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Crypto 301

Wallets & Centralized and Decentralized Exchanges


A crypto wallet stores a person's information for them to be able to buy and sell bitcoin and other cryptocurrencies. It contains a lot of information but functions somewhat like a bank account. 

The public key comes from the Bitcoin or cryptocurrency network and the private key comes from you. 

When you want to spend bitcoins or other cryptocurrencies, you use the public key (from the wallet), then send it to someone else who has their own private key (from their wallet). This allows transactions without the need for a third party to verify. 

The public key is normally an address (string of letters and numbers). Your private key allows you to unlock transactions sent to your public key. That way you can share your public key without worry. It allows people to send you cryptocurrencies without any risk to you. Without your private key no one would be able to access your wallet. 

A transaction record exists on the public ledger called a “hash”. This is a unique string of characters given to every cryptocurrency transaction. It is verified and added to the blockchain. 



Satoshi Nakamoto created the first cryptocurrency wallet in 2009. Released as open-source software, it was called Bitcoin-Qt and it used the wxWidgets user interface toolkit. It is now called Bitcoin Core, and it takes the Qt user interface toolkit.



A hot wallet allows you to buy and sell on decentralized exchanges as well as transfer crypto to and from various people and exchanges. Many exchanges have their own hot wallet that allow you to buy and sell coins on their native blockchain. 

For example, Trust wallet is the native wallet of the Binance Smart Chain. You must use it to purchase any coins on that blockchain. 

Metamask is used for Ethereum-based coins. And the Coinbase wallet can be used for Ethereum and a number of new emerging blockchains.



Wallet software is targeted by hackers trying to steal Bitcoin and other cryptocurrencies. But there are ways to prevent this. One way is called "cold storage". This means that you keep your private keys offline, away from internet connections, on a device that you don't use online. Another way is storing them offline by printing them out or saving them on a different device that does not have an internet connection.

A hardware wallet is a computer that stores private keys. They carry out signing and encryption internally, and they never give your information to the host computer except for when you have already signed a transaction.


PAPER WALLETS                            

Paper wallets are made on a computer that is not connected to the internet. The private key is written or printed onto paper, and then erased from the computer. Paper wallets can be stored in a safe place for later use. 

Physical wallets are also an option. They are token coins with a private key inside, which you can access under a security hologram on the other side of the coin. Once you remove it, the security hologram will disappear, meaning that your private key has been accessed.



Most cryptocurrency exchanges will store your crypto assets for you. Typically, they are held in a cold storage wallet. This is convenient for small amounts or if you’re planning on trading your crypto in the near future. The problem is that exchange wallets are not as secure as private wallets. Exchanges are centralized and vulnerable to hacking. This is one reason why 2-factor authentication is an important security protocol to have enabled on your exchange account if you plan on holding assets there. 



The first major cryptocurrency exchange was Mt. Gox which launched July 10, 2010. 

Before this, bitcoin was mainly acquired through mining or paying miners directly in exchange for their bitcoin. Headquartered in Tokyo, Japan, Mt. Gox exchange became the leading platform for buying and selling bitcoin. In 2013-14 it was handling over 70% of all Bitcoin transactions globally. 

Later in 2014, Mt. Gox shut down over allegations of theft and fraud with 850,000 bitcoins belonging to customers missing from the exchange. These were likely stolen. This served as an early warning to cryptocurrency investors about the dangers in the space.

Since that time, exchanges have been far more diligent about security and working closely with regulators to ensure a safe environment. Below I list several of the major exchanges operating today.



With over 500 million users worldwide, Binance is the largest cryptocurrency exchange in terms of daily trading volume. It was founded in 2017 and was forced to move out of China and relocate to the Cayman Islands due to the Chinese government crackdown on cryptocurrencies.



Coinbase is the largest cryptocurrency exchange in the US by trading volume. It was founded in 2012 by Brian Armstrong and Fred Ehrsam, who envisioned an easier way for people to get into Bitcoin without having technical knowledge or dealing with the risk of losing money on unsafe exchanges (think Mt. Gox).



Kraken is a US-based cryptocurrency exchange, founded in 2011. The company offers trading between crypto and fiat currencies as well as Bloomberg Terminal pricing information for 72 different digital coins available on its platform. 


CRYPTO.COM is a Singapore-based company that operates an application and exchange for trading cryptocurrencies. They have over 10 million users worldwide, thousands of employees, and are expanding rapidly.



Tyler and Cameron Winklevoss launched the Gemini exchange in 2015. In June 2016, Gemini was the first licensed Ethereum exchange. And in December 2017, it was the first to launch bitcoin futures contracts. 



A decentralized exchange is a place where people can buy and sell crypto. Centralized Exchanges (CEXs), mentioned above, have one company in charge of all the money. But DEXs are different. The person who is selling something has control of their assets. One difference between DEXs and CEXs is that DEX platforms do not use a central authority to store or hold currencies on behalf of third parties, making them less susceptible to hacking attacks.

The beauty of the DEX protocol is that it can be used for all sorts of transactions, even those where liquidity might not yet exist on other exchanges. The power lies in its automatic market maker which will bring buyers and sellers together based on mathematical formulas.

These automatic market makers take into account the liquidity of two assets to estimate their exchange rate or price. There are also thousands of coins available to trade on DEXs. A lot of them are scams but there are tremendous opportunities there as well. Getting in very early on a coin can result in explosive gains not possible with coins listed on centralized exchanges.



A popular way to trade cryptocurrency is with Uniswap, which is a decentralized protocol that runs on the Ethereum blockchain. By incentivizing traders for forming liquidity pools and filling orders in exchange for trading fees earned from swapping tokens out there’s no need for centralized exchanges. There are no extra fees or concerns over your account being hacked as all trades happen peer-to-peer without any third party ever getting involved.

Traders can swap thousands of different erc-20 tokens instead of using centralized exchanges like Coinbase or Gemini, which charge hefty fees. This incentivizes users by forming pools together so they can share profits from successful trades all the while mitigating risk by spreading out capital across many people who own small amounts. 

The Uniswap platform charges a fee for transactions. This is distributed among the users who have provided liquidity in that market. And each user receives an amount proportional to his or her stake of those fees collected from trades. 3% goes specifically toward transaction costs while 97% remains within the community.



PancakeSwap may sound like a joke but it’s growing in users every day. With $100 million-plus in 24-hour trading volume, it has become the most popular decentralized exchange (DEX) on the Binance Smart Chain.

It allows you to trade Binance Coin (BNB) and many other tokens. Users can trade BNB for a myriad of other coins on the network without the need for a centralized service. The trades are automatically executed by smart contracts, which means you don't have to worry about losing control over your private keys.

This platform has grown massively since its September 2020 launch. It now has many users and supports many assets. This platform is an entire ecosystem of different DeFi tools, all supported by the native CAKE token. It’s also a popular platform for purchasing many of the small-cap meme coins that have exploded in popularity.

Chris Curl
Crypto Cycle