Introduction
A Bitcoin (or any other Altcoin) wallet is basically a software program in which you store your coins.
An exchange lets you convert “real money” like US dollars or EURO to crypto currency (Bitcoin or Altcoin). Exchanges also provide a wallet—but you don’t necessarily have full control of that wallet.
The purposes of wallets are different.
1. The private wallet is focused on the storage of cryptocurrencies more safely and for the long-term.
2. But the Exchange wallet is focused on the convenience of tradings between users within one exchange.
What Is a Bitcoin Wallet?
A Bitcoin wallet actually contains one or more private keys that allow you to sign transactions. These private keys are the mathematical proof that you indeed own a certain amount of Bitcoin. Think of these private keys as secret codes that allow you to spend that Bitcoin. The blockchain is a record of all these transactions.
These private keys are very important. If someone steals your private keys—say, if they had malware running on your computer—they could spend your Bitcoin. For example, they could use your private keys to send your Bitcoin to their own Bitcoin address. Your Bitcoin would then be stored in their wallet and would be secured by their own private keys, to which you wouldn’t have access. That’s why it’s very important to store your Bitcoin wallet and its private keys securely.
If you lose the wallet and your private keys, you’ll also lose access to all your Bitcoin. That’s why it’s important to have backup copies of your Bitcoin wallet, too—just like you’d have backup copies of any important data.
If Bitcoin was being widely used for payments, a Bitcoin wallet is the program you’d use to send and receive Bitcoin for day-to-day transactions, too. You might want to store only a small amount of Bitcoin in a wallet you carry with you—for example, on your phone—and leave a larger amount of Bitcoin in a more secure location, similar to how you don’t carry your life savings in cash in your physical wallet.
What Is a Bitcoin Exchange?
A Bitcoin exchange is a website or service that lets you convert “fiat currency” like US dollars and Euros to Bitcoin. These websites also let you convert that Bitcoin back to US dollars or your fiat currency of choice. In other words, exchanges buy and sell Bitcoin at the current market rate.
If exchanges didn’t exist and you wanted to buy Bitcoin with US dollars, you’d have to find someone with Bitcoin, agree on an exchange rate, pay them, and then have them send that Bitcoin to your wallet. And, to sell Bitcoin, you’d have to find someone who wanted to purchase it from you. Exchanges simplify this process, providing a single place you can purchase or sell Bitcoin at the current market rate using your bank account
Cryptocurrency Exchanges
One of the major well known and safe exchange platform is Coinbase.
When you head to Coinbase, create an account, and buy some coins. That coins aren’t immediately sent to a coin wallet address that you provide. Instead, it’s stored in a wallet in your Coinbase account. You can sign into the Coinbase app or website, view your balance, and sell the coins if you want. Coinbase does allow you to transfer the coins from the Coinbase exchange to another coin wallet, if you like.