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Your confusion is understandable. With the news headlines full of crypto-related hacks, the mistake can cost you a fortune. For example, during the first half of 2022, cryptocurrency worth <a href="https://edition.cnn.com/2022/08/16/tech/crypto-hack-rise-2022/index.html" rel="noopener noreferrer nofollow">$1.9 billion</a> was stolen from various services as a result of hacks, 60% more than during the same period a year earlier.And the figure has every chance to continue its growth. Where is the safest place to manage your crypto assets? Crypto wallets or exchanges?Before answering, let’s start with the basics: what are crypto wallets and crypto exchanges?<h3 id="strong-quick-take-strong">Quick Take:</h3><ul><li>Сryptocurrency wallets don’t store your crypto, only access to it.</li><li>Centralized exchanges (CEX) are almost the same as banks, but there is the opposite — decentralized exchanges (DEX).</li><li>Security is the most vulnerable point of crypto exchanges.</li><li>The function of today’s crypto wallets goes far beyond just “storing keys”.</li></ul><h2 id="header-0">Crypto wallet is</h2>A cryptocurrency wallet is a place in the form of a software (e.g., a mobile app) or portable device (e.g., a flash drive) in which your private and public keys are stored. They are used to access your funds on the blockchain. That is, wallets store ONLY keys, but NOT the funds.<h3 id="how-does-it-work">How does it work?</h3>With keys, you have full control over your funds (unlike exchanges). Working together, keys allow you to make transactions securely. For example, the public key encrypts the transaction information, and the private key decrypts it. Successful encryption and decryption allow one user to send cryptocurrency and another to successfully receive it.A public key is an identifier for you: it lets someone know that it is YOU who is sending or receiving the funds. Technically, it’s your address on the blockchain (like an address on a mailbox) that you can share with anyone to get the cryptocurrency (a message). A private key is your PASSWORD from your assets (mail messages), which you shouldn’t show to anyone. Whoever holds the private key gains access to all the funds on the blockchain address.ProTip: Keep your private keys in a safe place, or better yet, make copies and keep them in different safe places.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/50f3dc6ee679405d81bb7e6f20c6484c.gif" /><h3 id=""></h3><h3 id="crypto-wallet-types">Crypto wallet types</h3>Crypto wallets are divided into cold and hot, as well as custodial and non-custodial. Cold ones run offline, while the hot ones — online. The first include paper wallets and hardware wallets. The last — mobile apps, web wallets (browser extension), and desktop ones.Hot wallets store keys online, so they are more vulnerable to hacker attacks in cases of network vulnerabilities. Cold non-internet access wallets are by far the most secure for storing cryptocurrencies, but by no means the most convenient for frequent transactions and trading.According to the level of control over assets, wallets are divided into custodial and non-custodial. Often those wallets, which have access to the Internet, are equated to custodial, though it is not always so. The point of a custodial one is that the keys are under the control of the wallet provider. In case you lose access, you will be able to set it up. Non-custodial wallets are completely under your control and responsibility. If you lose your keys or recovery phrase, you lose your assets.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/f4aa39e390aa41659119684b4fa6194e.jpeg" />By the way, we have a comprehensive guide about <a href="https://art-wallet.medium.com/crypto-wallets-for-beginners-3db2dedc0d06?source&#61;user_profile---------3----------------------------" rel="noopener noreferrer nofollow">crypto wallets for beginners</a>, where you can find answers to all your crypto wallet-related questions, their types, their operating process, and security advice.What are wallets used for?The main function of wallets is to store keys. However, today vendors strive for multifunctionality. Thus, wallets can be used to receive, send, buy, and sell crypto, as well as offer token swapping, staking, and access to dApps (decentralized applications).What can present-day crypto wallets offer?<ul><li>Store keys and manage funds</li><li>Trade crypto</li><li>Create <a href="https://art-wallet.medium.com/what-if-you-had-all-in-one-crypto-profile-c63c904a8e6c" rel="noopener noreferrer nofollow">crypto profile</a></li><li>Integrate with other wallet owners within dApp</li><li>Create, store, and share NFTs.</li></ul>A more detailed overview of the wallets’ functions you can find <a href="https://art-wallet.medium.com/why-you-need-a-crypto-wallet-b08d99edfca8" rel="noopener noreferrer nofollow">here</a>.<h2 id="header-1">Crypto exchange is</h2>A cryptocurrency exchange in its broadest sense is a web platform that operates online. It mainly serves to sell, buy and exchange cryptocurrencies. And only then for storage. Most crypto exchanges offer their online wallets, which become available after registering an account on the exchange.There are two types of crypto exchanges: centralized (CEX) and decentralized (DEX).Centralized exchanges can be compared to a bank, which is an intermediary or third party that handles and controls the flow of transactions between users. You can also leave your funds to be stored in an exchange, just like you would leave them in a bank. Unlike crypto wallets, storing assets on a centralized exchange means transferring a kind of responsibility to the exchange (platform). It turns out that by using a CEX, you trust it and rely on the security and liquidity of transactions. Also, CEX requires personal information before a transaction is made.What’s good about CEX?<ul><li>Easy navigation</li><li>Fast and easy transactions and high liquidity.</li></ul>What’s bad with CEX?<ul><li>Your funds are not under your control. If the exchange stops working, you may not get your funds back or you may have to go through a complicated legal process to get your coins back. That is, the safety of assets is directly dependent on the security of this exchange.</li><li>Charging fees for services.</li><li>Vulnerable to cybercrime.</li></ul>Decentralized exchanges, by contrast, have no central authority or third-party responsible for handling transactions and holding assets. The main difference between DEX is that their technical part is smart contracts (in other words, code), which allows them to automate transactions and conduct transactions. Simply put, no third party, as in CEX, is needed to perform them.If a smart contract is built correctly with a high degree of security, it is difficult to hack. Consequently, a DEX with such a smart contract is considered safe both for transactions and for storing cryptocurrency. Moreover, if we go deeper into the technical part, a smart contract provides functionality for better liquidity due to the pooling mechanism. In other words, users pool their assets in a smart contract to ensure better liquidity and facilitate asset exchange.What’s good about DEX?<ul><li>Doesn’t require the personal information</li><li>Assets are not managed by a third party.</li></ul>What’s wrong with DEX?<ul><li>Liquidity can be low, making it difficult to execute large transactions</li><li>Can be difficult to navigate</li><li>Compared to wallets, DEX lacks user-friendliness.</li></ul>What is the difference between wallets and exchanges?<h3 id="strong-the-security-issue-is-the-main-difference-between-wallets-and-exchanges-strong">❗️The security issue is the main difference between wallets and exchanges</h3>Exchanges are mainly for trading, while wallets are for storing. Therefore, technicians take many measures to ensure the safe storage of currency. While exchanges offer their web wallets, they are rather an additional feature than a basic one.A private key, a public key, and a seed phrase, which are the main components of a wallet, provide more secure storage of currency than just an exchange. In addition, exchanges are more vulnerable to attack than wallets, although attacks on the latter have not been excluded. In fact, between 2011 and 2018, there were more than 60 major hacks of cryptocurrency exchanges worldwide, resulting in losses of <a href="https://hackernoon.com/the-12-6-billion-black-hole-are-your-assets-protected-7ee34d9c810e" rel="noopener noreferrer nofollow">$12.6 billion</a> to investors.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/a01b2bd316504dcbb53e7041f4e35130.png" />At the same time, the total revenue from the scam for 2022 as of mid-August is <a href="https://blog.chainalysis.com/reports/crypto-crime-midyear-update-2022/" rel="noopener noreferrer nofollow">$1.6 billion</a>, down 65% from the end of July 2021, as per Chainalysis.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/6f2b35b2f4654d7299ff66ab23294ed2.png" />This decline can be explained by the recent fall in the prices of various cryptocurrencies due to the crypto winter. However, constant hacks have led to more and more interventions at the state level: all to improve the regulation of crypto exchanges. Thus, a “track and trace” approach to transactions is thought to better protect crypto investors from fraud, industry experts <a href="https://www.smh.com.au/money/investing/scammers-shift-their-sights-from-card-payments-to-crypto-20220825-p5bcrv.html" rel="noopener noreferrer nofollow">say</a>. However, such regulation may lead to limited activity on the exchanges and they will prove to be useless in terms of currency storage.It turns out that crypto wallets are the safest for storing and managing currency? It is one of a safe, but not an ideal option, although a cold wallet is closer to that definition. <a href="https://art-wallet.medium.com/most-crypto-wallets-arent-secure-what-about-yours-2bfc3c39dba4" rel="noopener noreferrer nofollow">Most online crypto wallets are also insecure</a> and susceptible to constant hacking. Popular browser wallets such as <a href="https://www.coindesk.com/tech/2022/06/15/metamask-phantom-and-other-browser-wallets-patch-security-vulnerability/" rel="noopener noreferrer nofollow">MetaMask and Phantom</a>, as well as users of no less famous <a href="https://www.vadesecure.com/en/blog/hacker-impersonates-trustwallet-in-crypto-phishing-scam" rel="noopener noreferrer nofollow">Trust Wallet</a> also became victims of fraudsters. Moreover, according to the <a href="https://techcrunch.com/2022/08/03/solana-wallet-hack/" rel="noopener noreferrer nofollow">source</a>, the losses from the hacking of more than a thousand Solana wallets amounted to about <a href="https://twitter.com/PeckShieldAlert/status/1554674781383180289?ref_src&#61;twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1554674781383180289%7Ctwgr%5E9efe7ae5ccf152cfaa357ef15c5b2320e520623c%7Ctwcon%5Es1_&amp;ref_url&#61;https%3A%2F%2Fcointelegraph.com%2Fnews%2Fongoing-solana-based-wallet-hack-has-already-seen-millions-drained" rel="noopener noreferrer nofollow">$8 million</a>.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/baeb603a408846b7b373b0319ea9ded7.png" />ProTip: If you often trade on an exchange, it may be more convenient to keep small amounts of cryptocurrency there, but for storing large sums, a wallet is a better choice.A matter of control and responsibilityWallets have the primary function of giving you complete control over your funds. With that comes a lot of responsibility. If you’re ready for full control of your assets and the inability to access them if you lose your keys, non-custodial wallets may be your choice.If you are prepared for your assets to be accessible to a provider who can restore access to them if it is lost, then you may consider custodial wallets. Anyway, keep in mind that it is possible to store assets on an exchange, but it is not considered a safe place for that purpose.Functionality issueAs mentioned above, exchanges are for trading, wallets are for convenient and secure storage. However, more and more wallet providers bring full-featured solutions to the market. As a result, a crypto wallet today is not just about storage, it’s about advanced functionality. However, often the extended functionality is followed by a complicated and intricate interface that scares away users who are not ready to leverage even a small part of the functionality.After studying <a href="https://www.cryptowisser.com/wallets/" rel="noopener noreferrer nofollow">more than a hundred wallets</a> on the market and learning the pains of crypto-users, <a href="https://oneart.digital/en" rel="noopener noreferrer nofollow">OneArt</a> is building its universal, multi-blockchain-enabled wallet with a user-friendly interface, secure management and storage of cryptocurrency and NFTs at its core. And that’s just the beginning.<img src="https://academy-public.coinmarketcap.com/srd-optimized-uploads/75dd613a7a464d5488b6c2ec8636e691.png" /><a href="https://oneart.digital/" rel="noopener noreferrer nofollow">Website</a> |<a href="https://twitter.com/BNBCHAIN" rel="noopener noreferrer nofollow"> </a><a href="https://twitter.com/art_wallet" rel="noopener noreferrer nofollow">Twitter</a> |<a href="https://t.me/BNBchaincommunity" rel="noopener noreferrer nofollow"> </a><a href="https://t.me/artwallet_official" rel="noopener noreferrer nofollow">Telegram </a>|<a href="https://www.youtube.com/c/bnbchainofficial" rel="noopener noreferrer nofollow"> </a><a href="https://www.linkedin.com/company/oneart/" rel="noopener noreferrer nofollow">LinkedIn</a> |<a href="https://www.buildnbuild.dev/" rel="noopener noreferrer nofollow"> </a><a href="https://apps.apple.com/us/app/oneart-nft-wallet-browser/id1600729515" rel="noopener noreferrer nofollow">OneArt app (iOS)</a>

Crypto Wallets vs. Crypto Exchanges: Which is Better?

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