If the discourse around and about cryptocurrency has encouraged you to venture into the market of digital tokens, it’s important that you understand the various components of it. And before you take a deep dive into this ecosystem, make sure you know enough about what makes the world of digital tokens function, where they are stored, and how safe they are. And when we speak of storing cryptocurrency, two significant but different components come to mind. Cryptocurrency wallets and cryptocurrency exchange.
Just as you don’t always carry your cash in hand and instead store it in your wallet, a cryptocurrency wallet is similar in many ways. It stores your digital tokens and keeps them safe just as your bank keeps your savings safe. Besides, a crypto wallet also facilitates sending and receiving digital currencies. Since cryptocurrencies are not tangible or in a physical form, these wallets store them and a user or owner of the wallet can make use of them as per his need.
There is another significant aspect of your crypto wallet and they are the keys. Your wallet has private and public keys that help you control as well as make your wallet function. The private keys help you sign a transaction, meaning they are similar to passwords when it comes to spending your digital tokens. And that’s why you have to ensure they remain safe. If anyone gets access to your private keys, you might lose all your balance.
The public keys, on the other hand, act similar to your username on a payment app and help you receive crypto tokens from other users.
As the name itself suggests, a cryptocurrency exchange is a platform that helps a user to buy and sell tokens. The exchange can be accessed on the internet as well as through an app. Not only does it facilitate buying and selling crypto tokens but also allows you to convert your money in fiat currency into digital tokens of your liking. The major difference between a wallet and an exchange is that the purpose of the former is primarily storage while the latter facilitates transactions as well as the conversion of currency into cash and vice-versa.