INTRODUCTION

Hello everyone, I really enjoyed the class which is all about the different types of exchange and their advantages. I would be answering question 3 thoroughly and meticulously.

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.

3-) Explain in your own words what an Exchange is.

Exchange can simply be defined as an act involving giving one thing and getting something else in return. Giving something and receiving something of the same kind in return is another way one can simply put it. It has to do with interchanging something or substituting one thing for another.

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In a crypto sense, exchange is an online business where users buy, sell and trade cryptocurrencies for other assets. This is usually done with sole aim of making profits. It could also be an avenue where crypto users get to change their digital currencies to fiat or physical currency using exchange sites such as Binance e.t.c.

On these platforms, users get the opportunity to interchange or swap the digital currency they currently own in their wallets wherever and whenever they want.

There are two types of cryptocurrency exchanges, the centralized and decentralized cryptocurrency exchanges.

Centralized vs decentralized cryptocurrency exchanges

A centralized exchanges act as a third party between the two main parties i. e the buyer and the seller. This is usually operated and controlled by a company and offers more reliability. About 99% of all transactions of cryptocurrencies are known to go through this kind of exchanges.

Examples of centralized cryptocurrency exchanges includes coinbase, Gdax, gemini et.c.

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Decentralized exchanges(DEX) allow their users to perform a p2p transaction with the need of an intermediary or third party. Due to some complications related to the centralized exchanges, some users prefers the decentralized exchanges. Examples include airswap, io, blocknet et.c.

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Differences between a Wallet and an Exchange. e

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Both the crypto wallet and crypto exchange are useful when trading cryptocurrency. But these tools both fill a different part on the crypto ecosystem. A crypto wallet is a software program that allows you to store your crypto coins. When you buy a coin, it is in no physical form. So the best way to store it is to use an online storage facility. A crypto wallet will do that for you. A crypto wallet has private keys that allow you to perform transactions. These private keys are like secret codes. So they are important and should be safeguarded because if someone steals your keys, you could lose all your assets.
A lot has been discussed about a cryptocurrency exchange as it is a platform that allows you to buy and sell your bitcoin, eth, dogecoin, or other cryptocurrency tokes at a fixed price and with security. You can convert your fiat currency to crypto nd vice versa. In the absence of a crypto exchange, you might have to look for anyone who is willing to sell the coin you want to purchase it. You both have to agree to a rate to do the transaction. But this is obviously complicated.

Wallet	exchange
Wallet has big security level	exchange has low security level
Used to safekeep the users asset	used for buying and selling of assets and also to save assets
You are being given your private and public keys	you get to select your perfect and convenient passwords yourself

Mention the advantages and disadvantages of DEX and CEX.

Advantages of centralized cryptocurrency exchanges.

• Reliable

Centralized exchanges allows an extra layer of reliability and security when it comes to trading and performing crypto transactions. Centralized exchanges performs transaction using a developed, centralized form which offers a high level of comfort.

• User-friendly

Centralized exchanges offers a simple, familiar and friendly way of investing and trading in cryptocurrencies. Using crypto wallets and peer-to-peer transactions can be complex. Centralized exchanges requires user to just log into their accounts, view their assets and make transactions through websites and applications.

• Recoverable/retrievable

In case of loss of forgotten passwords, the passwords of users are easily recovered as well as their accounts.

Disadvantages of centralized cryptocurrency exchanges

• Hacking risks

Centralized exchanges are operated and controlled by companies. These companies are responsible for their customers. The companies usually holds a large number of crypto assets which makes them a target for hackers and theft.

• Transaction fees

Unlike in the decentralized exchanges, centralized exchanges often charge high transaction fees for their services and the convenience they also provide.

• No privacy

Since all your transactions are being monitored, there is no guarantee of privacy whatsoever

Advantages of decentralized cryptocurrency exchanges

• Mitigating hacking risk.

Since they need of a third party is not required, all transactions on decentralized exchanges happens between the buyer and the seller. Therefore, there is no risk to any form of hacking which gives user the assurance f grater safety from hacking and theft.

• Prevention of market manipulation

Decentralized exchanges prevent market manipulation and protects users from face trading due to their nature of allowing for p2p exchange of cryptocurrencies.

• Anonymity

KYC(know your customer) forms are not required to be filled out by customers offering anonymity and privacy to users

Disadvantages of decentralized cryptocurrency exchanges.

• Complexity

Anyone who does not have the knowledge of cryptocurrency cannot use it. This is because users of decentralized exchanges must remember the key and passwords to their crypto wallets or their assets may be lost forever. They also require that the user learn and get familiar with the process unlike centralized exchanges which offer and convenient and user friendly system.

• Lack of fiat payments

Decentralized exchanges do not facilitate the trading of fiat currencies for digital ones, making them less convinient for users.

• Liquidity struggles

Due to lack of volume, decentralized exchanges often lack liquidity. This is because most of crypto transactions are facilitated by centralized exchanges which suggests that theses exchanges are accountable for the majority of the trading volume.

The top centralized exchanges includes binance, coinbase(pro), huobi global, kraken, bitfinex, bitstamp, kucoin, ftx among many others.
The top decentralized exchanges includes uniswap(v2), tokenlon, ox protocol, venus, sushiswap, compound, pancakeswap, curve finance and so on.

Have you used an Exchange before? tell us about your experience.

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YES , I have

When I learnt about steemit, the first question I asked myself is how do I exchange my earnings to fiat. I started my research until I got to know about online exchangers and olamax.io was what I tried first. It was and convenient. This online exchanger is a platform where you can exchange your tokens/coins for some other tokens/coins or fiat. The key benefit is the ability to get your money in your bank account easily, faster and convenient. No hassle, no delays, no long talks, just business. Olamax exchanger is a platform where you can buy and sell steem, sbd and many other coins. The first time I tried the app to sell sbd, I put in the amount and it brought out the price of my token. It was so easy because you only need to put in your account details and begin transactions about transferring the token. It was difficult for me about first but I reached out to the support team, I got a fast response and everything was sorted out immediately. I could not try anything else since they became so reliable.

Screenshot from olamax.io

CONCLUSION

I really enjoyed the lecture as I am aware of so many things when it comes to exchange, wallet and their advantage and disadvantages.
Thank you Prof @imagen

cc : @dilchamo