Cryptocurrency WalletsA cryptocurrency wallet is what it sounds like, a place to store your cryptocurrencies. However, they work differently than your traditional wallet that you walk around with. That's if you even do that anymore, as many people have all their debit and credit cards on things like Apple Pay and Samsung Pay. Like your traditional debit and credit cards, you need a password/PIN and signature to send a crypto transaction, whether that's paying for coffee or simply moving it from one place to another. With crypto wallets, your signature is called a private key, which is a long string of alphanumeric characters. This private key is stored within your cryptocurrency wallet and is only used when you go to sign a transaction. This is often in addition to a spending password you set for the wallet which is your PIN and this essentially approves use of the private key to sign the transaction.
When you set up your own cryptocurrency wallet, you hold the private keys, meaning that only you are able to spend the asset you hold, whether Bitcoin, Ethereum, Cardano, or Dogecoin. Another difference between a traditional and crypto wallet is that you can't really lose a crypto wallet. This is because when you set up a wallet you are given a 12 or 24-word recovery phrase that can be used to restore your wallet whether you lost your device or simply got a new one. Just be sure to keep the recovery phrase somewhere safe, as if you lose it then you can't recover the wallet. Likewise, should someone else get access to your recovery phrase, then they can recover your wallet and spend your funds.
When you sign up with a cryptocurrency exchange and hold assets there (often called an exchange wallet), they hold the private keys, meaning you need them to send the assets for you. This also means your funds can be frozen by the exchange, as they control them. There is no recovery phrase for you to keep safe, but your assets are only as safe as the exchange's security.
What is a Cryptocurrency Exchange?A cryptocurrency exchange is a place to buy and sell cryptocurrencies. Many crypto exchanges are centralized, meaning they're controlled by a central authority or authorities and follow regulations stipulated for respective jurisdictions. Centralized exchanges provide liquidity for users and therefore also collect things like trading fees and commissions. There are also decentralized exchanges, which aren't controlled by any specific authority, rather they are funded by users who are willing to provide their own liquidity in exchange for trading fees or other such rewards.
Best Cryptocurrency ExchangesYou'll find links to our reviews of the best centralized exchanges on the cryptocurrency market. Reviews include important information such as available cryptocurrencies, funding methods, how to sign up, restricted jurisdictions, earning opportunities, and more. You can check out the best decentralized exchanges here.
How to Buy Cryptocurrency?Once you've signed up for a cryptocurrency exchange or set up your own cryptocurrency wallet, you can buy some cryptocurrency. The process is similar for each, but the main difference is that when using your own cryptocurrency wallet, you'll often have to provide a crypto wallet address where your purchase will be deposited. However, some crypto wallet applications have exchanges and buy/sell capabilities built-in, taking away the need to even do that. Here is the general process for buying cryptocurrency on an exchange:
1. Fund your exchange account with fiat or cryptocurrency. This is generally done through a “Deposit” or “Buy” button that should be located on your account dashboard. Follow the prompts to deposit your desired asset.
2. Barring the exchange having a direct trading pair with the fiat or cryptocurrency you deposited and the digital asset you wish to purchase, you'll need to first swap for an asset that does.
a. There is also likely the option to purchase your desired asset instantly using fiat through something like a credit card. While this can be a much faster process, there are much higher fees in addition to credit card cash advance fees. Unless you're in a big rush to make a purchase, you're better off making a deposit using a bank transfer, e-Transfer, or similar option. If interested in buying crypto with a credit card, check out this guide.
3. Once you have an asset that can be swapped for your desired crypto asset, make the trade in whatever amount you want. You can place different types of orders such as market or limit, with market filling immediately and limit being filled based upon price and quantity parameters you provide.
4. That's it! Once the trade is executed the funds will be in your exchange wallet. You can then withdraw them to an external wallet or leave them there to potentially earn a return on them.
How to Sell CryptocurrencyReady to realize your crypto gains by selling your crypto assets you bought? It's as easy a process as buying crypto, and is essentially the inverse process:
1. If the asset you wish to sell isn't already on an exchange and you're not using a decentralized exchange, you'll need to send your asset to the exchange. This is done through the “Deposit” function.
If you already have the asset on the exchange, you're already ready to sell.
2. As with buying, if there isn't a direct pair between the asset you want and the fiat you wish to withdraw after selling, you'll need to swap for one that does.
3. Make your desired trade for the asset you wish to withdraw.
4. Find the “Withdraw” button on your account dashboard and follow the prompts. The wait times and withdrawal fees will vary depending on the exchange and withdrawal method.
5. That's it! Your funds will be deposited into your desired account within the window specified at the time of withdrawal.