Crypto Academy Season 5 Beginners' course - Homework Post for Task 7: Dex, Cex, Popular Exchanges and Trading Cryptos by @bright6126

An exchange in crypto world can be defined as a platform on which traders and individuals have the ability to purchase and sell cryptocurrencies. It allows individuals to use exchanges to trade one crypto for another, to swap cryptos and to undergo other forms of transactions like sending or transferring of assets. For instance, converting Bitcoin to steem, or to purchase crypto using Fiat currency, like the US Dollar. Exchanges also shows the current market prices of the cryptocurrencies they offer in real time. It also provides room to convert cryptocurrencies back into the U.S. Dollar or any other currency on an exchange, to save as cash inside your account (if you wish to trade back into crypto later) or withdraw/transfer to your local bank account.

EXAMPLES OF EXCHANGES

• Coinbase
• Gemini
• Roqqu
• Binance Exchange
• Kraken
• Uniswap
• Bitstamp

TWO FORMS CRYPTO EXCHANGES

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Generally, we have two forms of crypto exchanges that is widely used worldwide. They include:

1. Centralized Exchange
2. Decentralized Exchange

CENTRALIZED EXCHANGE

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A centralized exchange can be defined as a an exchange platform that is developed, owned, and run by a company. It comprises of a central authority that manages and control all the activities of users of the exchange. There is not much Independence in centralized exchange because the users do not have full control of their account sequel to fact that the exchange platform have access to the user's keys which makes it not to be very 100% secured.
Centralized Exchanges are often characterized with having almost all the details of the user because there is a a required KYC feature that must be undergone during registration or signup phase therefore, anonymity is always guaranteed. Some examples of centralized exchange platforms are Coinbase, Binance Exchange, Roqqu etc.

DECENTRALIZED EXCHANGE

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In the Crypto world, decentralized exchange can be defined as a type of Exchange that is independent, autonomous and not controlled by any central authority. It allows user to user (peer-to-peer) market which enables a trader or investor to deal directly with another trader or investor through a smart contract without any interference of a third-party or central authority.
In a decentralized exchange, the user has complete control of his keys and can at anytime initiates a transaction. Examples of decetralized exchange includes Pancakeswap, Uniswap, SushiSwap, Quickswap etc.

DIFFERENCE BETWEEN A WALLET AND AN EXCHANGE

First time of all, let's get straight the definition of Wallet and that of Exchange.

WALLET
In Cryptocurrency wallet refers to a software or application that enables, an investor to save all their digital asset. investors have the option of choosing between a cold wallet or a hot wallet or a cold wallet.

A hot wallet is the kind of wallet that stays online that is, it requires Internet connection for access, while a cold wallet stays offline that is, it doesn't requires Internet connection to access.

Most investors would always prefer cold wallets to hot wallet because they are more safer and secure from hacking and other security risks, cold wallet are not prone to breaches by hackers, an example of Hot Wallet is the Trust wallet while an example of the cold Wallet is Trezor.

EXCHANGE
A cryptocurrency exchange can be defined as a website, or web application that allows an individual purchase or buy digital assets or convert fiat currencies to a digital currency. Market price rates in a crypto exchange fluctuates and changes in a similar fashion to the stock exchange market. Exchanges have wallets, mostly web-hosted wallets on their website database.
Accessing any exchange wallet requires creating an account with the platform and undergoing KYC features. Some Examples of Exchanges are Binance Exchange, Roqqu and Coinbase.

In the following table, the difference between a wallet and exchange would be stated clearly.

FEATURE	WALLET	EXCHANGE
PRIMARY FUNCTION	For storing digital assets	Used by investors and Traders for trading digital assets
TYPE OF CURRENCY	supports only Cryptocurrency	It supports both Cryptocurrency and Fiat
SECURITY PROVIDED	optimum security guaranteed	Security is not fully guaranteed
DECENTRALIZED	fully decentralized	partly decentralized
INDEPENDENCE	Completely Independent	Dependent and controlled by the platform
ACCESSIBILITY	Can be accessed online using and internet connection (hot wallet and offline (cold wallet)	Accessed online only

ADVANTAGES AND DISADVANTAGES OF DECENTRALIZED EXCHANGE (DEX)
A Decentralized Exchange can be defined as a form of Exchange that is not run or controlled by a single authority rather, It is a peer-to-peer exchange medium that solely depends on a smart contract to complete transaction and also allows users to have a complete control of their keys.

ADVANTAGES

1. AUTONOMOUS AND INDEPENDENT
   Decentralized exchanges offers complete immunity from the government policies. They are not affected or controlled by any government policy.

2. MITIGATING HACKING RISK
   The users of decentralized exchanges have no concern to transfer their digital assets to a third party. So, there is no risk or fear of a an exchange being compromised or hacked, and users are assured of greater safety from intruders and theft.

3. ANONYMITY
   One of the prime feature of a Decentralized exchanges is that it do not require customers to complete any KYC forms, so if offers full privacy and anonymity to users.

4. NO CENTRAL SERVER
   In a Decentralized exchange, transactions are stored on different nodes(known as servers) which implies that there is no central server that stores all the transactions.

DISADVANTAGES

1. COMPLEXITIES
   The users of decentralized exchanges will have to bear in mind to always remember their keys and passwords to their designated crypto wallets, else their digital assets are lost forever and unrecoverable. They obliged the users to master and get familiar with the pattern of the platform and the process, but for centralized exchanges, they offer a more convenient and user-friendly process for recovering and other services.

2. DOESN'T ALLOWS FIAT PAYMENTS
   Decentralized exchanges do not provide room for trading of fiat currencies (local currencies) for digital ones, making them less robust and conviniente for users that do not already hold cryptocurrencies.

3. LIQUIDITY STRUGGLES
   Tentatively, 99% of crypto transactions are influenced by centralized exchanges, which means that they are responsible for the majority of the trading volume and because of the lack of volume, decentralized exchanges tends to always lack liquidity, and it can be very tedious to locate traders when trading volumes are relatively low.

ADVANTAGES AND DISADVANTAGES OF CENTRALIZED EXCHANGE (CEX)
Centralized Exchange can be defined as the Exchanges that can run, controlled, managed by a central body or authority and it comprises of a central server. The makes the users not to have total Independence and control of their keys.

ADVANTAGES

1. USER-FRIENDLY
   Centralized exchanges provides a friendly user interface and offers new investors a familiar, friendly way of initiating and running trading activities as well as investing in cryptocurrencies. In contrast to using crypto wallets and peer-to-peer transactions, that can be very complex, the users of centralized exchanges can easily log into their accounts on the Exchange, ability to see their account balances, and to initiate transactions in the platform.

2. RELIABILITY
   Centralized exchanges provides an extra layer of security and reliability to user's exchange when it comes to transactional activities and trading. By improving the transaction via a developed centralized platform, centralized exchanges provides higher levels of comfortability and usability.

3. HIGHER TRADING VOLUME
   Centralized exchanges are characterized with higher amount of trading volume compared to the decentralized Exchange.

DISADVANTAGES

1. HACKING RISK
   Centralized exchanges are run by companies that are responsible for the storing and retrieving of their customers digital assets. Some users exchanges usually hold billions worth of dollars of bitcoin and other digital assets, this tends to make them a target for hackers and theft.
   A vivid example is the case of Mt.Gox, which was once initially one of the world’s largest cryptocurrency exchange company until it reported the theft of 850,000 bitcoins, and that led to its suspension.

2. TRANSACTION CHARGES
   In contrast to peer-to-peer transactions in the decentralized system, centralized exchanges tends to charge high transaction fees for their services and convenience, this can be especially high when trading in high or large amounts of Cryptocurrencies.

3. BREAKDOWN RISK
   Centralized Exchanges uses a single server and sequel to this, a breakdown in the central server will affect the whole platform. So once the server responsible for controlling the entire process breaks down, the whole platform also goes down.

HAVE YOU USED AN EXCHANGE BEFORE, WHATS THE EXPERIENCE?
I have used an exchange platform before and I'm still using it even as of writing this homework Post. The exchange I make use of is called Roqqu, you can visit their official site at here or download the app on Google play store
Below is their logo

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I have quite some cool experience using Roqqu and their overall performance is average because at some point the platform encountered some bugs which made then freeze some of my digital assets although it was later fixed and restored properly.

In the meantime, I use Roqqu to trade Steem because the Roqqu exchange allows buying and selling of Steem and to also receive and send Steem. Below is a screenshot of how I trade Steem on Roqqu.
I login to my Roqqu application on Android then click on STEEM.

Screenshot from Roqqu

I can either sell, buy or receive, send Steem using the Exchange. All I need to do is just click any of the button as displayed in the screenshot below.

Screenshot from Roqqu
I still rate Roqqu 4star.

CONCLUSION
Wallets and Exchanges are important concept in the world of Crypto currency and having good knowledge about the difference between them is of a great importance for example knowing that cold wallet is the most secured means to store Crypto currency would help an investor to be more at a safe side.

From this homework we understood the difference between wallet and Exchange. We also went further to elaborate on the two types of exchanges namely; Centralized Exchanges and Decentralized exchanges.

Also using the right crypto Exchange is very important for example Centralized Crypto Exchanges controls and have access to users keys which means any modification can be done anytime without the user's consent and not just only that, it is more vulnerable to hacking and theft.

Hope you enjoyed my post... Do have a blast.

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#5 BITCOIN, CRYPTOCURRENCIES, PUBLIC CHAINS	LINK
#6 DIFFERENT TYPES OF CONSENSUS MECHANISMS	LINK

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