Steemit Crypto Academy S5 - Homework Post for Task 7
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.
Introduction
Since the introduction of the first cryptocurrency, Bitcoin, cryptocurrency has grown in popularity around the world, resulting in the emergence of a multitude of additional cryptocurrencies. In actuality, the crypto market already has over 3000 cryptocurrencies trading on over 650 exchanges, all of which are growing in terms of volume, market capitalization on a daily basis.
What is an Exchange?
Whenever we discuss about an exchange, we can think of it as a location or a region where commodities and services are traded. It is a platform that allows for the simple exchange of one type of good or asset for another. Today, anytime we go to a local store to buy anything we need, we engage in trade because we give money that is fiat equivalent to the value of what we want to buy, such as yam. Now, we may say that a trade has occurred when we pay a particular amount to be able to take this yam.
Now, in terms of what we're talking about, a cryptocurrency exchange is an online platform where users can trade their cryptocurrency for fiat currency or other cryptocurrency assets. The exchange platform enables swift trades between the numerous cryptocurrencies available on its website, which can then be exchanged or traded for Crypto or Fiat, allowing users to conveniently purchase or sell their crypto assets for fiat or crypto.
Binace, Huobi-pro, Bittrex, and a number of other cryptocurrency exchanges are just a few examples. We have centralized exchanges, such as the ones I described earlier, as well as decentralized exchanges, such as Pancakeswap, JustSwap, and others.
Difference Between An Exchange And Wallet
- A Crypto exchange is built primarily for trading because it links buyers and sellers, whereas a Crypto wallet is made primarily for holding or individuals who want to invest for the long term.
- Some wallets, particularly offline wallets, can be accessed without an online connection; however, in order to access an exchange, you must have an internet connection.
- In terms of fund security, the Wallet is safer because it allows users to access their private key and gives them complete control over it, but the exchange, on the other hand, does not offer users access to their private key and can be vulnerable to an attack causing funds loss.
- Some exchange allows individuals to change their crypto assets to normal or their local currency, but this isn't done in a wallet since the primary purpose is for storing and hodling.
Mention the advantages and disadvantages of DEX and CEX?
Advantages of DEX
- In a DEX, the individual possesses their private keys, implying that they have complete authority over the assets in their account.
- DEX stands for Decentralized Exchanges, and the exchange is totally decentralized, meaning it is not controlled by any authorities or parties.
Decentralized exchanges (DEX) remove the need for an intermediary in transactions, putting transactions in the hands of users faster and more directly.
DEX does not require any type of KYC or documents verification, thus user can easily buy or sell on the website as long as they know how it works.
Disadvantages of DEX
DEX can be tricky to navigate for a newcomer because the platform is sophisticated and not user pleasant.
Decentralized exchanges have the disadvantage of not allowing market participants to buy or sell fiat currency.
- DEX is a modest platform with a small amount of growth potential. Because there isn't a lot of trading volume, this usually leads to a coin's scarcity and a higher conversion rate.
- In a decentralized exchange (DEX) if the user forget is password, the password cannot be retrieved. That is, if a user misplaces or loses his or her key, he or she will no longer be able to access funds.
Advantages of CEX
- CEX's platforms are awesome, so trades and transactions are always well-organized and comprehensive, and users can get help and feedback whenever they need it.
- There is no uncertainty with centralized exchanges (CEX) because they demand Know Your Customer (KYC) before registration and are frequently confirmed further. As a result, any wrongdoing committed by accident does not appear to be lost. It is possible to retrieve it.
- Since CEX requires the users to verify thier identify (KYC) thier password can easily be retrieved if lost or misplaced.
Individuals can buy or sell their crypto assets to Fiat currency, or deposit or withdraw with their banks.
CEX has experienced tremendous expansion. Higher trade volumes are frequently the result of this.
Disadvantage of CEX
- Individuals on a centralized exchange do not have complete control over their private keys because they do not have access to them.
- Because all of the information is held on a central server, a centralized exchange (CEX) is more vulnerable to hacking.
- To trade or transact on some centralized exchanges, users must present a valid ID card and other documents for verification, which might take time and cause stress.
- Due to the fact that it asks individuals to complete kyc or papers verification, it does not protect or guarantee the privacy of its customers.
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Have you used an Exchange before? tell us about your experience.
Yes, I've used an exchange before, and the exchange is BINANCE, the most popular and biggest cryptocurrency exchange in the world.
I'm really comfortable with this exchange, and the user-friendly and simple-to-use interface features have made me fall in love with it.
In the year 2020, a friend introduced me to Binance and encouraged me to try it out. At the time, I only used it to buy and sell Bitcoin. But, having just gained some experience in cryptocurrency trading, I now trade on Binance.
My overall experience with the site has been positive, with the exception that when I first signed up, it took over ten days for my KYC verification to be approved.
Besides that, Binance has been fantastic; my trades are usually done instantly, and both withdrawal and deposit don't take long because once they are confirmed on the blockchain, they are immediately reflected.
One of the reasons I enjoy the exchange is their referral program, which pays a percentage compensation for each referral.
Conclusion
The concept of cryptocurrency is to free us from the grip of a central authority, but with the introduction of blockchain technology, everything becomes decentralized and secure.
We have an exchange and a wallet, with the exchange being best for trading and the wallet being best for hodling or keeping assets. DEX and CEX are the two exchanges. DEX stands for decentralized exchange, which means there are no central authorities, while CEX on the other hand is a centralized exchange that is it's controlled by a central body. I have mentioned and discussed their advantages and disadvantages.
Thank you!