Season 5 Beginner Course // Dex, Cex, Popular Exchanges and Crypto Trading // Steemit Crypto Academy S5 - Homework Post for Task 7 by @ oshimadu
Greetings dear professors and colleagues of the Crypto Academy. The topic that I will address this time is about regulations in cryptocurrencies, for which I will answer the following question suggested by professor @imagen:
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Entire question
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.
01 What is an exchange?
An exchange is the action of delivering a good and receiving compensation in exchange for it, this is what is generally applied in a management of any kind, but more focused on our subject, in the commercial field.
Now, for the topic under discussion, where the world of cryptos has the main focus, an exchange or Exchanges, they are nothing more than digital platforms that make life easier for users in the exchange of their goods or assets, that is, their cryptocurrencies for others, or, for fiat money(government issued money). This transaction can be done from anywhere in the world and to any place without having to travel, only with the use of devices such as mobile phones, a computer and the internet.
This management is carried out based on the rates offered by the market according to supply and demand, which are generally the lowest, and therefore, far exceed traditional methods.
In short, we can say that the exchange works like the stock market, but associated with the world of cryptocurrencies.
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The operation of the exchanges is divided into two aspects: buying and selling. For either of the two transactions, certain requirements must be met:
- In order to sell, it is important to specify the amount of cryptocurrencies to be traded and how much they will cost to sell. This request will be supported by a report that acts as an order book, that is, the place where the customer stated the agreed price for the sale
- Unlike buying and selling, you have two options, so the user can choose the one that suits him best. The first is to search the order book to place an order, and the second is for the user to create his own order through a bid, where the purchase terms and the price to be paid are in line with his capabilities.
On the other hand, if the user wants to buy, there are two options: first, he can search for an order in the order book, or he can create a bid order to be priced. That he is willing to pay for the transaction. To complete the transaction, we choose a payment method, which will be based on the rules and policies established by the exchange, which can be combined with other uses source are credit cards, debit cards, and Paypal.
- Binance
- Paxful
- Coinbase
- Huobi Global
- Kraken
02 What is Differences between Wallet and Exchange.
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Before specifying the differences between the two, it is important to be clear about the concept of each. A Wallet or wallet is where we store our cryptocurrencies, and from where we can manage them to make the exchange by using keys for other cryptocurrencies or fiat money. It works like a bank account with the difference that the user has control over their funds.
There are Two types of Wallet
- hot wallet
- cold wallet
There are two types of wallets, the Hot Wallets that work with the internet, they are special for people active in the purchase and sale of cryptocurrencies. While Cold Wallets do not require internet and are more adapted to the most passive users, that is, who prefer the storage of cryptocurrencies for a long time. Assets are stored using a hard drive or a USB device.
For its part, an Exchange is the digital platforms that allow us to exchange our cryptocurrencies for other crypto or fiat money or government issued money ,they handle and maintain by government . However, there are companies with the duality of providing their services such as Wallet and Exchange, in short, we can carry out both functions, the safeguarding of our assets and the exchange management.
| Wallet | Exchange |
|---|---|
| Safeguard or deposit of cryptocurrencies, that is, its role is like that of a digital wallet | They allow the exchange of critical currency for others or fiduciary money, they are online exchange houses. |
| They can operate without internet when it comes to Cold Wallet and with internet if it is Hot Wallet | They require the internet to carry out exchange transactions. |
| Users have absolute control over their cryptocurrencies, only he can decide what to do with them and when to do it | The exchange is the one who has control over cryptocurrencies. |
| When we lose the password there is no way to recover it, and therefore, we will lose our money. A printed backing is recommended in addition to digital | It gives us the option of recovering the password through a very simple method. For this reason, we do not run the risk of losing our assets. |
| We cannot create or generate a password | We ourselves generate our own password, it is personalized. |
03 Advantages And Disadvantages of DEX and CEX.
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- Advantages
Before explaining the advantages and disadvantages of DEX and CEX, it is important to know that these refer to types of exchanges. The main ones are: centralized and decentralized, CEX .
The CEXs are exchanges that work like traditional stock brokerages, a central entity is in charge of managing the assets, they have all control over our assets. Simply put, a company is in charge of managing the exchange and is governed by maintainers such as KYC (Know Your Customer) and AML .
DEXs are decentralized exchanges, they are not governed by a company or central authority, that is, exchanges are made directly, without intermediaries. Which means that it is the users themselves who control their cryptocurrency transactions through the purchase and sale, with the use of point-to-point applications.
- Disadvantages of DEX.
© Its interface is not feasible for new users, it can be somewhat complex, since it requires connection with other dapps.
© The DEX do not offer many options of tools like the CEX, on the contrary, we can only place two types of orders: buy and sell.
© It is not possible to do a quick negotiation (instantaneously) in the face of the vertiginous fluctuation suffered by the prices of cryptocurrencies, since in order to become effective our requests, they must spread throughout the network, which generates losses of time that affect our transactions, just because of price changes, many times in seconds.
© In relation to decentralized exchanges, the operability they offer is much higher.
04 Have you used an Exchange before? Tell us about your experience.
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Currently, there are many exchange platforms, as cryptocurrencies have emerged and are at the forefront. The only experience I have with Exchange is with binanace, which I only used for a short time, a few months. My experience is that I have noticed that it is very secure, its interface is quite simple and the service is quite fast. However, it is possible to exchange cryptocurrencies for government currency in my country but it is difficult to buy cryptocurrency as the value of our country's currency has gone down but I have used it .I can guarantee that I have received good service.
Screenshot from my binanace
My next goal is to trade in binance and buy different cryptocurrency and make more use of it.
Thanks for reading my post.😊😊