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What is an exchanges?

A cryptocurrency exchange is a digital environment whereby traders are united for the sole purpose of buying and selling of their digital assets. These exchanges allow users to purchase cryptocurrencies with Other coins or with fiat money using their debit or credit cards ;and even recently the option of Pair to pair (P2P) trading. The price of assets traded on an exchange is dependent on the demand and supply of the coin per time. Exchanges have feature like, Spot trading, futures, a lot of technical indicators, charts and graphs to help the trader in making informed decisions regarding the choice of trade Strategy or Coins to buy.

Aside connecting prospective traders , an exchange also makes or tries to make transactions secure from fraud and cyber criminals. So Imagine a trader, say Pat. If Pat wants to buy some cryptocurrency assets, instead of going to find another trader , probably by advertisement, all he needs to do is download a cryptocurrency exchange and put his Coins on sale. What happens is that the request is updated on the order book and another user or trader bids for the asset. So at the end of the day, the exchange has saved Pat the stress of looking for a buyer directly. Another unique thing that Pat benefits from is the Low Fraud risk ; Pat can ask for a refund or hold the exchangee accountable.

Differences Between Wallets and Exchanges; In Terms of Functionality and charges

The key difference betweenwallet and an exchange boils down to the fact that a wallet belongs to an individual and used in storing coins whereas an exchange is not owned by the trader and used for trading ,that is ,buying and selling coins(using a coin or fiat money ); although some exchanges also have inbuilt wallets like Binance.

Some Major differences Between Wallets and Exchanges

Wallets

1. Easy to access
2. Longitivity in storage
3. Great security, even better with cold type wallets .
4. Is not used for trading or exchanging coins
5. crypto storage devices devices are quite expensive, and offline wallets; cold wallets, are hard to use.
6. Trust wallet is n example of a wallet.

Exchanges

1. Selling of coins
2. Buying of coins
3. Exchanging fiat money for cryptocurrencies
4. Exchanging cryptocurrencies for fiat money
5. Lower level of security in contrast to wallets. In fact, some famous exchanges have been hacked in the past
6. Their interfaces are generally user-friendly, so they have easy accessibility and easy usage
7. They posses an inbuilt wallet that allows quick trading
8. Exchanges include Binance, Coinbase, Poloniex, FTX, BitMEX, Kraken etc.

CENTRALIZED EXCHANGE (CEX)

A centralized exchange is an Exchange; that is, an ecosystem that brings together traders for the purpose of Trading and exchanging their digital assets for Fiat Money or other cryptocurrency and vice verse. In a centralized exchange, there is a central agency that governs or regulates the platform, meaning traders are registered on the platform with strong due diligence and a trade is materialized on the go. It has it's Strenghts and weaknesses ; which we will deal with as we Progress.

Merits of CEX

A centralized exchange has a lot of advantages and we will be talking about a few under the headings bellow:

1. SECURITY : Centralized exchanges, because they adhere to due diligence, are safe for traders to trade with because the platform regulators or managers ensure rhAt the platform Is free from fraudsters and a good KYC protocol is usually welll enforced in these kind of exchanges.
2. EASE OF USE : Centralized exchanges are very easy to setup because they consist of inbuilt wallets and there is no need to connect to an external wallet. For instance, if Tom wants to set up an Exchage account, he can just Create a Binance account and trade his coins without having to create a special Wallet for it.
3. Customercare services : Centralized exchanges have systems in place to take respond to the issues of the customers . This makes centralized exchanges very user friendly ; although the complaint are most times not effectively attended to.

Demerits of CEX

Below are a few disadvantages of the the centralized exchange

1. Privacy : Because of the concept of KYC and strict due diligence, the privacy of the trader is mostly sacrificed . The keys to the inbuilt wallets are with the exchange and because It is a centralized organization, these exchanges are mandated by law to be open to regulators and so government agencies can crackdown on these exchanges and pressure them into releasing sensitive trade information or user information ,meaning the exchange can do and undo; as exchanges are not very transparent with their activities.
2. Limited coins and tokens : Projects listed on centralized exchanges are limited as compared to a decentralized one. Some projects may not meet the listing standards of a particular centralized exchange; although the project itself may not be fraud. So a trader only gets to trade within the available assets on the exchange and that is not the very best and doesn't serve the trader very well.

DECENTRALIZED EXCHANGES (DEX)

A decentralized exchange is an exchange ; an environment where traders are united for the purpose of Exchanging one coin for the other, that is not regulated by a central entity and no KYC protocol is in place as anyone can log on to the platform, connect their wallet and trade their coins, sounds cool right ? That's because it truly is. Your wallet key is not with the exchange and no information is saved about the users. Governace of these ecosystems are distributed to the users. A good example is the UNISWAP exchange.

Merits of DEX

The decentralized exchange has some cool advantages, it is a relatively newer technology but has been the bride of traders indeed. Bellow are a few merits.

1. Privacy: Decentralized exchanges are very cool in terms of privacy. Assuming Pat is trading using a decentralized exchange, His private keys are his and his only, his private information are not stored on the site . That means Pat cannnnot be targeted by law enforcement and regulators.
2. Access to a wide variety of coin : Decentralized exchanges have a very good and wide array of coins and tokens for traders to invest around . Just like mentioned earlier, Decentralized exchanges do not have strict regulatory protocols of centralized exchanges, so more projects can easily be listed on a decentralized exchange.
3. Transparency : Decentralized exchanges are very transparent in their transactions every information are available for the trader to see and one can easily view the block chain transactions mong other things.

Demerits of DEX

1. Fraud : Since a decentralized exchange does not implement the KYC protocols, a lot of fake projects are listed. They are lot of time cloning and buying of a fake coin is not very rare. Creating a token is not very difficult as a lot of programming technicalities are not required ; a token can be easily created on another blockchain. So there are fake coins here and there and they are no systems to fish them out .
2. Wallet Issues : Decentralized exchanges doesn't have inbuilt wallets and an external wallet is always required for transactions to be effected. Sometimes they are connection issues and some wallets are not compatible with certain exchanges and all of these can make trading using the decentralized exchanges very tedious and frustrating.
3. No Customercare Services : Since these exchanges are decentralized, there are no systems in place to cater for the complains of the customers, so if anything goes wrong, the trader is on his or her own.

Have you used an exchange before?

Yes, I have used an exchange before which is binance exchange.

My Binace Experience

Sometimes earlier this year, I created a Binace account which was founded in 2017 by Changpeng Zhao. I loved the access to technical analytical tools that aids trading. I got some Dogecoin using fiat money on the P2P platform of the exchange and it went very well although I was having some doubts earlier . I took about a minute for the transaction to be finalised. The Dogecoin was very small I only brought it to practice I later sell it few months after when I was learning future trading on binance but I lost all my money. I am somehow busy now due to the program am doing but once am through I will go back and learn the trading well. Life is a risk, am not discouraged .

Conclusion

Both the centralized and decentralized exchages are cool in trading, but the ultimate choice is depended on the taste of the customer, volume of the trade to be carried out, level of privacy and the availability of the time or coin in question. I would suggest all traders invest using both types of exchanges as each of them are very good in their own way.

Cc: @imagen