Dex, Cex, Popular Exchanges And Trading Cryptos - Steemit Crypto Academy Season4 - Homework post for task7
Hello guys, with great humility of heart, i, @jueco, happily welcome you to my task 7 assignment of the beginner's course, given by Prof @imagen.
In this assignment task, we are given three distinct questions of which we are required to answer just one, below are the three given questions;
CHOOSE ANY OF THE FOLLOWING EXCHANGES AND DEVELOP A BASIC GUIDE ON HOW TO USE IT, INDICATING WHETHER IT IS DECENTRALIZED OR CENTRALIZED
- HUOBI
- KUCOIN
- WAVES DEX
CAN CRYPTOCURRENCIES AND EXCHANGES BE REGULATED? HOW DO REGULATIONS AFFECT THE CRYPTO WORLD? NAME SOME COUNTRIES WITH REGULATIONS
EXPLAIN IN YOUR OWN WORDS WHAT AN EXCHANGE IS. DIFFERENCES BETWEEN A WALLET AND AN EXCHANGE. MENTIONED THE ADVANTAGES AND DISADVANTAGES OF DEX AND CEX. HAVE YOU USED AN EXCHANGE BEFORE? TELL US ABOUT YOUR EXPERIENCE
In this post, we shall be learning a lot on Exchanges such as Binance, we shall also learn on centralized and Decentralized exchanges.
Please join me as we begin by considering the first task;
WHAT IS AN EXCHANGE
From a literal understanding, an exchange is the act of swapping a substance of value for another substance of value, of almost equal values.
It can also be termed as the giving of something inorder to receive a different substance of equal value.
When it comes to cryptocurrency, an exchange is refered to as a business platform, where cryptocurrency are swapped for other currencies of equal worth, or sometimes swapped for Fiat currency.
A cryptocurrency Exchange act as the middlemen, the only connection between the seller and buyer of a currency.
During transaction, an exchange approves of the use of credit card as a means of payment, it also accept wireless transfers as a means of payment.
Inorder to be eligible to make transactions on an exchange, a user needs to get himself registered to the exchange, and this verification include series of steps.
The verification in an exchange is done inorder to ensure security of user's funds, once a user has been successfully verified, he can then proceed to exchange currencies and make transactions.
FEATURES OF AN EXCHANGE
- It mostly runs on a centralized system
- It has a very high liquidity rate
- It operates all the time
- It possess overall authority over user's funds
The conversation of a currency to another depends on the exchange rate of such currency when compared to another.
For example, the exchange rate to convert from 1usdt to naira which is my country's currency, is N570 per USDT.
Currency Exchange rate can be easily calculated using this Calculator
An exchange rate is very important in cryptocurrency as it provides buyers with the knowledge of how much Fiat currency is required to purchase a crypto currency.
It is of utmost importance to note that an exchange is different from a wallet, although they have some similarities.
A wallet may be referred to as a device used to store private/public keys for the transaction of cryptocurrency.
These cryptographic keys are used distinctly, the public keys are usually seen by the public, and it is used to transfer assests into an account, it sometime serves as the wallet address.
Private keys are keys used only by the owner of an account, the private keys are the keys that can be used to send out assests from an account.
A wallet can also be said to be an app that allows the storage of digital assests.
A wallet is not used to spend cash, it is only used for transactions and to store Cryptocurrencies for a longer period of time.
FEATURES OF A WALLET
- It mostly operates on a decentralized system
- It has a very high level of security
- No liquidity
- Absence of middlemen
DIFFERENCES BETWEEN AN EXCHANGE AND A WALLET
| EXCHANGE | WALLET |
|---|---|
| It provides room for buying and selling of currencies | It is used only to store assests |
| It allows the conversation of Fiat currency to digital currency and vice-versa | It does not permit the conversation of digital currency to Fiat currency |
| It is used as a trading platform | It can't be used as a Trading platform |
| It is used by short term investors | it is used by long term investors |
| It doesn't give a user absolute control over his funds | it gives a user absolute control over his funds |
| Funds can be retrieved if password is forgotten | funds are forever gone is keys are lost |
| It mostly run on a centralized system | it mostly runs on a decentralized system. |
Having considered this task, shall we proceed to the next task
ADVANTAGES AND DISADVANTAGES OF DEX AND CEX
Before diving into main aim of this task, permit me to discuss a little on the meaning of DEX.
DEX
DEX is an acronym for Decentralized Exchange.
A Decentralized Exchange is an exchange free from the control of a central unit.
It is an exchange that permits direct peer-to-peer transactions of currencies without the interference of a middleman.
It is good to note that a Decentralized Exchange runs on a decentralized system, using a blockchain technology, and this implies that a user has maximum control over his funds and keys.
These keys cannot be retrieved once lost.
ADVANTAGES OF DEX
- It is impossible to hack as it runs on a decentralized system
- It also helps hide the identity of users, hereby keeping them safe from malicious individuals.
- It ensures transparency of a user's transaction
- It gives a user 100% control over his funds
- It treats all users equally, as no one is superior to the other.
DISADVANTAGES OF DEX
- It doesn't support the conversation of digital currency to Fiat currency
- It works mainly on smart contract
- Irreversibility of transactions made
- Inorderliness of user's activities
- High cost of establishment
CEX
Cex is an acronym which stands for Centralized Exchange, and it may be explained as an exchange that runs under the control of a central unit.
It is an exchange that provides the platform for buying and selling of digital assests, it also gives room for the conversation of Fiat currency to digital currency.
In a centralized exchange, the maximum control of fund belongs to the exchange, not the users.
A Centralized Exchange acts as the middleman between buyers and sellers of cryptocurrency.
ADVANTAGES OF CEX
- SPEED:
Transactions on a centralized exchange is usually fast and accurate - LIQUIDITY:
A Centralized Exchange has a high rate of liquidity and this enable users to sell and buy at any convenient time. - RELIABILITY:
Cexs are always reliable to make use of, as they work in a way that suites you. - Another importance of Cex is that, it is user-friendly, and very easy to understand
- Funds can be easily recovered if password are lost
DISADVANTAGES OF CEX
- It is controlled by a central unit
- It doesn't give users maximum control over their funds
- Cex can be hacked by malicious programmers
- Another disadvantage is that Cex charges it's users for every little transaction
Now, the truthful answer to the last question asked if I have made use of an exchange is a yes.
I have made use of an exchange.
When I was introduced to steemit, I was made to understand that I needed an exchange where I can convert my digital assests to Fiat currency, and I was encouraged to download the binance app.
At first, I didn't understand anything on the app, how it works was strange to me, not until my friend with the name Frank, explained how it works.
I did series of verification, inorder to create a strong security for my funds, although this process was a bit stressful, I'm glad I did so.
Presently, I enjoy the ease with which I convert digital currency to Fiat currency and vice-versa.
CONCLUSION
Indeed, wallet and Exchanges are good for storing funds, but before deciding on which one to use, a user needs to weigh the pros and cons of both .
Below are some examples of Cex to make use of
- Binance
- Coinbase
- Poloniex
I sincerely appreciate Prof @imagen for this interesting lecture, I eagerly look forward to learning from you, o Prof.
My comment box is open to all who have an additional comments to make.
CC
@dilchamo