Crypto Academy Season 3 | Intermediate course Assignment by @allbert: A world of Wallets and Exchanges
Introduction
It is another beautiful season to learn from the Steemit Crypto Academy programme and I am more than excited to have the privilege of being one of the participants this season. Today I will be working on an intermediate course by professor @allbert whose lecture I enjoyed thoroughly and I will be providing answers to the questions in the assignment. Without wasting no time, I should begin.
Explain the differences between wallets and exchanges as well as mention which operations should be performed in an exchange and which operations should be performed in a wallet.
Wallets
A cryptocurrency wallet is a storage software usually regarded as a device that users keep cryptocurrency safe via keys (private or public keys). The keys are used to give authorization on transactions (send and recieve) to the coins.
Wallets could be physical devices as well as software online application. Wallets can be classified into cold and hot wallet, and while cold wallets are physical wallets such as Trezor, Ledger and so on, while Hot wallets are software wallets such as Atomic wallet, and so on.
Exchange
Cryptocurrency exchanges are platforms that allows users to trade crypto assets either via fiat using a debit/credit card or via peer to peer trading, or from cryptocurrency to cryptocurrency. Cryptocurrency exchanges ensure to provide security as well as a smooth transaction for users. Very good examples of exchanges are Binance, Poloniex, Kraken, Coinbase, Huobi Pro, etc.
The difference between wallets and exchanges.
In this section, I will be differentiating wallets and exchanges.
Wallet
The main purpose of wallets is to keep, and hold crypto assets
Exchange
Exchanges serve as a means of trading available crypto assets for other crypto asset of value, fiat, or vice versa.
Wallet
Wallets are decentralized and very secured. The security of the assets in a wallet is the responsibility of the holder.
Exchanges
Crypto exchanges are often linked to hacks so they take responsibility for the safety of the coins on their platform.
Wallet
Passphrases, Mnemonic and Private keys are given to users who create wallets.
Exchanges
Users are expected to only put in strong passwords and email, no mnemonic, private key and passphrase is expected.
Which Operation Should Be Perforned In An Exchange and Which Operation Should Be Performed In a Wallet?
Initially it was the sole purpose of exchanges to perform trading transactions and on the other hand it was the sole purpose of wallets to keep assets safe, however things are a little different now as every industry is trying to serve its own customers more by providing better services.
Wallets.
There are lots of crypto wallets that now provide their customers with the option of earning more crypto tokens if they choose to stake their tokens, there is also a limited charge on access to platforms.
Exchanges.
Exchanges now go as far as owning their own crypto tokens, this provide users with the opportunity to trade tokens at a reduced cost, they also provide the service of allowing their customers earn while staking their crypto assets.
When I first started my crypto journey, I had just one exchange account but as I kept on growing on this space I felt the need to diversify and begin to handle different crypto exchange account. The first reason behind this decision is the great need for security, we know that we cannot determine what goes around so I feel more safe when I have my assets in different exchanges than when I have it all combined in one spot.
The second reason is that, it is more convenient to use some exchange than the other and for the love of ease and convenience, the more I find out about a new crypto exchange that offers more value, the more I definitely want to try it out and that means creating more exchange accounts.
Location is another good reason for having several exchanges, some exchanges are limited to users from specific regions thus the need to look for other alternatives when out of a particular location.
As a result of the different volumes available on various exchanges, the transaction charge on each of these exchanges differs, the lower the volume then the higher the transaction fee and with the availability of different exchanges, it will be easy to switch to the exchange that provides a better and more convenient transaction fee.
Although it is important to have both wallets and exchanges as a crypto user, I will definitely support that wallets are more important than exchanges.
Exchanges stand a high chance of being hacked or going bankrupt and there is nothing we can do to revive our assets after they have been stolen, in this case it is better to have a wallet which is definitely a more secured form of keeping crypto assets, wallets provide each user with the option of having a designated passphrase and it is difficult for hackers to get though with owner’s authorization.
Hackers are usually more interested in big exchange companies, so they go for those big exchange companies instead of wasting time with individuals who have their assets locked with a private passphrase and might be difficult to get it out.
The loss of asset through a wallet is completely dependent on the ignorance of the user, the secured passphrase is supposed to be personal and when it is let out then there is a risk of losing crypto assets in the process and the crypto company will not be responsible for such damage.
To get this done, I will be creating an account in a very popular Ethereum wallet (My Ether Wallet) and with a cryptocurrency exchange Kucoin.
Creating MyEther Wallet Account
This was one of the earliest Ethereum wallets which enabled people to have Ethereum Addresses. To get this wallet, it is important to first go to the MyEther Wallet Website which is https://www.myetherwallet.com/
The Wallet is available on the platform (Web), as well as on mobile devices (iOS and Android). After getting to the website, scroll down to get the option to "create a new wallet" or "access existing wallet". Since I am creating a new wallet, I will be clicking on "Create a new wallet".
When the page a opened, a pop-up introduction with warning for security purposes is displayed. After reading, click on continue.
When you click on continue, another page explaining that MEW is an open sourced and decentralized wallet is displayed, as well as making it clear that the security of your wallet is mainly your responsibility.
After reading trough this, you click on the "NEXT" button.
On the next page, is another set of educational lesson, explaining where your funds are and the function of the wallet. MEW states it clear that the funds are stored on the blockchain and not in the wallet.
After reading through, click on the "Next" button which takes you to another page with security warnings on loss of fund.
The importance of privacy and security cannot be over emphasized seeing how MyEther Wallet is emphasizing on it. After reading through the entire introduction with MyEther Wallet, you click on get started.
There are three ways to create an account, one is via the mobile wallet, the others are via Mnemonic phrases and via keystore file. The Mobile wallet is recommended but you could use other methods as well.
For the sake of the assignment, I will be using the Mnemonic method. When I click on the Mnemonic phrases, a et of phrase show up, these phrases can be 12 or 24 phrases. I copy them safely and ten click on "I Wrote Down My Mnemonic Phrase"
After clicking, a verification page opens to show that I copied and kept the Mnemonics in a safe place
After verification, click on verify and then the Ethereum wallet is created. Click on "Unlock Wallet"
You can now access your wallet on the MyEther Wallet via any of the following ways; an MEW Mobile Wallet, Hardware, MEW CX, or via software (mnemonic/private key on the website)
If i am to access via software, I will be imputing my Mnemonic phrase and will click on continue so as to see my wallet appear or you can download the MEW mobile wallet, since that is recommended and log into your wallet account on the DApp.
To download the MEW App, you click on MEW wallet, download the app by clicking on the "download now" at the right hand corner then scan the barcode to connect with the web.
Or I will insert the mnemonic in the mobile wallet. In this case, I am using the WEB wallet, so I will be inserting the mnemonic in other to access my wallet.
After inserting the mnemonic, the wallet is accessed.
Creating A Kucoin Exchange Account
- To create a Kucoin exchange account, you visit https://www.kucoin.com/
- Click on Sign up to begin account creation
- Account creation can be in two ways, either via mobile number or via email address. Email address is a more familiar method of creating an account.
*Input your email and click on send code, after which the code should appear on your mail.
- After inputing the Email, the Code sent to the email, and Password, clicking on signup creates the account with little or no stress.
- Account is created successfully.
While exchanges and wallet have different purposes, their fuctions are in so many cases interwoven and they can't be neglected. Wallet gives users the right to own the funds by themselves, exchanges allow them to trade their funds as well as enjoy other benefits.
It was really a great time writing this post, I learned a lot from the class and I hope to learn more from subsequent classes.
Hello and thanks for participating in the Steemit Crypto Academy season 3.
As for the presentation, I respectfully recommend you to review the use of HTML codes, especially the justification of text, as this will make your publications more pleasing to the eye.