What Happens When You Use an Exchange Wallet?

[Supreme Donvic]

A lot of things happens when you decide to leave or hold your bitcoin with exchange, now when you HODL your bitcoin on an exchange the private keys are not private any more the exchange and you are in control and the only control you have is by allowing them to be in total control and not you.
And one of the purpose for bitcoin creation is defeated which is Self-custody.

Number two you have an IOU, not direct ownership and if anything should happen to the exchange your bitcoin is gone, exchange will make you lose the power to have direct ownership to your bitcoin.
The safety of your bitcoin is now the hands of other person which is very bad and I will prefer the government to have such power than an individual or group of people who decide to have something called exchange.

Even when you want to withdrawals it depends on the platform’s rules and you must follow the rules or lose your bitcoin and all this exchange brings new policy always.

[Hatchy]

Your post is a bit contradictory. When you keep funds on an exchange, you don't actually own the private keys.. the exchange manages the money for you. They provide you with an account, not a wallet. A real wallet gives you full control over your own keys. Also, exchanges aren't just for Bitcoin, they are multi coin platforms that support many different coins or  tokens.
Regarding your point about government control.. the whole purpose of self custody is to have total ownership. No one else should have power over your hard earned money. That is exactly why you shouldn't trust the government with your funds.

[Nightwalker(NW)]

I believe on popular phrase we do use here on the forum "Not Your Key Not Your Coin" meaning if you have your coin stored in an exchange there are possibility for you to lose access when the exchange is being hacked or shut down. And beside they have the backend keys which you do not have, you only have password to the exchange and they could ceased you access to the exchange and you lose all your coin.
That is why is always advisable to use a self custodial wallet or an open source wallet where you would know whatever that is going on internally, so do not prioritized using exchange wallet or even storing your coin inside exchange except you are trading and after much profits you are expected to move at least some percentage of your coin to a wallet were you could secure your profits more better.

[EL MOHA]

Regarding your point about government control.. the whole purpose of self custody is to have total ownership. No one else should have power over your hard earned money. That is exactly why you shouldn't trust the government with your funds.

I think the OP is on about government having control over his funds than an exchange having control that’s to say he will rather use traditional banks as a storage means than any exchange, in as much as we all know that both are not reliable means of funds storage i actually agree that a traditional bank is actually better than exchanges when entrusting your funds with but self custody is the best option for any storage and I think that’s what the OP was actually trying to imply

That is why is always advisable to use a self custodial wallet or an open source wallet where you would know whatever that is going on internally,

I think the right word is Self custody and open source wallet not or because using that word “or” means that many newbies will think there is a self custody wallet and open source source wallet both different from each other which isn’t true as open source wallets are simply self custody wallets too

[Karl_3000]

A lot of things happens when you decide to leave or hold your bitcoin with exchange, now when you HODL your bitcoin on an exchange the private keys are not private any more the exchange and you are in charge of your private keys.

You really need to edit this, Hatchy said so already.

@Queen uloma, Nigerian board has become a zone for spamming. If you know what you are doing, this topic does not worth any merit yet unless the topic has been edited and corrected. Try not to let friendship reduce post quality on this board.

Your post is a bit contradictory. When you keep funds on an exchange, you don't actually own the private keys.. the exchange manages the money for you. They provide you with an account, not a wallet. A real wallet gives you full control over your own keys. Also, exchanges aren't just for Bitcoin, they are multi coin platforms that support many different coins or  tokens.
Regarding your point about government control.. the whole purpose of self custody is to have total ownership. No one else should have power over your hard earned money. That is exactly why you shouldn't trust the government with your funds.

You have said it all about the private key you are correct. But about the exchange, it can be called crypto exchange wallet.

[I_Anime]

Till now many still prefer to hold with exchanges than non custodial wallet . And no matter what you say it won’t change a thing they will still continue . But I will say this ,

Exchanges is not where you hold your assets, is actually where you buy or sell your token to other currencies. Just  as it implies “exchange “ . So you buy or sell with exchanges while you hold with non custodial wallet .

[Joy- maker]

Before you choose to store your bitcoin in a centralised exchange, there are important consequences you should understand which includes risk and convenience.

First of all you don't control your bitcoin, the centralised exchange is the one to control the private keys not you, so not your coin, not your keys. And you are left with no choice but to rely fully on the Exchange's honesty and security.

Secondly, centralised exchange are big targets for thieves and hackers, and if the centralised exchange you store your bitcoin with got hack recovery is not guarantee, so those storing their Bitcoin with that centralised exchange are likely to loose their funds.

Thirdly, centralised exchange can chose to freeze withdrawals, or suspend accounts, or lock users funds during maintenance or investigation. So Buddy their are a lot to be mentioned, but I will leave you with this few.

[Supreme Donvic]

A lot of things happens when you decide to leave or hold your bitcoin with exchange, now when you HODL your bitcoin on an exchange the private keys are not private any more the exchange and you are in charge of your private keys.

You really need to edit this, Hatchy said so already.

@Queen uloma, Nigerian board has become a zone for spamming. If you know what you are doing, this topic does not worth any merit yet unless the topic has been edited and corrected. Try not to let friendship reduce post quality on this board.

Yes the exchange is in total control of the private keys and not you as a person however the fact that you decide to let the exchange manage it for you is were I’m coming from you as a person can decide not to allow exchange manage your private keys anymore by choosing a wallet. So your only involvement in the private key is you letting it to happen is like you gave them the go ahead order that’s why you decided to use exchange and not wallet.
The act of you allowing it is your only involvement in the private keys and that was the message I was just trying to pass I believe some understood that, however I would have placed it to be more clear.

Regarding your point about government control.. the whole purpose of self custody is to have total ownership. No one else should have power over your hard earned money. That is exactly why you shouldn't trust the government with your funds.

I believe you didn’t understand my statement, I said instead of me to keep my bitcoin on an exchange that is controlled and run by someone or a group of people that I rather use bank and allow the government have control over my money.
And my reason for saying that is because when you are using exchange to hold your bitcoin there’s no self custody anymore and I trust my government security than that of exchange so I will rather hold my money in bank for long term than exchanges.

[Cryptohygenic]

To hold ur funds for exchange na one very big mistake some people dey do especially for them way dey hold for the long term because as you no get access to your private keys, na so ur funds take dey vulnerable to be scammed. In terms of securities, one thing way make bitcoin and the blockchain more secured that the traditional banking system na self custodial bcos nothing better pass way u dey in power to take decisions for your self instead to rely on third party.

[Jubilee58]

Any Bitcoin stored in an exchange is vulnerable to attack, the security of your bitcoin is no longer in your hands but with the exchange. Sometimes, the exchange might decide to withdraw their services from your area and if you are unable to get notifications before time you are going to loose your investment. I have had ugly experience keeping my crypto in an exchange, first I lost my crypto to hot it exchange when they withdrew their services from Nigeria and secondly, I lost my crypto to OKX exchange when they withdrew their services from Nigeria and if I had stored them in my own private wallet, those cryptocurrency would have been saved. In nutshell, keeping your bitcoin in an exchange is not a wise decision.

Because of the high level of risk involved in storing your bitcoin in an exchange, it advisable to save your bitcoin in a private wallet and ensure your private keys are intact to avoid loosing your fund.

[Finebone]

Your post is a bit contradictory. When you keep funds on an exchange, you don't actually own the private keys.. the exchange manages the money for you. They provide you with an account, not a wallet. A real wallet gives you full control over your own keys. Also, exchanges aren't just for Bitcoin, they are multi coin platforms that support many different coins or  tokens.
Regarding your point about government control.. the whole purpose of self custody is to have total ownership. No one else should have power over your hard earned money. That is exactly why you shouldn't trust the government with your funds.

You are actually right on what you said here and I just wanted to add to it, exchange can be likened to a bank account where the banks hold and manages your money for you, and you must adhere to the rules and regulations of the banks while using their services, but the most dangerous thing about storing your bitcoin or crypto in an exchange is that if anything happens to the exchange like hacking or theft, just know that the possibility of losing your asset may be very high. But if you store your bitcoin in a self custodian wallet like electrum, you bitcoin is safe as long as you don't share your seed phrase with anyone.

[IceLincoln]

OP in as much as your post is not properly well written your message is clear and is vital. I would have said it’s old news but there are a lot of people who are still doing it and even newbies so it’s also important we keep hammering this warnings.

I might also be inclined to agree that it’s better storing funds in traditional banks than in exchanges for a long term reason being that atleast you have a physical body to lay complaint or hold accountable in cases of any incident.

[Nathrixxx]

When you're using a centralized exchange, then know that there's no difference from you and the one that uses a commercial banking system, because they have many things in common, while the coins you're having on them are not yours, until you realize on how and why you should take your asset off them, and take full charge of your financial economy and be free from central authorities.

[Agbamoni]

Till now many still prefer to hold with exchanges than non custodial wallet . And no matter what you say it won’t change a thing they will still continue . But I will say this ,

Exchanges is not where you hold your assets, is actually where you buy or sell your token to other currencies. Just  as it implies “exchange “ . So you buy or sell with exchanges while you hold with non custodial wallet .

TBH it is not their preferred choice. They are only lazy and ignorant to do the right thing at the right time.

I was talking to someone the other day about leaving our crypto in an exchange wallet. He said, the time and the stress to always move them to a non-custodian wallet is tiring. It gets me to wonder, how to be security consisout feels tiring to some people. They know the right thing but wont do it.

[Zigabel]

Another point I was looking to see you mention is that you stand a very high risk of compromise, there have been several times we have heard of exchanges been compromised by group of people and even individuals sometimes and the assets of Investors are been lost to the hijackers of the platform.  You also do not necessarily have to loose your password of phrases which is not often there in most cases and the exchange compromise may just affect your wallet and according to their policies they will decide to renumerate or not.

[justinlamode]

Using exchange wallet to hold your Bitcoin is wrong and dangerous because you are not in control of your coins. The risk is high and in multiple ways such as the exchange seizing your coins on the ground of KYC or violation of any form. They can even bring up one allegation which may not be true. There was a time Kucoin forced people to go through KYC for receiving coins for one of the signature campaigns. The reason was not clear but people were locked out and asked to contact support.

[I_Anime]

Till now many still prefer to hold with exchanges than non custodial wallet . And no matter what you say it won’t change a thing they will still continue . But I will say this ,

Exchanges is not where you hold your assets, is actually where you buy or sell your token to other currencies. Just  as it implies “exchange “ . So you buy or sell with exchanges while you hold with non custodial wallet .

TBH it is not their preferred choice. They are only lazy and ignorant to do the right thing at the right time.

I was talking to someone the other day about leaving our crypto in an exchange wallet. He said, the time and the stress to always move them to a non-custodian wallet is tiring. It gets me to wonder, how to be security consisout feels tiring to some people. They know the right thing but wont do it.

Is stressful till you get your asset stolen from you, like they say prevention is literally better than cure . But In this scenario is better than stories that touches the heart .

What would you gain after every your exchange got hack, which lead to loss of assets . Because exchanges are quite vulnerable and can be easily targeted by hackers and stuff compared to that of DEX , or your normal noncustodial wallet .

[Mhizlove]

My own view be say if you dey hold bitcoin exchange e dey only give that feeling say you be the owner but you no get real control over am, because you no hold the private key and before you can access your funds you will be waiting for someone else permission or for someone to decide before you can get access to your money. That alone don go against how bitcoin dey like the belief of bitcoin, wey dem create am because of people to truly get ownership for their money

If you're depending on the exchange it means that you should trust their rules, how the system operates and also their stability. Because if policies changes this might lead to you losing access to your own money without even being warned. You see real bitcoin security comes with self custody, where your in possession of the key and also you makes your own decision.

[Fivestar4everMVP]

Well, the only reason why anybody should send their bitcoin to a centralized exchange is on the grounds that the bitcoin is getting sold or is to be sold in a short time like let's say max - 2 days, maybe due to waiting for the price to increase a bit especially during bull runs..

Outside the above, storing bitcoin as an investment for long or short term should be done while holding the bitcoin in a good wallet, could be a hardware wallet which is actually the best, or a mobile wallet (not highly recommended) but wallet code must be open source.

Self custody is something that comes with some form or sacrifices but I believe nothing is too hard for us to do when it comes to safeguarding out very own investments, but laziness and sometimes, lack of proper knowledge is why some people choose to leave theirs bitcoin on centralized exchanges.

[Cryptomultiplier]

Till now many still prefer to hold with exchanges than non custodial wallet . And no matter what you say it won’t change a thing they will still continue . But I will say this ,

Exchanges is not where you hold your assets, is actually where you buy or sell your token to other currencies. Just  as it implies “exchange “ . So you buy or sell with exchanges while you hold with non custodial wallet .

TBH it is not their preferred choice. They are only lazy and ignorant to do the right thing at the right time.

I was talking to someone the other day about leaving our crypto in an exchange wallet. He said, the time and the stress to always move them to a non-custodian wallet is tiring. It gets me to wonder, how to be security consisout feels tiring to some people. They know the right thing but wont do it.

Is stressful till you get your asset stolen from you, like they say prevention is literally better than cure . But In this scenario is better than stories that touches the heart .

What would you gain after every your exchange got hack, which lead to loss of assets . Because exchanges are quite vulnerable and can be easily targeted by hackers and stuff compared to that of DEX , or your normal noncustodial wallet .

I believe your funds will be lost if the device in which you use your non custodial or cold wallet is hacked.
As for the risk of using a CEX, you can have your account wallet frozen for suspicious or reasons as stated in the terms and conditions and you won't have a say because as the saying goes, 'not your keys, not your coins'.
Another risk that can be encountered when using a CEX wallet is that of the CEX going bankrupt or they crash or get banned by the government.

You don't use a CEX if you intend to hold crypto currency for long term, only if you are into quick trading or other specific business transactions that you can leave some funds there for the purpose of that.