Cryptoacademy season4//beginner's course task7:dex,cex,popular exchange and trading cryptos for professor@ imagen
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Task7-Question3
- Explain in your own words what an exchange is.
- Differences between the wallet and an exchange.
- Mention the advantage and disadvantage of dex and cex.
- Have you used an exchange before?
Tell us about your experience.
Explain in your own words what an exchange is.
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An exchange in terms of cryptocurrency is a business process where crypto traders are allow to trade(buying and selling) their asset or cryptocurrencies for fiat currencies(government issued money) or other cryptocurrencies through the help of a digital platform or digital crypto market place like olamax,binance,coinbase and other digital trading platform.
Note that, in this process trading or transaction are done according to the current exchange rate or worth of a respective asset or cryptocurrency.
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This cryptocurrency exchange are of two types which are:-
- centralized exchange
- decentralized exchange
Centralized exchange:- centralized exchange is an exchange that requires the digital exchange platform or digital crypto market place operators to control the activities and transactions of a trader(buyer and seller). The platform operators serves as a third party and makes commission or percentage from every transaction made by the buyer and sellers.The operate somehow like the bank where trader are meant to follow certain rules and regulations.
Decentralized exchange:-in decentralized exchange traders are allow to control their own assets or crypto funds. This type of exchange doesn't require a third party it only requires a crypto trader to trade his asset with another trader which the funds or asset will be transfered from each other wallet instead of the platform wallet.
It simply requires a seller to place and order for exchange with another asset with amount issued out, then a buyer will place a buying request immediately trade execute and transaction will be done.
Differences between the wallet and an exchange.
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There is a clear difference between wallet and exchange,before we look at their differences let first understand what a wallet and exchange is.
wallet:-wallet is simply a digital program that allows us to store are asset and cryptocurrencies.
Exchange:-exchange is simply a process of buy and selling of asset on a digital cryptocurrency market platform.
| S/N | wallet | Exchange |
|---|---|---|
| 1. | Generally,crypto wallet are digital platform were you can safely store your cryptocurrency. | Generally,crypto exchange is a process of buying and selling of cryptocurrency. |
| 2. | in crypto wallet,crypto can be store offline. | while exchange required online operation. |
| 3. | A wallet only has a decentralized system of operation. | while exchange operate both on centralized and decentralized method. |
| 4. | lastly, in wallet staking of asset are not done as it only requires storing of asset. | while in exchange staking is done regularly. |
Mention the advantage and disadvantages of dex and cex
Advantages of decentralized exchange
in decentralized exchange anonymity is a style of operation which mean that there is nothing like a central authority to set rule and regulations,so everyone is free to sign in and start trading without any identity verification.
it is most preferable cause there is no transaction charges unlike the centralized exchange which usually charge percentage for every transaction.
owners of assets are responsible for their asset that is to say the have full control of your asset.
Disadvantages of decentralized exchange
one of the basic disadvantage of decentralized is that the process of trading and transactions are always slow cause it requires placing order for exchange of asset.
in decentralized exchange traders especially new traders and are required to learn a lot and have some level of knowledge about trading and cryptocurrency before going into it to avoid losing funds.
lastly, decentralized exchange is a recent development so traders are not too sure of the system in terms of being trustworthy, that alone scare them off..
Advantages of centralized exchange
In terms of speed transaction centralized exchange is the best compare to decentralized exchange. generally it give way to fast and easy transaction.
It is a bit trusted and reliable for transaction and trading cause it owned by corporation and companies.
It is easy to understand as a new trader, cause there are rules and regulations to guilde them on their process of transactions.
Disadvantages of centralized exchange.
- In centralized exchange, percentage are deducted on every transaction that are made which goes to the central authority.
- No privacy in centralized exchange cause it involve third party interference being involve which means transactions are monitor.
Have you used an exchange before?
Tell us about your experience.
Have used exchange countless time both in transaction and checking of exchange rate.
When i first sign up on steemit i was wondering on how i will be able to exchange my sbd to fiat money(naira) not untill i was told by a steemit friend that i can exchange my sbd,steem,hbd,bitcoin and hive etc. for naira through a platform called olamax.
Olamax is a centralized exchange platform.
Using olamax have been rest assured of my funds when processing transaction though i was scare at the beginning. have not face any issues so far since i started trading my asset on olamax it is reliable and trusted.
Really,I had a great time going through this assignment. Through this tasks have been able to understand vividly and perfectly the word exchange and walletand the role the play on cryptocurrency as a whole, thanks to prof.@imagen and all who made this task possible. hoping to be back on my next beginner's task.
Thanks.
