Steemit Crypto Academy S5 - Homework Post for Task 7

yusan786 (55)in SteemitCryptoAcademy • 3 years ago

Explain in your own words what an Exchange is. Differences between Wallet and 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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What is an exchange?

The action of supplying a good and obtaining pay in exchange for it is known as an exchange, and it is commonly employed in management of any kind, but more specifically in the commercial field. Now, for the matter at hand, an exchange or Exchange, they are nothing more than digital platforms that make life easier for users in the exchange of their commodities.This transaction can be completed from anywhere in the world and to any location without the need to travel, using only mobile phones, computers, and the internet.
This management is carried out based on market rates determined by supply and demand, which are often the lowest and hence much exceed previous approaches. In a nutshell, the exchange functions similarly to a stock exchange, but it is linked to the world of cryptocurrencies. The exchanges' activity is split into two parts: buying and selling. Certain conditions must be completed in order to complete either transaction:

In order to sell, you must first indicate the number of cryptocurrencies to be traded and the price at which they will be sold. This request will be backed up by a record in (Ask) that functions similarly to an order book, in that the customer specifies the price at which he consented to make the deal.
In order to buy, Unlike a sale, you have two possibilities, allowing the consumer to select the one that best suits him. The first is to use the order book to place an order, and the second is for the user to create his own order using Bids, where the buying conditions and price to be paid are tailored to his needs.If the user wants to buy, however, he has two choices: first, he can look for an order in the Order Book, or he can create a purchase order (Bids) in which he must define the price he is prepared to pay for the transaction. To complete the transaction, we must select a payment method that complies with the Exchange's laws and procedures, which may include the use of credit cards, debit cards, or PayPal, among other options.

Differences between Wallet and Exchange

It's vital to understand what each notion entails. A wallet or wallet is a place where we keep our cryptocurrencies and manage them so that we can trade them for other cryptocurrencies or fiat money using keys. It functions similarly to a bank account, with the exception that the user retains control over their funds.

There are two types of wallets.

Wallets They are unique for persons involved in the acquisition and sale of cryptocurrencies since they work with the internet. Cold wallets, on the other hand, do not require internet access and are better suited to the most inactive users, those who desire to keep their cryptocurrency for a long period. A hard disc or a USB device is used to store assets.
Exchange is the name given to the digital platforms that allow us to swap our cryptocurrencies for other cryptocurrencies or fiat currency. However, there are firms that provide dual services, such as Wallet and Exchange; in other words, we may do both roles, asset preservation and exchange management.

Aspects	Exchange	Wallet
Function	They are online exchange houses that allow the trading of vital currency for other currencies or fiduciary money.	It serves as a cryptocurrency safekeeping or storage facility, similar to a digital wallet.
Methods of connection	To conduct exchange transactions, they need to use the internet.	When it comes to Cold Wallet, they can work without the internet, and when it comes to Hot Wallet, they can work with it.
Assets under your control	Cryptocurrencies are under the management of the exchange house.	The Users have complete control over their bitcoins, and only he has the authority to determine what to do with them and when.
Creating passwords	We create our own passwords, which are unique to us.	We weren't the ones that came up with the password.
Reset or retrieve your password	It allows us to retrieve the password using a straightforward way. As a result, we are not at risk of losing our assets.	We will lose our money if we lose the password because there is no way to recover it. In addition to digital, a printed background is recommended.

Mention the advantages and disadvantages of DEX and CEX

The most common are centralised and decentralised, as well as CEX (Centralized Cryptocurrency Exchange) and DEX (Decentralized Exchange) (Decentralized Exchange). The CEXs are stock exchanges that operate similarly to typical stock brokerages, with a central organisation in charge of asset management and complete control over our assets. Simply put, a firm is in charge of handling the exchange, which is supervised by KYC (Know Your Customer) and AML (Anti-Money Laundering) (Anti-money laundering).
DEXs are decentralised exchanges that are not managed by a firm or central authority, allowing for direct exchanges without the use of middlemen. Which indicates that it is the users themselves who govern their cryptocurrency transactions

Advantages of CEX

It appeals to newcomers since it has a basic interface that is similar to other banking platforms.
Allows users to trade bitcoins for fiat currency.
Because they provide more liquidity, consumers may complete transactions in the shortest amount of time and in the most straightforward manner feasible.
They are available in practically every country on the planet, but they are subject to local rules.
They have a higher transaction volume since they allow users to purchase and sell cryptos with fiat money as well as a variety of payment methods like transfers, debit or credit cards, or online payment methods like Paypal.
Commissions on bank deposits are waived for users.
It provides a broader variety of cryptocurrencies, allowing users to select the one that best meets their needs or is most convenient for them.

Disadvantages of CEX

Users risk losing their investments since they are unable to control and use private keys. Users must, in practise, entirely entrust their funds to the exchange. Since the user is forced to supply important personal information such as email, complete name, bank account records, and location of residence, among other things, there is no anonymity or privacy. All in order to appease the governing bodies over which they are ruled.
While many countries have decentralised exchanges, certain governments have restrictions on the usage of bank transactions and credit cards.
The currency transfer choices you provide are somewhat limited.
Bitcoin commissions are pretty hefty when it comes to selling it.
They rely on a central server; if it goes down, the entire system goes down with it.
Because all information is stored on a central server, it is more vulnerable to hacker attacks.

Advantages of DEX

Anonymity is the order of the day. They are referred to as "purer" since the blockchain requires simply information, namely, a wallet address in order to function.
It has a lower chance of being hacked because it works in a similar fashion to Blockhain technology, that is, it runs on the premise of a computer network, so we are accountable for our funds and the entire process that involves sale and buy, in short, the exchange.
Unlike CEXs, which rely on a central server, operations are not fully disrupted when a node crashes. This means that even if one node fails, the others will continue to function normally.
Because they operate on a P2P (peer-to-peer) basis, users can control the exchange rates at the time of transaction.

Disadvantages of DEX

Its interface is inaccessible to novice users, and it can be complicated due to the need to link with other dapps.
Unlike the CEX, the DEX does not offer a wide range of tools; instead, we can only place two sorts of orders: buy and sell.
It is impossible to conduct a quick (instantaneous) negotiation in the face of the vertiginous price fluctuations experienced by cryptocurrencies, because in order for our requests to be effective, they must spread throughout the network, resulting in time losses that affect our transactions, simply because of price changes that occur many times in seconds.
In comparison to decentralised exchanges, their operability is far higher.
It is only possible to conduct out exchanges if they are all carried out on the same blockchain.

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

Since the advent of cryptocurrencies, there are a plethora of exchange platforms available. I consider myself naive in this world, and the only Exchange experience I have is with the Orinoco catwalk, which I have only used for a few months. My experience has been that it is incredibly secure, that the UI is very user-friendly, and that the service is really quick. However, it has only happened to me a few of times that it takes time to exchange cryptocurrencies to fiat money from my country, but I can verify that I have received good service.
My next objective is to join Binance, one of the world's largest and most prominent cryptocurrency exchanges. It also has a Wallet option for storing our funds, in addition to exchanges.