Cryptocurrency storage is one of the most pressing issues for holders. There are dozens of wallets, but wallets in which it would not be scary to put a large amount of money just a few. As a result, many come to the conclusion that there is no point in transferring money from one unreliable place to another and they keep cryptocurrency right on the stock exchange. Is there really no difference between the current cryptographs and reliable exchanges? Let’s try to figure out in the article!
The principle of storage of cryptocurrencies in wallets and exchanges
There are devices designed for the storage of cryptocurrencies and appropriately protected – hardware wallets. However, the principle by which the storage of cryptocurrency and the execution of operations with them is implemented comes down to the three options.
By registering on the exchange, the user creates an account on its servers. Wallets numbers, keys to them and other information are stored, respectively, in the same place. The user can access funds from any place where there is Internet by logging in to the account on the exchange with a login and password (and / or other data).
The only difference with an online wallet is that wallets can provide more opportunities when making transactions and exchanges are sharpened for exchange and trading, therefore, a large number of functions for money transfer are usually not provided.
Storage of cryptocurrencies in the wallet and on the stock exchange: transfers and recharge
However, the stock exchange can be used as a crypto-storage. Special addresses are generated in wallets and on exchanges, which are the “number” for money transfer and represent a random number dial letter.
A person who wants to transfer a crypto money to another, asks him for this address number and indicates it as the recipient address when creating a transaction. The funds will be credited to the address, regardless of the system in which it works – in the program’s wallet on the computer or in the account on the exchange.
The system works in the opposite direction. The user, who stores cryptocurrency on the exchange, indicates the address to which he wants to transfer money. His address or the address of the person to whom he wants to pay it does not matter. The exchange transfers money, the recipient receives it exactly the same as if they were transferred from a local OTC wallet.
Cryptocurrencies fall on the user’s balance in three ways, either from his own wallet or from someone else’s or through a mining program for coin mining, which indicates the address of the wallet.
There are multi-currency wallets that support several types of crypto-coin, and single-currency wallets that support only one currency. You can usually see the list of supported currencies on the official website of the resource.
With exchanges, the vast majority of cryptocurrencies are trading at large. Although some (say, failing ICO tokens) may never enter the exchange.
Only certain systems, certain cards, and so on can be supported on different cryptoresources. It depends on the resource agreements with the respective companies.
Typically, large exchanges operating in the jurisdiction of states that support and regulate cryptocurrency, have agreements with a number of payment systems of the same state or international.
Small semi-legal exchanges are more difficult to negotiate with traditional systems, so there may not be support for fiat funds. In purses, fiat money with a few exceptions is not supported.
Storage of cryptocurrencies in the wallet and on the stock exchange: security issues
For the same reasons, online wallets sin for the same reasons, as a result of which they are also not popular. Programs wallets are considered more reliable for a number of reasons.
Most purse creators really declare data storage only on the user’s device. However, it is impossible to verify this in the same way as the security of cryptographic storages. And if the data is duplicated on the server, then the wallet and cryptobirth assume the same risks.
Some popular cryptobirds have evolved over the years, have legal status and are tracked by official structures. It is more profitable for their owners, simpler and safer to compensate users for losses in case of misunderstandings than to block accounts, divert money from users’ accounts and so on.
Large cryptobirds can afford to hire specialists in cryptography and provide the exchange with servers that will not fail even in case of “weighting” of user accounts by introducing additional levels of protection.
Wallets are often created by lonely enthusiasts who, with all their qualifications, are unlikely to be able to cover all security issues and to do it qualitatively. What is more reliable – a team of cryptographic specialists or half a dozen people who provide the work of the wallet? This is one more question.
Storage of cryptocurrency in the wallet and on the exchange: what to choose?
On average the exchange of software protection pay less attention than the creators of the program wallets and stock exchange accounts, being located on third-party servers, reasonably less credible.
However today, an investor should be guided not only by security issues, because sometimes the reliability of exchanges and wallets is almost equivalent with the greater profitability of exchanges. Therefore, when choosing the optimal storage, it is better to rely on the goals and circumstances of using cryptocurrencies.
Wallet is preferable for long-term storage of a cryptocurrency. For several months and even more so years any stock exchange can change drastically. The wallet has the same risks, but to a lesser extent. In addition, the exchange often breaks open.
However, for large investments, the option with the exchange should be considered carefully, since they assume that the investor is going to work with the portfolio for more than one month. There is a risk described in the case of long-term investments.
Perhaps the way out for such an investor will be diversification – storing the main part of the assets in the wallet, and a small part, by means of which the portfolio will be optimized, – on the stock exchange.
If the user plans just pay in cryptocurrencies, then the wallet is suitable for him if he is not particularly going to use fiat money, and the exchange, if he intends to actively use them. However, the exchange here will be used as an exchanger, so if the user knows reliable exchangers, then he can do without exchanges.
However, a lot of depends on the amount of money. If the user has substantial funds in cryptocurrencies and intends to use them occasionally and little by little, then the wallet seems to be a more reliable repository.
For the trader is better suited exchange. Sometimes traders distribute active funds to several reliable exchanges in accordance with their trading volumes on each of them.
However, if not all funds are used for trading and earnings are considered as a long-term investment or a component of a portfolio, then it should be kept in an appropriate way – not on the stock exchange.
In general, the most reliable strategy for storing cryptocurrency is the distribution of assets among several reliable resources. Wallets are at least one of these resources almost always, because there are no alternatives yet.
Exchange – as needed. If an investor notices that he often has to use the exchange, then it is quite reasonable to use the account as a wallet on a large resource. Otherwise, it is better to make a choice in favor of security.