Steemit cryptoacademy homework task for @levycore | Learn about cryptocurrency

Hey steemians
In this post I will be submitting my homework task for @levycore.

1. What is the fundamental difference between cryptocurrency and conventional financial systems?

Before going on to the difference between cryptocurrency and conventional financial systems .

• Cryptocurrency : You can say it as a currency which is found in the digital form , their creation , management and finance all happens digitally. Main feature is that it is decentralized , that means , all the users have equal control over the platform and it doesn't belong to central authority.

Ex : Bitcoin , Ethereum etc.

• Conventional financial systems : conventional financial systems are the financial method you used in your daily life , which is basically centralised or you can say controlled or governed by the central authority.

Ex : Banks

• Now the difference :

Criteria	Cryptocurrency	Conventional finance system
(1) Nature of currency	Decentralized Nature : There is no such central authority which control or govern the currency instead all the users wo are using the currency have equal control or right over their asstes and platform .	Centralised Nature : It means that the financial system is controlled or governed by the central authority , and the people or users using it don't have control over the asset . (In india RBI controls and governs the currency while bank other banks hold them).
(2) Security	Cryptocurrencies are said to be more secure than conventional financial systems due to the technologies used in the mining and formation of block .	Security in conventional financial systems are not so good as you must have heard about scams where user didn't use his or her ATM buy his or her money has been withdrawn and online scams where scammers asks for otp and withdraw money from your account.
(3) Speed of transaction	Speed of transaction is faster in cryptocurrency in comparison of conventional financial systems due to less involvement of intermediaries or mediator to verify a transaction .	Speed of transaction is lower than that of in cryptocurrency due to the intermediaries involved during the process of transaction.
(4) Availability and reach	You can make transaction anywhere in the world 24×7 or whenever you want whether it is day or night , winter or summer , anytime anywhere at the time of any emergency in the world at faster rate .	Due to intermediaries conventional financial systems can't available for 24 hr or anytime when you want because they have fixed hours of work and they will be working online in their working hour ( like in banks which starts from 9 and ends at 5 ) , so you can't rely on the conventional financial systems at the time of emergency, let us suppose you used internet banking but as I mentioned above it is not secure because there are scammers everywhere at the network.
(5) Transparency	Any user needs transparency from the system he or she is using , so that one can keep track of the ongoing things(transactions) on the platforms which leads to trust in a system . You can see anyone's transaction anytime if you think that someone is charting or scamming that made the cryptocurrency system transparent.	There ia no such thing as transparency in the conventional financial systems as you can not keep track of all the transaction and Transfers in the system , you can only see your transactions and transfers , that might lead to a sense of not trusting each other on the system.
(6) Involvement of mediators or intermediaries	No involvement of intermediaries due to P2P payment system except confirming blocks from the miners while transactions are happening , you can't include miners into intermediaries as miners are important for a cryptocurrency system as they are the only one who is there for mine cryptocurrency to make cryptocurrency system run.	Intermediaries and mediators are allowed at every step you make for a transaction , suppose you went to bank , there first you have to fill a form (time consuming) then you have to go to a mediator who confirms your account details then you go to the next one who verifies you and then the last person made that transaction happen with the help of the technology they are using.
(7) Volatility	As I have told to tell about difference between both the system , i can't be bias and just tell about all the advantages of cryptocurrency systems, ine should always know about the high volatility in the cryptocurrency market , so in this system one day you have everything and the next day you could have nothing , so you should invest smartly in cryptocurrency system	Well atleast in conventional financial system what you have in your bank will have same value always , it's value won't change.

2. Why is a decentralized system needed?

• Well I think I have mentioned all the shortcomings of conventional financial systems and why centralised system is needed , so pardon me if I sound monotonous .

Need of Decentralized system

• (1) For me the foremost thing will be safety if I am going to join a system , and I can find more security in the decentralized system due to the technology used in the process and the time consumed during a transaction(which is very low) , so these are the things that makes decentralized system a secure network and security is must needed for a system to establish itself.

• (2) Freedom to users : Decentralized system provide freedom to its users to control their assets as they want them to control , which lacks in the conventional financial systems.

• (3) Availability and speed of transactions : You can make a transaction 24×7 or anytime in the any corner of the world - within the matter of just some seconds and without being interfered by any mediator or intermediaries while making transaction.

• (4) Less transaction fee : transaction fee is very low in the case of cryptocurrency systems due to less involvement of mediators or intermediaries , they just get paid a little amount of the transaction while in the conventional financial systems you have to pay at many level if you are making a transaction outside your country.

• (5) Reliability on decentralized system : As I have told that our assets are secure and we can make transaction anywhere and anytime that makes decentralized system is a more reliable system than any other .

• (6) Transparency : This is the feature that leads to trust in an organisation or a system if there is a transparency in the system , where you can see transaction and transfers of other person and same other person can see yours , that leads to a sense of trust between users .

So I have told why we need decentralized system.

3. What affects the value of cryptocurrencies?

• There are several factors that affects the value of cryptocurrency.

(1) Paucity of cryptocurrencies : Due to the less supply of a certain cryptocurrency ,its price can get affected , its price goes high .

• Let us understand with this an example : As we all know Bitcoin(1st cryptocurrency) has a limited no of coins which are 21 millions in number , so every time a new coin gets mined , every buyer tries to buy it leasing to high price of bitcoin.

(2) Influence of positive and negative news on cryptocurrency : Cryptocurrency can be influenced in a positive or a negative manners according to ongoing news about that currency .

• Ex : SEC(security and exchange commision) alleged or accused and files a case against Ripple for seeling XRP as unregistered security , that was a bad influence for Ripple , after that XRP price fall continuously .

Source : https://www.sec.gov/news/press-release/2020-338

• Here you can see a press release from SEC regarding XRP as an unregistered security.

Source : https://coinmarketcap.com/currencies/xrp/

• Now you can see just at the day when SEC alleges Ripple of using XRP as an unregistered security , price of XRP falls from $0.62 to $0.26 , it is something you can say as negative influence on the price of a cryptocurrency . So that is how a news affect price of cryptocurrency.

(3) Commits made by a cryptocurrency : Commits tells us about the improvement happening on the cryptocurrency project , and that's why a lot of changes or improvement can be seen in a blockchain .

• So by looking at commits ine can easily tell about the development of a certain cryptocurrency which leads to high market cap and lot of investment in the project leads to the high value of cryptocurrency.

(4) Company or a influential person investment : As we all know about Elon musk , world's 2nd richest man , has changed his bio to bitcoin and that lead to the hike in price of bitcoin and tweeted that you can buy Tesla(his automobile project) by bitcoin , that all leads to the hike in price of bitcoin .

Source : https://images.app.goo.gl/qrYCsE1kCQMwqPee8

• Bio of Elon Musk on 29 Jan 2021

source : https://coinmarketcap.com/currencies/bitcoin/

• Here you can see how changing bio by Elon musk affected the value of Bitcoin , Bitcoin price increase from $30k to $36k in just that period .

(5) Rules and regulations : As all the nations don't have the same thought about cryptocurrencies, so they restrict transactions of cryptocurrency, or put a ban on it which can affect the price of cryptocurrency.

• Ex : when Donald Trump(former president of USA) said that he doesn't support cryptocurrency made an affect on the price of cryptocurrency and price went down.

4. Why can't everyone be a miner?

• Well yeah it is true that everyone can't be a miner because of the resources or ability needed for the mining .

• Every consensus algorithm use different kinds of mining style , in this post I will be talking about 4 of them .

(1) Proof of Work(PoW) : it is a consensus algorithm where you need technology like CPU, GPU and ASICS miners to solve a puzzle and to claim a block and mining rights .
So it is not possible for anyone to buy that costly equipments like ASICS miners and GPU , well that is the reason why everyone can't be a miner .

Ex : Bitcoin uses Proof of Work to mine.

(2) Proof of Stake (PoS) : It is a consensus algorithm where you need some a value to yourself , because one who has more value or amount to oneself has the more chance to win a block or claim mining rights .

• It is not possible for everyone to have that much amount to hold for mining so it is why everyone can't mine .

Ex : Ethereum uses Proof of Stake consensus algorithm to mine .

(3) Proof of Elapsed Time(PoET) : it is a consensus algorithm where you need to get permission to enter the network as well as resources to claim mining rights and blocks by a lottery system .

• But it is not possible for everyone to get permission to mine and enter the network and have resources to mine , so that is the reason everyone can't mine .

Ex : Hyperledger sawtooth

(4) Proof of Burn : it is a consensus algorithm where you need to burn your asset in order to win block or claim mining rights .

• Everyone is not capable of burning his or her asst so they are not able to mine .

Ex : Slim coin uses Proof of Burn algorithm to mine cryptocurrency.

So if I have to tell in short to mine you must have

• Costly equipments.
• Maintenance and hardware repairing charges.
• Consumption of energy and time.
• Need cryptocurrency to mine like in PoB and PoS.

Why can cryptocurrency transactions be called more transparent?

• Cryptocurrency transactions are said to be more transparent because of the decentralized nature of the blockchain.

• Due to decentralized nature of blockchain , every transaction you made got recorded on every node where miners are present .

• Then the transaction get verified by the nodes on the blockchain and get completed.

• Then you can see your transactions made on the blockchain on your wallet or by other means .

• So these transactions that you made are not only seen to you, these transactions are seen to everyone on the blockchain as it has been recorded and stored permanently, you can't delete or edit that .

• So all these points leads to the transparency in the cryptocurrency that everyone can see your transactions details and you can see everyone's transaction details .

• Well we can understand it by an example , suppose I'm doing a transfer action on the Steemit blockchain , then all my activity of transfer is stored on my wallet history that includes amount, time and receiver address , that makes it a transparent network.

Hope you now get an idea why cryptocurrency are more transparent than conventional financial systems.

6. Explain how the development of cryptocurrency in your country?

• In this section I will be taking about actions taken by Govt of India on cryptocurrency as cryptocurrency is not accepted as a way of currency in India but it is not illegal as well.

• RBI

RBI(Reserve Bank of India) imposed ban on cryptocurrency trading on 6th of April 2018 by releasing a circular , it was said that it is leading to the frauds and scams in the country and gave orders to all the banks to not deal in the cryptocurrency .

• Supreme court of India

Supreme court of India revoked that ban from cryptocurrency trading in India and declared cryptocurrencies as not illegal in india.

• Finance minister on Cryptocurrency

Finance minister gave the relief to all the cryptocurrency holder and trader in india by saying that all the options will not be shut down in India , certain windows will remain open to experiment upon blockchain and bitcoin.

• Rumours about banning cryptocurrency

There are rumours going on since starting of 2021 about banning cryptocurrency in India by proposing a bill in parliament , whenever there is a session .

So by looking at all these details I am really not sure about the future of cryptocurrency in India as they are saying that there might be a ban on cryptocurrency.

Conclusion

• In conclusion , I want to give my opinion about cryptocurrencies system , I think that cryptocurrency system will revolutionize the currency system when accepted by nations and states . But there are limitations everywhere as nothing is perfect.

So if cryptocurrency systems can counter :

• Volatility
• illegal content on platforms
• Little but more security from hackers
• Acceptance all over the world to cryptocurrency

, If all these limitations can be countered by the cryptocurrency system , I think it will be the next big thing in the future due to its decentralized nature and many features .

So I have answered all the questions asked by @levycore
Thank you .