Crypto Academy Season 3 / Beginners course - Task 5 / CEX, DEX, Popular Exchanges & Trading Crypto. for Professor @imagen / by @warrior02

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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Explaining in my own words what it's an exchange?

An exchange can be defined as a platform where one can buy, sell and trade cryptocurrencies either for Fiat money or to swap for another Crypto currency. An exchange can also be said to be an online market where buyers and sellers of digital coins make transactions for Fiat or digital currency.

There are four(4) major purposes which an exchange serves, they are;
• Order Book
• Capital Deposits
• Order Matching
• Assets exchange

There are currently two main types of exchange;

• Decentralized Exchange
• Centralized Exchange

Decentralized Exchange: is that which grants users direct access to market and give them total control over their accounts and digital currencies. Decentralized Exchanges are usually fast and cheap due to the absence of third party interference. They do not have power to block or shut down any user unless there is a total shut down in the system. Example is Uniswap, WavesDex, AirSwap, Bancor Protocol

Centralized Exchange:
This type of exchange does not give their users full right to their accounts and can block or mute any user. There is usually KYC or a verification process, so that users will submit their complete details to the platform. Some examples are Binance, Bittrex, Coinbase.

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differences between an exchange and a wallet

In terms of Crypto, a wallet is an app/site which allows user to store his/her digital currencies and private key. It also allows user to send and receive digital coins from other people

While

A digital currency exchange is a platform which allows its users to buy, sell and trade digital assets, such as tokens and Crypto currencies. It also allows users to store their coins, send and receive Coins.

Other differences are:

No	WALLETS	EXCHANGE
1	A wallet is only decentralized	There are centralized and decentralized exchanges.
2	A wallet is mostly for storing coins	Buying, selling, trading and storing of coins is possible.
3	Does not require any Proper user verification	it requires user verification and user ID needed.
4	It is not Subject to corporate or government regulations	It is subject to regulations
5	There is very little, or no transportation fee	There is transaction fee rate

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Advantages and disadvantages of DEX and CEX.

Advantages of DEX

1. Anonymity: DEX offers its users anonymity because, during registration there is no form of verification or ID submission.

2. Lower transactions fees: The charge deducted for transactions is usually low due to the absence of a third party interference

3. Absolute Control: In DEX every has total control over his wallet and coins, they do not store the users password or key.

4. Decentralized: In DEX there is no central head or entity, which has the right to mute or freeze user accounts, everyone on the platform has equal rights.

Disadvantages of DEX

1. Scalability: The time taken to complete a transaction in DEX is usually not as fast as that of CEX.

2. Complexity: Most DEX platforms are usually difficult to understand, they do not have a user-friendly interface. Which is unsuitable for beginners.

3. Exchange for Fiat: In DEX, Crypto currencies cannot be exchanged or traded for Fiat currencies. This is not so good, because not many goods/commodities can be purchased with digital coins and this factor can discourage beginners.

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Advantages of CEX

• Simplicity : In most CEX, the interface is user-friendly and simple to understand. An example of such is Binance.

• Transparency: The interface is usually transparent, because it allows users to see the ledger of every transaction made.

• Scalability: The time taken to complete transactions on CEX is quite fast, unlike that of DEX.

• Back-up: Every user's data is backed up and stored on the platform if in any case a user misplaced or forgets his/her password

Disadvantages of CEX

• Transaction Fees: The charge deducted for transaction is usually much when compared to DEX.

• Under Regulations: CEX is usually under government regulations, so if the government makes a policy that affects them badly it is most likely to also affect users.

• Privacy: In CEX there usually a third party interference, this not allow the users(buyer and seller) to have some privacy when making transactions.

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Have you used an Exchange before?. Tell us about your experience.

It's been about two (2) years since I came into the world of Crypto and started using exchanges, I used Uniswap then, though I wasn't that serious until I joined Steemit this year, i switched to Binance when I started, it was quite uneasy for me as a beginner, because I didn't have any physical guidance. I must confess it has a really friendly and simple interface. With Binance, one can perform P2P transaction, and it also allows me to store other cryptos with its integrated wallet like, Bitcoin, Dodge coin, Ripple, Steem, etc. Though getting verified on the platform took me sometime, but I'm currently verified, and I'm still using Binance till date. I even took some of their beginners class which helped me to further understand the platform. It's been a wonderful experience.

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Conclusion

With this task I have been able to identify the two types of exchanges in the crypto world and also the differences that exit between them, and how they function as well.