HomeContributionsWhy Hardware Wallets Are Better than Exchanges to Store Cryptocurrency

Why Hardware Wallets Are Better than Exchanges to Store Cryptocurrency


This article was contributed by Muhammad Usama, a SEO specialist working for Softwarebench.

A cryptocurrency wallet is a platform that allows an investor to keep all of their cryptocurrency in one place. People can choose between a hot and a cold wallet. A hot wallet is always online, whereas a cold wallet is always offline. The majority of crypto owners however should choose cold wallets because they are less vulnerable to hacking and other security threats.

A cryptocurrency exchange, on the other hand, is a website or service that allows users to sell or purchase digital currency or convert fiat currency into digital currency. It is entirely up to you whether you keep your Bitcoin, Ethereum, XRP, or other cryptocurrencies and tokens, in an exchange or in a wallet.


However, storing your digital currency on an exchange may result in the loss of all of your digital currency if the exchange is hacked or if the exchange owners trade the currency and lose, get bankrupt, or simply run away (as ridiculous as this sounds, it has happened before). Furthermore, maintaining your digital money will require you to deal with difficulties like backup, security, and wallet management. Always consider the dangers before choosing between a wallet and an exchange.

Crypto exchange market rates fluctuate similarly to stock exchange market rates. Exchanges have wallets, which are generally web-hosted wallets. These types of wallets differ as they are wholly provided by the respective exchange unlike other web-based wallets, like Guarda, which are third party applications. To get access to your wallet, you'll need to sign up for an exchange account and log in. On exchanges, the wallet will typically be auto generated for you.

The common misconception is that cryptocurrencies are never held in the hardware wallet themselves; instead, they are always stored on the blockchain. Your private key, which allows you to access your crypto is only stored in the hardware wallet. That private key unlocks the door to your blockchain address, which is where your assets are stored.  The blockchain is everywhere, all you need to interact with your tokens is your hardware wallet.

Hardware wallets are often referred to as cold storage since they isolate your private keys from the Internet, reducing the danger of your funds being compromised in an online assault. They allow you to sign and confirm blockchain transactions.

You're “signing” a particular message when you initiate a blockchain transaction. Your “signature” verifies that you are the owner of your private key. Without the key, it's impossible to fake this signature, thus no one else can make a transaction on your behalf.

A PIN and an optional passcode safeguard your private keys stored on the hardware wallet.

It's nearly impossible for a criminal to remove your keys if they get their hands on your hardware wallet. The keys are never accessible through the internet, making them impossible to steal.

That is why it is referred to as cold storage. The assets are backed up using a single seed phrase if your hardware wallet is lost. A seed phrase, also known as a recovery phrase, is a sequence of words that allows you to regenerate your private key. You can migrate your keys to a different hardware wallet by using your seed phrase.

The blockchain ecosystem relies heavily on hardware wallets. When working with blockchains, they give security and utility. If you don't already have one, here are several reasons why you should.

  1. Security: It protects your valuables even if the computer you're using isn't. Hardware wallets provide an additional degree of defence against cyber threats, phishing sites, and viruses.
  2. Flexibility: A hardware wallet has the ability to work with numerous blockchains at the same time. This allows you to handle Ethereum and other alt coins, as well as Bitcoin, Lumens, and other cryptocurrencies, on the same device. With a single recovery word, they may all be simply backed up.
  3. Portability: A hardware wallet, which is often a small plug-in device, is a portable key that allows you to securely access your crypto assets from anywhere. Without having to register new accounts, a hardware wallet can “log you into a variety of dApps. You can also log in to ordinary apps like and using them.
  4. Trading from your hardware wallet:  Some Platforms allow you to trade directly from your hardware wallet. It helps you to keep custody of your tokens at all times, this is the safest way to exchange digital assets. Rather than being placed into an exchange wallet, the assets trade directly from your wallet. You save time by avoiding deposit delays and fees associated with withdrawal limits.

Should I keep my cryptocurrency in a wallet or on an exchange?

The choice of whether to store Cryptocurrency on an exchange or in a wallet is entirely personal.

However, holding your Cryptocurrency on an exchange may result in the loss of all of your digital currency if the exchange is hacked or if the company's owners trade the currency and flee.

You only gain a convenient experience by saving your cryptocurrency on an exchange because you never have to worry about backing up or securing your platform. You can save your digital currency in a wallet without relying on anyone else. However, you'll have to deal with issues like backup, security, and wallet management. However, hardware wallets are the best recommended because they are extremely secure.

There's a reason why hardware wallets are preferred: they store keys offline and allow the asset owner to physically secure them. They make cryptocurrencies more comfortable to hold because they can be secured independently by anyone and can even help you maintain your privacy.

About the author

Muhammad Usama is a SEO specialist at Softwarebench. He performs deep intuitive control on all SEO aspects of company innovations and projects. He is excited about new technologies on the web that make our life easier and our environment better.


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