Crypto Academy Week 14 , Homework task for @levycore
Answer
Right from time, the existence of cryptocurrency has always been a challenge to the conventional financial system
Cryptocurrency is a form of digital currency with no singular governance, no central authority and it offers fair rights for all users. A singular body can't give the order to produce more coin, neither could they withdraw these coins from circulation because the system is being maintained with codes.
Electronic wallets are used to store cryptocurrency. This money can be disposed without any physical interaction. To make transfer during transactions, money will be debited from the sender's wallet and credited to the beneficiary's wallet.
Transactions in cryptocurrency networks are carried out directly and documented in a public ledger known as blockchain. The blockchain is a group of blocks, that are interconnected to provide transparency, effectiveness and efficiency.
On the other hands, In conventional financial system, central banks, which have some influence over commercial banks and thus operate in a centralized structure, characterize the traditional financial system.
The banking system has been around for a long time, and the majority of people have used it. Its shortcomings, however, are costly, such as slow mode of operation, non availability 24/7, and expensive transactions fee on some services, governance by a central authority, lack of transparency, and the fear of account restrictions.
One of the major point that differenciates cryptocurrency from conventional financial system is that for daily transactions on conventional financial system, there are intermediaries, the banks who input this information in their provided centralized ledger and it is possible for them to cancel transactions or obstruct the account in some situations.
Because of the conventional financial system's centralized structure and reliance solely on databases, this has become an apparent vulnerability, leaving the system vulnerable to hacking. The financial system's centralization also raises the possible effect of difficult economic times. Some of this issues are solved by the decentralization which is the major feature of the blockchain, on where cryptocurrency exists, and also the blockchain proved to be practically hacker-proof.
Answer
- The need for safety: The key point here is the requirement to operate and work effectively, reliably, efficiently and without errors or vulnerabilities that could be exploited by hackers.
Need for Continuous Operation: The need for people to make transactions at any time, 24 hours a day, 7 days a week. Necessities that the operational system run constantly and be fully active around the clock during midnights, weekends and even on holidays
Need for Freedom: That individual, companies, entities, and organizations operating in jurisdictions with stringent regulations imposed by banks and financial institutions wanting more freedom and independence to make transaction with ease and without fear of being under law.
- The need for full access and control:
In Decentralization, users have full access and control over their funds. No, limitation to how much you can own in your wallet or the minimum you can have. Your private keys controls your access and that's all. No one can block your account or restrict the owner from accessing their wallet.
Answer
i. Economic factors
Usability, availability, supply, demand, and other economic variables, have a strong effect on the value of cryptocurrencies. A reduction in block incentive or rewards, for example, would result in a decrease in coin output and this would eventually lead to an increase in price of the particular coin.
ii. Mining Effect
The more reliable the blockchain and the more difficult it is to mine a specific cryptocurrency, the higher the coins price could go and if many of a particular coin could be mined easily, this can also affect the price of the coin.
iii. Media and Public perception
The valuation of cryptocurrencies is directly influenced by the media and public opinion. As in the recent media story about Tesla's Bitcoin transactions being halted after it was authorised not long ago affected the value of bitcoin and within a twinkle of an eye, values began to drop
iv. Bitcoin price
The price of bitcoin has been known to influence the value of other coins on many occasions. For the fact that Bitcoin came first in the world of cryptocurrency and also the most common, it serves as a mother to the vast majority of coins, influencing the value of many others.
v. Regulation or Legal effect
The price of cryptocurrencies is also affected by the legal status and government behavior of a particular country. The value of cryptocurrency would be directly affected by regulatory limitations or legal recognition of a cryptocurrency by any territory.
Answer
- Power supply problems.
Power outages occurs often in some areas and countries, such as Nigeria, and for a miner, this will result in downtime. Downtime will inevitably affect the mining process, and if the outage damages any of the mining valuable equipment, it will result in extra costs for repair or replacement.
Power consumption cost.
Some people are aware of how to manage and reduce their energy use. This will enable them to keep the cost of electricity below 50% of their mining profits. If it goes beyond, however, it might not be worth the effort.
And if the hardware is improperly assembled, it might consume more energy than the normal way. A miner's interest in mining could be harmed as a result of this.Impatience
If the minner is not patient enough to hold or stake his assets which he his not willing to sell at the moment to project so that he can receive rewards in return, like the operation of the PoS, such person can not benefit the program of PoS.
Problems with Internet access.
What prevented many people from being a miner is the lack of access to the Internet. For real, lack of Internet access is one of the major reason many people can't engage in mining. An Example is Nigeria. You will buy data on your devices at high cost just to access internet, and might still experience fluctuation in the internet service availability.Stepping down after the first attempt.
If after the first attempt, calculation is done, and the miner discovered that he has incured more cost that what was earned,
It might leads to stepping down, or shutting down of mining activity.
Answer
To begin with, Cryptocurrency is a digital asset or currency, which is established on the foundation of blockchain. To make things works, cryptocurrency inherits it's features of blockchain.
Blockchain is a technology that brought Decentralization and Transparency.
Blockchain is a decentralized ledger of digital transactions e.g cryptocurrency transactions
Each blockchain accounts are given a public address that does not identify them in any way. Anyone with access to these public addresses can display the account assets and transactions at any given time. In the financial sector, this is an extraordinary degree of Transparency.
Before blockchain, nothing financial has been transparent to these level.
For example, Businesses can easily monitor their contactors or vendors' financial records and hold them responsible for their expenses and spendings, thanks to blockchain technology.
Traditional financial institutions used to do whatever they wanted with their account holders' funds in an anonymous manner. But with cryptocurrency which exists on the blockchain, due to level of transparency, such can not occur.
Answer
The testimony of cryptocurrency was coming up gradually, and people began to embrace it in my country Nigeria.
But right from time, there is an ideology, that the rich wants to be getting richer and the poor should be begging for ends meet. Cryptocurrency began to liberate people and the poor who get to know about cryptocurrency began to explore and live a better life.
This came to the notice of our government and the rich who doesn't want to compete with the poor in the society, and they began to contemplate wether they should finally ban cryptocurrency or leave it.
Finally, not long ago, during February 2021, it was announced by the central bank of Nigeria, that every personal account, found guilty of trading cryptocurrency, should be blocked. Then we realized that the outcome of the contemplating of the Nigeria government has resulted into banning cryptocurrency in Nigeria.
This became a major setback to majority who are new to the Crypto life and blockchain. There is this fear of "what if I am caught" in many people, but then, many of us who get to know that crypto is the future of the world still keep up hope and not ready to give up.
Conclusion
Cryptocurrency holds a better future through blockchain. It has shown and brought many features which the conventional financial system are lacking. It will be better to adopt and get acquainted now because it's still at early stage. The earlier is always the better.
Special thanks to Prof @levycore for this week's lecture
Hi @benie111 , Thanks for submitting your homework
Feedback: You have completed every point and you have understood the basics of cryptocurrency
Rating: 6