What is an exchange
An exchange act as an intermediary between buyers and sellers or in general it's a platform where different users meet in an online platform known as an exchange where commodities such as cryptocurrencies or fiat currency can be exchanged amongst such users.
An exchange works like the local bank where registered users will be required to make some deposits to carry our transaction such as buying and selling of currencies be it digital or fiat in some exchanges registration and KYC are made mandatory (centralized exchange) while some need no registration all a user is required to do is to connect their digital wallet (decentralized exchange).
Users making transactions on exchanges are changed to pay some fee known as transaction fee which is used for processing all transactions.
Types of exchange
Generally, we have two kinds of exchange the centralized and decentralized exchange.
Centralized exchange are exchanges that require, users, to make process registration make verification before processing transactions they are also controlled by users which means they can be monopolized and decisions can be made by large stakeholders, also in the centralized exchange users don't have complete control over their account and wallet there are restrict sometimes on withdrawal of funds.
Example of a centralized exchange Binance, probit, poloniex, and kucoin.
While the decentralized exchange is the opposite of centralized exchange here it users have control over their fund no transaction limit on users as the exchange is not controlled by large stakeholders.
Example of decentralized exchange Newdex, pancakes, and uniswap.
**Difference between Centralized and decentralized exchange.
| Centralized exchange | decentralized exchange |
|---|---|
| Control by large stakeholders decision can be made by a single body | Not control by single body votes are made. |
| Centralized exchange | decentralized exchange |
|---|---|
| Users registration and KYC is needed | Registration are not necessarily made |
| Centralized exchange | decentralized exchange |
|---|---|
| Users wallet and account are not in their control | wallet, and account are controlled by users |
| Centralized exchange | decentralized exchange |
|---|---|
| Exchange is vulnerable to attack | exchange is very secure. |
Differences between a Wallet and an Exchange.
Wallet
A wallet is a software program design for storing, sending, and receiving digital tokens such as bitcoin, ethereum, and other coins a wallet provide its users with private keys which are used by users to control all transactions the keys are also used for keeping a wallet safe if a user losses his key they may lose access to their wallets there are two kinds of wallet the cold and hot storage wallet both can be used for transaction purposes.
examples of hot wallet exodus wallet, trust wallet, and metamask wallet they are an example of hot storage wallet that requires the use of internet connection.
example of cold storage wallet nano ledger wallet and safe pal hardware wallet this wallet can work without an internet connection and are very secure.
| Exchange | Wallet |
|---|---|
| An exchange is a platform or an online application where users meet to buy and sell digital currency or fiat | A wallet is an application program or software for storing digital currency. |
| Exchange | Wallet |
|---|---|
| An exchange has a p2p forum for merchants to buy and sell coins in local currency | wallet doesn't make provision for p2p service. |
| Exchange | Wallet |
|---|---|
| An exchange can be easily targeted by hackers | A wallet is more secure |
| Exchange | Wallet |
|---|---|
| An exchange account is not controlled by a user | with a phrase key, one is in control of his wallet. |
| Exchange | Wallet |
|---|---|
| Exchange does not operate offline for making transactions | Some wallets can operate offline. |
*Mention the advantages and disadvantages of DEX and CEX."
*Advantages of DEX"
Don't require a user registration detail.
One can connect his external wallet and start making transactions such as buy and sell.
it is decentralized and decisions are made base on votes
It is more secure and safe
Disadvantages
- In decentralized exchange customer service can be very difficult to reach
Advantages of CEX
unlike DEX customer support services are very fast and good
There are more features in CEX like the p2p service, staking, pools, and bot trading
Disadvantages
It can easily be hacked
There is always regulation policy from the government officials which can affect an exchange.
Decisions made by stakeholders can be unfavorable to customers.
Have you used an Exchange before? tell us about your experience.
Yes, I have used exchanges like binance which is also a centralized exchange so far I've had a wonderful experience there has not been any annoying issue so far customer service is always available to support I would say it has been a wonderful experience so far.
Conclusion
Both exchange and wallet are very important for any traders as both can be used for storing sending and receiving coins although we have seen cases where exchanges get attacked or hacked which is why it's more advisable for one to store his coin in the wallet as it's safer.