QUESTIONS
Crypto Exchanges have been of great assistance to the world of cryptocurrency, without which it would have been impossible to trade and do some other transactions with crypto assets.
So I'm going to go straight into my tabulated answers to the questions listed above.
1.EXPLAIN IN YOUR OWN WORDS WHAT AN EXCHANGE IS
An exchange in cryptocurrency simply means trading,it allows customers to trade digital currencies for other digital currencies or for fiat money. Wire transfers,credit card payments or other forms of payment transactions may be accepted on exchanges
.
What basically takes place on an exchange is buying and selling of crypto assets,you can also trade one crypto for another on exchanges ,and you can also convert your crypto assets back into a fiat money and transferred to your bank account
.
In the absence of an exchange, and there's a need to sell or buy a particular cryptocurrency,you'll have to search for someone who's willing to either but it from you, or someone that already owns the particular cryptocurrency you're looking for and also willing to sell. This is called peer-to-peer (P2p)
.
In choosing an exchange for your crypto transactions,there are a few things you'll need to look out for
.
- Liquidity
- Security
- Accessibility
- Coins offered
- Storage
- Educational tools
- Tax information,etc.
2. DIFFERENTIATE BETWEEN A WALLET AND AN EXCHANGE.
It's important to note that both tools are very useful in trading cryptocurrency,but they play different roles on the trading ecosystem
.
| WALLET | EXCHANGE |
|---|---|
| i.A wallet enables you to safely store your cryptocurrency | i.A crypto exchange avails the opportunity to buy and sell cryptocurrencies. |
| ii.Crypto assets stored in a wallet should be for investment purposes,as they can't be actively traded with. | ii. An exchange also has the ability to store assets,but usually for trading purposes. Most exchanges also have their own separate app for storing crypto assets. |
| iii. A wallet can not engage in crypto trading. | iii. Exchanges allow trading of cryptocurrencies (spots and futures). |
| iv. It's convenient in storing coins over a long period of time due to it's security protocols,like the private keys that are given while signing up. | iv. Storing coins here is meant to be for trading purposes alone and should be for a short period of time due to less storage security protocols,which makes it susceptible to hacking. |
3. MENTION THE ADVANTAGES AND DISADVANTAGES OF DEX AND CEX.
DECENTRALIZED EXCHANGES
This form of cryptocurrency trading platform does not need a third party involvement in holding coins for customers. Here each user is in charge of their wallets and keys and trading is done on a peer-to-peer platform
.
Examples include:
- Airswap
- Blocknet
- iO
- Barterdex,etc.
| ADVANTAGES | DISADVANTAGES |
|---|---|
| i. The absence of a third party involvement has made it's security status quite strong. | i. Owners of decentralized exchanges prefer being anonymous,which can bring about a certain suspense over the ownership. But anonymity has been an integral part of the Crypto community for years,so users would not worry if there's a trusted track record of the exchange. |
| ii. This exchange functions on decentralized servers . Data are stored on various servers around the world ,making it very difficult to be hacked. | ii. Newbies are not easily adjusted on these platforms,as they are not new user friendly. |
| iii. While personal information is required by most centralized exchanges . The DEX doesn't require these things. Privacy is upheld here. | iii. These exchanges are yet to meet up to the centralized exchanges because of poor public awareness strategies. |
| iv. The peer-to-peer platform that is used in this form of exchange makes it very useful in countries where exchanges are banned by the government. |
CENTRALIZED EXCHANGES
These exchanges are the most common online platforms that investors use in buying and selling cryptocurrency holdings. The idea of centralization revolves around a middle man(third party involvement).
On these platforms,the middle man is trusted by buyers and sellers to handle their assets and also to help conduct transactions for them ,more like a banking system
.
Examples include:
- Binance
- Huobi
- Kraken
- Gemini
- GDAX,etc.
| ADVANTAGES | DISADVANTAGES |
|---|---|
| i. They often offer a friendly and familiar strategies for investing and trading to newbies. | i. These exchanges are responsible for holding customers assets,which runs into billions of dollars worth of crypto assets,making them prime targets for theft and hacking. |
| ii. They are more reliable as they offer more security in trading and transactions. | ii. They often charge more transaction fees. |
| iii. They offer a faster speed in transactions. | iii. Customers don't have full control of their assets ,as their private keys are entrusted to the exchange operators. |
| iv. They are consistent in high liquidity because of their popularity among investors. |
4.HAVE YOU USED AN EXCHANGE BEFORE? TELL US ABOUT YOUR EXPERIENCE
(CONCLUSION)
I have made several transactions on binance and my experience so far has been wonderful. Just as I stated above on the advantages of centralized exchanges ; The platform practically has courses in it on how to begin,exchange coins and even make trades on spots and futures. It's really user friendly.
Another thing that caught my fancy was their consistency in functionality,personally I've not experienced any glitch on the binance platform while undergoing a transaction.
On the other hand , I've been involved in a peer-to-peer transaction on a decentralized platform where I was scammed,at first it was goin smoothly when I bought some Tron from this guy who truly sent them to me after payment was made. But on our 3rd transaction,after making payment to him,he blocked me and never sent me my cryptocurrency toll date. So it's only natural that I trust the exchange operators more on a centralized platform.
(CONCLUSION)
I have made several transactions on binance and my experience so far has been wonderful. Just as I stated above on the advantages of centralized exchanges ; The platform practically has courses in it on how to begin,exchange coins and even make trades on spots and futures. It's really user friendly.
Another thing that caught my fancy was their consistency in functionality,personally I've not experienced any glitch on the binance platform while undergoing a transaction
.
On the other hand , I've been involved in a peer-to-peer transaction on a decentralized platform where I was scammed,at first it was goin smoothly when I bought some Tron from this guy who truly sent them to me after payment was made. But on our 3rd transaction,after making payment to him,he blocked me and never sent me my cryptocurrency toll date. So it's only natural that I trust the exchange operators more on a centralized platform.