Crypto Academy Season 3 Beginners' course - Task 5: Dex, Cex, Popular Exchanges and Trading Cryptos
Explain in your own words what an Exchange is. Differences between a Wallet and an Exchange. Mention the advantages and disadvantages of DEX and CEX. Have you used an Exchange before? tell us about your experience.
From my knowledge in English, whenever we come across exchange it means swapping of things, that’s giving out something in order to receive something in return. We can therefore relate it to market where goods and services and exchanged for other valuable assets.
In the crypto sphere it doesn’t change so I will define Exchange in the crypto world as a platform where trading of crypto assets are occurs, that is people exchange their crypto assets for different assets or for fiat. It can be said to be the marketplace for crypto assets because on exchanges buying and selling of crypto assets happen.
Exchanges have contributed significantly to the growth of the crypto world as it has made trading possible. Exchanges generate some income from transaction fees. Every exchange has basic features like wallets which is used for holding your assets.
Exchanges can be grouped into categories named Decentralized Exchanges (DEC) and Centralized Exchanges (CEX).
Centralized Exchanges are exchanges that are governed and controlled by a body or a company. These exchanges serve as a third party for transactions. Examples are Coinbase, kraken, Huobi Global, Binance etc.
Decentralized Exchanges are exchanges that have no governing entity, transactions are done these exchanges are done on peer to peer mechanism.
Examples are Venus, UniSwap, Compound, Tokenlon etc.
DIFFERENCES BETWEEN A WALLET AND AN EXCHANGE
A wallet in my understanding is a place where funds are stored for security. A digital wallet is therefore a account where our digital currencies are stored.
| WALLET | EXCHANGE |
|---|---|
| It is an account that allows you to store your crypto assets. | it is a platform where buying and selling of crypto assets occurs. |
| Does not offer its users the opportunity to invest. | Allows its users to invest and make profit through the staking feature. |
| Wallets are decentralized | Exchanges can be either centralized or decentralized |
| Trading can’t happen in a wallet | trading happens in exchanges. |
ADVANTAGES AND DISADVANTAGES OF DECENTRALIZED EXCHANGES (DEX)
PRIVACY: decentralized exchanges are operated on peer to peer mechanism which doesn’t require any third party. No data or information is sent to any third party and hence gives its users high level of privacy.
Users of Decentralized exchanges has complete control over all their assets and decide whatever to do at what time without the approval of any governing body.
Fees charges as transactions fees are very low as compared to that of centralized exchanges.
It does not usually have the ability to carry out a lot of transactions at the same time unlike in the case of centralized exchanges.
Most decentralized exchanges do not allow users to buy digital assets using fiat currency. This makes it very difficult for beginners to start.
Because of its low level of publicity and patronage but the public it usually has low trading volume hence offers low liquidity and it makes it unattractive to traders.
ADVANTAGES AND DISADVANTAGE OF CENTRALIZED EXCHANGES (CEX)
They are licensed and regulated. Centralized exchanges are licensed and regulated by governments, as a result these exchanges are insured so users have confidence and hope that incase anything happens they will still get their investments back.
Secured trading. In peer to peer trading these centralized exchanges make sure that the trade is executed very well by the use of escrow where an assets is held until a trade is finalized before its released to the buyer.
User friendly. Centralized exchanges are very user friendly as it has very basic features that can help newbies find their way easily as compared decentralized exchanges.
Prone to attack. Centralized exchanges involves a governing body where all data is stored. This makes it possible for cyber criminals to launch attacks on these exchanges and hack.
Centralized exchanges charge very high amount of money as transaction fees as compared to the amount charged by decentralized exchanges.
There is no privacy as users are required to give a lot of information out before they can be verified to trade on the platform.
MY EXPERIENCE WITH EXCHANGES.
When I joined steemit and started getting rewards there was the need for me join an exchange in order to sell for steem for fiat. I have been using Binance for my trades. Binance is a centralized exchange that I have enjoyed using. I haven’t encountered any case of theft on the platform and I’m much convinced that I’m safe keeping my assets in my Binance wallet. Trading on their peer to peer feature is very fast and reliable. Their spot wallet can hold a very wide range of assets including steem which for me is very good.
Exchanges have played a major role in the growth of the crypto world by making it possible for people to trade with ease. Exchanges serve as market places for crypto assets. Its been a nice learning experience. Thanks to professor @imagen
Hi @beniba, Thank you for taking interest in the 5th Task of the Beginners Fixed Class. Your grades are as follows:
My Review and Suggestions:
You have completed the task.
In general, your explanation is still lacking, please provide more information.
Give more effort to each task you make. The information you provide has often been created by other people, try to explore new information.
You can add some supporting screenshots to make your explanation about your experience with exchange better.
Vary headers and sub-headers to make them look more attractive.
Improve your writing skills even more by studying "Markdown Style Guide".
Thank you!