Find people in the cryptocurrency world and ask this question, "Where do you keep your coins?" 90% of people will answer [wallet] or [exchange].
(The remaining 10% will be baffled "Where did I put it?")
In fact, the so-called deposit in the wallet or exchange does not mean that the coins are placed in the database of the wallet or exchange, all the coins in the world are still stored in the blockchain. The main difference between a wallet and an exchange is the different forms of control over the coins.
There is a saying "Not Your Keys, Not Your Bitcoin", which means that you really control your coins only when you really control the Recovery Phrase
However, in daily life, few people really know how to control their assets independently, and there are still many users who store in the exchange.
So BITPIE today will tell you how to store coins in exchanges and wallets, and talk to you about how to allocate and store your assets in a reasonable way.
Where are your coins when you store them on the exchange?
The general exchange top-up procedure is as follows.
1、The exchange generates a recharge address
2、You transfer coins to that address
3、The exchange checks this transaction on the blockchain to confirm it and credit it.
4, Your corresponding balance increases.
First of all, for the sake of centralized management, the exchange will not provide the helper (private key) of the account to the user, so the highest control of this coin is in the hands of the exchange, so your balance in the exchange is essentially a number fed to you by the exchange's database, which can also be understood as a note from the exchange to you.
So when you deposit your coins in the exchange, your coins are equivalent to being in the address of the exchange; when you perform operations such as withdrawing coins, whether you can get your coins depends on whether the exchange will honor that IOU for you.
Extended reading.
1、Usually the exchange will regularly sort out the balance of the address and consolidate and transfer the assets on most of the user addresses to a certain address, so sometimes when you search for your own exchange address on the blockchain browser and find the transfer of assets, it may be that the exchange is sorting out the balance, as long as the balance in the exchange can be right, don't worry too much.
2、When you make transfers, pending orders and other operations inside the exchange, they are all digital transfers in the exchange system, and it is impossible to check the transactions on the blockchain, this belongs to off-chain transactions. When you withdraw coins, the exchange sends the coins to the address you submitted, the transaction can be checked on the blockchain, this kind of transaction belongs to the on-chain.
When you store your coins in your wallet, where are your coins?
If you have used a wallet, you have been told to remember the key （Recovery Phrase）
The reason why private key and helper word are so important is that they are the highest authority to control blockchain assets. Deposited coins are in the wallet, sending and receiving is completely free, and no one is doing audit on your incoming and outgoing coins.
Some kids think that depositing coins in the wallet means transferring the coins to the wallet party, in fact, this is a big misunderstanding, as mentioned above, all the coins in the world are stored on the blockchain, the main function of the wallet is to generate helper words, receive coin addresses, and help everyone interact with the blockchain, for example, the balance in your wallet is what the wallet helps you display after reading the balance of your address on the blockchain, without the wallet, operating the assets on the blockchain would require some code ability.
When you store your coins in a wallet, your coins are completely under your control, and even when you want to change a wallet, just go to another brand of wallet with your recorded helper words to restore them, and the assets are all coming back as they should.
So do we need to store all our coins in our wallets?
Because the analysis above is mainly from the storage, sending and receiving scenarios, which are all advantages of wallets, it sounds like wallets will be superior to exchanges, but is that really the case? Of course it is, I do not praise the wallet can also praise the exchange?
If you are a frequent and heavy trading party, the first choice is definitely an exchange if you don't store any digital assets.
If it is a light trading demand, or even a fixed investment party that only goes in and out, the wallet will be the obvious choice. (There are functions such as pure trading and coin exchange in the Pitt, and it's easy for wallet parties to trade!)
Of course, it is more suitable for most people to keep most of their coins in their wallets for a long time, and a few coins in the exchange to solve the problem of itchy hands.
I don't think centralized exchanges are evil. The emergence of exchanges has greatly improved the liquidity of blockchain assets and played an important role in the process of blockchain popularity.
Whether you choose an exchange or a wallet there is no right or wrong, after you understand the logic behind the wallet and the exchange, customizing the asset allocation and storage solution that suits you is the most important thing.