Crypto Academy Season 3 Beginners' course - Homework Post for Task 5: [DEX, CEX, POPULAR EXCHANGES AND TRADING CRYPTOS] by @reddileep for Imagen
HOMEWORK TASK-5
Entire Question
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.
Further, There are 4 Types of persons in an exchange.
BUYERS
- The party that is ready to buy cryptocurrencies in the exchange is what we call buyers. Sometimes, they are tempted to buy when the market is down. Then they wait for the market to rise
SELLERS
- The party that is ready to sell their cryptocurrencies in the exchange is what we call sellers. There can be the persons who bought crypto from a down market. So, they are tempted to sell their crypto when the market is up.
INVESTORS
- In modern exchanges, we can see a lot of investors who hold their coins for a specific period of time. At present, they are growing day by day and even the exchange reinvest their funds for large scale projects.
SYSTEM MAINTENANCE SUPPORTERS
- They are the persons who contribute to the maintenance process of this platform. Their role is to ensure the security of the exchange. Otherwise, they are working as supporters for the users in the platform.
All above mentioned persons together we can define as an exchange. If we look deeper into the exchange, there are two main types of exchanges
CENTRALIZED EXCHANGE (CEX)
- In a Centralized exchange, an individual or company acts as an intermediary to facilitate trading on their platforms. He receives trading fees as rewards.
DECENTRALIZED EXCHANGE (DEX)
- In a Decentralized exchange, there are no intermediary for the operation. Here, anyone can sign in and start trading. Further he don't need to do the identity verification in the platform.
Below I have mentioned the difference between a Wallet and an Exchange in a Table
This Table is created by me from Microsoft Powerpoint Program
ADVANTAGES OF DEX
A Decentralized exchanges are more stable and it never happens any server down.
As the system of Decentralized exchanges are distributed among every users. No one can break the system.
Anyone can join to the exchange without verification as it is decentralized and it has no standard controllers.
Very lower trading fees as compared to the Centralized Exchanges
DISADVANTAGES OF DEX
The transaction speed is not fast due to the mining process.
Waiting time is too high due to low volume of trading
Flexibility is less as compared to the Centralized exchanges
In a trouble, we can't contact any supporter from the system as it is fully decentralized and there are no any supporters in the system.
Fiat Currency exchanging are not available in a decentralized exchange and we can use only cryptocurrencies.
If we lose our Login keys, there is no way to recover our account and all the coins will be wasted.
ADVANTAGES OF CEX
We can gain high transaction speed with Centralized Exchanges.
Trading volume is very high as compared to Decentralized exchanges.
We can use most of cryptocurrencies in an Centralized Exchanges and even in Fiat currencies.
Trading Interface is very modern and we use a lot of functions such as Stop-Loss, Leverage and P2P.
Having a good customer service to assist in any difficulties encountered in the trade.
Almost all who use this platform are verified users and easy to ensure the trust between buyers and sellers.
As we have registered with KYC verification method, we can easily recover our account when we lost our keys or in case of theft.
DISADVANTAGES OF CEX
We can see Intermediaries in a Centralized Exchange and we have to work according to their rules.
Sometimes we have difficulty accessing the exchange due to server maintenance.
Users don't have the access of Private keys and all internal activities are done by administrators of the exchange.
Larger Stake holders can have a monopoly on the exchange and they can manipulate the market as they wish.
Of course I have used an exchange and I have used both the Centralized and Decentralized exchanges. Below I have explained my experience of using an exchange.
MY EXPERIANCE OF USING AN EXCHANGE
Personally, I have used Binance Exchange and Probit Exchange. I hope to talk about my Binance exchange experience as I use it day to day. Binance is an Centralized exchange and it's still the biggest exchange. I am using Both desktop device and my mobile device to login to the Binance exchange. I will briefly explain my experience below step by step with my Desktop Screenshots
When I login to Binance Site, I have to enter Phone verification code in addition to enter the password as I have activated 2 Factor Authentication key feature. After I entered the verification key, I can successfully login to the interface of the Binance exchange. Before joining for trading, I had to complete my KYC verification in the exchange and everyone should complete it for trading without limits.
After login to the platform, mainly we can see there are 4 types of wallets in the Binance exchange.
Fiat and SpotMarginFuturesP2P
Bellow I have included a screenshot of my Desktop showing those wallets.
In Fiat and Spot Wallet, we use it mainly to Deposit or Withdraw Fiat or Crypto. Further, that is what we mainly and mostly use for trading.
In Margin Wallet, we commonly use this wallet for store crypto for multiplied trading up to 10x Leverage. Day to day I use this Wallet for exchange my STEEM to BTC or BTC to STEEM. Still we can't use Steem on this wallet and I commonly use BTC/USDT pair for margin trading.
In Futures Wallet, This is a high risky wallet and the Trades made here are supporting up to 125x Leverage . Here too we can't use Steem coin in this wallet and I hope it will be added here soon. However, I have also used this wallet in BTC/USDT Pair.
In P2P Wallet, We use this wallet for Peer to peer trading directly. In my life I use this wallet to deposit USDT coins from my LKR currency and to withdraw my crypto to my bank as LKR currency.
This is my Homework Post for Task 5. I have cited all image sources properly and cover image and Screenshots are created by me.
At the end of my article I would like to appreciate professor @Imagen for his effort for creating very essential lessons on behalf of us.
Thank you...