In this post I want to complete the introductory beginner course Task 5, there are three questions that I can choose to work on, so I choose question number 3, the question is:
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.
What an Exchange is?
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Exchange in general is to exchange one object with another, but what we will discuss here is a cryptocurrency exchange. Cryptocurrency exchange is a service provider platform for exchanging cryptocurrencies with fiat or other cryptocurrencies, the exchange is a market for trading cryptocurrencies.
If you will not be able to trade if there is no place, this is where the exchange is, namely to bridge between sellers and buyers. Not only that, the current exchange is much more modern and rich in features because not only trading features are provided but there are also staking, hodl, farming, and Peer to Peer trading features.
The exchange platform takes profits of the transaction fees of each user as well as the listing fees for each asset that will be listed on their market.
Differences between a Wallet and an Exchange
Before we discuss the differences between the two, I will first explain the meaning of wallet and exchange.
Wallets are used by people only to store cryptocurrencies, not many features are available in wallets. We can send cryptocurrency from any exchange into the wallet, and vice versa from wallet to any exchange or to any other wallet using a private key.
While the exchange is a special place for exchanging cryptocurrencies with other cryptocurrencies or with fiat, it can also be for storing and others as, the exchange can be accessed by people all over the world to trade cryptocurrencies, P2P, and other features.
| Wallet | Exchange |
|---|---|
| Unable to trade | Can trade |
| Assets can be sent unlimited | There is a limit of assets that can be sent per day |
| Forgot the key can't be recovered | Forgot password can still be recovered |
| High security credibility | Vulnerable to hacking as many exchanges are centralized |
Advantages and disadvantages of DEX and CEX
The Decentralized Exchange (DEX) trading platform gives full power to the account holder and is not regulated by any party, we are free to manage our assets and trade without third parties, even the government cannot interfere. Losing the key means you lose access to your account forever due to irreversible, DEX trading platforms like Newdex (EOS and TRON)
On the other hand, Centralized Exchange (CEX) trading is centralized, meaning that this trading platform is managed by the platform's founding company to provide a place for users to trade their assets. Here we are regulated and must follow protocols and procedures in accordance with platform policies, even the government can intervene to close and prohibit these platforms from operating in certain countries such as Binance.
| Advantages (DEX) | Disadvantages (DEX) |
|---|---|
| High security with private key | Lost private key cannot be recovered |
| Not regulated by any party | Low trading volume |
| No KYC required | Limited functionality |
| Not easy to hack | Can only trade crypto to crypto |
| There will be no fraud because it is not centralized | Very low liquidity |
| Advantages (CEX) | Disadvantages (CEX) |
|---|---|
| Can recover passwords lost due to using KYC and email | Vulnerable to hacking |
| Very high trading volume | The account is under the control of the exchange because it is centralized |
| Complete trading, P2P, crypto-fiat | There is a possibility of fraud from a third party |
Have you used an Exchange before? Tell us about your experience.
Yes, of course, even though I don't use exchanges very often, I am no longer familiar with exchanges even for exchanges that I just met. The first exchange I used was probit, then I continued to study the various features available on the platform.
Next I used Exchanges binance, but I had a little trouble accessing this site because it was blocked by our government so I switched to Upbit. I started to find comfort in this platform because it offers direct exchange between cryptocurrencies and IDR (Indonesian currency), so this is very easy for me.
I don't use the exchange very often at the moment, there are various reasons behind me not using the exchange very often. Firstly I rarely have time to use my smartphone because I am still in education, secondly I have no plans to invest because I do not have much money and am still 18 years old.
Hello @reza-khem,
Thank you for taking interest in the 5th Task of the Beginners’ class. Your grades are as follows:
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Thanks again as we anticipate your participation in the next class.
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