DEX, CEX, POPULAR EXCHANGES AND TRADING CRYPTOS - STEEMIT CRYPTO ACADEMY SEASON 5 - HOMEWORK POST FOR TASK 07
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Hello crypto enthusiasts!
I am here again with this homework task for professor @imagen – Lesson – DEX, CEX, POPULAR EXCHANGES AND TRADING CRYPTOS. Enjoy!
Homework Task
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.
Explain in your own words what an Exchange is.
Exchange:
Exchange is an act of giving/sending and receiving/accepting something similar in worth/value. A cryptocurrency exchange is an application or an online program where cryptocurrencies can be traded or exchanged.
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A cryptocurrency exchange is a platform that eases the trading of cryptocurrency for other cryptocurrency or fiat currencies.
Cryptocurrency exchanges help users make easy transactions like buying, selling, swapping, or staking their assets. Exchanges gives users the ability to trade a coin for another just like trading Steem for Tron. Exchanges also allow you to convert digital currency or fiat to cryptocurrencies in their equivalent values or buy and sell cryptocurrencies directly from your local bank account.
Exchanges also provide information like Crypto prices, charts, All-time high (ATH) prices, and market cap to their users to enable them to make good analyses on coins. Some exchanges require users to provide their personal information like their names, dates of birth, email addresses, Identity cards, etc for proper security of their assets, while some don't require all this information.
Exchanges are readily available to users all the time as long as their users have access to use them. Good exchanges are mostly filled with legit cryptocurrencies because they prioritize the security of their users' assets. When a new cryptocurrency is added to an exchange, we say it has been Listed on that exchange.
Examples of cryptocurrency exchanges are;
Binance.
KuCoin.
Huobi Global.
Coinbase.
Bithumb.
Bitstamp.
Bitfinex.
Differences between a Wallet and an Exchange.
The buying, selling, saving, or storing of cryptocurrencies can be done on 2 different general platforms which are; Crypto Wallet and Crypto Exchange.
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A cryptocurrency wallet is an application program or software that allows users to store all their cryptocurrencies. A crypto wallet can either be a Hot wallet which is online, or a Cold wallet which is offline. Most users prefer to keep their assets in a cold wallet because they are safe from online hackers.
A cryptocurrency exchange is an app, a service, or a website where users buy and sell cryptocurrencies or convert fiat currencies into cryptocurrencies.
Differences between a Wallet and an Exchange in the table below;
| Cryptocurrency Wallet | Cryptocurrency Exchange |
|---|---|
| A crypto wallet allows users to save their assets | A crypto exchange is a platform where users buy or sell their crypto assets or convert fiat money to crypto. |
| A wallet gives users total control over their private keys. | An exchange does not allow users full access to their private keys. |
| Users can navigate/operate some wallets without internet connections | Users need internet connections to navigate/operate all exchanges. |
| Users have total control over their crypto assets stored in their wallets | Exchanges have control over their user's crypto assets. |
| When creating a wallet, the system generates a password for you. | When creating an exchange account, you choose any password of your choice. |
Mention the advantages and disadvantages of DEX and CEX.
Decentralized Exchange (DEX):
Decentralized exchange (DEX) is a cryptocurrency trading platform that does not allow the total authority or control over a user's cryptocurrency to a third-party intermediary/service.
Advantages and disadvantages of DEX;
| Advantages | Disadvantages |
|---|---|
| The biggest advantage is that it offers security to users over their assets. | They are not beginner-friendly to users who her completely new to the crypto world. |
| Exchanges allow users total control over their crypto assets. | They lack public awareness because many users know about the centralized exchanges, unlike DEX. |
| They are very fast in operation and they charge lower than centralized exchanges. | Finding users to trade with can be difficult when there is no regular presence of users on the app. |
Centralized Exchange (CEX):
Centralized exchange (CEX) is a cryptocurrency trading platform where users' assets are controlled by a central or third-party authority.
Advantages and disadvantages of CEX;
| Advantages | Disadvantages |
|---|---|
| Centralized exchanges are known for their user-friendly set up which enables users to navigate without confusion. | , Unlike the DEX, CEX can be an easy target for hackers because the central authorities have all the private keys of their users and they are all ket in a particular server. |
| CEX is a very reliable exchange platform and a lot of users prefer it because of this. | Unlike the DEX, the transaction fees in CEX are usually high. |
Have you used an Exchange before? tell us about your experience
Yes, I have used more than one exchange platforms before.
My favorite exchange is Binance because it is the most popular and widely accepted exchange.
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Binance isn't an easy-to-use exchange like especially for first-timers but with constant usage, one will know how to navigate the platform better.
During my sign-up process, verification of my account wasn't easy because I had to redo that process multiple times due to errors. I used my email, phone number, national identity card, and a photo of my face.
Furthermore, the crypto transaction was banned in my country so I wasn't able to use my debit card to buy crypto, but with the help of a peer-2-peer (P-2-P) transaction, I was able to buy my cryptocurrency.
I enjoy using the platform because its the most accepted in the crypto world so I feel my assets are secured in it.
Conclusion
Cryptocurrency traders need to know Wallets, centralized exchanges, decentralized exchanges, and how they work. I want to thank professor @imagen for his lesson.