Crypto Academy Week 14 - Homework Post for [@levycore].Learn about cryptocurrency

Hello again Professor @levycore. The world of cryptocurrencies is fascinating. When I started studying the projects and all the developments I was really hooked. Knowing that everything we have today is a result of decentralization development opened my eyes even more..

Let's get started.

_{Image edited by me in Powerpoint.}

1. What is the fundamental difference between Cryptocurrency and the conventional financial system?

The fundamental difference is the PRINCIPLE by which each is governed. For example, traditional currencies are governed under a centralized scheme, where a central figure (central banks of each nation) has control over how much money is printed, how much money is worth and in some cases even has the power to impose laws prohibiting withdrawals of a certain amount of money. They control the amount of money in your pocket

Centralized banking systems have a platform where customers are charged usage fees and minimum requirements to access their services. For this reason, many people in the world do not have access to a bank account.

On the other hand, cryptocurrencies are governed under a decentralized principle, where no one has control over them.

The value of each cryptocurrency is not determined by a single individual but is given by the public.

In the decentralized system, cryptocurrencies have their own platforms which are freely accessible, without charging usage fees or restrictions between countries.

2. Why is a decentralized system needed?

Cryptocurrencies were born as a response to the great crisis of 2008 when many banks and countries were involved in the bursting of the real estate bubble. As a result of this crisis, the creator of Bitcoin "Satoshi Nakamoto" saw the big problem of the centralized financial system where through wrong policies the lives of millions of people are affected.

In the centralized system, few people manage the economy of the majority in a non-transparent way.

To solve the problems of the past, a way was devised, to be able to carry out operations without the intervention of third parties. The answer to this was the decentralized system, in fact, cryptocurrencies were created to be operated without intermediaries in a decentralized environment, where a central entity does not profit from the fees of the operations.

Through the decentralized system, governments and banks cannot control people's finances. In fact, we could see decentralization as true economic independence.

Through decentralization and cryptocurrencies, we can transparently conduct operations.

3. What affects the value of cryptocurrencies?

The trust and confidence that people place in them.

The way a coin gains value is through its associated project. For example, when a Blockchain project looks profitable and promising, the public response will be that they will start investing Fiat currency or other crypto assets in that specific cryptocurrency.

This inflow of capital will cause the price of the cryptocurrency to increase its value in the market. This is the same thing that happens in the stock market, where the public is always going to invest in the best companies.

Another way a coin gains value is through positive news. Everything related to the public opinion of a crypto asset will make people look favorably on a cryptocurrency and want to invest in it.

On the contrary, if a project or a cryptocurrency is involved in a scandal, or the management of the project has been lousy by its developers, this will cause the public's confidence to decline, and they will start to withdraw their positions in that Coin.

In other words, bad projects will make people not want to invest and on the contrary, they will start selling their cryptocurrencies. All sales lead to a lot of supply and therefore the price of the cryptocurrency is devalued.

4. Why can't everyone be a miner?

Cryptocurrency mining involves many obstacles that most are not able to deal with, from technical challenges to specialized computer knowledge to high financial investments.

To understand these challenges we must first understand that there are different protocols to be able to mine a cryptocurrency.

For example, the first protocol, the one that belongs to Bitcoin: Proof of work, requires the purchase of specialized mining equipment. This equipment is expensive and also needs an additional cooling system that requires an additional investment.

Obviously, the installation of this equipment requires a large physical space, such as a warehouse, and specialized knowledge in the installation of the equipment. They also require a constant power supply, which is not available in most countries.

The worst part is that for bitcoin mining (for example) to be profitable, dozens or hundreds of these devices are needed, in other words, having a single mining device does not return the investment.

In the case of the second best-known protocol, Proof of stake, with which ETH is mined, the economic factor again plays a key role.

Since this mining protocol is based on the cryptocurrency investment that the person has. In this way, those who have the greatest possibility of generating new blocks are people with greater economic resources.

In general, mining has become an activity with a lot of competition, so it is not as profitable today as it was a few years ago.

5. Why can cryptocurrency transactions be called more transparent?

Operations performed in centralized financial systems are done through central servers whose information is secret and cannot be audited by the public.

These central servers are easy targets for hackers who can steal and alter transaction data.

On the other hand, cryptocurrencies have transparent transactions since each transaction is stored as a block in a Blockchain. Each block is unalterable and immutable.

At the same time, all blocks are stored in a public ledger, which can be accessed at any time and verify the information.

On the other hand, security is reinforced against hacking since the Ledger has a copy in each server that forms the blockchain, so it is almost impossible to alter a block since it would be necessary to hack all the computers in the network at the same time.

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

I live in Venezuela, a country hit by the economic crisis and hyperinflation. Every day our currency (the Bolivar VEB) suffers devaluation against the dollar.

Week after week we Venezuelans are faced with the reality that we can buy fewer things with the money in our pockets.

Cryptocurrencies have been a lifesaver as they help us keep our savings, invest and increase our capital, and purchasing on certain occasions. In my case, cryptocurrencies have been life-changing.

Before the pandemic, cryptocurrencies were only for people of high social status. Only people with large capital could afford bitcoin mining farms. But information for the general public was restricted, and most of us saw cryptocurrencies as a scam.

Over the past 20 years, the Venezuelan government has had diplomatic problems with many nations around the world, especially the United States. This has caused several countries in the international community to lift sanctions against our economy. These sanctions prevent the government from obtaining foreign currency abroad, which is why some years ago the government opted for bitcoin mining with the nation's resources as a way to capitalize.

In 2018 the Venezuelan government announced the creation of the nation's first cryptocurrency which they called "Petro" ^Source It is a blockchain-based cryptocurrency (or so they say) which is backed by the nation's gold and natural hydrocarbon reserves.

_{Venezuelan government token Logo, Image taken from ^Source.}

Through this cryptocurrency Venezuela is trying to fight inflation, making periodic payments with this cryptocurrency to public workers. The problem is that the vast majority of people do not know how to redeem these tokens, and it is not accepted in the vast majority of commercial establishments.

On the other hand, many doubt that it is really a decentralized currency since this crypto asset is totally controlled by the government of Venezuela and the government of Russia. Here we can see its whitepaper. ^SourceIn fact, it does not even appear in the Coinmarket cap.

On the other hand, after the pandemic and because of the loss of jobs, more and more people have started to get involved with cryptocurrencies. For example, every day more and more academies proliferate that help people invest in cryptocurrencies and develop portfolios. Some are legitimate and many others are fraudulent.

During the last decade, Bitcoin had preeminence in Venezuela, however, since the pandemic within our communities there has been an exponential growth of the Steemit Platform. Every day more and more people are benefiting from Steemit cryptocurrencies. The development and results can be seen in the posts of our communities #steemvenezuela or #starsofsteem.

By the year 2021, with the rise of the SBD people who had years without enjoying a good meal, or buying a household appliance finally have the joy of seeing their luck change... thanks to cryptocurrencies.

The next step in our country is happening this very month, as within our communities we are starting to encourage the payment of services and products through SBD and STEEM.

In one of our Discord chats, our Steem representatives have created a group called "Market Place Stars of Steem", which is a group totally destined to offer services with cryptocurrency payments. This makes us totally independent from the traditional financial system.

_{Development of cryptocurrencies in my community. Marketplace for trading services and products with SBD and STEEM.. Image taken from my phone}

In fact, many of our members do not have a bank account because they do not meet the minimum requirements demanded by banks, such as having a permanent job or bank references. Thanks to cryptocurrencies this is no longer a problem, as we can all start to manage our finances in a decentralized way.

In addition, several platforms have been developed that allow the exchange of cryptocurrencies to fiat currency, which have accelerated the development of cryptocurrencies in Venezuela. The most important of these is "Orinoco". ^Source

_{Orinoco platform ^Source.}

Within its portfolio of options, it allows payments in local currency, dollars, and other currencies of Latin American countries. It receives BTC, ETH, STEEM, SBD, EOS, USDT, TRX among others. They also handle NECTAR, which is a Stablecoin generated by the same platform. Commissions are approximately 1% of the transaction.

7. CONCLUSION

Cryptocurrencies have been a blessing for all of us, a proposal that has opened an infinity of valuable opportunities that for years have been destined to a few.

But we must be aware that no cryptocurrency would exist without a blockchain project to support it. Nor would any blockchain exist without a decentralized system.

Decentralization is the backbone of all this development. It is what keeps these projects transparent and free of corruption.

Cryptocurrencies are the basis of the economy of the new millennium, and of more balanced and fairer financial systems, systems designed to help people.