Hello, dear steemians. I am very glad to participate in this homework task 6 which is about Dex, Cex, Popular Exchanges and Trading Cryptos by professor @imagen. Let's start.
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|(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.|
💢 Explain in your own words what an Exchange is❓
An exchange is a marketplace where things, goods, or any kind of currencies (fiat or crypto) are traded for each other. In order to exchange anything you want, you need a platform where you will get another exchanger like you who also want to exchange for your preferred items. And we can call this platform an exchange.
There are many kinds of exchanges are available now. First of all, we will get two types of exchanges that are:
1. Physical Exchange (Offline): Basically these types of exchanges are situated in local areas. It could be in a building where the buyers and sellers both are face to face. And the building owner is the broker.
2. Virtual exchange (Online): These types of exchanges could be called the digital exchange. In this present world, most of the organizations are being digitalized by transforming into online platforms. Virtual exchanges are the best examples of those. In a virtual exchange, there is no need for brokers. The trader can sell the assets directly and get money from the buyer which is called P2P trading. This is totally online, no need for physical appearance.
There are more than thousands of exchanges all over the world. We can describe the exchanges in another two types that are:
1. Centralized Exchanges (Cex): If there is any central authority like a third party or brokers between buyers and sellers will be listed as a centralized exchange. The users of a centralized exchange don't have full authority over their assets. Even the user's transactions are also controlled by the authority of the exchange. Here the transaction details are listed in a single server and the user interface is quite easy to operate than a decentralized exchange. It is not only an advantage but also a disadvantage because of the hacking issue. However, centralized exchanges are quite popular.
Here are some popular Centralized Exchanges:
- Huobi Global,
- KuCoin, etc.
2. Decentralized Exchanges (Dex): If there is no central authority like a third party or brokers between buyers and sellers will be listed as a decentralized exchange. The users of a decentralized exchange have full authority over their assets. They have access to peer-to-peer(p2p) cryptocurrency transactions that are highly secured even without any interruption of any intermediaries. There is a disadvantage of decentralized exchanges that you can't buy any cryptocurrency with your fiat money. You should have at least USDT to exchange with other cryptocurrencies.
Here are some popular Decentralized Exchanges:
- Compound, etc.
💢 Differences between a Wallet and an Exchange❓
There are differences between a wallet and an exchange. Before describing the differences we should know about both of them. But I have explained about the Exchanges above on question one. So, here I am giving a short explanation about a wallet. After that, I will explore the differences.
The Wallet is a store where the users could keep their assets safe. It is used for storing and holding cryptocurrencies in long-term positions. The security of a wallet is more preferable than an exchange. Some popular wallets are Trust Wallet, Metamask, BSC wallet, Ledger, Trezor, etc. There are two types of wallets those are:
- Hot wallets
- Cold wallets
Differences between a Wallet and an Exchange
|1||A wallet is used for storing the assets safely||A exchange is used for trading with the assets|
|2||The users of a wallet has full control over their assets stored in the wallet||The exchange users have limitations over their assets stored in the exchange|
|3||A wallet is more secure than an exchange||An exchange is less secure because of the nasty scammers|
|4||The wallets are fully centralized||There are both centralized and decentralized exchanges are available|
|5||A wallet provides the private key that can not be changed||An exchange provides a password that can be changed by the user and the private key is stored inside that is controlled by the central authority|
|6||There is no intermediaries between the user and the app in a wallet||In exchange there could be an intermediary between the user and the exchange|
|7||There is no recovery option to your private key. If you lost it, you will lose your assets||There is a password recovery option in the exchanges|
💢 Mention the advantages and disadvantages of DEX and CEX❓
Advantages & Disadvantages of Decentralized Exchanges (DEX)
|1||Decentralized exchange gives users full control over their assets in the exchange||There is less liquidity in decentralized exchange than a centralized exchange|
|2||Peer-to-peer cryptocurrency exchange is allowed in the decentralized exchanges||Transactions are very risky. It cannot be retrieved if transferred to the wrong address|
|3||Because of decentralization, it is highly secured. Nobody can hack it easily||The interface of a decentralized exchange is not user-friendly|
|4||There is a very low trading cost in the DEX which is good for a trader||It is difficult to find traders because of low trading volume|
|5||Third party or any intermediaries are not required in a DEX for trading||In a DEX, only cryptocurrencies are traded. Fiat currency is not allowed.|
Advantages & Disadvantages of Centralized Exchanges (CEX)
|1||Higher liquidity of assets along with higher trading volume in centralized exchange||If a user can't meet up the regulatory requirements, his/her account could be deactivated|
|2||Users can buy or sell cryptocurrencies with their fiat money and also can make deposits or withdraws||The transaction fees are very high in a centralized exchange|
|3||The interface of a centralized exchange is very user-friendly||It is less secure, so that, there is a chance for hacking issues|
|4||The transaction of a CEX is quite faster than a DEX||Third-party or intermediaries are required during transactions in a CEX platform|
|5||There are many unique features like stop-loss, margin trade, etc that help the traders||There is less privacy of every user transaction. Cause, the exchange has full control over the user's assets|
|6||There is no fake account in CEX because the users have to provide their true identity and information||The users have to trust the exchange and they will have to sacrifice ownership of their assets|
💢 Have you used an Exchange before? tell us about your experience❓
I know about many exchanges like Bittrex, Binance, FTX, Poloniex, etc. But I have used only the Bittrex exchange. And I am still using Bittrex for exchanging my steemit earnings. But I had a lack of knowledge about exchanges before completing the homework tasks. After joining Steemit Crypto Academy I have learned many precious things. Here I became acquainted with the Poloniex exchange. And now, from my knowledge, I can say that Poloniex is much better than Bittrex as a steemit user. Because the transaction fees are very low in Poloniex and its interface is very user-friendly. So, my suggestion for other steemians is that every steemit user should use the Poloniex exchange for better dealing with steem.
As I have used the Bittrex, I am sharing some deposit & withdrawal history with screenshots.
On the homework task 1, I have learned about Poloniex exchange. I am totally new to this exchange platform. But the main thing I know that is the withdrawal fee for TRC20 USDT is totally FREE on Poloniex. And the withdrawal fee for STEEM is 0.01 STEEM per transaction. This is really a great advantage of using Poloniex exchange.
I have explained all the questions given. I want the thank professor @imagen, for arranging this informative homework task about Dex, Cex, Popular Exchanges and Trading Cryptos.
Thanks for reading my post. Please comment below your opinion.