Finance

What Makes Crypto Wallets Different from Bank Accounts?

If you’ve ever created a wallet using a client-side interface such as MEW, you’ve probably heard the expression “We’re not a bank.”. What does that mean? You are aware that you’re not interfacing with Citibank, Chase, or any other private bank.

There has been a steady improvement in the methods of money storage and payment over the years. Each type of financial movement comes with its own features. Two well-known options for making payments and storing money are a wallet and a bank account. Although they may look similar, wallets and bank accounts have many differences.

Crypto Wallets:

Crypto wallets protect your private keys, which are the passwords that grant you access to your cryptocurrency accounts. They allow you to send and receive cryptocurrencies like BTC and ETH. There are many options, including hardware wallets such as Ledger, which looks like a USB stick, and mobile apps such as Coinbase Wallet. This makes it easy to use crypto online, just like shopping with your credit card.

Bank Accounts:

Accounts are sub-parts of wallets that allow you to separate funds according to a specific use case, without the need to create multiple wallets. Each wallet that you create will come with one account by default (the Main Account by default). You can manage multiple accounts within each wallet using both the Blockstream Green mobile app and desktop.

Key differences between a Wallet and Bank Account

  1. A wallet is more convenient than a bank account for storing money.
  2. A separate WIF wallet import format is used to represent a wallet. A bank account, on the other hand, is represented with the account type, bank name, branch, and type.
  3. To make transactions using a wallet, you don’t need authorization. However, transactions to bank accounts may require authorization from the account holder.
  4. Even on holidays, a wallet can be accessed in other countries. You may not have access to information about your bank account on certain holidays or in other territories.
  5. A wallet’s withdrawal options offer less flexibility than a bank account.

How do Wallets differ from Accounts?

1. Interest rates

DeFi accounts stand out because of their interest rates. While savings accounts can pay around 0.5% interest, DeFi accounts could offer a higher rate of return. It all depends on many factors such as:

  • Which currency do you use?
  • How long are you willing to keep your money afloat?
  • Which DeFi app do you prefer?

2. FDIC insurance

FDIC-insured banks make up the majority of banks. This means that you will be covered up to $250,000 per bank, per person, if your bank goes under. You could lose your hot wallet or cryptocurrency exchange provider, however. Many cryptocurrency investors prefer cold wallets or physical wallets to protect their digital assets. These small devices can be stored offline and give you complete control over your digital assets. KuCoin wallet allows users to trade, buy, trade, send, and receive many cryptocurrencies including Bitcoin (BTC), Ether(ETH), Tether (USDT), and others.

3. Available currencies

Your crypto account allows you to keep both digital and fiat currencies, unlike your bank account which may only store U.S. dollars. You can store dollars, pounds, and euros and earn interest.

4. Direct deposit your paycheck

A growing number of fintech and cryptocurrency companies, from Square to Paypal to Coinbase, are now allowing direct deposits to their platforms. As a result, it is easier to receive or convert traditional crypto payments. This opens up the possibility of crypto trading, spending via Coinbase Card, or earning crypto rewards. You can choose whether you want your paycheck to be deposited in crypto, US dollars, or how much. All for zero fees.

5. Customer service

The quality of your customer service depends on the company you use. If you are someone who enjoys visiting a local branch to speak with someone in person, you might want to stay with a traditional bank.

Let’s imagine that you decide to transfer your digital assets into an offline physical wallet, as described above. The security of the wallet would be your responsibility. To recover your account, you’ll need to create a password. You could lose your wallet access if you forget your password and seed words. There is no “forgot my password” button.

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