Explore the essential platforms and tools for managing and trading crypto.
This module introduces the common platforms and tools people use to buy, sell, and store cryptocurrencies. It covers exchanges (where you trade crypto), hot wallets (software for everyday crypto use), and cold storage (hardware devices for secure long-term storage). You'll get to know the names of popular exchanges and wallets and understand their differences.
A cryptocurrency exchange is an online platform where you can buy, sell, or trade cryptocurrencies for other digital assets or traditional (fiat) currencies like US dollars or euros. Think of it as a digital marketplace similar to a stock exchange, but specifically for cryptocurrencies.
Exchanges serve as the primary gateway for most people entering the cryptocurrency world. They provide the infrastructure needed to match buyers with sellers, determine prices based on supply and demand, and facilitate the secure transfer of assets.
There are two main types of cryptocurrency exchanges, each with different characteristics and use cases:
Centralized Exchanges (CEX): These are operated by companies that act as intermediaries between buyers and sellers. They're similar to traditional financial institutions in that they maintain custody of your assets while you trade on their platform. Most beginners start with centralized exchanges due to their user-friendly interfaces and additional services.
Decentralized Exchanges (DEX): These operate directly on blockchain networks without a central authority. They allow peer-to-peer trading directly from your wallet without an intermediary holding your funds. DEXs offer more privacy and control but can be more complex to use. We'll cover these in more detail in a later module on DeFi (Decentralized Finance).
Here are some of the most widely used centralized cryptocurrency exchanges:
Based in: United States
Best for: Beginners, first-time buyers
Features: Simple interface, educational resources, regulated and publicly traded company
Drawbacks: Higher fees than some competitors, limited advanced trading features
Based in: Global (Binance.US in the United States)
Best for: Wide selection of cryptocurrencies, active traders
Features: Low fees, extensive trading options, large selection of coins
Drawbacks: Interface can be overwhelming for beginners, regulatory challenges in some regions
Based in: United States
Best for: Security-focused users, intermediate traders
Features: Strong security track record, good selection of coins, staking options
Drawbacks: Less intuitive for complete beginners, limited payment methods in some regions
Based in: United States
Best for: Security and compliance-focused users
Features: Strong regulatory compliance, insurance on digital assets, clean interface
Drawbacks: Fewer cryptocurrencies available, higher fees than some alternatives
Using a centralized cryptocurrency exchange typically involves these steps:
Using Coinbase to exchange $100 for Bitcoin is similar to using a currency exchange booth at an airport to convert dollars to euros. You create an account on Coinbase, connect your bank account or credit card, and place an order to buy Bitcoin with your $100. The exchange handles the conversion at the current market rate (minus their fee), and the Bitcoin appears in your Coinbase account. You've now exchanged your traditional currency for digital currency, all through an online platform.
For more information on cryptocurrency exchanges, visit: Wikipedia's explanation of cryptocurrency exchanges
A hot wallet is a cryptocurrency wallet that is connected to the internet and accessible through your computer or smartphone. These digital wallets are designed for everyday use, allowing you to quickly send, receive, and manage your cryptocurrencies.
Unlike exchanges, which hold your crypto on your behalf, most hot wallets are "non-custodial," meaning you have full control of your private keys and, therefore, your funds. This gives you greater security and autonomy over your assets compared to leaving them on an exchange.
When you set up a hot wallet, the software generates a set of private keys that control access to your funds on the blockchain. These keys are typically secured by:
The wallet doesn't actually "store" your cryptocurrencies – those exist on the blockchain. Instead, it stores the keys that prove ownership and allow you to manage those assets.
Here are some widely used hot wallet options:
Type: Browser extension & mobile app
Networks: Ethereum and compatible blockchains (Polygon, Binance Smart Chain, etc.)
Best for: Interacting with decentralized applications (dApps), NFTs, and DeFi protocols
Features: Built-in token swap, dApp browser, extensive community support
Type: Mobile app
Networks: Multi-chain support for Bitcoin, Ethereum, Binance Smart Chain, and many others
Best for: Mobile users wanting to manage multiple cryptocurrencies in one app
Features: Built-in DEX, staking options, dApp browser
Type: Mobile app & browser extension
Networks: Bitcoin, Ethereum, and many other cryptocurrencies
Best for: Beginners and Coinbase exchange users
Features: User-friendly interface, easy connection to Coinbase exchange, dApp browser
Type: Desktop & mobile app
Networks: Support for 150+ cryptocurrencies
Best for: Users wanting a visually appealing interface with portfolio tracking
Features: Built-in exchange, staking options, detailed portfolio visualization
While hot wallets are convenient, their connection to the internet makes them more vulnerable to security threats than offline storage methods. Here are some important security practices:
A hot wallet is like your everyday physical wallet that you carry in your pocket or purse. It's convenient for daily transactions – you can quickly access it to pay for coffee, receive change, or check your balance. But just as you wouldn't keep your life savings in your everyday wallet due to the risk of loss or theft, you might not want to store large amounts of cryptocurrency in a hot wallet. It's perfect for convenience and regular use, but with that convenience comes some additional security considerations.
For more information on hot wallets, visit: Coinbase's guide to crypto wallets
Cold storage refers to keeping your cryptocurrency offline, away from internet connection, providing the highest level of security for your digital assets. This approach is particularly recommended for long-term holdings or large amounts of cryptocurrency that you don't need to access frequently.
The most common form of cold storage is a hardware wallet – a physical device specifically designed to securely store cryptocurrency private keys. These small devices look similar to USB drives but contain specialized security features to protect your crypto assets.
Hardware wallets keep your private keys isolated in a secure chip inside the device, never exposing them to your computer or the internet. When you want to make a transaction:
This approach means that even if your computer is compromised with malware, your cryptocurrency remains secure because the private keys stay isolated on the hardware device.
Here are some of the most widely used hardware wallet options:
Models: Nano S Plus, Nano X
Supported coins: 5,500+ cryptocurrencies
Features: Certified secure element chip, Bluetooth connectivity (Nano X), companion app (Ledger Live)
Price range: $79-$149
Models: Trezor One, Trezor Model T
Supported coins: 1,000+ cryptocurrencies
Features: Open-source software, touchscreen interface (Model T), password manager
Price range: $59-$219
Features: Large display, solid metal construction
Supported coins: 40+ cryptocurrencies
Integration: Works with ShapeShift platform
Price: Around $49
Paper wallets: Private keys and addresses printed on paper, completely offline
Steel wallets: Recovery phrases stamped on metal plates (fire and water resistant)
Air-gapped computers: Dedicated computers that never connect to the internet
Best for: Maximum security for long-term storage
Even with the enhanced security of hardware wallets, following these practices will help ensure your cryptocurrency remains safe:
The choice between cold and hot storage depends on your specific needs and usage patterns. Here's a general guideline:
| Consideration | Hot Wallets (Software) | Cold Storage (Hardware) |
|---|---|---|
| Best for | Frequent transactions, smaller amounts | Long-term holding, larger amounts |
| Security | Good, but vulnerable to online threats | Excellent, protected from online attacks |
| Convenience | High - always accessible | Lower - requires physical device |
| Cost | Usually free | $50-$200+ for hardware devices |
| Use case example | Trading, daily purchases, dApp interaction | Savings, investment portfolio, large holdings |
Many cryptocurrency users employ both types of storage: a hardware wallet for the majority of their holdings and a hot wallet with smaller amounts for regular transactions and convenience.
A hardware wallet is similar to a safety deposit box at a bank. It provides maximum security for your valuables, but requires a bit more effort to access. When you security for your valuables, but requires a bit more effort to access. When you want to access your assets, you need the physical key (the hardware wallet) and your PIN code, similar to how you'd need a physical key and identification to access a safety deposit box. This extra step makes it much more secure than keeping your valuables in a more accessible location, but it means you can't access your assets as quickly. For most people, this trade-off makes sense for storing significant amounts of wealth that they don't need immediate access to on a daily basis.
For more information on the differences between hot and cold wallets, visit: Coinbase's comparison of hot vs. cold wallets
In this module, you've learned about the essential platforms and tools for managing cryptocurrency:
Understanding these different tools and their appropriate uses is essential for safely managing your cryptocurrency. Many users employ a combination of these tools: exchanges for buying and selling, hot wallets for everyday transactions, and cold storage for securing larger holdings.