Published April 26, 20226 min read

Cryptocurrency: Difference between Wallet and Exchange

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CoinMooner Team
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Businesses and individual investors always look for better financial terms. When it comes to the crypto wallet vs. exchange question, they need clear and competent explanations on what to select. Our experts have prepared the answers. Please continue with the review to get the details.

Crypto Exchange and Wallet: How Do They Work?

Crypto wallets and exchanges operate differently. A wallet contains unique private/public keys that should be used for sending and receiving digital money as well as monitoring balance. A crypto exchange is a virtual platform for selling and purchasing tokens. Many exchanges provide chat, a news feed, rate analytics, etc.

What Is a Crypto Wallet?

It is unique software for receiving and sending various types of cryptocurrencies. Cold/hot wallets provide the highest security level and ease of usage. Cryptocurrency wallets are not designed to store coins. They offer tools for interacting with a blockchain. Wallets can generate essential data to send and receive cryptocurrency through transactions.

Main Purpose

When comparing a crypto exchange and a wallet, investors should realize that the main purpose of the latter is to store passwords to your cryptocurrency. It allows keeping wallets secure and ensures safe crypto storage. Investors can use wallets to receive, spend, and send various types of digital currencies.

Types of Cryptocurrency Wallets

Currently, there are several types of cryptocurrency wallets. The key ones are hardware or cold wallets like Ledger and online hot wallets like Coinbase. They have slight differences. Let us have a closer look at them.

Hot wallets

It is a software crypto wallet. Investors can use them on their PCs or smartphones. Thus, a stable Internet connection is needed. The wallet is connected to the server and works with cryptocurrency transactions using web pages in your browser. The key role of hot wallets is to approve and sign transactions. Hot wallets are more open to cyber-attacks because they operate online. The most popular types of hot wallets are Coinbase, Trust, Edge, Exodus, and some other wallets.


Cold wallets

These are hardware wallets. It is a device where an investor’s private keys are securely kept offline. They cannot be reached via the Internet. A blockchain records all your transactions, and you can access them using a hardware device only. When deciding on keeping your crypto in a wallet vs. exchange, you should know that cold wallets allow doing it much more securely. Investors mostly use such popular hardware wallets as Ledger, CoolWallet, KeepKey, Trezor, and some others. Their average price varies from $50 to $200.


What Is a Crypto Exchange?

A crypto exchange is a web-based online platform for selling, buying, and converting various types of crypto. Their exchange rates are formed in the same way as on traditional stock exchanges. Crypto exchanges offer their own crypto wallets. You can access them after registering a new account on an exchange platform.

Main Purpose

The key idea of any crypto exchange is to let consumers get easy and quick access to their crypto account data. It offers clear instruments, such as balances, for saving, selling, and purchasing crypto easily. Comparing a crypto wallet and an exchange, it becomes clear why investors prefer dealing with exchanges. A crypto exchange is a kind of digital bank where all info about your assets is gathered in a single place.

Types of Cryptocurrency Exchanges

Presently, there are three main types of cryptocurrency exchanges. These are hybrid exchanges (HEX), centralized exchanges (CEXs), and decentralized exchanges (DEX). Please check out the details below.

  • Centralized exchanges. It is the most widespread type where all trade transactions are processed by the exchanges’ servers. Users’ accounts and their wallets are controlled by the exchange and are given for use under certain terms. Such platforms support pairs with cryptocurrencies and fiat currencies. There are such well-known centralized crypto exchanges as Binance, Bitmex, Currency.com, EXMO, etc.
  • Decentralized exchanges. Decentralized exchanges have neither a single governing body nor intermediaries. DEXs are DeFi platforms based on the blockchain network. These crypto exchange platforms are managed either automatically (smart contracts) or semi-automatically (by developers and the community). They operate on the P2P principle and do not require registration. Decentralized exchanges don’t store clients’ funds. Among the trusted decentralized exchanges, there are Binance Dex, IDEX, Kyber Network, Bancor Network, etc.
  • Hybrid exchanges. Platforms of this type are launched to prevail over certain restrictions in DEXs and CEXs. HEX exchanges are still emerging. Thus, they are projected to accumulate the best features of the mentioned exchanges. The most popular types of hybrid exchanges are Eidoo, Qurrex, and Legalos.
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    Crypto Wallet vs. Exchange: Key Differences

    There are some differences between a cryptocurrency wallet and an exchange. It concerns deposits, fees, withdrawals, returns, and other issues. Our experts have analyzed all of them in detail.


    Holders can top up crypto wallets using various means, including credit cards, bank wire transfers, e-wallets, cryptocurrency exchanges, or buying coins from intermediaries. Crypto exchange accounts can be deposited in the same way. However, exchanges charge larger fees and set higher withdrawal limits.

    Airdrops, forks, & ICOs

    Crypto exchanges attract and encourage new clients by offering them airdrops. It is the distribution of coins and tokens for free to new users or people who already own a certain digital currency and use the platform regularly.

    Moreover, crypto ICO tokens can be purchased on major exchanges. It may be a good type of investment. Many crypto exchanges also provide a trade with lucrative options for trading forks, such as SegWit, ETH Classic, or BIP 66. Crypto wallets don’t deliver such opportunities because they don’t feature trading options.

    Withdrawals & fees

    When comparing a crypto wallet vs. exchange, fees do matter. Fees on cryptocurrency exchanges directly depend on the trading volume. The larger the volume, the higher the fees. Therefore, large exchanges often attract new customers with low withdrawal fees. However, some crypto exchanges charge very high fees for withdrawing certain altcoins. For withdrawal of funds, the user must pay platform fees, payment processing fees, and withdrawal fees.

    Withdrawals & smart contracts

    All users of decentralized exchanges use smart contracts to make deals or sell and purchase coins without intermediaries. Smart contracts are supported by ETH, Solano, Cardano, Elrond, etc. Using smart contracts for trading results in saving time and resources. The absence of intermediaries allows making transactions at lower costs.


    When evaluating a crypto wallet vs. exchange, investors always pay attention to possible returns. Crypto exchanges offer trustworthy methods for making a real profit. The key options are investing, trading, forks and airdrops, lending, and staking. Potential investors should study all conditions an exchange offers for any type of getting possible returns. Users of crypto wallets can get significant returns by mining or trading existing coins on exchanges.

    What to Choose for Beginners

    Investing in digital currency is rather a complicated process for beginners. Inexperienced investors have to choose the right crypto wallet vs. exchange so that it corresponds to their goals. So, it is recommended for beginners to use crypto wallets to store private keys safely. They can also start using Gemini and Coinbase as the most beginner-friendly crypto exchanges.



    So, now you are aware of the main features of storing crypto in an exchange vs. wallet. Depending on your goals, you can select any of the options. From this review, you have already learned the key differences between them and the opportunities they offer. We recommend that you try both options and compare their pros and cons by yourself.

    Frequently Asked Questions

    What Is Crypto Wallet And Exchange?

    A crypto wallet is a software solution designed for sending and receiving cryptocurrency, while an exchange permits trading crypto coins and converting them into various fiat currencies.

    How to Choose Between Crypto Wallet vs. Exchange?

    It depends on why you need to keep crypto in your wallet or exchange. If you wish just to send and receive coins, it is better to use a crypto wallet. If you aim at trading cryptocurrencies and getting a recurring profit, a crypto exchange should be used.

    Are There Any Similar Features in Wallet and Exchange Working?

    Both of them deal with various cryptocurrencies. If you carefully study all their investment opportunities, you can wisely use them to get a recurring income.

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