DEX, CEX, POPULAR EXCHANGES AND TRADING CRYPTOS | STEEMIT CRYPTO ACADEMY SEASON 4 | HOMEWORK POST FOR TASK 7
I'm super excited to continue with my introductory post, thanks for the Steemit team for this wonderful privilege. I will be posting my assignment on the Task 7 by professor @imagen
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3 . EXPLAIN IN YOUR OWN WORDS WHAT AN EXCHANGE IS
DIFFERENCES BETWEEN A WALLET AND AN EXCHANGE
MENTION THE ADVANTAGE AND DISADVANTAGE OF DEX AND CEX
HAVE YOU USED AN EXCHANGE BEFORE ?
TELL US ABOUT YOUR EXPERIENCE
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An exchange can be defined as a platform where different trades are being carried out. Cryptos, Forex, commodities, financial instruments can all be traded on different exchange platforms but since our focus for this Homework is on cryptocurrency exchange, I will be talking more on that.
A cryptocurrency exchange involves the trading (buying and selling) of different cryptocurrencies like Bitcoin, Etherum, Tron, Ripple, Dodge coin etc on exchange platforms. It is to be noted that crypto exchange can either be centralized (i.e there is a central entity controlling the operations) or it can be decentralized (i.e there is no intermediary or central entity controlling its operations). We have different types of crypto exchange platforms, examples of centralized exchanges include : Binance, Huobi Global, coinbase, kraken, Bithumb, Bitfinex etc while examples of decentralized exchanges include : uniswap, Tokenlon, ox protocol, venus, sushiswap etc As at today, Binance ranks highest and biggest as the number one crypto exchange platform.
A Crypto wallet can be defined as a program or devices which serves the purpose of storing and keeping the crypto coins of a user. Just as we keep our fiat currency in our physical wallet, so also we can keep our digital currency in crypto wallet. To access a crypto wallet, both the private and public are normally needed because that's what a user can make use of to access his/her wallet.
Now let's talk about the differences between a wallet and exchange
| CRITERIA | WALLET | EXCHANGE |
|---|---|---|
| FUNCTION | Specifically used for storing crypto coins | Serves the purpose of trading digital coins and asset |
| SECURITY | More secured because owner has total control | Less Secured |
| CONTROL | The owner has total control of his/her wallet | The owners of the exchange platform controls what's happening in the platform. |
| CONTROL OVER THE PRIVATE KEYS | Wallet Users have total control of their cryptography (private) keys | Doesn't permit total control of one's private keys |
| ACTIVITY | Features such as buying, selling or trading is not done | This offers various features or activities like selling, buying and trading of different cryptocurrencies |
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A Decentralized exchange is an exchange that is not controlled by a central entity, they are usually built on the blockchain technology and this form of exchange is void of an intermediary. It is to be noted that DEX permits or offers peer-to-peer transactions.
SECURITY
There is high level of security in the DEX because there are no third party transactions or any form of intermediary on the DEX. This mode of exchange is less vulnerable to hacking.
PREVENTS MARKET MANIPULATION
The peer-to-peer mode of transaction on the DEX helps to curb the manipulation of market.
PRIVACY
There is a high level of privacy in the DEX as users anonymity are normally ensured and maintained.
TRANSPARENCY
All transactions and records are usually transparent for all to see on the DEX platform because of the blockchain technology that is being used, nothing is hidden here.
COMPLEXITY
The way the DEX platforms are being structured is a bit complex compared to the CEX platform. In DEX for example, users will need to make use of private keys to have access to their wallets, these keys have to be remembered, they can easily lose their wallets if forgotten.
EFFICIENCY
When compared to CEX in terms of efficiency, DEX isn't as fast as the CEX.
FEATURES
Some features like Margin trading, stakes, margin lending, spot and future trading are usually not offered on the DEX.
LACK OF FIAT PAYMENTS
Most DEX do not support the exchange of fiat to crypto, because of this, many people do not like using it.
Now let's take look at the CEX
USER FRIENDLY INTERFACE
The CEX isn't as complex as the DEX, users can easily navigate their ways on the exchange and carry out their transactions. Peer-to-peer transactions which some people don't fully understand how it works is not obtainable here.
MORE FEATURES
On CEX platform like the Binance, there is availability of more features which can attract users, features like margin trading, spot and Futures trading, staking and margin lending etc can be found on most CEX platforms.
AVAILABILITY OF FIAT/CRYPTO EXCHANGE
On the CEX platforms, users can exchange their fiat currencies to any kind of cryptocurrency of their choice.
RISK OF HACKING
Because of the huge volume of trading that happens on the CEX, it normally attracts hackers and theft.
TRANSACTION FEES
CEX platforms normally charge high transaction fees for their services compared to DEX. It could be worse when you are trading huge volume or amounts.
NOT RELIABLE
CEX is structured in a way that once a part of the system breaksdown, it will automatically affects every other parts, this could jeopardize the whole system, hence it is not entirely reliable.
Yes, I have used several exchanges like Binance, JustSwap, Coinbase etc. All these exchanges affords me the opportunity to sell, buy or swap my cryptocurrencies. Using some of these exchanges has been great as they have good user interface and they respond fast.
Let me pick Justswap as an example, I love using Justswap to swap my cryptocurrencies most times because of its simplicity, low transaction fee and good user interface that's easy to navigate.
The screenshots below are the recent transactions I carried out on Justswap over the last weekend where I swapped 5 TRX for 14 SUN. The transaction was very easy to do, very fast and it was successful.
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Both exchange and wallet have their unique functions and I think they are both indispensable when it comes to carrying out crypto transactions. Also both DEX and CEX have their pros and cons but from my observation, I think the Cryptocurrency Ecosystem still needs both. .
I want to appreciate professor @imagen for a great work done on this course, thanks and I appreciate !
#club5050 😀