effective way of storing digital cryptocurrencies without requiring an internet connection. However, this kind of wallet is simply a piece of the printed paper that holds both private and public keys, both can be easily used with the QR code. Thus, as they are considered more secure they are widely being used by mass audiences.

Final Thoughts 

Cryptocurrency exchanges and platforms are continuously emerging in order to fulfill the demand of the increasing number of cryptocurrency investors. However, fiat to digital currency trading services is becoming viable as they are assisting traders that lack payment options.