Steemit Crypto Academy Season 2, Week 3 || Homework post for Decentralized and Centralized Exchanges...

blind-spot (70)in SteemitCryptoAcademy • 3 years ago (edited)

This is my first task post within the Crypto Academy initiative. I found the lesson and homework by @yousafharoonkhan captivating and interesting since having an idea of decentralized and centralized exchanges gives the trader an edge over selecting and strategizing their trade strategies. While swaps, DEFI, and pools are getting more popular by the day, it has also become growing important to learn about metamask and swaps. Yousaf's lessons cover these basic but important factors.

Question no 1 :

Write the definition of Decentralized and Centralized Exchange in your own words.

In the picture above you can see I have illustrated two diagrams on MS paint, they may not be perfect but will give you the gist of the idea.

A centralized exchange needs information (it can be a transaction, a trade, a movement, or anything) to be passed through the main hub, usually a private company, a group of people making the governance, and so on. No information can be passed from one side to the other, without the exchange being fully involved with it. This also means that the passing of any information is under strict scrutiny, monitoring, and the right to be withheld, modified, or nullified based on the exchange's will.

On the other hand, we have decentralized. A decentralized exchange is where any and all information can be relayed without the involvement of a central hub. A peer-to-peer system where all information can be moved along any direction and to any destination without being controlled, monitored, or need to be modified to fulfill the principles of an intermediator. It is the buyer and the seller alone, that define the outlines of their transaction.

Question no 2 :

Explain in your own words the difference between decentralization and centralization exchanges.

To understand the differences, let's use the example of a carrom game. We will create 2 scenarios:

1 . Decentralized exchange (carrom game at home)

What happens when you play a carrom game at home?

Yes, you decide the players, the teams, the number of games to play, and even the rules! The objective is simple, to win...just like in an exchange - to trade! In a decentralized exchange, the users get to influence the details, just like a carrom game at home. There is no outsider or third party that influences the game, just as such, no third party influences the exchange.
It allows the exchange to be a free agent of each trader.

However, the game is limiting. The players are the same and can get repetitive. Also, there isn't much in the games, except playing. Similarly, a decentralized exchange can feel limiting, but in a different way. It is usually a small number of people that are dabbling with a dex. This can lead to a free, liberating exchange but with limitations. It is hard to advance the exchange or trades and usually is a good option if you want to trade P2P.

2 . Centralized exchange (carrom tournament)

What happens when you play carrom at a tournament?

The rules are defined by the organizer. So is the time, the prize money, the players, the schedule, and so on.
Just as such, a centralized exchange has nothing to do with the players. It doesn't matter who or what you are trading, all the outlines are defined by the exchange. It also means there usually is a bigger amount to play in fees in a centralized exchange. However, due to the higher budget a private entity can provide, the exchanges are usually made user friendly and can provide more incentives for using them in place of a dex. Much like how it is usually better to win a carrom tournament rather than win one at home.

Let's look through the table and find summarized differences:

Feature	Centralized	Decentralized
Free movement of information	❌	✔
Trade fees	✔	❌
User friendly	✔	❌
Volume & Liquidity	⬆	⬇
Owned and Run by the people	❌	✔
Faster and easier lisitng	❌	✔
More financial options	✔	❌

Question no 3 :

Write about any 2 best centralized exchanges of 2021. why are they best in front of you?

My current favorite is Binance. I do not think there is anyone who doesn't love binance at the moment. It was the first exchange I used to purchase steem back in 2018.
I love it for a different reason. You can see in the screen shot how it shows the level of my account and the verification. The higher level lets me trade for a lower fee and sometimes also lets me ignore withdrawal fees. Binance also provides various giveaways and has multiple initiatives through which you can win some extra crypto. Binance also has some of the highest liquidity in many coins compared to other exchanges. With an increasing volume and a high liquidity trading on binance has become safe for me.

They have their own native token BNB, which is now used for their BSC projects. This native token gave me the opportunity to carry out various arbitrage trades, since every token can be traded for BNB.

Currently, binance also has stock options with TESLA and microstrategy coming up. I invested the minimum amount to gab a feel of how it is to trade stock on binance. Remember, only put what you are ready to lose.

The second is ionomy. It is a rather slow and still growing exchange. However, this makes it similar to a dex, but a centralized exchange. The exchange doesn't feature too many coins, nor does it have many financial option like Binance. But, it still has nodes that can be bought and shared, from which you can get node share rewards. The best thing about ionomy is its transparency.

It is secure and safe. I usually use it to carry out arbitrage trades and also look at the node shares. They will be listing more and more as time passes. I am collecting my ION tokens and make smaller trades with BTC in the exchange.

Question no 4 :

Install Metamask, and share step by step screenshot.

To download the extension on PC browsers, use the link for the browser you use:

Brave (brave://extensions/)
Chrome (chrome://extensions/)
Edge (https://microsoftedge.microsoft.com/addons/Microsoft-Edge-Extensions-Home)

Now follow these steps:


Search "metamask"	Locate and press on "get"	Select "add extension" on the popup

This should successfully install metamask on your browser and redirect you to the next step. To create a new wallet follow these steps:


Click on "get started"	Select "Create a wallet"	Click on "I agree"

Now you can start setting up the wallet. Follow these steps:


Manifest a password that you will use every time to log in	Click to reveal your key phrase and copy it. Do not share this and store it safely!	Either write the key phrase down, copy and save in a notepad, or click on the link to download it and secure it.


If you have your seed phrase then just feed in the phrase. And click confirm.	If you have followed these steps properly, you will next find this page. Your metamask wallet is ready to use!

Question no 5 :

How to use Uniswap exchange , and Swap/buy or swap/sell any coin

1 . Enter and go to this link https://app.uniswap.org/#/swap from your address bar to directly start swapping. You can alternatively write "uniswap" on google and click on the first link that says https://uniswap.org or Unswap|Home

2 . You should be redirected to this page. Here you need to click on "Use uniswap" to start swapping or you can browse around the website to learn about the project. I recommend checking the governance tab and learn about the UNI token. But to swap, we will click on "Use uniswap"

3 . You will be redirected to https://app.uniswap.org/#/swap where you need to connect a wallet that holds your funds to uniswap, in order to swap them for your choice of coin that is available on the uniswap.
To do this, we will click on "Connect a wallet" either on top right corner of the screen or below the fields.

4a. Since we have followed this tutorial and made a metamask wallet, lets click on that and connect it.

4b. This pop-up will come. First we press on "next ". On the subsequent pop-up we will press "connect ".

If you follow these steps successfully, your metamask wallet address will now show on the top right hand corner of uniswap. The balance of your wallet will also be reflected.

5 . To swap, simply select the coin you hold on your metamask and want to swap. Feed-in the amount. Now select the token you want to receive after the swap. The trade amounts will be automatically updated. Since I am not swapping anything for this tutorial, there will be no amount shown, rather a message showing I have insufficient balances.

If you have the right amounts and balances, you can click on "Verify" which will be in place of "Insufficient balance" and carry out the transaction!

Conclusion

The strive for decentralization has been increasing since the last few years. It began when the first Bitcoin was coded and powered with decentralization. However, as all businesses, the exchange business has also seen the goods of both sides, centralized and decentralized. Understanding and knowing how both exchanges interact makes it more useful for traders like you and I to choose and decide which exchange we prefer and plan out our strategies.
On the other hand, the dynamics within crypto are forever growing. Learning about wallets, seed phrases, swaps and so on has become imminent. With the rise is DEFI and funds security, it is important to learn these skills. They have become the foundation of the individual crypto holder.