Steemit Crypto Academy Season 4 Beginners' course - Task 7: Dex, Cex, Popular Exchanges and Trading Cryptos

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Explain in your own words what an exchange is. Differences between a wallet and an exchange. Mention advantages and disadvantages of DEX and CEX. Have you used any exchange before? Tell us about your experience.

Explain with your own words what an exchange is

Basically exchange is getting one thing in substitute of another thing, the whole idea involves giving out and receiving in.

There are a lot of forms which one can define an exchange, but in relation to the topic I would be defining in relation to finances particularly the cryptocurrency.

Exchange of a currency is substituting one currency to another currency, while talking into account the market value of both currency in relation to one another.

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Cryptocurrencies play the same role as liquid cash which we use everyday, it is only normal that an exchange is also required for substituting from one cryptocurrency to another or for liquid cash.

Exchanges here refer to platforms where a cryptocurrency holder can change their cryptocurrency to another one or can choose to go for fiat money.
The same is applicable to a buyer who wants to substitute fiat for a cryptocurrency of his choice.

TYPES

There are different types of exchanges available currently due to the increasing popularity of cryptocurrencies in today's world.

These exchanges according to their functionality are categorized into two

•CENTRALIZED EXCHANGE

•DECENTRALIZED EXCHANGE

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CENTRALIZED EXCHANGE

This is also known as CEX, they are exchanges controlled by a single authority or a single network.

Here everything is centrally controlled, making them the facilitator of transactions between two parties. The user has to entrust security of their private keys to the system.

Like most centralized systems, here users are required to verify identity amongst other documents before they can successfully begin it's use.

Popular amongst them is the leading exchange platform Binance, you are required to perform a number big verification processes before you can trade on Binance.

Although centralized in nature some things have led to the acceptance and popularity of such an exchange. Here accounts can be recovered providing that the user is able to verify his details.

Also mistakes occuring during transaction processes can be rectified if the proper channels are followed.

DECENTRALIZED EXCHANGE

Decentralized exchange are a complete opposite of the centralized ones, here there is no single authority in control but the system is based on Blockchain technology.

Network of computers and users using a peer to peer system form the basis of this exchange, this eliminating the involvement of a third party for facilitating transactions.

This exchange relies on what is known as smart contracts, which are programs in the form of cryptography.

Here use of real life Information is not required unlike the centralized exchange, since third party involvement is not required only both transacting parties are required for a transaction to take place.

Security of private keys is in the control of the user. Once private key is lost, such accounts become unaccessible.

One of such notable exchange is the Justswap where a user can swap one coin for another. This form of exchange allows only use of cryptocurrencies and not fiat currency.

Differences between a wallet and an exchange

Before we state the differences between a wallet and exchange it is pertinent to understand what a wallet means as we've already talked about an exchange.

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A wallet is used to store or keep money, in relation to cryptocurrencies your coins or token is digital cash so a wallet in this case is use to store them.

NOTABLE DIFFERENCES

• Wallets mainly serve the purpose of storage while some exchanges sometimes offer the service of a wallet.

• Wallets do not offer buying and selling services while exchanges are platforms for buying and selling of cryptocurrencies.

• Wallets are usually decentralized hence they allow control of private key, Exchanges do not always allow control of private key.

• Storing cryptocurrencies on wallets is safer as it limits hacks, while storing on wallets provided by exchanges might be a little risky.

• Wallets are not centralized in nature but Exchanges can come in centralized or decentralized form.

Mention the advantages and disadvantages of CEX and DEX

CEX

Some of the advantage and disadvantage of centralized exchange CEX include

Centralized Exchange	CEX
ADVANTAGE	DISADVANTAGE
(i)
The user interface can easily be understood making it a good start for new users	They are more at risk of hacks and cyber attacks
(ii)
Loss of keys does not mean loss of funds as account can be recovered	Trusting private keys to the system might mean trusting that huge funds will be kept safe
(iii)
Help is available for problems with wrong transactions	Because of third party involvement transaction fee is higher compared to DEX
(iv)
Flexibility compared to DEX as it supports exchange of both cryptocurrencies and fiat	Real life Information is required for verification which some users are not comfortable with
(v)
It is easier to get information about them since centralized authority requires physical location	Data theft or mismanagement can occur

DEX

Some of the notable advantage and disadvantage of Decentralized Exchange Dex include

Decentralized Exchange	DEX
ADVANTAGE	DISADVANTAGE
(i)
This type of exchange involves a high level of security making it hard to access by hackers	Loss of keys means loss of wallet and all funds in it.
(ii)
Removal of third party involvement reduces the fee required to make a transaction	User interface is not always friendly for new users who do not have idea about trading
(iii)
There is a sense of freedom and privacy because real life Information is not required	In cases of transaction gone wrong such mistakes cannot be corrected or reversed
(iv)
There is no single authority controlling them making them more trustworthy to users	Only cryptocurrencies and not fiat money can be traded here reducing it's trade flexibility
(v)
User is in control of private key giving room for transaction freedom	Popularity is not very high because trading options are limited

Have you used any Exchange before?

I have used many exchanges both centralized and decentralized in nature. But i would talk about the centralized one because of the unique .

I come from a country Nigeria where there is a current ban on using our bank account to make any cryptocurrency related trade so it was tasking as a newbie in the crypto world to find other alternatives.

The centralized exchange I was first involved with was Binance, it requires users to make verification using real life identification before you can successfully trade.

I was extremely skeptical about putting my information on their storage because I didn't know what repercussions or other laws that might come up with regards to trade in cryptocurrencies.

So I had to meet about two friends who were already using the platform and they explained the situation. I was also made to understand that peer to peer system was available where users could swap cryptocurrencies for fiat amongst themselves without the direct involvement of our banks.

This feature was not available to me on the Decentralized Exchanges and that made my initial knowledge of cryptocurrencies usage based only on centralized Exchange.

Another centralized Exchange I have used frequently is Poloniex, this time around I was no longer skeptical about it's usage because of my familiarity with binance usage.

Some of my transactions regarding Exchange and sale of cryptocurrencies using Poloniex and Roqqu, Roqqu is an exchange popular in my country Nigeria.

Images uploaded above are from my accounts

CONCLUSION

Exchanges both centralized and decentralized play a pivotal role in trading which is essential with anything regarding currencies whether fiat or crypto-based.

This was a well enjoyed lecture, I look forward to your review professor @imagen