Crypto Academy / Season 3 / Week 1 - Homework Post for Professor @allbert
This is Season 3 Week 1 of Steemit Crypto Academy and I'm writing Homework Task for Professor @allbert
Q1.
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)
Difference Between Wallet and Exchange
We can refer to wallets as a safe to store our cryptocurrency. In some cases, they also serve the purpose of a physical device that securely stores the information of tokens. These wallets can be classified into two main categories: hot and cold wallets. These categories are defined based on security.
On the other hand, exchanges are virtual applications in which we can exchange our tokens with any other exchange’s user. Every exchange has a wallet as well that allows immediate trading. However, this internal wallet is not much reliable and secure.
Purpose
The basic purpose of a wallet is holding or storing whereas exchanges are used for trading.
Validation Difference
The validation for a wallet is done with the help of a 'seed phrase'. Your screen will display some random words, and all you have to do is arrange them in order to justify that you are the legitimate owner. Opposite to this, the validation for an exchange is quite different. You will have to provide your legal documents to prove your identity. These legal documents can include your passport, driver license, or identity card. Some accounts like Binance also require you to provide facial identification.
Functionality Difference
The third key difference between a wallet and an exchange is their functionality. The function of a wallet is to hold and store your digital currency whereas an exchange provides the functionality of trading as well.
Registration Difference
Wallet Registration requires having a seed phrase or private key whereas we can Register on Exchange simply via email, mobile number, and password.
Security Difference
Another difference between an exchange and a wallet is in terms of security. Wallets are proven to be more secure as compared to the exchanges. Because wallet have private keys or seed phrases, we just need to save them and our wallet will be secured. On the other hand, exchanges can get hacked and users can lost their assets.
Operations to Perform
A wallet charges more fees for trading so one should perform the function of trade on an exchange and, you can use a wallet for storing. Moreover, some wallets offer the operations of staking as well as some Exchanges also offer this service. Furthermore, we have options of launchpool, liquid swapping and loans on the exchanges like Binance. Whereas we can also swap coins on pancakeswap. There are many other operations which we can perform on both wallets and exchanges. Wallets are basically used for storing coins that's why Wallet offer less operation but exchanges offered many services and operations which we can perform.
Q2.
In your own words, Why do you think people should have more than one exchange account?. Do you have an exchange account? and Why that specifically?
People should have more than one exchange account because of factors like security, operations, and volume.
Security
Security is a crucial aspect of cryptocurrencies so if you have all your tokens spread out in various exchanges then it is safer. If one of your exchange accounts gets hacked, you still have the rest of your tokens saved in other exchanges.
Different Operations
Secondly, different exchanges provide different operations. For instance, you can find a certain cryptocurrency is available in an exchange, but another type of cryptocurrency is available at another exchange. Thus, when you need to purchase a cryptocurrency, you need to find the exchange that deals in it.
Volume
Lastly, the volume or liquidity in exchanges is different and, the less the volume the, higher the fees. The volume of a cryptocurrency denotes the availability of that currency or, in other terms, it is the liquidity of that currency. Hence, if you have different options in exchanges then you can choose the one with the lowest rate.
My Exchange Account
Yes, I have an exchange account in Binance. Binance is known as number One exchange in terms of volume and is a reliable means of investment. I also chose this exchange because it is easy to handle and provides excellent security. Furthermore, they also have a good selection of coins and tokens for investment. The exchange also provides the ease of investing directly with USD and provides various activities that help in earning token rewards. There is also an option of P2P market where we can buy and sell our crypto assets easily. We also have an option of loans and can stake coins on binance. This exchange provides 2F security and I am very much confident that my coins are secure on this exchange. That's why I have been using it for 2 years.
Q3.
What are better? Wallets or exchanges.?
Wallets and exchanges both are different and both have their own prose and cons. One cannot decide which is better but still In my opinion, wallets are better than exchanges in some cases like security point of view or Storage facility. Moreover Wallets provide complete ownership of coins, on the other hand exchanges can go bankrupt and stop it's operations.
Security
Exchanges are most prone to hacking and the news about many famous exchanges being hacked has blown away the internet. Early in 2019, Binance (one of the most popular exchanges) was hacked and bitcoins worth $40 million were stolen. Sometimes, one may feel wallets are more expensive than exchanges but, when it comes to security then one can spend a little extra bucks too.
Storage Facility
Moreover, cryptocurrency wallets also provide a long term storage facility. If you plan to have a long term 'buy and hold' strategy, you can rely on a wallet. A wallet also makes it easy to access your coins and tokens when needed.
All in all, both wallets and exchanges have their pros and cons. So, one has to know their strategy and goal before choosing either one of them. If you ask me, I will rate wallets better than exchanges.
Q4.
Create an account in a wallet and in an exchange of your choice and show screenshots of the process.
Part 1.
I am going to create an account in Coinbase exchange:
1) Open Coinbase and click on Get started.
2) Enter basic information like email, password etc. and the click create account.
Part 2.
I am going to create a wallet with Coinbase wallet by downloading it from the playstore.
1) Download Coinbase wallet from Playstore and then open the app and click create account. 
3) After picking the username, protect it by creating a pin or with fingerprint and then backup by clicking on the checkbox that I understand that If I lose my keys I will not be able to access my account.
Conclusion
People commonly confuse the terms wallet and exchange. However, there is a fine line of difference between the two things. The one common thing is that both, wallets and exchanges, are made to help you handle your crypto assets in an efficient and secure method. Moreover, Wallets are basically used to hold or store coins whereas exchanges are used to do trades.