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QUESTIONS
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.

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An exchange is a platform used by crypto traders to buy, sell and Hodl cryptocurrency. Cryptocurrency can be bought through various processes like bank transfer, Peer to Peer exchange and swapping of two tokens like Ethereum and Usdt, also used for staking of tokens. There many exchanges that crypto traders use include; Binance, CoinBase, Cash App. Other exchanges include; New York Stock Exchange (NYSE),Tokyo Stock exchange (TSE). Exchanges make profit by attaching a fee to carry out transactions and for listing a particular token. Generally an exchange allows exchange of cryptocurrency through Fiat or by crypto as means of payment. They enable storage, farming and staking of cryptocurrency. An exchange is a mediator/middle man between two traders that are willing to sell and buy cryptocurrency through P2P.

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Brief History of Exchanges in
Cryptocurrency

Initially when Cryptocurrency was shaped the trades were not secure enough, there was consistently an issue of hacks and frailty of assets, the most striking trade is Mt. Gox in 2007 by Jed McCaleb. However, with the happening to bitcoin, there is explicit enactment that a exchange should have before they are permitted to keep/accept brokers' assets. At the point when Bitcoin was presented in 2009, dealers were permitted to mine and send btc through distributed. In 2010, Bitcointalk, the first bitcoin trade arose.

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Wallet

A wallet is a cryptocurrency application that allows storage of crypto tokens. This is a place where all one's assets are stored; they are controlled by a set of specific private keys that enables the trader to access his assets. The wallet allows swap between two currencies and enables cryptocurrency to directly be converted into fiat at any time. It can be downloaded from an app store or directly from the web.

There are different types of wallet, they include

1.Hot Wallet
2.Cold Wallet
3.Hardware Wallet
4.Mobile Wallet

What is a Hot Wallet?

We know that a wallet allows the owner to receive and send cryptocurrency. A hot wallet is a wallet controlled through the Internet, hot wallets are mostly free and downloaded on a smartphone they can be accessed with the private key. When compared to a cold wallet, it is more vulnerable to online attacks and hackers.Eg: Exodus, Electrum.

What is a Cold Wallet?

A cold wallet is simply a wallet that is not connected to the internet. Cold wallets are not connected to the Internet therefore this makes them less convenient to use. They are also vulnerable to cybercrime and hackers. Some people believe that the best way to store Btc is through a cold wallet. Examples of Cold wallets include; Cool wallet Pro, Keepkey, paper wallet.

What is a Hardware Wallet?

Hardware is a computer device that is used to transfer into a computer. A hardware wallet is a wallet where funds are stored on hardware devices like flash drives or external devices. If these devices are lost or fall into the wrong hands, the assets saved on the device will be lost. The private keys too can be stored on an external device. Examples include; Ledger Nano S and Ledger Nano X.

What is a Mobile Wallet ?

This is a type of Hot wallet that can be accessed on a smartphone, they are downloadable on app stores or directly from the web.

Differences between An Exchange and A wallet

Exchange	Wallet
A platform where one can buy, sell or stake cryptocurrency	A program that allows one to store all his crypto asset
It is protected by KYC and AML	The private key is used to secure funds
A exchange is prone to hackers because they are sometimes run on Centralized exchange, making then prone to cybercrime	Wallet is more secure in storing of assets
An exchange is used as a mediator between traders that are performing a transaction	A wallet is solely used to secure funds/assets

Types of exchanges

1.Decentralized exchange (DEX)
2.Centralized exchange (CEX)

Decentralized Exchanges (DEX)

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This is a type of exchange that occurs between two traders where peer-to-peer transactions are not controlled by any official body like a bank or government. The exchange is the only intermediary that mediates this transaction. Eg: Uniswap, Sushiwap. They don't allow the exchange of fiat for cryptocurrency.

Centralized Exchanges (CEX)

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This is a type of exchange that allows the exchange of fiat for cryptocurrency unlike DEX. They are a more secure intermediate used to secure and protect assets. They facilitate buying, selling and storing of tokens. They are secure by Know your Customer (KYC), Anti Money Laundering (AML), Counter Financing Terrorism (CFT) checks these help produce traders against fraudulent activity. Examples of CEX include; Binance, Coin base and Hot bit. Binance verification requires a national identity card, international passport or driver's license then it requires a face verification, it's run in KYC to stop fraudulent activity.

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Advantages of Decentralized exchange and Centralized exchange.

DEX

Advantages	Disadvantages
They use Peer-to-Peer for cryptocurrency transactions and it doesn't need involvement from any official body	Difficult for a normal user to navigate
More suited for experienced traders	The private key can be lost, which controls all assets
The User has anonymity	Risker loss of asset, whenever a particular coin is minted off, there will be loss of assets

CEX

Advantages	Disadvantages
It allows the exchange of fiat for cryptocurrency	There is less privacy due to KYC
They require KYC to run, it enables traders to know their customers	There are elevated fees for all transactions
It is more user friendly, it is easier for a layman to understand	There are open to cybercrime

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

Yes I have used an exchange before. But my own experience was not all that pleasurable, during the course of February of 2021, I completed my Binance verification through my voter ID and face verification completing my KYC. I wanted to sell Btc therefore I made a request to buy from a P2P vendor, the vendor hadn't paid me the said amount for the BTC but on the chat session it appeared as paid, I then proceed to release my asset without confirming transfer, this made me lose my asset and made me lose the btc, I had been holding at that time. Even though it was a sad experience, I am still keen to learn more in the cryptocurrency market and use the knowledge to empower my generation.

Conclusion

I would love to thank Professor @Imagen for a wonderful assignment.

Thank you for reading;

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Professor @imagen

Special regards to

@sapwood
@nane15
@dilchamo