Crypto Academy Week 14 - Homework Post for @levycore
Hello Professor @levycore, would always say I'm grateful to be here to learn so much. I really enjoyed your lecture. You explained what Crypto currency is an an easy to understand way. Would head to my homework post now.
What is the fundamental difference between Cryptocurrency and the conventional financial system?
There are a lot of things that set Cryptocurrency and the conventional financial system apart. The Traditional Financial Systems are centralized, meaning they have a central body that oversees every work that takes place, unlike cryptocurrencies that are decentralized and use a decentralized network, that is autonomous of the various banks and governments.
In the absence of a centralized body which controls money transfers, Cryptocurrencies have faster transactions and have little to no transaction charges while the banks charge a lot fees for money transfers which sometimes take a lot of time, sometimes days, to reflect.
Since the Conventional System is managed by third parties, it makes them subject to being compromised but compared to the Cryptocurrencies, all transactions are peer-to-peer, so you manage all your transactions making you responsible for your account. Cryptocurrencies can only be comprised on account that the users misplaced their login credentials.
Why is a decentralized system needed?
In comparison to the centralized system, the decentralized system has so many advantages and quite fewer faults.
The decentralized system doesn't have days and time of working; no matter the day or the time of the day, any transaction you make will go through.
The decentralized system also places a very high regard on the security of its system. Therefore, there is little to no security breaches and hacks with this system, the only situations where hacks may have been registered is when users may have been careless with their login credentials.
The decentralized system allows users to fully control their assets. There is no central agency to set conditions. Users can access their wallet anytime and anywhere.
Also, the privilege of interoperability makes the decentralized system to be able to share information between and across different blockchain without alteration is one thing the decentralized system has over the centralized system, since there are no third parties involved, it makes it simpler to make transactions without any alterations.
What affects the value of cryptocurrencies?
- Supply and Demand Chain
The Supply and Demand Chain is the main factor that affects the value of any cryptocurrency. The value of a cryptocurrency may increase, if the supply of the cryptocurrency is not able to meet the demand on the Crypto-market and this would make the cryptocurrency scarce and valuable. The value would in turn decrease if the supply outweighs its demand on the crypto-market.
- Influence by Recognized Stakeholders
Recognized Stakeholders can also influence the value of cryptocurrencies. For Instance, when World's second richest man, Elon Musk, announced that he bought an amount of DogeCoin for his son, a lot of people went in to invest in DogeCoin, this would make the value of the Cryptocurrency spike. Also when Elon Musk announced on Social media that his company is not going continue accepting Bitcoin because of the effects mining Bitcoin is having on the environment, a lot of people withdrew their investments from Bitcoin resulting in its current dip.
Why can't everyone be a miner?
Crypto-Mining can be defined as the process of using high-power computers to solve cryptographic equations that would reward you with cryptocurrencies. This involves the validation of data blocks which are added to transactional records which are then added to a public record called a blockchain. The role of Miners is to validate all the data that is stored on the blockchain and they do this by solving complex cryptographic problems.
Not everyone can mine because of how difficult it is to setup. Before you can start mining, you need a very powerful combination computers known as 'Mining Rig' which has its price ranging from $15,000-$60,000; depending on the amount of profits you want to make, and it is not everyone who can afford this to start mining.
Also, because of the kind of work the Mining Rigs are able to do, these computers consume a lot of power which is enough to power houses. To an extent where, miners burn coal to power these computers instead of electricity, because of the outrageous amounts they would have to pay for electricity.
After being able to acquire a Mining Rig, it is very important to have the technical-know-how of Crypto-mining, without understanding the Cryptocurrency market and how Crypto-mining works, it would be like building a house without a foundation, it will definitely collapse.
Why can cryptocurrency transactions be called more transparent?
Cryptocurrencies are transparent because it uses a decentralized public record(ledger) called the Blockchain to keep track and store it's transactions data. The data stored is then copied and shared to all the computers on the entire network of computer systems on the blockchain. The blockchain is an open record and there's nothing that is hidden from users. It is supervised by miners who are tasked to make sure every data stored on the blockchain is validated. This makes it seamlessly impossible to steal, change or hack the system.
Explain how the development of cryptocurrency in your country?
Cryptocurrencies have made quite a name in my country, Ghana, with a lot of Ghanaians knowing a lot about and investing in cryptocurrencies. Some cryptocurrencies have become a household name among the youth. In spite of all this familiarity, it isn't officially licensed under our Payments System Act 2003 (Act 662) according to a statement made to Banks, Specialized Deposit-Taking Institutions and the General Public by the Bank of Ghana in 2018. Ghanaians in general, do not really like change and this is very sad because cryptocurrencies are the future of the finance world but as the years go by, we would still adopt the system.
Conclusion
Cryptoucrencies are now becoming the most preferred currently, in this growing technology-oriented world. Cryptocurrencies are steadily growing and making great impacts in the financial setting, because of the advantageous merits it presents.
Big thanks to @levycore for this lecture. I hope you enjoy my work.
@alphafx please review