Crypto Academy: Season 3| Beginners Introduction Task 5- Centralized And Decentralized Exchanges

Explain in your own words what an Exchange is. Differences between a Wallet and an Exchange. Mention the advantages and disadvantages of DEX and CEX. Have you used an Exchange before? tell us about your experience.

In the life of every trader, exchange cannot be left out in their daily activities as it is an essential part of their trading life style.
Exchange to layman is the process of giving out something in return for another, meaning an offer has to made backed by acceptance.
Exchange platform in the world of cryptocurrency is nothing but a platform where users are giving the opportunities to buy, sell and hold cryptocurrency assets and as well trade such assets for fiat currencies (cash). To be able to trade in an exchange, one has to first of all register an account with the exchange platform and make a deposit in a fiat currency then you can use the fiat currency deposited to buy and crypto asset of your desired choice.
Exchange platforms are being categorized in two forms namely, Centralized Exchange (CEX) and Decentralized Exchange (DEX).
Centralized Exchange In Centralized exchange platform, operations are being govern and controlled by the exchange platform company. Examples of such platforms includes, Huobi, Poloniex, Binance, Coinbase, crypto.com and many more.
Decentarlized Exchange on the other hand decentralization has been the core mandate of blockchain technology and a decentralized exchange is an exchange platform which uses the distributed ledger mechanism which implies that there is no third-party involvement but rather user controls the activities of the platform. Examples of such platforms includes, uniswap, metamask and many more.

Differences between a Wallet and an Exchange.

• Wallet is a sub model on an exchange platform which functions as a holder of crypto assets and fiat currencies whereas an exchange is the grand platform that enable users to buy and sell or trade all kids of crypto assets or stock.
• Users have the liberty to control their wallet but has no control over the exchange.
• Exchange cannot be assessed offline but a wallet can be accessed offline.

Mention the advantages and disadvantages of DEX and CEX.

Advantages of Centralized Exchange (CEX)

• Centralized exchange offers high trading volume for its users.
• Its GUI is user friendly and easy to use.
• It is highly scalable in the sense
  Disadvantages of Centralized Exchange (CEX)
• It is subject to breaches in the sense that it can be hacked which can lead to the loss of funds.
• it is not safe due to the fact that public and private keys of users are kept away from them which makes it unsafe.
• Breaches in User identity. User information may be put up in the public domain due to its centralized nature, since information about your credentials where provided during the registration process and verification process.

Advantages of Decentralized Exchange (DEX)

• Control: as a user of decentralized exchange, you have control of your public and private keys as there is no regulations.

• Security: as a user of DEX platform, you are rest assured of your security since you don’t have to provide your personal details on the process of registration.

• Regulations: DEX platforms are are not regulated which means that there is no third party involved as it operates like the public ledger technology.
  Disadvantages of Decentralized Exchange (DEX)

• Liquidity: DEX have lower liquidity since there is lower trading volume of exchange.

• One loss his/her assets when both private and public keys is lost.

• On DEX, there is limited crypto assets to transact with or swapped.

• There is no availability of fiat currencies on its platform which makes it difficult to trade.

My Experience on the Use of Exchange

As the sayings goes “Experience is the best teacher”, as a new user of Binance Exchange platform which is categorized under centralized exchange, as passionate I was when I was introduced to steemit, there came a time to transfer my earned STEEM to binance , I made a mistake in the transfer process as I mistakenly mixed up the memo given to me on the binance, after making the transaction and waiting for it to reflect in binance wallet it did not because of the error I made. After detecting that, I realized I cannot retrieve my lost STEEM back. I took note of the error and got to know that the memo provided binance was important as it was a unique identifier of my account.
I made another transfer this time round the details was intact and I had a successful transfer.
I traded the STEEM for ETH which was actually my first time and I didn’t want to make any mistake but it was bound to happen as I didn’t take my time master the system, I I nitiated the trade and instead of using the market price, I keyed in my own price and initiated the trade, I waited for hours and it never swapped. I phoned a friend and explained to him and he aided me cancel the trade and use the market price. This time around I didn’t loss my funds. After experiencing such, I never made any mistake on the platform as I devoted my time learning every aspect of the platform.

Conclusion

To conclude with private and public keys should be stored in as safe place to avoid it getting loss. With CEX platforms they are easy to use and user friendly, I entreat new users to devote a bot of their time to learn every aspect of the system to be able to master it well and avoid losing one’s assets.

Cc:
@sapwood
@imagen