Crypto Academy Season 3 | Intermediate course by professor @allbert Task 1: A world of Wallets and Exchanges
Question 1 Explain differences between wallets and exchanges as well as mention which operations should be performed in an Exchange and which operations should be performed in a wallet (in terms of fees).
Exchange platform is introduced to help user's maximize trading activities such as having access to multiple crypto pairs for example a trader can be able to exchange more than 20 different pairs to other token in an exchange platform and also perform multi-task earning activities like staking, low discount fees, having access to bonus and other important crypto news and announcements of newly introduced token.
Wallet a digital software application for holding, staking, storing, and receiving a digital token a wallet can be an offline or an online storing bank for users to access, store and make digital transactions.
Difference between exchange and wallet
| Exchange | Wallet |
|---|---|
| Users don't have complete control over an exchange platform this means that most exchange platform is centralized and control by a group of bodies like the exchange authorities | A wallet provides users with phrase keys or seed phrase with these keys users are in complete control of their wallets activities like transaction and storing of the asset. |
| ------------------ | ----------------- |
| In exchange, users enjoy a special opportunity like a discount on trading fees bonus for holding a certain token on their exchange wallet | Holding your assets like bitcoin or any other token in any wallet doesn't provide users with special discounts or bonuses. |
| ------------------ | ----------------- |
| Exchange platform provides users with multiple tokens/pairs that can be exchanged for another token and conveniently exchange digital assets to fiat | In a wallet no much option for users to exchange/convert their token to multiple tokens. |
| ------------------ | ----------------- |
| No option for users to add tokens of their choice in an exchange | In a wallet, a user can add a contract token of the new token which means a user can add a new token of their choice in a wallet. |
| ------------------ | ----------------- |
| Security depends on the exchange platform | wallets are highly secure with users control over their wallet |
| ------------------ | ----------------- |
| Users can always recover passwords if forgotten | Password can not be recovered when missing |
One very distinct difference between a wallet and an exchange is that a wallet is more secure and highly protected against external threats there also different types of wallets which includes cold and hot storage wallets the cold storage wallet are more secure as they can be operated offline without internet connection.
While a distinct exchange platform different from wallets is it allows traders to trade/exchange different crypto pairs, you can always recover or change the password when missing or forgotten also mining pools and staking pools are available for users to earn extra rewards that wallets don't provide.
Which operations should be performed in an Exchange and which operations should be performed in a wallet (in terms of fees).
In terms of fees operations performed in an exchange and wallets are.
In an exchange, traders get discounts on transactions, for example, poloniex exchange uses TRX as it native token for performing transaction such as making a withdrawal when a trader uses trx to make withdraw he enjoy a certain reduction in transaction fee.
In the case of a wallet, you make a transaction operation in terms of network fee if users will be sending bitcoin to another person he will be charged base on the bitcoin network fee.
Question 2 In your own words, Why You think people should have more than one exchange account?. Do you have an exchange account? and Why that specifically?
There multiple reasons why I think traders/investors should have multiple exchanges accounts.
Crypto pairs/token; there are thousands of different crypto pairs available today in the market and it will be very exhausting for a particular exchange to list all these available pairs in its exchange with multiple exchange accounts a trader can have access to different pairs in different exchanges
Trading discount and fees; with multiple exchanges, a trader can be able to compare transactions fees in different exchanges to see which is more favorable so they can use them for their trading activities.
Maintenance; There are times where the exchange would want to carry out maintenance services in this process all trading activities will be on hold a trader can use his alternative exchange to carry out his trading, activity in another exchange while he waits for maintenance to be carried out.
Question 3 which is better exchanges or wallets
I have friends who prefer using an only exchange account for all their trading, storing of crypto their reason is with an exchange platform you can do everything a wallet does.
I respect their opinions base on the question if I would choose which is better I will go with the wallet reason are if I can control my wallet I can control my funds/asset.
Security is every user's priority and a wallet provides more security.
Also with a wallet, a user can have access to a decentralized exchange where you can connect your wallet to an exchange and perform all your trading activities.
Base on the above-given opinion a wallet is better than an exchange.
Question 4 Create an account in a wallet and exchange of your choice and show screenshots of the process.
Exchange
Here I will be creating a probit exchange account below are the steps with screenshots.
- Go to the platform's main website and click on sign up to create a new account.
- A space to fill out required documents will be provided which I will be filling up the necessary information required.
- On successfully filling out the form I will be given the option to accept the platform terms and conditions which I did.
- A verification code will be sent to my email which I will go to my email and copy-paste on the probit page to complete my registration.
On pasting the verification code my account has been successfully created.
Wallet
Here I will be creating a dash wallet.
- First I will be downloading the dash wallet application from the Google play store.
- On successful download I will proceed to open the application by clicking on create new wallet to create a new wallet account.
- Next I will be setting up my new 4 digit pin which can be used for accessing the wallet.
- Next process I will be importing/generating my phrase keys.
Which I will need to write down on an external device.
- After writing out my phrase keys and rearranging them orderly I have completed creating my wallet.
Conclusion
Both wallet and exchange are very important as a crypto user it is recommended to have a wallet for storing and holding crypto and also to have exchange for easy convenient means of exchanging your crypto pairs.
All screenshot was taken from my created exchange and wallet account.