Crypto Academy Contest /S1W2 - Review Centralized Exchanges by @estyroberts

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I would like to welcome you all to the second week of the steemit engagement challenge. I would be talking about centralized exchanges (CEXs) by answering the [questions] given in the challenge.

Introduction

The word ‘exchange’ simply means to swap, to give one thing for another.
In the crypto world ‘exchange’ refers to a market place where you can swap one cryptocurrency for another (crypto pairs), you can swap a crypto to fiat in an exchange and also store your crypto assets.

There are two types of exchanges:

Decentralized Exchange - in decentralized exchange the swap of cryptocurrencies is done directly from peer to peer(p2p).

Centralized Exchanges - As the name implies, central means there is a middle man between buyer and seller. Exchange is not done directly.

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About Centralized Exchange and it’s Benefits to users

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Centralized Exchanges are owned and controlled by a single person, it has a central authority where transactions are carried out from. Centralized exchange is a platform where crypto users are able to trade their crypto assets to either another cryptocurrency or to fiat. Note that in centralized exchange the transaction is done by a middle man as with our local banks you can see that when we want to transfer money to a person the bank stands in as the ‘middle man’, ‘the third party’ between you and the person for the transaction to hold.

Centralized exchanges allows for swapping, trading, swapping, buying and also stacking of crpto assets by traders.

The centralized exchange makes use of order books (-buy and sell) and also pair buyers and sellers for transactions to happen. Centralized exchange are the most used because they make buying and selling very easy and fast, they have very high level of liquidity.

Because centralized exchange are prone to attacks and hacks they require users to undergo a process known as Know Your Customer (-KYC) where you input your details and also a facial scan to get your account verified.

Top 5 CEX’s on Coinmarket cap;

Binance
FTX
Coinbase exchange
Kraken
Ku coin

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Benefits of CEX’s to users

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Centralized Exchanges are very easy to use and navigate. For example the Binance, when making a transaction a small notebook pops up showing you how to do it

Centralized exchanges provides traders with high liquidity because of the great amount of buyers and sellers and this reduces the delay when making transactions.

Centralized exchanges try to reduce security crisis by making its users undergo verification processes (-KYC)

Centralized exchange has dual function as users can perform trading activities and also store their assets as with a wallet.

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What I look out for when choosing an exchange to trade my crypto pair.

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I haven’t really used or gone through many centralized exchanges before, so before I try to use one I lookout for the following;

• Recommendation - Before using any exchange I must have heard about its positive and negative sides from my crypto friends around me and also when I proceed to download I check reviews and ratings.

• Security- I also want to know if this platform is secure or not before I proceed to use it. Security is a key factor to look out for, knowing how the platform reacts in time of crisis and how assets are being protected.

• Capacity of Liquidity- with a high liquidity you are sure that transactions would not be delayed, so it is essential to always check for this.

• Easy use - Before using an exchange I check out if it is a platform that can be easily used by me.

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My Favorite Centralized Exchange and it’s Unique Feature

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I would go with Binance as my favorite, because I have had a first hand experience with it and so far It has been good. although I haven’t used others.

Binance is ranked no.1 on the coinmarketcap,as it is the most used, Founded in 2017 by Changpeng Zhongshan. Binance has over 300 cryptocurrencies traded and also has a wide variety of crypto pairs. The Binance exchange supports margin, spot and futures trading.

Over the years of its introduction it has produced its own cryptocurrencies knows as the Binance coin (-BNB) which it launched in 2017 and the Binance smart chain (-BSC) which it launched in 2020. Binance exchange gives it users a discount on transactions when they use the native coin BNB.

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The Unique Features

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• P2P (-Peer to Peer Trading) ; Binance offers P2P trading showing different users offering buy or sell and allows you to choose a favorable price from any.

• Crypto storage; Binance has an in-built wallet where users can deposit in assest and this is a very easy process. Just by clicking on deposit and choose the crypto you want to store.

• Security; Binance takes security to a high esteem, it makes use of 2 Factor Authentication (2FA). Whenever a withdrawal or deposit transaction is made a code is being sent to the registered email or phone number for approval. I can attest to this as I have also experienced it.

Things I would like to be changed about my favorite exchange (-Binance)

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The first thing I would like to be changed or improved is the verification process, it can be very stressful and tiring. When I first tried to verify my account it took way too long because of the facial recognition. If this could be improved it would make everything go more seamlessly.

The second thing I would like to be changed is the set minimum 10USDT to purchase tokens if this can be reduced it would attract even more users with not much fiat.

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Shortcomings of Centralized Exchange (CEX’s) and how users funds can be protected since we do not have access to our private key.

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The major shortcomings of Centralized exchange is that it is centralized, because of having a center authority it is prone to malicious attacks and if it get hacked a lot of user assets would be at great risk. Also centralized exchange are under a governing body and at any point a law could be passed that would be detrimental to users.

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For me I think that one’s crypto assest should not be stored long term in a centralized exchange, because once there is an attack the user would be left vulnerable. The first crypto was made to create financial freedom from middle men and CEX’s defeats this purpose because it holds the private keys, although it has a good side.

Conclusion

Exchanges weather centralized or decentralized are very necessary in the crypto world as it can be used by traders to swap, buy, sell or store assets. Each with its own disadvantages and advantages, so I advise anyone looking to use an exchange should do proper research.

Note: All images not sourced are gotten from my installed Binance app.

Thank you all for reading through.