Crypto Academy Season 3 Beginners' course - Homework Post for Task 5: [Dex, Cex, popular exchanges and crypto trading] by @patrickbonyah
QUESTION3: 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.
Basically an exchange platform is much more or less like a market place, where people meet to make business transactions, but in a digital form.
An exchange platform provides more secured opportunity for investors to engaged in buying and selling activities online.
In exchange platform the investors either deal with cryptocurrency or fiat money in its transactions. The exchange platform can be seen as a centralized exchange or decentralized exchange, but with similar objectives relating to investment projects.
The exchange platform is seen as a middle man between buyers and sellers online.
In the Centralized exchange, It is managed and controlled by an organization or group of persons, which ensure the middle man role, thereby eliminating autonomous.
There are high charges paid during transactions in decentralized exchange, through which the platform obtained its commission. An example is Coinbase, Huobi etc. Whilst the decentralized exchange, involves difficult or complex exchange system, where there is no involvement of third party, and so the transactions is peer to peer, and mostly does not encourage the trading with fiat currencies for cryptocurrency.
Moreover, the decentralized exchange is highly autonomous. An example is Uniswap, Burgerswap, coinbase etc.
In short terms, an exchange is a digital market online platform, where investors meet to trade.
Though there are some similarities and differences between, but for the purpose of this lessons I will like to bring out some of the differences between this two platforms.
The wallets stores and protect cryptocurrency for a long time , Whereas, Exchange is mainly used to for making transactions and stores cryptocurrency for shorter possible time.
Charges on wallet transactions are relatively low, Whereas, Charges on exchange transactions are relatively high.
All transactions on wallet is more safety, since the user is totally in charge, Whereas Transactions on exchange may pave way for hackers, since the user is not totally in charge.
There is instant trading, buying and selling, to make more profits, Whereas Transactions on wallet delays, since one need to move the coin from the wallet before he or she can make the transaction.
The CEX platform is easy for beginners to operate.
CEX has high trading volume due to its high liquidity.
User’s information on CEX platform can be backup in the of loss or forgetfulness of password.
Transactions on CEX are monitored, and so it becomes difficult for one to be scammed.
When the CEX platform is hacked all users are affected.
The CEX platform does not guarantee ownership of account, and so the user depends on the exchange to continue.
The CEX encourage the involvement of a third party, when making transactions, which makes non autonomous.
The transaction fee on CEX is relatively higher than DEX.
Transactions fees on the DEX is relatively low.
When making transactions on the DEX, it does not encourage third party, which makes it autonomous.
The DEX is more secured than CEX due to its decentralized nature.
The DEX platform encourage full ownership of account.
The trading volume on DEX platform is low due to it's low liquidity.
On the DEX platform, incase of forgetfulness or loss of password, it becomes difficult for one to backup his or her information.
The DEX platform is difficult for beginners to operate.
The transactions on DEX platform are not monitored, and so one can be hacked easily.
Yes, I had , thus Binance and my experience was when i made an exchange. That first transaction i made on Binance was selling of etherium, where the transaction was fast and smooth and credited within a few minutes. And with that i was more convinced.
I can say that i have acquired more more knowledge in cryptocurrency and am looking forward to learn more. With the experience i had, I could see that the advantages and the disadvantages I mentioned earlier are similar. But I hope to explore more on other exchange as much as cryptocurrency is concern.
In conclusion, it clearly indicates that both centralized and decentralized exchange have the same goal of providing opportunities for users to trade their coin, though they have some similarities and differences. They all offers the users first hand services while trading, which is necessary for a crypto trader to know more about exchange as far as crypto is concern.
Thank you.
Cc: @imagen
Cc: @reminiscence01
Hi @patrickbonyah, Thank you for taking interest in the 5th Task of the Beginners Fixed Class. Your grades are as follows:
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