Online Wallets and Exchanges

• What is a cryptocurrency wallet?

• A cryptocurrency wallet — also known as a Bitcoin wallet
or crypto wallet — functions like a traditional wallet, but
instead of paper currency, it holds proof of your digital
cash.
• A cryptocurrency wallet stores the public and private keys
required to buy Bitcoin or other cryptocurrencies, and
provides digital signatures authorizing each transaction.
These digital wallets can be a device, a program on an app
or online website, or a service offered by crypto
exchanges.
• Do I need a cryptocurrency wallet to trade Bitcoin?
• Yes. While many exchanges provide or suggest crypto
wallets for your use, in order to buy or trade Bitcoin or
other cryptocurrencies you need to have a wallet
address so that the digital currency can be transferred
to your control.
• Most of these digital wallets are password-protected,
and many offer other security features such as
encryption, two-factor authentication and other
protections
• Types of Bitcoin wallets
• Digital wallets for Bitcoin and other
cryptocurrency come in a variety of formats, each
with its own pros and cons regarding ease of use
for trading and security.
• Safeguarding the passwords that enable your
access to your digital wallet is manadate
• Bitcoin wallets come in two broad categories: Hot
storage or cold storage wallets
• A Bitcoin wallet is a software application in which you store
your Bitcoins

• 1. Binance
– create bitcoin wallet that offers a platform for trading more than 150
cryptocurrencies

• Features:
– This application offers a wide range of tools for trading online.
– It is one of the safest bitcoin wallet that provides 24/7 support.
– This platform is compatible with Web, iOS, Android, and PC clients.
– Binance offers basic and advanced exchange interfaces for trading.
– It does 1.2 bn average daily trading volume with more than 1,400,000
transactions per second.
• Coinbase is a crypto wallet that can be utilized for
purchasing, selling, transferring, as well as storing digital
currency
• features:
– You can buy and sell any digital currency and keep track of
them in one place.
– It provides an app for both iOS and Android devices.
– You can schedule your currency trading on a daily, weekly, or
monthly bases.
– It stores your funds in a vault for safety purposes.
– It is one of the largest cryptocurrency exchanges.
– Get $5 in free Bitcoin for signing up
Cryptocurrency Exchanges
• Features
– accept deposits of bitcoins and gives back when demanded
– Maintains “fractional reserve”
– make and receive Bitcoin payments
– exchange bitcoins for fiat currency or viceversa
• Adv
– help to connect the Bitcoin economy and the flows of bitcoins
with the fiat currency economy
• Limitations:
– Security /risks
• Three types of risks .
1. BANK RUN - when a bunch of people show up all
at once and want their money back.
2. Ponzi scheme – make people give them money in
exchange for profits in the future, but then
actually takes their money and uses it to pay out
the profits to people who bought previously.
3. Being hacked -
• Methods used to monitor banking segment
– 1. Bank regulation
– 2. Proof of reserve- ( This is proof that you
actually control at least a particular amount of
particular assets.)
– 3. Proof of liabilities - (proof that you do not owe
more than a particular amount of particular
assets.)
• A cryptocurrency exchange is an online platform where
people exchange their fiat money (government-issued
currency) into cryptocurrencies and vice versa
• Based on the customer’s ease, competetive pricing ,
govt.regualtion , crypto exchanges are of
three types :
• 1. Centralised exchanges (CEX)
• 2. DeCentralised exchanges (CEX)
• 3. Hybrid Exchange
• 1. Centralised exchanges
– Highly accepted and used around
– Fully regulated and controlled by central authority
– Like stock exchange
– Acts as an intermediary that holds investors
money like a bank
– Trading is done on the exchange database
– High liquidity and enable faster transaction
• 2. Decentralised exchanges
– peer-to-peer marketplace that directly connects
buyers and sellers for carrying out transactions
without intermediary
– can't be hacked or shut down by the government
easily
– Provide investors security, transparency and greater
control  over trading and allow privacy to the users
– automated process that controls all the transactions
• Limitations
– less popular and thus have lower trading volumes,
lower liquidity , slower transactions
– funds sent to a wrong wallet cannot be cancelled or
retrieved
– IDEX is the most-user friendly decentralised
exchange for trading Ethereum tokens and Waves
DEX is another one for trading Bitecoin and Litecoin.
• 3.Hybrid exchange
– merging the privacy and security of DEXs and high
liquidity, fast transaction and regulated framework of
CEXs.
– Advantages
• incorporate solutions on blockchain technology
• Investors’ funds are stored in cold wallets, making them
Less prone to cyber thefts
• Provide real-time access and ensure compliance to laws
• Allow users to have custody over the funds even if third party
is involved in transaction