Posted March 20, 2023



Investments in the bitcoin cryptocurrency have become a popular investment method in recent years.

It is a trend in which many people who have no previous experience often get involved, so we can see how some concepts are simplified for better understanding.

If we mention a bitcoin wallet or an exchange, things look very clear at first glance.

A bitcoin exchange is a platform where bitcoin can be bought and sold, with the addition that it also provides the option of using a wallet over which the user does not necessarily have full control.

From the definitions of the two terms, we can already see that some questions arise the need to be answered.

If you want to use the benefits of bitcoin wallets and exchanges, you must first find out how they work.


We already mentioned earlier that a bitcoin wallet is software used to store bitcoin cryptocurrency. Although this definition is correct, it is a little bit too simple.

A Bitcoin wallet actually contains one or more private keys that allow transactions to be signed.

These private keys are, so to speak, mathematical proof that you actually own the bitcoin cryptocurrency and can be seen as passwords that give access to the account.

You may find this even easier to visualize if you imagine that private keys are secret codes that allow bitcoins to be spent. As we know, the blockchain is a record of all these transactions.

Private keys are extremely important. If someone, for example, steals your private keys and uses malware, they can use up the entire value of your bitcoins.

Third parties can do this by sending your bitcoins using the disclosed private keys to their bitcoin address.

A bitcoin address is a series of randomly ordered numbers and letters that indicate ownership of a certain amount of bitcoins. Bitcoin addresses can be compared to an account number/IBAN.

So, in case of theft of private keys, your bitcoins would be placed in the wallet of a third party who would secure them with his private key and you would be denied access.

The described situation clearly shows how important it is to take care of the security of your bitcoin wallet and to save your private keys.

Potential attackers i.e. third parties who can compromise your bitcoin wallet are not the only concern.

If it happens that you lose your bitcoin wallet or private keys, you will lose access to all your bitcoins at the same time. This is why it is important to have a backup of your bitcoin wallet in the same way as you would have a backup of some important data.

Instructions for backing up your bitcoin wallet can often be found within the software you use.

When bitcoin is used as a means of payment, a bitcoin wallet will be used to receive and carry out transactions. It is recommended that you have a small amount of bitcoins in your bitcoin wallet that you carry with you (e.g. on your smartphone).

The rest of the larger amount is better to have in a safer place.


A bitcoin exchange is a website or service that allows you to exchange regular currencies such as dollars or euros for bitcoin cryptocurrency and vice versa. In other words, they buy and sell bitcoins according to the current exchange rate.

If bitcoin exchanges did not exist and, for example, you wanted to buy bitcoins with dollars, you would have to find someone who has bitcoins, agree with them on the value of the purchase and finally on the bitcoin transaction itself to your bitcoin wallet.

In the case of selling, you would have to find someone who wants to buy bitcoins from you.

Bitcoin exchanges have simplified this process and are a single place where you can buy or sell bitcoin at its current value, using your bank account.


Bitcoin exchanges like Coinbase provide users with the option of using a bitcoin wallet supported by their website.

Let’s take for example that you created a user account on Coinbase and bought bitcoins.

Those bitcoins will not be immediately sent to the bitcoin wallet address you provided. Instead, the bitcoins will be stored in a wallet that is part of your Coinbase user profile.

As a user, you can log into your Coinbase profile via the website or app, check your balance, and sell or buy bitcoins.

Coinbase allows bitcoin transactions from the Coinbase exchange to another bitcoin wallet if you wish.

The whole process of buying bitcoins is simpler with exchanges and you don’t need to install and manage other bitcoin wallets.

You need to log in to your Coinbase account and everything is secured, and in case you forget your user profile password, you just need to go through the recovery process.

In the example of Coinbase, things work like in a bank.

When you store bitcoins in your Coinbase user profile wallet, that exchange actually stores your private keys.

Unlike a regular bitcoin wallet, the one on Coinbase’s profile is not fully under the control of the user.

There is really no joke with the choice of bitcoin exchange. Placing bitcoins on user profiles of dubious exchanges can run the risk of the worst possible outcome – the theft of all the value in a bitcoin wallet.

There may be a trend in the functioning of exchanges that is contrary to the idea of bitcoin.

Bitcoin promises a decentralized system that allows users to store their cryptocurrencies without trusting or being influenced by others.

When we have an independent bitcoin wallet, it works like that, but in the case of bitcoin exchanges, things are set up a bit differently.

Will you have your own bitcoin wallet or will you rely on the services of a bitcoin exchange? The decision is up to you.


It is a popular Cryptocurrency exchange because they list more than 100 different coins. It is one of the most trusted platforms as they support multiple fiat currencies like USD, EUR, RUB, TRY etc. It has become so popular that it has stopped creation of new accounts.


From day one, they are designed and built for newcomers and experts alike. They become one of the largest bitcoin exchanges, serving clients in over 190 countries, and continue helping people discover the world of crypto. Learn How to buy Tron.


Established in 2013, London based is a Bitcoin exchange as well as a cloud mining providing company. The company supplies both a trading platform and brokerage services for Bitcoin, Ethereum and a range of other cryptocurrencies.


Blockchain Validator

Posted May 02, 2022 Blockchain Validator Blockchain Validator A blockchain validator is a person who verifies transactions on a blockchain. Once confirmed, transactions are added...