I'm reposting my last week's assignment as guided by professor @allbert
Here is the original assignment link
It also got nominated in the top 3 assignments of the week. Still I haven't got an upbote by sc01.
Hey there professor @allbert and everyone reading. This is going to be first dynamic assignment post in this season.
I remember last season reading your assignment posts @allbert and I enjoyed reading them as well. Similarly like you I also have huge interest in crypto. Unlike you I'm not an engineer but a doctor. 😂
Lets get started with this assignment post without any further ado and hope anyone reading this gets to learn from my post as I was able to learn from yours.
So here we go;
QUESTION 1
Before indicating the differences between wallets and exchanges, lets shed some light on what exactly these two things are, then we will have an in-depth analysis on both of them.
a) WALLETS:
Wallet as the name suggests is basically a repository for your crypto assets. There are two types of wallets.
a) Cold wallet: This wallets remains offline therefore way less chances of hacking.
b) hot wallets: this type of wallet remains online.
One thing which I also like in wallets is the swap option. Through this option you can swap your assets which comes in very handy.
Examples: Exodus Mycelium etc.
b) EXCHANGES: Exchanges are apps/platforms which allow you to trade crypto. You cannot take charge of the exchange as you're in control of your wallet. That is one reason why wallet is considered way safer than exchanges.
On Exchanges you can buy and sell Cryptocurrencies from the live markets. There is also a wallet within an Exchange which you can use by signing up on the exchange platform.
Examples: Binance, Coinbase etc
| EXCHANGES | WALLETS |
|---|---|
| Used for trading crypto | Used to secure your assets |
| Buying and selling | long time storage of assets |
| Comparatively low level of security | Highly Secured |
| When you have your assets in exchange wallet, the exchange platform has slight control over your wallet as well | complete autonomy over your assets. |
| Very convenient while trading as you can directly trade in exchange platform | you can only store on wallet. You cannot trade. |
| You Exchange key can be recovered | If you forget your private key, you'll lose all your funds |
| Very user-friendly interface | Comparatively less User-friendly |
| Excellent for daily traders | convenient for long-term storage |
Now that we've learned in-depth about the differences between wallets and exchanges lets move on to operations in wallets in terms of fees
In the text above I shed light on how important wallets are for keeping your assets. In wallets your assets are safer than in exchange wallets. There is private key also the seed phrase which further increases the security level.
- Wallets are of different types. For example: desktop wallets, Mobile wallets, Web wallets and Hardware wallets
All of these wallets provide different type of advantages to the users. For example in a mobile wallet, there is an option of completing payments through scanning the QR code. In desktop wallets there is an option of storing your private key.
In hardware wallets which is the most secured wallet, there is fees for operating this highly secured wallet. The fee is usually varies from $100- $200. Now this hardware wallet charges fee because of it's high security which it obtains by securing crypto on USBs, hard drives etc which are connected to computers. These hardware wallets cannot by attacked by viruses.
Operations in an exchange platform
In exchange platforms we can generate small amount of profits by staking or by investing in mining pools as well.
So In this question we discussed thoroughly about the exchanges and wallets. Then we shed light on the differences in-depth and conclusively about the operations. I hope its completely clear to you all
QUESTION 2
Its the same like asking why should you have more than one bank accounts. There could be various reasons for that.
a) Matter of feasibility
Lets give you an example in a layman term first. For example you already have an account in a bank but you notice you're not getting the perks of it. You see another bank where you think you'll get more benefits, so you open an account there as well.
--
Similarly in crypto exchanges, there are some exchange platforms which might provide something's which are not available on other platforms, for example some Cryptocurrencies which are available on one platform and not the other.
b) Matter of Security
This is a very important point and I'll explain it in such a way in which probably all of us would relate. We all must have seen our mothers keeping money safe in our house. But what our mothers do is, they never keep the whole amount of money in place. For example if she has a total of $1000, she'll keep $500 at one place, $300 at one place and $200 at one place. And when we ask her why she does that, she says so that it remains secured
Similarly I think you should have more than one exchange accounts and have your assets divided so that it remains secure.
My exchange account
I have a Binance exchange account and honestly it is one of the best exchange platform. It is extremely user-friendly and also has no trading fees. Furthermore its a global market which have almost all the Cryptocurrencies on it. Binance has a multiple payment method which helps the users alot. Alongside all of these perks, I also find it highly secured as well.
In binance exhange, fiat currencies are also available, which are more than 50 in number.
So all of these benefits which binance is providing me is why I prefer using this platform.
In this question I discussed that why keeping more than one exchange account and also showed the exchange platform I use and the benefits it provides me
QUESTION 3
I believe its a matter of opinion and everyone can have their own opinions. I will discuss the pros and cons of both wallets and exchanges and at the end of this question I will tell you which one do I prefer and then you can have your own choice. Lets get started.
Picking between a crypto wallet and exchange is one of the principle choices any dealer should take. Both permit you to store crypto yet it is truly dependent upon you to conclude which will profit you in your exchanging venture in the long run
A crypto wallet basically is dependent upon its keys. If you're the master of the keys, you're the master of the wallet. So if you want complete autonomy, wallet would be a good choice for you. Wallet helps you sleep peacefully at night since you know your assets are going no where.
Then again, if you are a dedicated trader and fairly a daring person who preferences purchasing and selling advanced resources, maybe an exchange platform may be more qualified for you. Be that as it may, be cautioned, if the exchange app neglects to take the appropriate safety efforts to secure your key, it is very workable for another person to access your assets.
Also as mentioned above. The swap option provided in wallets is one of my personal favourites. The swap option might also be present in some exchange platforms. But in wallets it comes in very handy as you can swap between your assets.
In conclusion I would give my opinion and my preference. If you are an active trader, using an exchange platform with a built in wallet, then it is my advice for you to keep only those assets in your built-in wallet which you are currently trading and transfer other assets to your wallet. So do you now get my preference? I'd rather use both of these simultaneously instead of using only one of it.
But still, If I were to choose between these two I'd choose wallets by a bare margin. I'll choose wallets, because I like playing it safe. I like to be at peace when I am sleeping at night, knowing that my assets are safe. No doubt I have some of my assets in exchange wallet as well, but only those which I'm trading. Otherwise all my assets are secured in a wallet
In this question I thoroughly presented my point of views on which platform is better and my preference. You can have different opinions of course. Do let me know in comments which one would you prefer
QUESTION 4
For this question, we have to create an account on both wallet and an exchange. So lets begin.
For this I'll be demonstrating KRAKEN one of the most popular exchange platforms with an exchange score of 8.5 and stands on 4th position on the list.
- chose you username and password as shown above
Your account will activated but for better security verify your account
)
Your account is ready to use
For the demonstration of wallet I will be using Mycelium(powered by Bequant)
Here is main screen where you will activate your account
copy your backup code safely
signup
explore market
so in this question I demonstrated step by step how to sign up on a wallet and an exchange
So finally this informative lecture comes to an end. First of all thank you @allbert for this informative lecture. Honestly i believe its really important that people should have complete idea of wallets and exchanges.
--
In this lecture we first shed light upon the differences between wallets and exchanges. We discussed the pros and cons of both of them. Secondly I discussed on why should we have more than one exchange accounts and justified my text by examples. Furthermore I discussed the binance platform and what benefits does it provide.
After that I gave my opinion on which one do I think is better, and also justified my text by complete discussion. Lastly a demonstration of the complete process of signing up on wallet and exchange.
It took me some time in composing this but I enjoyed making it. Hooe you had a good read as well
Thank you.
Regards
@huzaifanaveed1
Well done doc.
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