I'll be working on the last question which the question says
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.
what exchange means
Exchange as the name implies is the processing of offering one thing and obtaining another in return. Now let relate it to the crypto space. Before now cryptocurrency transaction is don via peer-to-peer. This peer-to-peer take time because you will have to look for someone who needs your coin to trade with.
Overcoming this challenge, a crypto exchange was built to allow traders to easily sell off their coin either for another asset or for your traditional currency (fiat) because exchange support all countries currencies.
Exchange can be utilized to trade one crypto for another as well as converting too. For example, you have Tron and you want litcoin you can do that with exchange
Examples of exchange are coinbase, binance, huobi, etc before you can utilize these exchanges you will carry out KYC know your customers which gives rise to centralized and Centralize exchange which I will talk about as we proceed.
There are things you ought to look at when choosing an exchange. Which are security aspect, accessibility, fee, coin offered. Etc. Let look at two of them
security
Some exchange does not provide tight security as it is prone to be hacked easily it is advisable to always stock your coin in a wallet other than exchange. Cryptocurrency is not supported by any central institutions that signify that the crypto you hold in an exchange is not protected like the way your money in the bank account is protected.
To ensure your crypto, a few exchanges have protection arrangements to secure the digital currency utilizes hold inside the exchange from hacking or extortion.
fee
The second one we will look at is a fee as this is also important while trading some exchange trading fee is higher than others. Also, note that the exchange fee may be a stabilized price, however are frequently a level of your exchange. There may likewise, be several costs relying upon which currency you want to exchange. Ensure you see precisely how and when a trade intends to charge you for your crypto exchanges prior to giving up your money.
There are two types of exchange which are centralized and decentralized exchange.
centralized exchange
It is an online platform that enables traders to buy and sell their digital assets. The concept of centralization is refers to making use of third parties to authorize transactions.
And also as a centralized exchange utilizer, you have to adhere to all the rules and regulations set by the central authority as they are the ones who make decisions. In centralized exchange your not permitted to have the private key of your account.
dcentralized exchange
In a dcentralized exchange, theirs is no central authority to decide for us you decide what happens. It eliminates the need for a third party to involve in a transaction. The transaction is done via smart contrast with atomic swap.
You can't trade fiat or asset to another asset in decentralized exchange because it only facilitates peer to peer transaction.
Differentiating between a wallet and exchange.
We have already known what an exchange is before I'll proceed let have a brief knowledge of what a wallet is all about.
wallet.
These are applications that run on smartphones and computers built to interact with blockchains network It permits cryptocurrency utilizer to store and secure their digital asset. We have different types of crypto wallet which is divided into three hard wallets, soft wallets and paper wallet or can also be called cold or hot wallet.
We have more of soft wallet than hard wallet because of how effective they are when utilized. hardware wallets verge to be the most secure option, while paper wallet on The other hand comprises of a wallet that is printed out on a piece of paper but their use is now inconsistent.
Wallets generate a crucial information to send out as well as receiving cryptocurrencies through blockchain transactions. Wallet comprise of an address made up with alphabet and numbers which are created based on public and private keys.
The private key makes you be in charge of your cryptocurrency not minding the type of the wallet you use so if by mistake you lost your device or it was compromised you can still have access to your currency if imported on another device with the right private keys.
Having gotten a brief knowledge of what wallets are let now look at the difference between them and exchange.
| Wallet | exchange |
|---|---|
| No need of verification like KYC | KYC is always important |
| You can not trade your asset in a wallet | exchange allows trading of an asset |
| In wallet, you are fully in control of the asset | in exchange you are not fully in control of the asset |
| Wallet can not be hacked | while exchange is easy to hack |
| In a wallet, you have access to your private key | while in exchange you don't have access to your wallet private key |
disadvantage and advantage of cex and dex
Earlier we have talked about decentralized and centralized exchange let proceed to its advantages and disadvantages
Disadvantages of CEX
here the central authority make decisions for everyone
your asset is under the custody of the exchange operator.
Can be compromised
involvement of the third party in a transaction
no form of anonymity as it requires KYC.
Advantage of CEX
it is easy to use
sending funds to a wrong address can be recovered when you appeal
taking decision is quickly and plainly.
it is transparent as it need users verification before use.
Disadvantages of DEX
Funds sent to a wrong wallet address can't be recovered
transaction here is via peer to peer it is based on smart contrast
decentralized exchange is not easy to use as a newbie into the crypto space.
Decentralized exchange does not allow users to trade fiat currency for digital currencies. Making it hard for users who don't Hold cryptocurrency
Advantage of DEX
users make decisions and control what happens in the system.
privacy here is ensured. As it eliminate the need for a third party bringing anonymity
avoiding market manipulation
it can not be hacked since funds are not sent to a third party for transaction authorization.
Have you used an exchange before? Tell us about your experience
My answer to this question is yes I have used so many exchanges to make transactions which are Binance, huobi, roqqu, quidax
I have use roqqu several times it is a Nigerian base exchange. Before you can use the roqqu app you have to register with your email address, phone number and BVN bank verification number to increase your limit.
Assessing the app you see deposit, withdrawal, buy/sell, airtime. Which you can deposit asset and use it to recharge your phone. There is also a coin swap that enables you to swap your coin with another coin of your choice
When you click on deposits it will show you the amount you will like to deposit which will be calculated also in USD.
When you click on withdrawal, you will be asked to choose the option you want to carry out either withdraw to bank account, pay bills, withdraw to another wallet, recharge, or pay for a subscription etc depending on what the user wants at the moment
The point marked with red when you access them you can find interesting features like the saving button when clicked you will be asked to stake usdt to earn an apy
When you click on the transaction button you will also see another interesting feature. You get a reward once your referral make deposit or withdraw. Looking at the screenshot below you will see the bonus I got when my referral did a transaction. And here you can find all your transaction history.
Initially, when discussing centralized and decentralized exchange we made mention that if an asset is sent to a wrong address and you appeal the exchange can help you to retrieve the transaction that is one of the advantages of a CEX.
Let look at what happens here below if it's true or not
When you want to make an appeal you click on that green icon
Here are the roqqu team which you can chart with them. You click on send us a message.
Here is a list of problems you might face. You click on the one you want them to resolve. Mine was coin deposit issue below is how the conversation went.
I was asked the currency I tried to deposit which is tron and also was asked the amount which is 100 I provided them and in less time my issue was resolved with an apology message below
And I received back my Tron in my wallet. This shows that a centralized exchange can refund a wrong transaction.
So far this has been my user experience using the centralized exchange called roqqu.
final thought
Both centralized and decentralized exchange has their strength and weakness so I can't say which one is better it only depends on the individual choice and what they want.
This was a wonderful lesson and here is my homework post. Thanks for reading through.
Cc. @dilchamo
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