Crypto wallet, addresses and exchanges explained

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In the cryptocurrency space, there are various coins and/or tokens. Generally, we say that crypto assets are like fiats (traditional currencies) which can be used for transactions i.e buying and selling as well as for investment purposes.

Just like fiats have their systems and operational patterns, digital currencies are operated digitally and cryptographically. To use cryptocurrencies, several things must be understood and also put in place by a certain user. This article seeks to discuss some of those prerequisites and fundamentals including crypto wallet, token address, and crypto exchanges among others.

What is a Crypto Wallet and Address?
Cryptocurrency Wallet
From the foregoing, cryptocurrencies are simply virtual currencies and are operated and stored digitally. Therefore, a crypto wallet is a digital safe in which you can store your crypto assets. In there you can also perform transactions like receiving, and sending of digital currencies as well as checking your balance.

It is worth noting that a crypto wallet could be a mobile application, web application or in a hardware format. Examples of a mobile version of a crypto wallet are TrustWallet and Metamask. Also, with crypto wallets, a user is in full custody of his assets and he/she is solely responsible for the security of the assets stored in the wallet.

Creating a crypto wallet isn't tedious work as it can be done easily and fast. All a user needs to do is securely save the provided 12 seed phrases which is the only access to the wallet.
Crypto Address
This is a set of alphanumeric characters used in identifying a particular native token you own. It can also be a channel or medium in which cryptocurrencies are sent and received.

Basically, crypto wallets and addresses are similar to bank accounts and bank account numbers.
A bank account is the spot where your money is being stored while the account number serves as a means in which money is being sent to your account.

Decentralized and centralized exchange

Following the emergence of cryptocurrencies, several crypto exchanges have been rolled out. Notably, a crypto exchange is a digital marketplace where crypto sellers and buyers meet. Exchanges facilitate the trading of crypto assets between users. However, there majorly two types of crypto exchanges including centralized and decentralized cryptocurrency exchanges.

A centralized exchange (CEX) is a type of crypto marketplace where there is a central authority and security of funds/ assets is entrusted in the hands of the exchange. Here, there are no private keys for users as the exchange is the sole custodian. Here, the exchange is responsible for the provision of liquidity and users do not participate in governance and decision making.

In addition, to use centralized exchanges, a user is often required to complete the identification process otherwise dubbed KYC.

What is a Decentralized Exchange?

Unlike centralized exchanges, a decentralized exchange (DEX) is a crypto marketplace where different users can trade with the aid of Automated Market Makers (AMM).

DEXes are said to be more private as users do not have to undergo the KYC process before carrying out trading activities. In turn, this gives room for anonymity.

In contrast with centralized exchanges, where governance is done solely by the exchange, users are able to participate in the governance of decentralized exchanges by voting on the proposals. Here, users get to participate in the governance of the exchange through the owning and staking of the exchange's governance token.

On the whole, both types of crypto exchanges have their unique advantages and demerits as well as associated risks. Therefore, it is incumbent on the crypto trader to employ adequate safety measures when using either of the exchanges.

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