What is a Cryptocurrency Wallet, Exchange and PortfolioKehinde LAWAL
A cryptocurrency wallet is different from the common wallet in the sense that it doesn’t actually hold any funds/cryptocurrency(crypto). It’s only an interface to access, send and receive funds on the Blockchain. It only contains cryptocurrency private keys and public keys. It’s the private keys that hold or have access to send Unspent Transaction Output(UTXO) on the Blockchain.
A private key is just what confirms that you have the ability to send a particular fund on the Blockchain. Without your private keys, you won’t be able to send your cryptocurrency. However, newer cryptocurrency wallets/clients have an easy user interface that doesn’t require you to always input your private key whenever you want to send a transaction.
The two types of wallets are Hot and Cold wallets. Hot wallets are wallets that are always connected to the internet, examples are Coinbase, Paxful and Blockchain.info wallet. Unlike hot wallet, cold wallets are wallets that are not always connected to the internet. You only need to connect them to the internet when you want to send a transaction. Examples are Ledger Nano and Trezor.
Hot Wallet vs Cold Wallet
The advantage cold wallet has over hot wallet is that it’s less prone to attacks from hackers since they’re not always connected to the internet. However, they might not be easy to use like hot wallets.
Crypto exchanges are platforms that enable you to buy, sell and transfer cryptocurrencies. Majority of this exchanges are centralized and controlled by a trusted third-party. This means they provide services and support to satisfy both buyers and sellers. Many exchanges charge a commission ranging from 0.25% to 1% on any transaction executed on their platforms.
Moreover, many exchanges do serve the purpose of a wallet. However, it’s not advisable to store your crypto on an exchange. You should always withdraw it to your local wallet. The common and secure crypto exchanges are:
A portfolio simply means a collection of goods or valuables. In this case, a crypto portfolio is a combination of various Cryptocurrencies.
Do watch the video above to know more about using wallet, exchanges and portfolio management tools.