![Pink Brown Cat Kitten Accessories Business Etsy Big Banners.jpg](https://cdn.steemitimages.com/DQmSwUhDFbQ49WZre3vga4rEo69Nmwazc3tNrGpPZ687p41/Pink%20Brown%20Cat%20Kitten%20Accessories%20Business%20Etsy%20Big%20Banners.jpg)

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.

![BirdDivide.png](https://cdn.steemitimages.com/DQmRV8Gdz1A9cXtzNTVzmKzTYo3hcRNMxkfWGP1fbZAhcQ7/BirdDivide.png) ### Explain in your own words what an Exchange is. --- An exchange is an online hub where users are permitted to engage in market operations such as the purchase of cryptocurrency with fiat or with the equivalent of other cryptocurrencies. Fiat to cryptocurrency trade is made possible because most of these exchange platforms support various forms of payment such as bank transfers, mobile money transfers, credit cards, and many others. Also, as stated earlier, cryptocurrency to cryptocurrency exchanges are permitted as long as the respective trade pair is supported on the platform. The exact equivalent of the exchanging operation may not be realized because the exchange platforms do charge the respective amount of fees for every transaction. Alternatively, cryptocurrency exchanges are able to function as storage for various cryptocurrencies. Some users prefer to transfer their coins or tokens to these exchange platforms and hodl them for their preferred period of time before trading them for fiat or other cryptocurrencies. This trust is due to the secure nature and accessible framework of these platforms; exchange platforms function throughout the day, week, month, and year. Exchanges are of two broad types: Centralized exchanges and Decentralized exchanges. The centralized exchanges are controlled by governing bodies of the firm. Usually, a Know-Your-Customer(KYC) and other forms of identification and verification are demanded before a user can be allowed full access to the feature of the platform. Transactions on centralized exchanges are rapid, and liquidity is very high as well. Decentralized exchanges, on the other hand, are not controlled by a central power. Rather, it eliminates the need for middlemen and is centered on a P2P framework of trade. Thus, buyers are directly connected to sellers anonymously on the platform. Since the majority of decentralized exchanges embrace blockchain technology, the security of these platforms is considerably tighter and hack-proof to an extent. --- ### Differences between a Wallet and an Exchange. --- Cryptocurrency wallets are digital wallets that are commonly used for storage and the management of one’s cryptocurrency assets. It also permits users to transfer and receive supported forms of cryptocurrency. These transactions come with a fee that is dependent on the weight of the cryptocurrency that will be transferred. These wallets can be categorized into two popular forms: Hot and Cold, where a hot wallet is basically a cryptocurrency wallet with internet connectivity, whereas a cold wallet lacks an internet connection and instead stores coins on physical devices. The nature of hot wallets makes them susceptible to hacking, while cold wallets are more secure since the gadget would have to be physically stolen. Furthermore, coins on hot wallets can be accessed conveniently for transactions anywhere in the world as long as there is an active internet connection and the user remembers the security code for the wallet account. Cryptocurrencies stored on cold wallets are not that accessible should the user leave the storage device at home or a place that is out of reach. Wallet|Exchanges -|- Wallets only allow storage and transfers. Coins cannot be traded in wallets. | Exchanges serve as a pseudo wallet and also permits trading of the coins or tokens Transaction volume is the primary indicator for wallet | The volume of trades is the key indicator for exchanges User privacy is very high on wallets | Compared to wallets, user privacy is considerably low There is low regulation when it comes to crypto wallets | Cryptocurrency exchanges have fairly higher regulations. --- ### Mention the advantages and disadvantages of DEX and CEX. --- #### Advantages of Decentralized exchanges User privacy is ensured on decentralized exchanges as trades take place anonymously. No identification cards or personal file details are required. Hence, it makes it cumbersome to backtrack a trade to the individual or firm that issues it. Decentralized exchanges are also not prone to downtime. Since blockchain forms the core basis of the platform, there are multiple and interconnected nodes that are responsible for the dissemination of data on the network. Hence, if one node fails, the others will still be in operation. This makes DEX easily and readily accessible. Decentralized exchanges are not regulated by central authorities or governments of various countries. This is because the exchanges are based on blockchain, where peer-to-peer transactions are the norm- eliminating the need for middlemen. Decentralize exchanges are highly secure due to the fact that they operate on blockchain technology, which is secure and difficult to hack. Hence, the cryptocurrency assets of users are in safe hands when stored and exchange on decentralized exchange platforms. #### Disadvantages of Decentralized exchanges Liquidity on decentralized exchanges is low compared to centralized exchanges. Therefore, it could take quite a long time for a placed order of trade to be met successfully. This low liquidity can be attributed to the relatively small number of traders on these platforms. Decentralized exchanges are dependent on transaction confirmations, which arise from the efforts of miners or validators. Hence, a dip in the number of competent validators as well as the machinery of miners can negatively affect the speed of decentralized platforms. Also, most decentralized platforms are known to have intricate UI. As a result, new users resort to various explanatory articles and videos on the internet to find their way around the platform. This can demotivate and deter potential traders from utilizing the platform. --- #### Advantages of Centralized exchanges Centralized exchanges have been around for a longer time and therefore have retained more traders. This event, in turn, has contributed to the high liquidity on these exchange platforms. Open transactions are met with needs in a smaller window of time. Centralized exchanges experience faster transaction speeds. A massive number of transactions on these platforms are catered to in a matter of seconds. As a result, traders are able to take advantage of trendy markets to secure profits. Centralized exchanges have much simpler user interfaces and great user experience. Hence, new users become comfortable with the features of the platform in no time. This act then leads to more user retention rates. #### Disadvantages of Centralized exchanges Users are required to submit personal documents during the registration process. Hence, in the event of a hack, user identity can be compromised. This occurrence can put the safety of the crypto-rich users at stake as malicious hackers can locate them using their personal details. Furthermore, centralized exchanges have central servers responsible for the operation of the platform. In a case where a fault develops in the main server, the platform could experience downtime for a period of time. During such a period, users will not have access to the exchange platform. Also, centralized exchanges are controlled by third parties and law regulators. This can impede certain advances of the platform. --- ### Have you used an Exchange before? tell us about your experience --- ![Screenshot from 2021-09-04 00-13-56.jpg](https://cdn.steemitimages.com/DQmTStHV4oXrBsebyMGoJNHAzCdV9HkciXnYrTq8tS325BF/Screenshot%20from%202021-09-04%2000-13-56.jpg) I have used Coinbase several times for transactions. It is a centralized exchange platform. It has a user-friendly interface that is easier to operate even without a deep IT background. Security on the platform is fairly strong as users can activate 2-factor authentication. Even better, the platforms provide an opportunity to earn various amounts of cryptocurrencies by taking mini-classes on that respective cryptocurrency. The speed of transactions is very high as well.

![BirdDivide.png](https://cdn.steemitimages.com/DQmRV8Gdz1A9cXtzNTVzmKzTYo3hcRNMxkfWGP1fbZAhcQ7/BirdDivide.png)