An important decision to make when you transact with cryptocurrencies is to understand how the private keys will be managed for your wallets. For example, there are differences between exchanges with the responsibility for ensuring a wallet’s private key (This key unlocks the wallet and allows for transactions to be made) is kept secure. This responsibility could rest with the end user, normally called a non-custodial service. Or it could rest with the exchange performing as a custodian of the key. They have a user agreement, whereby the exchange adheres to industry best practices ensuring your funds will be kept secure.

An example of a non-custodial exchange is ShapeShift. They are currently running a sweepstakes offering something called rainfall rewards every time someone trades (in USDC at a ~$1 exchange rate for USD). There are also incentives with reduced fees for referring members. ShapeShift does not need access to your private key as it relies on a wallet which you keep on your computer (A software wallet), or plug into your computer (A hardware wallet). If you are curious about how hardware wallets make key management easier, or want to learn more, read about cryptocurrency wallets. Using your own wallet means you are responsible for back-ups, and security of your entire set of assets. A service like ShapeShift allows you to deposit funds in exchange on the spot for a different asset, which is managed through their application, and all occurs in your wallet’s ledger.

An example of an exchange with custodial services would be Coinbase. They offer industry leading protection of your assets and make it easy to exchange them in and out of the platform. In this case it’s important to know you may be trusting a third party with assets you only own contractually by doing business with them and keeping your accounts in good standing.