Steemit Crypto Academy S5 - Homework Post for Task 7 Dex, Cex, Popular Exchanges and Trading Cryptos -
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Assalam-o-Alaikum. What's up all Steemians!
Hope so that all of you will be good and happy and I pray for Allah to keep all of us healthy and wise. This post is all about the Task 7 of the Steemit Crypto Academy Introductory Fixed Courses. So, have a look at the task.
I am going to attempt question number 3 in this post. Happy reading!
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.
First of all, I will discuss cryptocurrency exchanges.
As we all know that the cryptocurrencies are newly developed financial system that is in the form of digital assets. As there are the markets in our daily life where we used to exchange our currencies with different goods or other currencies. So, the same is the case with cryptocurrencies. There are also digital marketplaces where cryptocurrencies are exchanged with one another. These marketplaces are known as cryptocurrency Exchanges.
The cryptocurrency exchanges are in the form of websites or applications that allow their users to exchange their cryptos with other cryptocurrencies or by fiat currency. Through exchanges, we can sell our crypto assets for fiat currency, as well as, we can also buy cryptocurrencies by fiat money.
Suppose, a man wants to buy a Steem token. For this purpose, he has to go to the cryptocurrency exchange like Binance or Poloniex and invest here to buy the Steem token. One can also exchange the cryptos with other crypto assets easily in the exchanges platforms.
Cryptocurrency exchanges also act as storage places for crypto assets. One can store his assets in the exchange for a short period and can trade his assets whenever and wherever he wants. Cryptocurrency trading is done in the exchanges where one can buy an asset at a low price and sell his assets at a considerable price to earn a better profit.
So, now I will compare the cryptocurrency exchange and the cryptocurrency wallet in the form of tabular data, as given below.
| Exchange | Wallet |
|---|---|
| It is used to exchange(sell or buy) cryptocurrency assets. | It is used to store the cryptocurrency assets. |
| There is no private key in the crypto exchanges. Users can log in to the exchanges simply by entering their set password. | Every crypto wallet has a particular private key that is used to log in to the wallet. Without a private key, a wallet is wasted. |
| Used for short-term storage of assets. | Used for long-term storage of assets. |
| Less secure than the crypto wallets. | More secure than the crypto exchanges. |
| Cryptocurrencies can be exchanged easily in the exchanges. | In wallets, cryptocurrencies cannot be exchanged or traded. |
Some advantages of decentralized exchanges (DEX) are as follow.
In decentralized exchanges, the funds and transactions are under the authority of the owner of the assets. No one can utilize the assets except the owner.
Traders in the DEXs can easily sell or buy their crypto assets anywhere and anytime without the involvement of the central authority.
DEXs are more secure than CEXs because there is no central unit or point in decentralized exchanges.
Less susceptible to hacking.
Transactions are safe and secure as the security system of decentralized exchanges is very good due to the presence of the private key.
Money crimes are increasing due to the decentralization of DEXs.
On-Chain and Off-Chain system in DEXs is also making the transactions, a little bit difficult.
Transaction fees are higher in the DEXs.
Higher liquidity of crypto markets is present in the CEX which is a great benefit for the traders.
Centralized Exchanges holds a massive trading volume of crypto assets.
Transaction speed is high in the CEXs as compared to DEXs.
Low Transaction fee is also a benefit for the traders in the Centralized Exchanges.
As the funds and transactions are under the control of the third parties. So, this thing makes the centralized exchanges less secure.
As the central authority is controlling the funds, the hackers found more chances to attack the system.
Less secure than the DEXs due to the absence of any private key.
The prices are a little bit higher than the outside market.
I am a new user of cryptocurrencies so I have not much experience with cryptocurrency exchanges. But, I have used the Binance Exchange for withdrawing my earning in the form of Steem. Binance is a centralized exchange which is the best exchange of the time. Moreover, I have also used the Binance exchange to trade cryptocurrencies with small capital. But I hope that I will get better knowledge from the crypto academy and utilize this knowledge to make my crypto journey pleasant.
The screenshot of my verified Binance account is shown in the screenshot below.
