Crypto Academy Season 3 | Intermidiate Course Task 1: A World of Wallets And Exchange
Having gone having gone through the class for today and based on my understanding of the class and personal experience I would like to attends the possible questions one at a time starting from the first one.
1- Explain Differences between wallets and exchanges as well as mention which operation should be performed in an exchange on which operation should be performed in wallets(in terms of fees)
Well one notable difference between an exchange and a wallet is that a wallets is a decentralize blockchain use for the storage or for the safekeeping of our cryptocurrency we are wholly in charge of our set of private keys while an exchange is a centralised and mainly used for trading and taking advantage of the volatility of the crypto market by buying the deep and selling the top and we have passwords which a centralised exchange could also have access to but we trust them not to tamper with our assets anyway.
Examples of a blockchain wallet include exodus.io, jax.io, blockchain.com etc while examples of an exchange include binance, Huobi, Hotbit, coinbase etc
Well I think based on how wallet function there are many use for the storage of digital assets and based on the facts that we are in control of our Private keys coins are more safer on a blockchain wallet than on an exchange and coins on an exchange is not subject to being delisted by an exchange terms and condition
Well in a wallet mostly the operation we do there is holding our coins we can also choose to transfer these coins from a wallet to an exchange maybe we want to exchange it for Fiat or for another cryptocurrency while in an exchange we can easily trade one coin for another cryptocurrency and in an exchange we can also hold our coins that is coins that are being listed by The exchange it can also be stored or we can also hold it on our exchange.
An exchange gives us a lot of options to buy a coin but the thing is that most exchange do not have a decentralized server and are subject to attacks by hackers which means that our coins are more safer on a wallet than on an exchange.
I think with what I have explained from the difference between an exchange and a wallet the functions is very clear because the basic function of an exchange deals with trading of crypto asset just like in our local marketplace but in this case a digital one where cryptocurrency or derivatives are traded why the basic function or operation as the case may be of a wallet is the storage of digital assets.
Now in this operations in terms of an exchange. An exchange charges us for trading of course depending on the volume of what we are trading and the coin we are trading and the exchange we are using for the trading.
Most times if we are trading high volumes an exchange usually charges lesser and if you are trading let's say with coins some exchange charges very little or nothing at all than when we are trading with fiat either by withdrawing or using it to buy coins but for a blockchain wallet where mostly the transactions will do is sending out coins to order wallet or exchanges the fees is also based on the crypto block chain and the volumes of the coin we are sending most times will see that when sending a small volume we are charged considerably high compared to the amount of coin we are sending than when we are sending large volumes of coin the charges then are very minimal compared to the amount we really want to send.
Another thing that also determines how much we are charged for fees on a block chain is the network fee of the blockchain like ordinarily the ethereum blockchain actually has a high network or gas fee as the case might be so sending on an Ethereum blockchain actually comes with high fees considerably.
2- In your own words, why you think people should have more than one exchange account? Do you have an exchange account? and why that specifically?
Work for me I think there are a lot exchanges we can possibly explore in this crypto universe. for me I think people should have more than one exchange especially for traders either for people who trade on futures derivatives or on spot. Ok let's say for example on binance for instance the trading pair available for steem is STEEM/BTC and STEEM/ETH.
True binance is a very good exchange and a lot of people would prefer this of course depending on your choice of pairs you would like to trade. let's say i would much more appreciate to trade STEEM/USDT pair and the only exchange i have is binance that means my goal will be defeated of course the fact that Binance doesn't have steem and usdt pair does not mean it's isn't a great exchange in fact it is one of the best but at that moment my immediate needs are not being met so that is why I think one need to have many exchange because there is some coins which will be available on an exchange and on another it will not be available and then maybe some crypto pairs that will may want to trade which may be attainable on an exchange and on another one it is not available. Like the STEEM pairs i mention in exchange like Huobi we can trade STEEM/USDT pair.
image taken on binance app
Evidence of the available STEEM pairs on binance which STEEM/USDT is not there. Binance offers only ETH and BTC pair with steem
Image taken on Huobi mobile app
The pix taken on my Huobi mobile app clearly shows that Huobi unlike Binance offers a STEEM/USDT pair.
so this is clearly one of the reasons why I believe we should have more than one exchange. Another could be maybe in the choice of coin we might want to buy might not be on our ideal exchange. Like there are some low gem coins with some potential which may not be available on Bittrex or Binance or Huobi etc as the case but will be available on Kucoin as such having binance or Bittrex isn't nearly enough this also means that we also need to have kucoin to have access to this coins and another reason while I believe we should have more than one exchange.
Also depending on the liquidity that the exchange offers in the aspect which I believe Binance offers much liquidity more than some other exchange. In the higher liquidity a crypto exchange offers the higher we are likely to trust this crypto exchange with our funds and different crypto exchange also have different transaction cost and Binance offers one of the cheapest fees.
so personally for me I believe that in order to have a well-rounded experience on crypto exchange and how to trade derivatives that for one to be a trader wether on spot or futures the person needs to have as much crypto exchange as possible even if is for holding his coins on spots wallet so the person can get to know about the different rates of this exchange and see which one will be the best in case in the future he decides to venture into trading.
My Exchange Account
Well I have more than one crypto exchange account but I must confess the one I used most especially or my ideal exchange account is binance because of a number of reasons. Which are listed below.
- The high liquidity available
- Low or cheaper cost of trading compared to some other exchange
- It is user friendly
- Also personally am in love with it P2p features
- Offers wide variety of cryptos for buying. A good place for easy trading and buying and selling of coins.
3- what are better? wallets or exchanges?
Well personally I think it depends on what our role is in cryptocurrency. I mean if we are hodlers that is people who are into crypto for the long-term aspect and have that long-term Outlook of 5 to 10 years and probably have other things they are doing but just want to accumulate this coins because they understand that cryptocurrency is the future of money for this kind of persons, i mean if I were this kind of person I would prefer a decentralized wallet to an exchange for security more than any other thing even much better i might even prefer a cold wallet a type of wallet where I can store my access offline probably with a USB which will make it more safer.
But then if I am a trader someone who is into crypto day in day out, one who is always interested to take advantage of the volatility of the market and trading derivatives I would very much more prefer a crypto exchange because unlike a wallet it offers this trading features and liquidity. But then if I'm both a holder and a trader then I think they are both important the decentralized wallet for my long-term holdings and the crypto exchange for my day-to-day trading then I would think that the two of them are very important in the life of one who is into cryptocurrency. A decentralized crypto wallet for holding my coins for security purpose and centralized exchange for trading and making short-term gains. That's my take on it.
4a- Creating of a decentralized wallet account
Well first, i went to Google play store and searched for jaxx blockchain
Then i downloaded it and launch the blockchain wallet application
After which I was asked to backup my private keys.
I successfully but my set of private keys up at a very safe location.
Then of course I was notified that my backup was complete.
And then the wallet was fully launched
4b- Creating of Exchange
I visited coinbase.com
And then I was asked to create an account since I don't have one
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I input my details and created my account.
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I was asked to verify my email which i did immediately
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I also had to verify my phone number which to verify a seven digit code was sent to me.
And then my account was created and i now have an Exchange account with coinbase
Conclusion
Well my all round take on this assignment post is that both a wallet and an exchange is very important they all have the roles they play I strongly believe that we need both if we are to succeed in the world of cryptocurrency and blockchain technology.
Yes they all have their pros and their cons where one is lacking the other make up for it. when it comes to the storage of our coins wallet offers more security while when it comes to trading of derivatives, exchange offers a wide range of possible pairs we can possibly trade in the world of cryptocurrency so therefore i simply believe that we need both of them i cannot really choose one from the other because personally i am both interested in investing and in making gains from short-term trade.