Exchanges - Steemit Crypto Academy Season 4 - Homework Post for Task 7 | By @syedmraza01

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.

EXCHANGE

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An Exchange is basically a platform where a trader trade, buy and sell the cryptocurrency. These kind of platform are basically created to make transfer of assets or funds easy from cryptocurrency to either fiat currency or any other digital currency. An exchange works like a broker who take its commission for the services he done for you or charge a fees. The trading done on the exchange is basically based on the value of current market price. All the exchanges have same kind of functions but there system of work are not same. They may be centralised or decentralised.

Centralised exchange are the most common type of exchange. These exchanges work on their own company servers. They are considered as most trusted exchanges in trade whose transactions are safe and secure. Binance and Coinbase are most common example of centralized exchange.

Decentralised exchange works similar to Bitcoin. They are not common. They allow users to buy and sell without a third party or a broker. It is difficult to hack decentralized exchange as they are very secure. dYdX 1 and Uniswap are some examples of decentralized exchange.

DIFFERENCE BETWEEN A WALLET AND AN EXCHANGE

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• The purpose of wallet is to safe and secure customer assets while on the other hand an exchange facilitate the trader to trade, buy or sell the currency or to convert one currency to another.

• Cryptocurrency stored in wallet can not be convert into another form of currency while exchange converts cryptocurrency to fiat currency or any other form of currency.

• A wallet allows full control on the transfer of assets. A user decide when to transfer and where to transfer the cryptocurrency. In other words a user have full control over the passwords and private keys where as in exchange, the overall hold is in the hand of platform. In other words it doesn't allow full access of passwords and private keys to users.

• Wallet are safer for the user to store their assets while there is less ratio of safeness in exchange as compared to wallet as exchange depends on a third party or a broker. So it is not confirmed that users assets are safed or not.

• There is no need of debit card in wallet to deposit while exchange uses debit card , credit card or other form of payments for deposit.

ADVANTAGES OF DEX

Some advantages of DEX are as follows :

• The level of security is very high in decentralised exchanges because it is not necessary for a user to transfer their assets to a broker or a third party. Therefore it is not easy to hacked decentralised exchange.

• Decentralised exchange protect users from market manipulation preventing fake trading because of its nature of peer-to-peer exchange.

• Decentralised exchange provides users anonymity . It is not required for a user to register his account by filling his location or personal information etc.

DISADVANTAGES OF DEX

Disadvantages of DEX are as follows :

• It is necessary for decentralised exchange users to remember their passwords and keys otherwise they loose their assets forever and unable to recover their assets.

• It is difficult to find a buyer or a seller in decentralised exchange because decentralised exchange is new and are not too popular among users and also have low liquidty rate.

ADVANTAGES OF CEX

Some advantages of CEX are as follows :

• Centralised exchange have high transaction speed which results in providing a better and friendly way of trading to users like apps and website.

• When talk about trading and transactions, centralised exchanges is very secure and reliable. It is considered as most trusted exchanges in trade.

• Trading ratio is very high in centralised exchanges as they have relatively high liquidity rate and they are most popular exchange among users.

DISADVANTAGES OF CEX

Disadvantages of CEX are as follows :

• The ratio of risk in centralised exchanges is very high. The security level is very low and risky. As they are most common exchanges having a high number of assets, they are the main target of evil actors.

• Centralised exchanges take high transaction fees for their services. The fees depends upon the number of amount trade so the centralised exchange take very huge amount of transaction fees when trading is in greater amount.

EXPERIENCE ABOUT THE EXCHANGE I USED BEFORE

Yes I have used Binance exchange. It is the most commonly used centralised exchange in crypto world till date in terms of regular trading. It is very easy and user friendly exchange. It provides users a wallet to store their funds and assets. You can easily buy and sell your assets on binance. Transferring of money is very easy. The good thing about binance is that almost every cryptocurrency is available on binance. With the help of binance I am also getting updated with the latest rate of crypto assets. Although it has some negative reviews as it is not good for the trading of large amount but after taking overall notice I can surely say that binance exchange is the best exchange for trading. I recommend it to everyone who works on crypto.

CONCLUSION

Exchange is basically a platform for trading, buying, and selling digital assets with ease. The exchange may be centralized or decentralized. Centralized exchanges are most popular and trusted exchanges in the market whose transactions are considered as safe and secure. On the other hand decentralized exchanges are comparatively new but they have high-level security. They both have some advantages and disadvantages based on their methods of transaction. For me the best exchange is binance exchange as it is very easy and user friendly exchange.