Exchanges and Wallets
Last updated
Last updated
Exchanges are platforms where you can buy, sell, and trade currencies. There are two types of exchanges: Centralized exchanges and Decentralized exchanges.
Centralized exchanges are operated by a single entity responsible for your funds. This is similar to Web2 custodians like banks, who handle account openings and manage passwords on your behalf.
However, this ease of access comes with the same Web2 problems — you risk losing your funds if the exchange goes bankrupt (FTX, anyone?).
Essentially, these exchanges can access or freeze your funds since they own your private key. Some examples are Bybit, Coinbase, Binance, OKX, etc.
On the other hand, decentralized exchanges(DEX) are purely code-based platforms run independently of human interference. Smart contracts enable lending, borrowing, liquidity, and so much more.
Some examples include Uniswap, Jupiter, MethLab, etc.
So, the key question here is: CEX or DEX? The answer depends on you.
If you want to just dip your toes into the world of cryptocurrency, you can start with an exchange account.
However, if you want to take full advantage of the DeFi ecosystem, make your tokens work for you, and immerse yourself in the Web3 community, you NEED a DEX.
And at this early stage of my journey, you must use a DEX to hold $PUFF.
Of course, getting started with a DEX is not as straightforward as with a CEX. But if you master this, you’re well on your way to becoming a distinguished dragon indeed by participating in campaigns for juicy Puffdrops ;). I’m here to guide you every step of the way, but let’s make sure you understand wallets.
Wallets allow you to interact with different blockchains. Just as a physical wallet holds your physical keys and identification, a digital wallet stores your public and private keys that let you access the entirety of the blockchain.
There are two main types of wallets: hot wallets and cold wallets.
A hot wallet is any wallet that is always connected to the internet, typically used for quick and frequent transactions. Think of Rabby, Metamask, and even Coinbase wallets.
Due to their internet connectivity, these wallets carry a higher risk of exposure to potential cyber threats.
Cold wallets (or hardware wallets) are completely isolated physical devices that store your private keys in secure element chips. Imagine cold wallets as your secure, offline strongbox, which you use to store your long-term valuable assets.
While cold wallets may not offer the same instant accessibility as hot wallets, they are the most secure form of storage in the crypto space. Hence, highly recommended.
Popular hardware wallets include Ledger, Trezor, etc.
