If you are using an online wallet to store (some of) your crypto currency, you will know what I mean when I say there is a certain appeal to it. Not just because of the easy-of-use, but it “feels” more secure than keeping funds on an exchange.
Now, before we go on, yes I know keeping crypto currency online will always be a risk, online wallets aren’t generally safer than exchanges in that regard. Hush now and read on, and who knows, maybe we can agree on some points?
One of the main reasons I prefer online wallets over keeping funds on an exchange, is simply because it’s not an exchange. it’s an online wallet service only doing that : storing your funds. No trade engine, no unexpected downtime for upgrades (mostly), no hidden fees,….
That also brings me to one of the reasons why exchanges could be better in that regard, simply because they can both store your crypto currency, and let you use it immediately if you wish to do so. It also makes exchanges a far bigger target for any hacking attempts, in my opinion.
Now, i’m pretty sure that any popular online wallet, such as blockchain.info, is targeted by hackers as well. It would be strange if they weren’t, right? But , as far as I know, they have less potential security vulnerabilities to worry about than an exchange.
When you run an exchange, there are a few dozen things you need to secure properly, so that no one can take advantage of the services offered. With an online wallet service, there are fewer ways to try and “game” the system.
Sending and receiving crypto currency, and for this case I’ll take Bitcoin as a prime example, also seems to be going a lot smoother with online wallet services. They can simply process the transaction faster, if not instantly. The user will usually end up paying the transaction fee, but that’s something I’m not too bothered by.
Exchanges on the other hand, can take up to an hour before they even send your Bitcoin to a different address, and it’s even worse for receiving Bitcoin on an exchange wallet address. It wouldn’t be the first time you end up waiting several hours before your Bitcoin can be used.
As I said in the beginning through, keeping any funds online is always a risk. You are better off storing it in a paper wallet somewhere, assuming you won’t lose the paper that is. We’ll just have to accept not everyone will opt for that, so an online wallet is a good alternative.
Later today, we will discuss my favorite online wallet, so make sure to check that article as well.