Cryptoacademy Week 4 Beginners Course Task 7: Dex, Cex, Popular Exchanges And Trading Cryptos
EXPLAIN IN YOUR OWN WORDS WHAT AN EXCHANGE IS. DIFFERENCE BETWEEN AN EXCHANGE AND A WALLET. MENTION THE ADVANTAGES AND DISADVANTAGES OF DEX AND CEX. HAVE YOU USED AND EXCHANGE BEFORE? TELL US ABOUT YOUR EXPERIENCE?
An Exchange, What Is It
Well when we talk about an exchange it could literally be seen as a place or where the trading of goods and services takes place. It is a platform that provides for the easy swapping of form of goods or asset to another. Today we involve in exchange whenever we go to a local shop to buy something we need, because when we go we give money which is fiat equivalent to the value of what we want to buy let's say sugar. Now when we pay a certain amount to allow us take this sugar we could say an exchange has taken place.
Now in terms of what we are dealing with which is cryptocurrency, what then is an exchange in crypto terms? Well the concept is very much the same a crypto exchange.
Well we could say that just like in a shop where there are different commodities or market place where we come to buy and sell a crypto exchange makes provision for trading or swapping this time not of food or tangible things but of digital cryptoassets. Therefore we could say then that an exchange is what enables the trading of cryptoassets which are digital it is like our local market only in this case it is the buying and selling of cryptoassets that is being done. It thus helps us to easily trade various crypto asset available in the market at will with our fiat or trading against other derivatives.
It is often a place where crypto assets are traded with its value dependant on the simple law of supply and demand which this exchanges keep track of. Most exchanges also makes it possible for us to store our coins with the provision of inbuilt hot wallet and we can easily trade our coins into our local fiat currency and involved in different trading pair for example STEEM/BTC, XRP/USDT, ETH/BTC just to state a few as they are over 10 thousand cryptoassets available in the market and most exchanges allows trading of most of it.
Some crypto excahanges are Bybit,probit,phemax, Huobi-pro and many others. We have a centralised exchange which is like the ones i mentioned earlier and decentralized exchanges as well like apeswap, pancakeswap, justswap etc.
Difference Between An Exchange And Wallet
Well an exchange like it's purely meant for exchanging or trading cryptoassets either for fiat currency or swapping between other coins as the case maybe. We could easily exchange crypto assets to fiat with an exchange and exchange a fiat back to cryptoassets i mean we could easily purchase a cryptoassets using our visa cards or master card as it makes provisions for this and an exchange also allows us to swap or exchange one cryptoasset to another but in a wallet all this features are not there, a wallet does not provide us with any means of trading an asset or exchanging for fiat or otherwise.
Unlike an exchange a wallet does not serve any trading purpose whatsoever it is mainly or it's main purpose is to provide a secured storage of our cryptoassets. Yes in a wallet our assets are rather more secured than leaving them on an exchange. In a wallet we are in complete control of our private keys while in an exchange we are not the exchange are in possession of our private keys which means we don't have absolute control of our assets and if we don't own the keys then it is not our assets. I mean it makes complete sense just like in a house where we don't have the key to open the paddlock we can't say that is our house because we ought to have the keys to our house.
But then an exchange possess our key and makes us look vulnerable but that is not the same in a wallet. An exchange does not guarantee secure storage of crypto assets but in a wallet our assets are more secured and we are in complete control of our assets.
We have two basic types of wallet a cold and hot wallet. The hot wallet is connected to the internet and ofcourse we know that with anything connected to the internet there is always risks of hacks while the cold wallet is offline like a ledger or flash drive which is ideally the best form of wallet with the storage of our crypto asset with maximum protection free from any sorts of hacks.
In all we could easily see that the basic functions of an exchange is buying and selling of cryptoassets and swapping between fiat and cryptocurrency offering less security to the storage of asset while that of a wallet as the name implies is used for the safe/secured storage of crypto assets enabling no form of trading activities.
Advantages Of Cex
1).One of the advantages is that incase we were to lose our login password we could always retrieve it's back since it's centralised with the forgot password feature
2).Easily purchase crypto asset using bank transfer or credit card
3).It is very easy for one who is new in the cryptospace to get around it as the features are not difficult to get around.
4).Centralised exchanges also are able to process more larger transactions per second
Disadvantages Of Cex
1).They possess our private keys which means our assets are not in our custody
2).Availability of intermediary which means higher transaction fees
3).A centralised exchange is more liable to hacks since all it's information is stored in a central server hence leaving our assets in more risk
4).It does not ensure or gurantee the privacy of its users due to kyc requirements
Advantages Of Dex
1).Well in a dex we are in possession of our private keys which means we have absolute control of the assets in our account
2).Maintains the annoymity of its users in that it does not require any form of identity verification
3).The elimination of the middleman because it is decentralized makes for a reduced transaction fee
4).In dexes also it's users are free to list any coin they want
Disadvantages Of Dex
1).If at all for any reason we are to lose our set of private keys then our assets are lose for all time as there is no way to retrieve it since we are the only one in charge of it
2).Well it can be somewhat difficult for a beginner to get around
3).They do not offer advance trading like margin trading or futures or even stoploss which limit a trader
4).Are not able to faster transactions in trades of high volumes like centralised exchange
My Experience Using An Exchange
Yes i have used an exchange before and my first exchange is binance. Well before now i don't really know about any exchange but binance is the most popular exchange i have been hearing of among many people. So i actually open a binance account like a month before i joined steemit only that it wasn't verified yet but had it verified after joining steemit because many of my friends here on steemit always recommend binance is a user-friendly exchange and that's what they use in selling their steem. so i got around it and i must say it wasn't really hard as a beginner can easily find their way around it.
I must say i really know how to use most of binance features both trading on spots like limit, stop limit, oco trade even in futures. So i must say binance is really a good step in my crypto trading journey it is just really popular. And one thing too i love about binance is the P2p features sice my country disabled banks working directly with any exchange affiliated with with binance P2p features we can get around it and manage to still withdraw our funds easily.
Conclusion
Cryptocurrency is always a good thing to talk about and the idea of cryptocurrency is to give us freedom from the central authority who aims to control our moves but with the introduction of blockchain technology which makes everything decentralized and secure but then with the introduction of Centralised exchanges it kinds of takes away what crypto was supposed to be in the first place as they control our assets. But then i believe that if we are to use any exchange it should be decentralized exchange at least we are in control of our asset unless we are traders needing advanced trading features of a centralised exchange then we could makes use of a centralised exchange