Steemit Crypto Academy Season 4 - Homework Post for Task 7 [Dex, Cex, Popular Exchanges and Trading Cryptos]
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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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An exchange is an online platform that allows you to exchange a digital asset for another based on its value in the current market so it allows you to exchange our cryptocurrencies for traditional money, send remittances, make payments, and many more options depending on the exchange.
For example, there are exchanges that allow you to pay for additional services such as telephone lines, buy gift cards and even earn money by storing our cryptos in them, the latter is known as staking.
Now we know that exchanges are exchange platforms and currently there are two types that have been the most popular, traditional and Peer to peer (P2P)
Traditional, traditional exchanges are usually quite simple to handle since they work in a similar way to an exchange house, where you place an order to sell or buy Cryptocurrencies to the platform and it will provide you with the exchange rate of the moment and the exchange methods to make said exchange.
Peer to Peer (P2P), as its name says, negotiations are carried out directly from person to person through the platform, so it generates the benefit of having direct contact with the seller or buyer, and you can also establish your own exchange rate as is the case of a well-known platform worldwide "Binance"
Below is an example of an Exchange.
Screenshot of Huobi EXCHANGE
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Exchange :
It can be defined as a Bank of Cryptocurrencies.
Trading crypto-assets
Service for purchases of Cryptomoenedas with the card, P2P, Bank transfer, fintech
There are centralized and decentralized entities
The user does not have possession of the private keys, but the exchange has them. (That's why I said in the previous question that we verify the security of the exchange to which we are going to deposit our assets)
Wallet :
You have full control of your funds.
You have the private keys to your wallet.
It is clearly your responsibility to manage your wallet and your private keys.
It is decentralized and is often used through dApps.
Decentralized Exchange : Advantages
It does not present a central entity that regulates the operations of its users, which offers freedom to them allowing them to be the ones who make their own decisions.
Transactions are not stored on a specific server, being stored on several randomly selected servers, thus preventing transactions from being tracked by hackers. The feature that offers greater security to our operations.
It allows a greater degree of Privacy allowing Users to remain anonymous, without their data being used or verified by other people.
Decentralized Exchange : Disadvantages
The use of decentralized exchange tends to be more complex than centralized system so it requires the user to have more knowledge.
As users have their identity protected, this leads to the use of this type of transaction for the realization of crimes such as money laundering, since in this way it is very difficult to detect the origin of the funds used in said transactions.
Decentralized exchanges, not being governed by a central entity, present changes or corrections later because they require the consensus of their users.
Centralized Exchange : Advantages
Transactions are made in a much faster way by having a central node making the trading of crypto assets easier and in less time.
The centralized exchange offers more possibilities of transactions by being able to trade a greater number of types of cryptocurrencies.
The centralized exchange is easy to use, so the user does not require extensive experience to use it
Centralized Exchange : Disadvantages
It is likely to be subject to "hacker" computer attacks since all the information is in a central node, it makes all this information a preferred target for these computer criminals in search of access codes and proceeds to carry out illegal transactions.
Being controlled by a central entity, this same entity can influence the increase or decrease in the price of cryptocurrencies to be able to take advantage of itself, being able to make the price fall so that there is the sale of certain cryptocurrencies and take advantage of the low prices for the purchase and after getting a large amount and be able to raise the price to obtain an economic benefit.
The user presents the risk of losing his investment at any time since his keys and control of the accounts are not fully handled by the users is also controlled by the central node.
Yes, I have used it, in my experience, I generally use the Orinoco platform, which allows me the opportunity to buy, sell, exchange, and other trading activities related to cryptocurrencies.
I normally use this platform for the exchange of my Steem "SBD" and exchange them for fiat money or the exchange to other cryptocurrencies such as Bitcoin, taking advantage of low prices, and when I appreciate an increase in their price I exchange them for money. Being really very fast and simple
I've had some experience using Binance. I learned to use a little the order book of that platform and its different options, although I still choose to use the market order, which is the easiest and most direct when buying or selling. There I bought USDT through Binance P2P, and with that I made my first investment buying Cardano. I've also bought some Steemit coins from Binance.
Screenshot of binance EXCHANGE
This is all about my homework post and I thank you for professor @imagen for such a valuable topic that was really very educational.