Dex, Cex, Popular Exchanges and Trading Cryptos - Steemit Crypto Academy S5 - Homework Post for Task 7
Hello, dear friends, I am @mrsokal. I am going to write my 4th post in Steemit Crypto Academy. Previously I wrote about the Decentralized Applications (dApps). Today I am going to write about Dex, Cex, Popular Exchanges, and Trading Cryptos.
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Image designed in Canva | by @ mrsokal
QUESTION
| (3) | 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. |
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♨️ Question : Explain in your own words what an Exchange is❓
A marketplace where we trade different types of things, goods, or any kind of currency both fiat and crypto between each other, is called an exchange. If you want to exchange anything, you will need a platform where you can get another person who also wants to exchange your elected products. And this platform is called an exchange.
There are a lot of exchanges available now. We can divide the exchanges into different types depending on various subjects. First of all, we get two types of exchanges and they are :
Physical Exchange (offline)
Virtual Exchange (online)
Physical Exchange: Physical exchange is mainly located in local areas. Physical exchanges can be situated in a building or in an open place where both buyers and sellers trade among them. Here the owner of the exchange is a broker. It is an off-market transaction system.
Virtual Exchange: Virtual exchange is also called a digital exchange. In today's world, every company is becoming digital. They are moving into online platforms. Virtual exchanges can be the best example among them. The virtual exchanges use a P2P trading system. So, they don’t need any brokers. Traders can sell their assets directly to the buyers and get money from them. This system is called P2P trading. This type of trading is totally online, there is no need for physical presence.
We can again divide the virtual exchanges into two parts. They are:
Centralized Exchanges (CEX)
Decentralised Exchange (DEX)
Centralized Exchange: In centralized exchanges, there must be a third party or a broker or an authority between buyers and sellers. If there is someone between buyers and traders then the exchanges are listed as centralized exchanges. The Users never get 100% authority over their assets in this type of exchange. In centralized exchanges, all the transaction details are listed on a single server. Its interface is very user-friendly to operate these exchanges. Though centralized exchanges have both advantages and disadvantages, they are quite familiar among people.
Decentralised Exchanges: In decentralized exchanges, there is no third party or a broker or authority between buyers and sellers. If there is no one between traders then the exchange ate listed as decentralized exchanges. The users got 100% authority of their assets in these types of exchanges. They support peer-to-peer transactions. It is highly secured. But you cannot buy your cryptocurrency with your fiat money from decentralized exchanges.
♨️ Question : Differences between a Wallet and an Exchange❓
| Wallet | Exchange |
|---|---|
| Users use the wallet to store their assets | Users use the exchange to trade with their assets |
| In wallet users have full authority over their assets | In exchange, users don’t get full authority over their assets |
| There is no third party between users and their asset | There is always a third party authority between users and their assets |
| Wallets are always centralized | Exchanges can be centralized or decentralized depending on their owner |
| When it is about security, wallet has higher security | Because of scams exchanges has less Security than wallet |
| Wallet provides us the private key which is not possible to change | Exchange give us a password which is possible to change anytime |
| There is no recovery option for wallet | There is a recovery option for an exchange |
♨️ Question : Mention the advantages and disadvantages of DEX and CEX❓
Advantages of DEX :
There is no participation of any central authority. So we can make transactions at our own will.
The security system is very high for this type of exchange. So we can trust this type of exchange.
Hackers or scammers can not get access to our account or assets easily.
Transaction fee is very low here.
We get control over our assets.
Peer-to-peer transaction is supported in decentralized exchanges.
There is no need for verification.
We can track the transactions from explorer. All the transactions are transparent here.
Disadvantages of DEX :
There is very little liquidity in decentralized exchanges.
Transactions are insecure because if we transfer to the wrong address, it will not possible to bring it back.
The interface of a decentralized platform is not easy to understand for newcomers. It is not user-friendly.
There are fewer traders in decentralized exchanges because of less volume.
It is impossible to trade fiat currency in decentralized exchanges.
If users lost their password or keys it is not possible to access to user's account.
Users can not complain about anything because there is no central authority.
Margin trading, stakes, spot, and futures trading are not possible in decentralized exchanges.
Advantages of CEX :
High liquidity of assets with a high volume is available in centralized exchanges.
We can buy and sell both crypto and fiat currencies.
It is very easy to use for a newcomer because of its user-friendly interface.
The transaction system is very fast in centralized exchanges.
A lot of unique and exclusive features are available in centralized exchanges.
There is no place for scammers because every user has to verify their real identity in centralized exchanges.
There is always a central authority in centralized exchanges. So any misunderstanding or mistake can be solved by communicating with the central authority.
If any user lost their password or keys, it is possible to restore the password or keys
We can easily get information about centralized exchanges since there is a physical location of centralized exchanges.
Disadvantages of CEX :
Without enough requirement, the user's account can be deactivated anytime. So users will lose their assets.
There is always a higher transaction fee in centralized exchanges.
Centralized exchanges are not well secured. So there is a chance for a hacking issue.
Transactions are not possible without third-party approval.
Transaction is not always secured in centralized exchanges because of central authority.
The users have to sacrifice the ownership of their own assets.
User's identity information will be recorded to the central authority in centralized exchanges.
There is no transparency of transactions in centralized exchanges.
Centralized exchanges can be banned anytime by the government. So in this case, users will lose all the assets.
- The central authority can control the volume and prices of the assets.
♨️ Question : Have you used an Exchange before? tell us about your experience❓
Yes, I have already used a lot of exchanges like Bittrex, Binance, Poloniex, Coinbase, Hotbit, Justswap, etc. All of these exchanges have the option to buy, sell, or swap different types of crypto-currencies. Among all these exchanges, Poloniex is my best choice.
In Poloniex, the transactions fees are very low. Moreover, steem/usdt pair is not available in all exchanges. For the steemians Poloniex is the best option among the exchanges because withdrawal fees for steem are only 0.01 steem per transaction. Moreover, the withdrawal fee for TRC20 USDT is totally free here.
♨️ Conclution ♨️
I have answered every question that is given. I want to say thanks to professor @imagen, for his wonderful lecture. From his lecture, I can learn about DEX & CEX. Thanks for reading my post. You can comment on your opinion below.
Hello @dilchamo mam, i posted this post 2months ago but unfortunately i was not eligible that time. Now i powered up and eligible for posting homwork task. So mam, can you plz rate this post now.