Before buying crypto, you should research the safest ways to store it. The last thing you want is for all your digital assets to be stolen or lost. So, you might be wondering if crypto wallets are safer than exchanges. Here’s the answer…
Crypto wallets are safer than exchanges because they give you access to your private keys. The exchange technically owns your private keys if you keep your crypto stored on it (this includes Binance). It doesn’t take long to send crypto from an exchange to a wallet, so consider using one.
This article will discuss why crypto wallets are safer than exchanges. It will also discuss the safest types of crypto wallets, so keep reading if this is something you want to learn more about!
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Is It Better To Keep Your Crypto in a Wallet or Exchange?
It is better to keep your crypto in a wallet because you will have more control over it. You can think of a crypto wallet as a real-life wallet. Once you keep it safe, you’re the only person who can access your real-life wallet. For example, you may keep it in your pocket where no one else can reach it. That way, no one can get the money or cards inside it.
It’s the same for a crypto wallet. Once you keep your crypto wallet’s information (such as the password and seed phrase) safe, you are the only one who can access your wallet and crypto.
On the other hand, leaving it on an exchange allows a third party (the exchange) to control your digital assets–this would be like giving a third party full access to your real-life wallet, which you likely wouldn’t want to do!
Why Are Crypto Wallets Safer Than Exchanges?
Let’s look together at some main reasons why crypto wallets are safer than exchanges:
1. They Give You Full Ownership of Your Crypto
While it’s generally OK to leave a small sum of crypto on an exchange, it’s not a good idea to leave large amounts. So, consider a wallet if you plan to buy a big chunk of crypto or slowly build up your crypto portfolio.
When your crypto is stored on an exchange, the exchange owns it. You might think you own it, but you don’t. You can only access private keys if you transfer your crypto to a wallet.
If you’re unsure what a private key is, it’s essentially a string of letters and numbers that lets you manage your crypto. You cannot access this key if your crypto is on an exchange, which can be an issue if the exchange ever gets hacked or ceases to exist (which I’ll discuss in the sections below).
2. Exchanges Can Get Hacked
Unfortunately, exchanges can get hacked. Even the most prominent platforms–like Coinbase–are susceptible to these threats, so moving large sums of crypto to a secure wallet is essential. If your crypto gets stolen due to an exchange getting hacked, you’re not guaranteed to get it back.
Crypto exchanges attract many hackers because of the high amount of private keys stored on them, so they’re great places for thieves to steal digital assets.
3. Your Crypto May Not Be Protected in the Case of Bankruptcy
A crypto exchange could go bankrupt at any moment, and if this happens, your crypto may not be protected. If the exchange goes bankrupt and ceases to exist, the company could use your crypto assets (and the crypto assets of many other users) to pay off any debts. Coinbase is an example of an exchange that can do this.
Many people who use exchanges to store their crypto aren’t aware of these dangers, so they keep everything there. But now that you know of this risk, you should consider a secure crypto wallet.
What Is the Safest Wallet for Crypto?
The safest wallet for crypto is a cold wallet. This type of wallet is not connected to the internet. Cold wallets (also known as hardware wallets) are physical devices you can buy online. Whenever you need to manage your crypto, you can plug them into your computer and log in to your wallet account.
These wallets are less prone to hacking because they’re not connected to the internet, so they’re favorable for people with large sums of crypto. Additionally, they give you full access to your private keys!
If you are considering buying hardware wallets for NFTs, the most popular one is Ledger. It’s not recommended to purchase cold wallets from places like Amazon or eBay because you might not get an authentic wallet. As a result, your assets could be stolen once you send them to your fake wallet.
Instead, purchase them from the company website (for example, Ledger’s official website). Doing this will ensure you get a secure wallet.
Although cold wallets are the safest, there are some cons to consider:
- They’re not very convenient.
- They can get lost. Since they’re small physical devices, it’s possible to lose them. However, you can recover your crypto if you lose your cold wallet once you take note of the seed phrase.
- They’re often expensive. Other types of wallets (hot wallets) are generally free.
The Next Best Thing: A Hot Wallet
The alternative to a cold wallet is a hot wallet, which many people find more convenient because it’s always connected to the internet. So, you can access it from any device (like your phone or laptop) at any time once you have an internet connection. Plus, many are free to download on your smartphone’s app store.
Hot wallets are safer than exchanges because they allow you to own your crypto keys, but they’re not as secure as cold wallets because of the higher chance of hacks.
But if you don’t want to spend money on a cold wallet, a hot wallet is your best bet. An example of a hot wallet is Coinbase Wallet.
Don’t be confused between Coinbase and Coinbase Wallet–while Coinbase is an exchange where you can buy and sell crypto, Coinbase Wallet is a self-custodial wallet, meaning it gives you full access to your crypto keys. So, your crypto will be safer on Coinbase Wallet.
Conclusion
Crypto wallets are safer than exchanges because they give you full access to your crypto. On the other hand, keeping your crypto on an exchange means that the exchange owns your private keys. This could be problematic if an exchange gets hacked or goes bankrupt.
The safest type of wallet is a cold wallet because it’s not connected to the internet, so hackers are less likely to be an issue. However, they can be inconvenient, so you could also consider a hot wallet.
Becoming a millionaire trading crypto, however, doesn’t happen overnight, unfortunately, and 99% of people who try to flip their money quickly trading crypto fail! It’s always recommended to create a steady flow of income so you can invest in a diversified portfolio, and never invest more than what you cannot afford to lose!
If this is something you’d be interested in, my friend John is hosting a free training that discusses a unique business opportunity that can truly change your life, forever! (Click here to go directly to the live event happening now!)
Thanks for going this far! If you found this post inspiring and useful, share it with your friends, please! (Virtual high fives and hugs to all my sharers out there!)
Cheers,
Odeh Ahwal
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