[REPOST] Crypto Academy Season 3 Beginners' course - Task 5: Dex, Cex, Popular Exchanges and Trading Cryptos
Previous Remarks:
Hello everybody.
Hopefully, all of you will be good and enjoying your health with the grace and blessings of Allah Almighty. Today I am here to present the Task 05 of the Steemit Crypto Academy Beginner's Courses. Today our topic of discussion is Crypto Exchanges and Wallets, DEX, CEX. So, let's start our task without any wastage of time.
There are three questions that are asked by the professor to perform only one of them. I have chosen question number 3 which can be stated as:
Question
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.
As we all know that cryptocurrencies are digital currencies that cannot be touched and felt but can be used for trading purposes in the digital market. In the real-life, there are shops and markets where can buy or sell our goods by exchanging fiat currencies. So, in the digital world, there are marketplaces where cryptocurrencies can be exchanged and traded. These market places are known as Crypto Exchanges.
The crypto exchanges are the platforms in the form of applications or websites where cryptos can be traded and one can also buy the cryptocurrencies by investing the fiat currency in the exchanges. For instance, one can buy Bitcoin by investing USDs in the crypto exchanges.
The crypto-assets can also be stored temporarily in a crypto exchange for trading purposes. One can sell and buy the assets at profitable prices in the crypto exchanges to enhance their interaction with the cryptos world. The exchanges need the accounts for their proper functioning and the accounts are signed up by providing the whole of the information about the user's identity. This information also includes the national identity, passport, etc of the users. So, after the creation of the account in exchange, one can easily trade the cryptos and earn better profit.
Crypto Wallets are the applications or websites where cryptocurrencies are stored to ensure the security and privacy of the crypto assets. However, the crypto-assets can be stored temporarily in the exchanges, but due to security reasons, they cannot be stored permanently there. So, the crypto traders store their crypto assets in the crypto wallets, which are secure to a much extent than the exchanges.
The crypto assets that are stored in the wallets can be transferred to the crypto exchanges to utilize them as a source of the exchanging material. Crypto Wallets allow users to store their Bitcoins, Ethereum, DASH, and other cryptocurrencies. The users of Steemit are also in touch with a crypto wallet which is called Steem Wallet, where the Steemit currencies (Steem, Steem Dollar SBD, TRX ) are stored.
There are two types of crypto wallets.
Hot Wallets are used to store the crypto assets and work along with active internet access.
Cold Wallets are used to store the crypto assets offline. These wallets are not connected to the internet. So, cold wallets are more secure than hot crypto wallets.
Comparison...
The main thing that differs crypto wallets from crypto exchanges is the presence of private keys. Private keys are the main thing that ensures the privacy and security of the coins that are kept in the wallets. These private keys act as the key sole key to enter the wallet. While on the other hand, the crypto exchanges do not have any private keys. Users can log in to the crypto exchanges simply by entering the password they have set for their account.
Another important thing that differs the crypto wallets from the crypto exchanges is that the crypto wallets are more secure and safe than the crypto exchanges and can be used to store the crypto assets for the long term.
Crypto assets cannot be traded on crypto wallets but in the case of crypto exchanges, the cryptos can be traded and exchanged with each other to get better profits.
Decentralized Exchanges
There are two types of crypto exchanges. One of them is the Decentralized Exchanges. Decentralized exchanges are those exchanges in which there is no involvement of the central body while making transactions on these exchanges. Some advantages and disadvantages of decentralized exchanges are as follow:
Advantages:
The most important and the first advantage of these exchanges is that the funds and transactions are under the control of the traders themselves.
Traders can trade (Buy or Sell) their assets whenever and wherever they want.
As the funds and transactions are under the control of the individuals so the decentralized exchanges are less susceptible to hacking.
There is no involvement of the third party for the validation of the transactions, so these exchanges are safe to use.
The security system of the decentralized exchanges is also very strong as there is the involvement of the private keys that are only available for the owner of the exchange account.
Disadvantages:
As the users are free-hand in these exchanges, so some ugly people use this feature for doing money crimes.
The On Chain/Off-Chain phenomenon in the decentralized exchanges also makes the transactions slow and expensive.
In decentralized exchanges, if someone wants to make a very fast transaction then he had to pay more for this purpose.
Examples: MDEX, MDEX (BSC), Uniswap (V2), PancakeSwap, OpenOcean.
Centralized Exchanges
centralized exchanges are those crypto exchanges in which the transactions that are made on the exchange are under the control of the central controlling unit or the central authority. This central authority or third party validates the transactions. Some pros and cons of these exchanges are as follow;
Advantages:
The first and the most impressive advantage of centralized exchanges is that the liquidity of the crypto assets is very high in the centralized exchanges and this thing really proved to be helpful for the users.
The massive trading volume of the crypto assets is also another good aspect of centralized crypto exchanges.
The transactions that are made on the centralized exchanges are more efficient and faster than those that are made on the decentralized exchanges.
The transactions are charged with fewer transaction fees in gas costs. This thing also attracts users.
Disadvantages:
One of the biggest disadvantages of centralized exchanges is the security problem. As the funds and transactions are under the control of the central authority so the security of the assets is defects.
The hackers found more chances to attack the system in the centralized exchanges.
The absence of private keys is also a disadvantage of centralized exchanges.
The prices of the assets are manipulated in the centralized exchanges as compared to the market outside the exchanges.
Examples: Binance, Huobi Global, Coinbase (Pro), Kraken, Bithumb
My Experience with Crypto Exchange
Yes, I have experience of about 5 to 6 years in the trading of crypto assets and I have used and explored many decentralized exchanges (DEX) as well as centralized exchanges (CEX). But now I am using the Binance exchange which is considered to be the largest exchange of the time. Below is the screenshot of my verified account at Binance exchange.
Binance is a centralized crypto exchange (CEX) and is considered to be the biggest centralized exchange of the time. I am using the Binance exchange for 5 years. I made my account in September 2017. The first transaction that I made in this centralized exchange was the buying of Ethereum. I invested some USDs from the P2P trading feature and buy the Ethereum token.
Fortunately, the price of Ethereum goes up after about 3 or 4 days of my buying. So, I sell ETH at a considerable profit. Now I have invested money in the Binance exchange and have bought a number of coins. 1inch is one of my favorite coins. So, I have a pleasant experience with the Binance Exchange.
Besides this exchange, I have also used the Poloniex, Bittrex, KuCoin exchanges as well. But I like the Binance Exchange among these all.
Conclusions
Exchanges are the platforms where we can trade crypto assets and earn better profit. Wallets are used to store crypto assets safely and securely. Wallets may be offline or online and offline wallets are more secure. Exchanges are of two types. Decentralized Exchanges work without the involvement of any central authority and are more secure. Centralized Exchanges work under the influence of the central authority and are much efficient than centralized exchanges.
So, that's all about the Task 5 of the Beginner's Courses of Steemit Crypto Academy. Hopefully, all of you will like it.
Writer: @steemdoctor1(Crypto Student)
Hi, @dilchamo and @nane15, please have a look, dear professsors.