If you’re reading this article, it would be fair to assume that you’ve heard of cryptocurrencies. You might also know what the term cryptocurrency wallet means. If you don’t, here’s a quick primer: A digital currency wallet is essentially a bank account for your coins and currencies. It acts as an interface between the user and the coins stored, allowing users to send and receive currency as well as check their balance or convert currencies.
When you store your coins in a wallet that isn’t controlled by a third party, it’s easy to see why many people refer to them as being stored in a bank account. The wallet is not only a storage facility but also protects your currency from theft by allowing you to set up certain measures that would prevent unauthorized persons from accessing your coins.
There are quite a few reasons why it is advisable for beginners and crypto enthusiasts, in general, to store their currencies in wallets rather than on cryptocurrency exchanges (like Bitcoin Up). Let’s go over some of them:
Exchanges Store Your Coins in a Centralized Location
Cryptocurrency is decentralized, meaning it’s stored on servers and computers across the world by different users. This means that there is no governing body (like a bank or financial institution) that can control those coins or dictate how they should be accessed by different users.
When you store your cryptocurrency on exchanges, you are leaving your coins in a centralized location. This means that the coins are stored in a single location and can be easily hacked into by criminals who can steal your coins to their heart’s content, with no ramifications.
Exchanges Lack Transparency
Exchanges aren’t required to disclose how they store or secure your coins or where exactly they’re being held. This makes it impossible for you to know whether your coins are being securely stored – only the exchange knows how they’re handling that information.
In addition, some exchanges don’t operate transparently and can engage in the practice of “frontrunning” where users who have access to privileged information buy cryptocurrencies before other users on the same exchange receive those signals from market influencers like newsletters or news outlets.
Exchanges Can Limit Your Coins’ Availability
Many exchanges charge users to make withdrawals, meaning that if you want to withdraw your coins from the exchange after a certain amount of time (usually more than 1 hour), it would cost you fees on top of any transaction fees that may be associated with making the withdrawal.
Because of this, it’s possible that you may not be able to access the coins when you need them or that they could become available to you at inconvenient times (when fees are high). This can result in missed investment opportunities and lost revenue.
The alternative is much simpler: find an appropriate wallet for your currency and store it in a secure location to which you alone have access. In the next section, we will go over how to find a wallet for your cryptocurrency.
It’s easy to see why cryptocurrency wallets are important and valuable in today’s world. Exchanges simply can’t provide the same security or reliability as a wallet because it puts coins in a location that is centralized, vulnerable to attacks, and where you don’t have access to key information like how they’re secured.
By storing your coins in an appropriate wallet, you eliminate the risk associated with storing them on exchanges and can use your money at a time that is convenient for you.
Interesting Related Article: “Is Cryptocurrency a Good Investment?“