STEEMIT CRYPTO ACADEMY SEASON 5 || (Beginners Fixed)-Homework Task 7 for @imagen || [CEX's & DEX's, Popular Exchanges and Trading Crypto's]
- Q-3) Explain in your own words what an Exchange is. Differences between a Wallet and an Exchange. Mention the Advantages and Disadvantages of CEX and DEX. Telling everyone about my Experience with Exchanges.
MY UNDERSTANDING OF AN EXCHANGE
An Cryptocurrency Exchange is an online marketplace which originates the buying and selling, trading, and the storing of digital assets, in this case the assets are used to refer to Cryptocurrencies.
The Exchanges provides it users the luxury of being able to invest their money into Cryptocurrencies, manage the assets in which they acquire(either by selling or storing) and most importantly possibly grow their assets in value over time depending on the market trends.
An example is the Company stocks being bought and sold to interested investors are managed by Stock Exchanges, Crypto-Exchanges enables its users to engage in the process of buying, selling, swapping and storing thier digital assets. Cryptocurrency Exchanges have been of great help in the conducting of transactions from around the World with little or no challenges for it's users. In order to use an Exchange, certain data's of the interested user must be provided.
DIFFERENCES BETWEEN AN EXCHANGE AND A WALLET
In the Revolutionary digital Industry, many companies have Exchanges and Wallets built up and this sometimes causes uncertainty in their differences by some Users.
However, in this part I would be highlighting the few differences of the two.
CRYPTOCURRENCY EXCHANGES
An Exchange empower it users to participate in the buying and selling of coins within the exchange, the trading of assets between 2 individual parties on the Exchange, storing of the acquired assets on the Exchange (if preferred) and the transfer of the digital assets to another exchange address or even a Wallet. An exchange gives users the opportunity to deposit their money from another online safehouse like a bank app as Fiat currency which can then be later used to purchase the Cryptocurrency of the users choice. An exchange is however prone to hacking depending on their security build up as users may lose their funds.
CRYPTOCURRENCY WALLET
A typical Crypto Wallet's main objective is the safekeeping of the digital assets already acquired from an Exchange. A user which stores assets on a wallet transfers them from an Exchange. A user who stores his/her digital currency on a wallet is more concerned about the security of his assets. In a wallet, you are in possession of all private keys and passwords which are used to access the account.
This is why a wallet is protected from hackers, the safety of the assets depends on the owner as you have to backup and secure your keys. A wallet could be a:
| Hot wallet | Cold wallet |
|---|---|
| Hot wallet: stores the Cryptocurrencies online and all the private keys and passwords handed to the user only. Loosing of the keys or combination of keys will lead to permanent loss of the assets. | Cold wallet: this form of wallet typically stores the assets offline in a drive, which also requires keys to access. |
IN CONCLUSION OF THE DIFFERENTIATION
- An exchange allows the buying, selling, trading and transferring of coins within and away from the exchange, while a Wallet is the way to go for the proper safekeeping of the digital assets as it is not prone to hacks like an Exchange.
- In order to use or Login an Exchange, you would need the email and other data in which you registered the account with and even if the data is lost, the exchange provides an option for recovery(because they are in control of part of the private keys), while a Wallet's keys is stored by the user and loss of the keys will lead to permanent loss of the assets.
- An Exchanges operations are completely carried out online, while a Wallets could be online or offline.
- An exchange will provide fast conversion or selling of Cryptocurrency into Fiat Currency for easy withdrawal, while assets stored in wallets need to be transferred to an exchange in order to be sold.
- An exchange is suitable for a User which engages in regular crypto transactions, while Wallets are for users who prefer to HODL(long term keeping).
ADVANTAGES AND DISADVANTAGES OF CEX AND DEX (CENTRALIZED AND DECENTRALIZED EXCHANGES)
| Centralized Exchange🛑 | Decentralized Exchange✴️ |
|---|---|
| A Centralized exchange is a form of exchange which is built by an organization or company in order to give potential users the ability to engage in buying, selling and trading of their digital assets. The Centralized exchange is somewhat ran by a governing body, and they mediate the transactions of thier users. A Centralized exchange allows for free and fair peer to peer trading between it's users. | A Decentralized Cryptocurrency Exchange is solely fabricated for the purpose of direct peer to peer transactions between it's users and there are no Intermediary or Governing bodies present. The way a DEX would work totally depends on it's programming on the Blockchain. It means authorities mediating the activities on the platform are nonexistent. |
Highlighted Advantages and Disadvantages of CEX and DEX
- Centralized Cryptocurrency Exchanges are more concerned with quality customer service, as they provide thier users access to faster and larger volume of transactions.
- Owing to the fact that DEX are built solely on the Blockchain technology, they are less to prone to hacks than the CEX. In A CEX, you might end up losing your private user data and funds when a security breach occurs.
- In a Decentralized exchange, the user is in total custody of their private keys for Login purposes, loosing these keys will lead to permanent loss of the account/wallet. While a CEX operates a Custodial Framework i.e they keep hold of part of the keys to aid account recovery when the users lose their original passwords and details.
- Centralized Exchanges always Require KYC-verifications (Know-your-customer): this implies that when a user is creating an account on a Centralized exchange like Coinbase or Binance, they are required to submit lists of personal information such as Bank verification details, home address, work address (varies), occupation etc... However such lengthy verifications are not required in a DEX.
- Asset Conversions: Centralized Exchanges allows its users to deposit money from thier banks/wallet apps and convert to Cryptocurrencies while also providing quick coin to coin conversions, while Decentralized exchanges only permit the use of coin to coin conversions.
- Integrated Features: DEX users have the luxury of browsing DApps smoothly, which they could use to also transact, surf and even entertain themselves. While CEX do not offer DApps, they allow users to engage in margin trading, staking, futures, margin lending etc...
- Centralized Exchanges provide user interfaces which makes it easier for novices to easily navigate through, while a DEX's interface might be too complicated for someone new to the crypto space.
- CEX's often offer wide varieties of promos and contests for its users to participate in, while DEX's rarely do so.
- CEX are most likely subject to regulations from Regulative bodies like Bank Secrecy Act(BSA)- for the united states, as this may lead to assets of their users becoming frozen.
- EXAMPLES OF CEX's: Binance, Coinbase💠, Kraken, Latoken, Roqqu- in Nigeria.
- And DEX's include: Exodus, Trust wallet, Uniswap(V2,V3), Pancake swap 🥞 , ApolloX etc...
MY EXPERIENCE WITH AN EXCHANGE: BINANCE💰
After reading alot about cryptocurrency and finally understanding its basic concepts, I asked my friend who was already into it for a long while to show me how I could proceed to obtain the coins of my choice, he then introduced me to binance. He said binance is one of the largest exchanges in the world with great features and most importantly, had an uncomplicated use interface for noobs like me.
Over time, I have learned more and more about the binance app and indeed it's one of the best!.
- The Process of Registration isn't strenuous at all, you just need to submit your email address, location, phone number, name and other private personal data for KYC-verifications because it's a centralized exchange
Image taken from Binance
- Like all exchanges, Binance has a page that displays the current prices of various coins and their wave trends.
Image taken from Binance
- One of the amazing features of Binance is that it has a "Lite Mode", which is designed to aid noobies with easy navigation on the app or site or even if you are a pro but you like to keep things simple.
Image taken from Binance
- A characteristic Feature of Centralized exchanges is that they do have regular rewards, vouchers and giveaways for thier customers in order to attain customer loyalty as seen here in this pic below
Image taken from Binance
- Moving to the "Pro mode" to get a wider view of Binance, you would notice a far more complicated interface been displayed, it includes the p2p trading, swap farming, margin, trades, futures and more!
Image taken from Binance
- Like all other Exchanges, binance produces the option of Deposit, in which users can use to transfer money from their various banks into their binance account. This may however result to charges depending on the method of deposit (card, bank transfer, p2p deposit). I regularly use the bank transfer and my experience has been a fast reflection of funds with no complaints.
Image taken from Binance
This deposited money can be turned to "Fiat currency" and can be converted to coins of a users choice unlike a Decentralized exchange which only deals with crypto-crypto transactions.
Image taken from Binance
- On Binance you could trade on Spot, Margin, p2p etc... I however trade on only spot as I input reasonable Bid-Ask Prices, the processing of such transactions are Soo fast on Binance
Image taken from Binance
- The Futures option is also available on Binance.
Image taken from Binance
Binance is one the best exchanges in the world and they offer more and more crypto related options not listed here, I would always recommend binance for any crypto person because my experience has been amazing throughout time.
