A cryptocurrency exchange and a cryptocurrency wallet serve different purposes in the crypto ecosystem. What an exchange does

• It is a platform where users can buy, sell, and trade cryptocurrencies, often using fiat currencies or other digital assets. Think of it as a marketplace with order books, trading pairs, and often additional features like margin trading, futures, or liquidity pools. Exchanges may custody funds for users (centralized exchanges) or allow self-custody via linked wallets (decentralized exchanges). This distinction matters for control and risk exposure in trades and withdrawals.

What a wallet does

• It is a tool (software, hardware device, or paper secret) that stores the public and private keys needed to access and spend cryptocurrencies on the blockchain. Wallets are primarily about storage and control of funds, not direct trading. They come in custodial (where a third party holds keys) and non-custodial/self-custody forms, with non-custodial wallets giving you full ownership of your private keys.

Key differences

• Custody and control: Exchanges (especially centralized ones) often hold custody of users’ funds; wallets let you control your own keys (non-custodial) or rely on a custodian (custodial wallet). This affects security, privacy, and recovery options.

• Purpose: Exchanges enable market activities—buying, selling, swapping, and sometimes complex trading. Wallets enable storage, transfer, and long-term holding.

• Security risk profile: Exchanges can be targets for hacks due to large holdings; wallets, particularly cold storage, reduce online exposure but require secure key management and backup recovery.

• Accessibility and use: Exchanges are typically user-friendly for trading but require KYC in many jurisdictions. Wallets require more setup and key management knowledge but offer greater self-sovereignty.

When to use each

• Use an exchange when you want to acquire crypto, convert between assets, or engage in active trading. If you plan to make frequent trades or need liquidity, an exchange is convenient.

• Use a wallet when you want to securely store crypto for long-term holding, avoid custodial risk, or need to manage private keys yourself. If you’re not actively trading, moving assets off an exchange to a personal wallet is common practice.

Quick practical tip

• If privacy and control are priorities, aim for non-custodial wallets for storage and consider using a reputable exchange solely for trading when needed, with funds kept in a wallet for safety.

If you’d like, I can tailor this to your specific needs (e.g., beginner vs. advanced usage, regulatory region, and whether you prefer web or hardware wallets).