Cryptocurrency purchased from an exchange does not 'go' to a physical location, but is recorded at an address on the blockchain network. Here is a detailed explanation:
### 1. Exchange custodial wallet (default storage location)
When you purchase cryptocurrency from an exchange (like Binance, Coinbase, etc.), the assets are **by default stored in the wallet address controlled by the exchange**. At this point:
- You do not directly control the private key: The exchange manages user assets centrally like a bank, and what you see is the digital balance in the exchange account.
- Exchange ownership management: Assets are actually stored in the exchange's 'hot wallet' (online) or 'cold wallet' (offline), managed collectively by the exchange.
- Risk warning: If the exchange is hacked, goes bankrupt, or runs away, your assets may face loss (like the Mt. Gox incident).
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### 2. Transfer to personal wallet (recommended for long-term holders)
If you want to truly control your assets, you need to **withdraw cryptocurrency to a personal wallet**:
- Generate wallet address: Use a hardware wallet (like Ledger, Trezor), software wallet (like MetaMask, Trust Wallet), or paper wallet to generate a blockchain address that belongs to you.
- Withdrawal process: Select 'Withdraw' on the exchange, enter your personal wallet address, confirm the network type (like ERC-20, BEP-20, etc.), and complete the transfer after paying the fee.
- Private key management: The private key of a personal wallet is kept by you, and you fully control the assets (ensure to properly back up the mnemonic phrase to prevent loss).
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### 3. The essence of blockchain: Distributed ledger
Whether assets are in the exchange or personal wallet, all transactions are recorded on the blockchain:
- Ownership is proven through address and private key: Cryptocurrency is essentially a record in the blockchain ledger, verified by signing with the private key to prove your control over the assets in the address.
- Publicly queryable: Anyone can view the balance and transaction history of an address through a blockchain explorer (like etherscan.io), but the identity of the address owner cannot be determined.
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### 4. Key difference: Custodial vs. Self-custody
| Custodial (exchange) | Self-custody (personal wallet) |
|---------------------|------------------------|
| Convenient and quick transactions | Manual transfer management |
| Depend on exchange security | Responsible for your own security |
| Supports fiat exchange | Fully decentralized |
| Third-party risk exists | Lost private key = permanent loss of assets |
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### Summary
- By default: After purchase, cryptocurrency is stored in the exchange's custodial wallet.
- Active operation: Withdrawing to a personal wallet allows for true ownership, but you must take on the responsibility of custody.
- Security advice: It is recommended to use a hardware wallet for large assets; small transactions can be temporarily held in the exchange.
Please note: **Always confirm that the address and network type are correct when withdrawing**, as incorrect operations may lead to permanent loss of assets.