Crypto Academy ||Season-2 ||Week-6|| Homework Post for @lavycore|| Learning Cryptocurrecy
What is the difference between Cryptocurrency and Conventional Financial System?
Cryptocurrency and Conventional Financial system are different in nature. There are lot of differences but we will discuss few of them. These systems are different in term like Centralized and Decentralized, Transparency, Transaction Execution, Volatility and Security. These are differences between them. We will discuss one by one.
Centralization and Decentralization:
It is one of the major differences between these two systems. This difference attracts the peoples toward cryptocurrency. Cryptocurrency is Decentralized currency. It means that one control this currency. It is not under control to specific authority. It works independently. We do not need to get approval for doing transaction.
On the other hand, the conventional financial system is under the control of an authority. This system operates under a central authority. This system cannot work independently. In the conventional final system, you must obtain permission to transact.
Transparency:
Transactions in cryptocurrency are transparent. If you transfer funds to anyone then anyone can see the details about your transaction at any time. We cannot hide transaction history in it.
On the other hand, in a centralized system, we can hide our transactions from others. No one can get information about our transactions because they are not transparent.
Transaction Speed
Transactions in cryptocurrency are executed very quickly. And transactions in our conventional furniture system are executed very slowly. Transactions in cryptocurrency are executed very quickly because they use blockchain technology and conventional financial system electricity. Uses a system that is very slow.
Transaction Time Independence
In cryptocurrency we can execute our transaction at any time. It has no time limit; it has no working hours concept. We can make our transaction at any time of the day
In the traditional system, on the other hand, we cannot transact at any time. Because those who run it work in working hours and we can transact it on time.
Resposibility
If there is any fraud in the corrupt currency or if this currency is lost then no one is responsible for it. You can't hold anyone responsible for cryptocurrency fraud.
In contrast, in the conventional financial system, the central bank is responsible for your currency. If there is any theft in the bank, etc., this amount is paid to you by the bank.
Security
If you look at the security, the cryptocurrency works on blockchain technology, that is why it has the highest security, no one can easily hack it.
The conventional financial system does not score so high that anyone can easily hack it.
Why we Need Decentralized System?
Decentralized system is a need of this technological world. There are a number of reasons why decentralized systems are needed. A decentralized system could be a better option if we want our communication to be faster and better. Some of the points below make sure we need this system
We need this system if we want our transactions to be executed without interruption. Because in a decentralized system we can execute our transactions without the intervention of any authority. And we don't need anyone's permission.
If we have to transfer our funds from one place to another, the centralized system takes a long time to do so. And moreover, if two people want to do business with each other but their countries are in turmoil, they cannot do the transactions. If we want our funds to move quickly from one place to another, we need a decentralized system.
Sometimes we have to make an emergency transfer of our funds, but sometimes it is not possible in the central e-system. Because this system works on working hours. We can send our funds in a limited time. It is also a matter of time before we need a system that can transfer our funds anywhere at any time. I need an assistant to solve this problem.
Security is a big issue. Sometimes our money is not safe in the bank. Anyone can easily access our account and withdraw money. So how do we need a system that has a high score that no one can easily do. So decentralized system can be a better option.
In a centralized system, if we transfer our money from one place to another, it costs a lot of money. So, we need a system in which consumes little funds to transfer funds from one place to another.
What are things that effects the price value of Cryptocurrency?
If we talk about cryptocurrency, its market is much volatile. Price of cryptocurrency is fluctuated may be more thousand time a day. Its price value depends on following factors.
Rules and Regulations
Rules and regulations are one of the factors that affect the price value of any cryptocurrency. This means that if the cryptocurrency is banned in a country, then the cryptocurrency from that country will not get investment. No one will invest in this particular cryptocurrency that has been banned. That way, the value will go down. In this way, the laws of any country can affect the value of the corrupt currency.
Popularization of Crypto
The more popular a cryptocurrency is, the higher its price value. For example, we see the bitcoin cryptocurrency, which came into being ten to twelve years ago today, and made its mark in the market. There will be very few people today who are not aware of it. So, it is very popular and its price value is very high. And the price value of the popular cryptocurrency is so low.
Investment of Huge Companies
The price value of cryptocurrency depends on whether or not a large company invests. If a big company invests its funds in it, its price value will be very high and conversely, if a big company refuses to invest in its art, its price video will be very low. As we can see in the current situation, Elon Musk's Tesla company has stopped buying and selling of their products in Bitcoins. In this way, we can see that the price of bitcoin has come down a lot.
Pandemic Situation
In addition, the state of emergency also affects the price of cryptocurrency. In recent days, we have seen that the value of cryptocurrency has increased due to the increasing rate of Corona virus. And as soon as it was reported that a vaccine for the coronavirus had been developed, this news reduced the value of the cryptocurrency.
Speculations of Well-Known Personalities
In addition to the big companies, there are some celebrities whose speculations change the value of the cryptocurrency. For example, in 2019, US President Donald Trump said in a tweet that he is not a fan of corrupt currency. This tweet was made on July 11, 2019. As soon as this tweet was published, the bitcoin value decreased.
source
Price effect after tweet
Also, in previous few days we can see that a famous personality Elon Musk has tweeted that Price of DOGECOIN is increased on May 8, 2021. We can see exactly on 8th May the price of DOGECOIN is increased.
Source
Price Effect after tweet
These are the factors that effect greatly on cryptocurrency price.
Why Can’t everyone be a Miner?
Mining is a process in which we mine cryptocurrency. Very high-quality computers are on standby in process of crypto mining. These computers solve various mathematical problems in return they are rewarded which is converted into cryptocurrency. Mining is a very heavy type of computer standby with high quality GPUs.
It also has a variety of consensus algorithms on standby. A popular cryptocurrency Bitcoin used Proof of Work algorithms. In addition, there are many other types of consensus algorithms, including proof of stack, proof of capacity, proof of burn and Stellar algorithms.
Now let's talk about some of the things that not everyone can become a minor. This is a process that not everyone can do. We will discuss few reasons of that why everyone not become a miner.
It has a lot of consensus algorithm standby that is very important to understand. The criteria for each algorithm are different. All of the above algorithms are very difficult to understand. Because everyone has different criteria. This is because mining is a bit difficult process.
When mining, we have to invest some of our money in the blockchain network. And that money is locked. Sometimes people don't have that much money so not everyone can become a minor.
The hardware and software used in the mining process are very expensive so not everyone can afford them.
Mining process consumes a lot of energy. And the cost is too high for everyone to afford
Thus, I saw that there are many factors that stand in the way that wants to be a minor.
Why the transactions in Cryptocurrency are called more Transparent?
Transparency of Transaction is cryptocurrency increase the confidence of user. When the user sees the other’s transaction then they automatically take interest in to crypto trading, it’s included in human nature. Transparency makes the Decentralized system unique than tradition financial system.
If I make crypto transaction, it is verified by corresponding crypto blockchain network then it is stored in blockchain. This transaction that is done in cryptocurrency are monitored by everyone. We can not hide the information of transactions.
If we talk about Conventional Financial system, it is not based on Blockchain technology. This is because except the few related user no one can see the transaction history. This is not fully transparent.
Data is stored on the blockchain after transaction is done, and the data stored on blockchain can be accessed by everyone but we cannot change and manipulate it. This is why the transactions in cryptocurrency are more transparent.
Explain the Cryptocurrency development in your country.
If we talk about current situation is Pakistan, the cryptocurrency is fully banned. There is no development of cryptocurrency in my country so far.
However, Pakistan deployed system that is based on Blockchain technology in Karachi. It does not mean that it’s legal. It is deployed only for remittance from Malaysia. It is deployed with the favor of Financial Action Task Force to handle the Terror risks and reduce the money laundering cases.
Except above things there is not development of cryptocurrency in my country so far.
In future it seems that world financial system travel toward the decentralized system. In this system transaction are executed very quickly. We can transfer our funds to other party without the interference of third party. Cryptocurrency used blockchain network that is very secured. One thing is more noticeable that is volatility of decentralized currency or crypto currency.
THANK YOU
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