Decentralized Exchanges vs Wallets - Which Should You Use? Crypto Breakdown January 27, 2022

Episode Summary:

Today on the Crypto Breakdown I look at

Centralized Exchanges, Decentralized Exchanges, and software ad nd hardware wallets.

I explain what they are, how they are different, and finally which one you should use for your coins.

Questions? Ask at [email protected] and we will answer!

Hosts:

Joe Dewitt Follow at: https://twitter.com/metabitz

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Disclaimer: All of the information, material, and/or content contained in this program is for informational purposes only. Investing in stocks, options, and futures is risky and not suitable for all investors. Please consult your own independent financial adviser before making any investment decisions.

Unedited Transcript:

Hey everybody happy Thursday. My name is Joe Dewitt, and this is the crypto breakdown today. I'm going to discuss a bit about cryptocurrency exchanges and crypto wallets and some of the differences between the two. So first off, let's talk about crypto exchanges. Now, when thinking about cryptocurrency exchanges, there are two different kinds of think about decentralized exchanges and centralized.

So the decentralized exchange would be something like unit swap or pancake swab, where users can go on and swap their tokens for other tokens. And the decentralized aspect means that there's no central authority actually controlling the application. It is run by the community and it is run by a team, but that team doesn't necessarily take profits.

Now of centralized exchange. On the other hand would be a company that is actually running an exchange like Coinbase or FTX. Now this is. Essentially, I'm a company that owns an exchange and users are able to go on and purchase assets with their credit card or debit card. Although now you have the central aspect where the company is actually going to make profits on you selling and purchasing the crypto where a decentralized exchange is purely just based on swapping tokens.

And there's actually no profit to be made. Now on a centralized exchange like Coinbase, you were also able to hold your tokens. Now, this is different than an actual wallet because holding your tokens on a centralized exchange does not actually mean that they're yours. Um, you purchase them. Sure. They are technically your assets and you have paid your us dollars for them, but they're not yours until you spend them.

They're still in the Coinbase ecosystem. Coinbase still has full control over them till you withdraw them. And two and a hardware or software wallet, tokens. Aren't physically yours. It's the same as a bank. That money in your bank account is being used by the bank until you decide to spend it now, Coinbase and other centralized exchanges are going to use your assets and leverage them while you let it sit there until you essentially withdrawal your assets.

So now this is where a wallet comes in. Now, there are many different types of wallets. There are software and hardware. Whereas software wallet would be an application on your computer or your mobile phone, and a hardware wallet would be something like a ledger, which essentially keeps all your seed phrases on a hard drive, which essentially just makes it, keeps it off of all of your software.

These wallets provide seed phrases, which are a string of 12 words that you. Um, put together in order to recover your account. Now, most wallets are unrecoverable unless you have the seed phrase. So that is the most important aspect to owning a wallet is actually keeping track of your seed phrase. I would never recommend to put it anywhere on your phone or on your computer, because that is a very compromisable place.

I always recommend writing it down and putting it in the safe or somewhere safe. Now these wallets don't provide any fee for actually owning one, unless you decided to get a hardware wallet, which. Um, require you to actually purchase one, but software wallets, they're all free. So anyone is able to go on and sign up for a software wallet and start holding their crypto.

So a centralized exchange is somewhere you go, if you want to purchase crypto with your debit or credit card, a decentralized exchange is somewhere you want to go. If you want to swap your tokens for another token of value and your wallet is where you store all your crypto. Um, to make sure that they are safe and actually, um, in your possession and that's all the time we have for today.

Guys. I hope I answered some of your questions on crypto exchanges and wallets. Feel free to like, and subscribe to the podcast, which will all be in the description below. Have a great day.