Homework 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

Introuction

Good Day Steemians , I will be responding to the Hometask given by professor @imagen , Thanks for this interesting topic.

Cryptocurrency is a virtual asset on the blockchain networks. Before the onset of exchange platforms, mining and transaction were the only possible way to earn cryptocurrencies, but after the introduction of Crypto Exchange platform, one can transact in different Cyptocurrencies without difficulty. Below I will focus on Cryptocurrency Exchange.

An Exchange

Source

An Exchange is a platform or market where a one can easily sell, buy or even hold cryptocurrencies at any point in time. In Exchange,one can easily swap coin for another or even exchange fiat for crypto. An Exchange is digital market where selling and buying of cryptocurrencies can take place.

In Exchange platform,there is a wallet section where users fund are stored, base on the user choice of currency,his/her crypto assest will be showing the same fiat equivalent.For instance if sonia440 have 10 Steem on Binance Exchange,it will also be showing equivalent of 10 Steem in sonia440 local currency or choosen fiat just beside it.In summary, An Exchange is Simply used for trading cryptocurrencies.
Below are examples of crypto Exchanges:

• Binance Exchange
• Huobi Global
• Kraken
• Uniswap
• Coinbase
• Roqqu etc .

An Exchange could either be Centralized(CEX) or Decentralized(DEX)

A centralized Exchange is the type of Exchange which is being manage and owned by a private individual or a company.There is a central authority that oversee the affairs or activity of the users.In centralized exchange the users doesn't have full access or control of their personal account because the owners of the platform have limited them thus it is insecure.

A Centralized Exchange has virtually all the details of the user.
Examples of Centralized Exchange are:

• kraken,
• Roqqu,
• Binance Exchange etc.

While Decentralized exchange is the type of Exchange that is not managed or controlled by central authority or group of persons .It runs peer-to-peer market system which allows the
buyer to deal directly with the seller through a smart contract without any consultation from a third-party or central authority.

Decentralized exchange grants user full control to his his /her account using keys which is used to initiates a transaction whenever he /she wants to transact.
Example of a decetralized exchange are:

• Uniswap,
• Kyber etc.

Difference Between a Wallet and an Exchange

Source

Assuming I have $10 with me in my pocket and I want to spend, all I have to do is just dip my hand inside my pocket and pay for whatever I want to pay for but assuming the money is in my bank account or any platform, I will have to place a request before I can be able to access the fund or cash.

From the above axample my pocket is like a crypto wallet whilen the bank is the exchange platform.

Wallet

Wallet is software that gives every user ability store his/her crypto assets.The major uses of a Wallets is for saving digital assest but some wallets grants the user the access swap assest using the assigned key.

The security level of a wallet can only be managed by the user, this implies that only the user has the full access to the wallet key and to his funds as well.
A wallet keys is saved offline,thus wallet is not accessed online which makes it difficult for hackers or imposters to access the wallet.

Exchange

Exchange is like a market system where buying and selling of digital currencies occurs. Exchanges is built such a way that it promotes buying and selling of crypto, swapping
of cryptos, saving of crypto. Exchanges could either be decentralized or centralized. Before you can be be able to access your wallet, you must create an exchange account first and then login.

In Summary (Difference Between a Wallet and an Exchange)

Wallet	Exchange
1. The major function of wallet it to save cryptocurrencies	The major function of Exachange is for buying and selling if Cryptocurrencies
2. It's more Decentralized	it's less Decentralized
3. High Level of security	low level of security
4. Users has full control over everything	Builder control almost everything
5. It works both online and offline	it works only while online.

Advantages and Disadvantages of Decentralized Exchange (DEX)

Decentralized Exchange is the type of Exchange that is not managed or controlled by a central system. It can be seen as person -to-person exchange system which depends on a smart contract .The users have full control.

Advantages of Decentralized Exchange (DEX)

• There is high level of privacy.This is achieved because it keeps the user information anonymous and no third party involve.

• There is no central authority that saves transactions details rather transactions is saved across different servers.

• It maintains high level of security because there is no central server that control the network, so it makes it difficult for hackers to access all the nodes at the same time.

• Since it's decentralized in nature , it will be difficult for the government or any authority to regulate it's affairs.

Disadvantages of Decentralized Exchange (DEX)

• Because the user information and data is kept private ,fake accounts could be owned by individuals who wants to use the account for fraudulent activity.

• DEX platforms is not always user-friendly as it seems to be.

• Transaction Cancellation in DEX platform is more expensive.

![2r8F9rTBenJQfQgENfxADE6EVYabczqmSF5KeWefV5WL9WEfmzCHSq4AUAh8e1givUGfQqTjPzQ9bnMG62S9fzHMidQym73RdBxya8tUNggaUbCeWG7ZntuLwmkQ7NQLN.png](

Advantages and Disadvantages of Centralized Exchange (CEX)

Centralized Exchange is the type Exchanges that is managed or controlled by a central authority or central server. The users does not have full access or control of their keys.

Advantages of Centralized Exchange (CEX)

• High Transaction Speed, Centralized Exchange have high transacting speed which makes trading in CEX faster.

• Centralized Exchange provides different assets which the users can trade from. CEX provide multiple number Cryptocurrencies to trade from.

• In CEX the users can exchange crypto to cash for withdrawals easily .This allows user to buy Cryptos easily at low price and also sell it whenever they want to.

• centralized exchange is the mostly used than DEX

• When comparing. CEX and DEX, CEX has a higher trading volume than DEX.

• You can buy Cryptos easily using CEX

Disadvantages of Centralized Exchange (CEX)

• It can be easily Hack, Since it makes use of a central server and all the keys of the users are saved in the single server. it's way to easy for fraudster to target the server and harvest the keys of all the users at same period of time.

• Breakdown of the central server will affect the platform in general because the whole system is being control by a single server . Whenever the central is down the whole system will be down too and this affects the whole platform.

• CEX does do not grant the users full access of their keys and assets.This implies that it's not secure and user can lose his assets any time.

• Central authority of centralized exchange system can manipulate the trading volume or price at time without query.

![cyxkEVqiiLy2ofdgrJNxeZC3WCHPBwR7MjUDzY4kBNr81LetETmuDWKvqCPmaSADqzr7cvw5uMJgEuBeuvuxazYG8zoQXWgA6qkN5Yo32DcRzka1VLsrb2BJSkBrF9yjpHU.png]

Have you used an Exchange before.Whats the Experience?

I've been using crypto exchange for the past two years and am still using it . It grant me the access to buy,sell,save and even swap Cryptos on Exchange platform. I normally use trust wallet, Tron link and binance but I prefer using binance because of the strong security system.

I usually use binance exchange to buy crypto assets when price value drops and i sell it off when the price increase just to make promise.

Aside Steem,Tron which I obtained from steemit, I have other cryptocurrencies like btt, usdt etc.
I apply the little knowledge that that have gained from crypto academy to know when to buy or sell.

Below is the Screenshot of my Successful Transaction on binance.

Below is the Screenshot of my failed Transaction on binance.

I also know how to use USDT to buy any coin or Swap using binance exchange.

Below is just step on how to use USDT to purchase any coin on Binance Exchange.

• login into your verify binance account with your email and password

• Clicked on Market and select a trade pair, for instance you can selected a trade pair of SHIB/USDT which implies that you want to swap USDT to SHIB.

• Then clicked on Buy shib.

• Entered the amount of USDT in the box which will give you the corresponding amount to Shib.

• Then click on Buy shib and completed the transaction.

• It will then display Success which means transaction was successful.

Conclusion

Exchange is a digital market available for the exchange of cryptocurrenies . It could be DEX or CEX . CEX is actually toping the table for now.

wallet is basically used for the storage of Cryptos assets . It could be online(hot wallet) or offline (cold wallet).Wallets are completely managed by the user.

Thank you Professor @imagen for this wonderful lecture and @dilchamo @nane15 your contributions to crypto academy are top notch