Steemit Crypto Academy Season 2: Week6 |Homework Post for @levycore, Conventional financial system

Conventional financial system also known as fiat money is a kind of legal tender that is issued by the government of a state through it agency which is known as central bank that can be used as a medium of payment and serve as a store of value. Examples of fiat currencies are : naira, dollar, euro, cedi, pounds, etc. This currency derives their value from forces of supply and demand that is the more it gets into circulation, the more it loses it value.

Cryptocurrency is simply a virtual currency that can be used to for exchange of goods and services digitally using a blockchain. Unlike fiat currency, cryptocurrency is not issued or backed by government but by corporations and it can only be stored online and can't be seen physically. Examples are bitcoin, ethereum, dogecoin, cardano, etc.

Differences :

Acceptability : fiat currency is more accepted as a means of payment than cryptocurrency, all business and organization allows people to pay for goods and services by using the countries currency but for cryptocurrency, only few business accept it as a means of payment and it is banned in some countries.

Stability : fiat money is relatively more stable in value than cryptocurrency, a cryptocurrency worth millions can change to hundred thousand with hours, the value keep changing from time to time.

Storage and security : A cryptocurrency can only be store in a digital wallet that is provided by a cryptocurrency network or exchange and once the the exchange liquidate or goes out of business the cryptocurrency is gone cause it is not insured by government but a fiat currency can be kept in bank or pockets, etc. Also this money are insured by the government.

Why decentralized exchange is needed

Decentralized exchanges is a cryptocurrency exchange that enables smart contract exchange to take place online in a private secured way without involving any thirdparty.

Decentralized exchange functions without a central control center and traders have autonomy of their virtual currencies.

Advantages of decentralized exchange :

Decentralize exchange allows users to enjoy privacy of transactions, the absence of central authority to monitor and control transactions makes it easy for users to transact freely with anyone's involvement and also the government can't interfere or regulate transactions.

Image Source

Decentralize exchanges also allows faster transaction than the traditional banking system which takes days or week to be complete but for decentralized exchange using blockchain it takes minutes also the incidence of fraud like the exchange company losing or defrauding people of their cryptocurrency is reduced as the people are in control of their digital assets.

How value of cryptocurrency are affected

The major thing that affects cryptocurrency is supply and demand, the higher the demand of a cryptocurrency the higher the tendency that the price will increase and also if the demand is very low there will be a fall in value also the more a cryptocurrency is in circulation the more it loses it value as the supply of a cryptocurrency should be limited.

The utility of a cryptocurrency is also related to it value, cryptocurrency that have other usage apart from payment of good and services are more valued than other cryptocurrencies.

Scandal, scandal also affects cryptocurrency especially the ones associated with the developers. One of the reason for the recent fall in bitcoin price and other cryptocurrencies price is the ban of cryptocurrency by government of china and how elon musk called some crypto a hustle. Scandal associated with the developers like fraud scandal affects cryptocurrency value negatively.

Why everyone can't mine

Mining in cryptocurrency is the act or process of creating a particular cryptocurrency and putting it into circulation. It is about developing and maintaining blockchain ledgers.

Mining cryptocurrency is a very hard task that requires high knowledge about blockchain and it also needs high tech like supercomputers to be able to mine, miners are rewarded with cryptocurrency for completing blocks and they are able to acquire cryptos this way.

The reason why everyone can't mine is not everybody have full understanding about how cryptocurrency works and mining process also not everyone can afford the supercomputers that will be used in mining process but people can get cryptocurrency by exchanging their fiat currency for digital currencies.

Why cryptocurrency is more transparent

One of the main advantages of blockchain technology or cryptocurrency is the transparency in trading services,transactions are public, traceable, and permanently stored on the exchange network, the cryptocurrency wallet address is the only information used to define where a cryptocurrency will be transferred to and also users have access to look into history of all transactions made on the network so you can trace transactions to a particular wallet and this reduce the incident of fraud.
Also transactions are fair in decentralized exchanges network.

Development of cryptocurrency in nigeria

Cryptocurrency started getting attention in Nigeria in 2016 and the media played a very important role because it was through it that people started getting awareness about various cryptocurrency in existence especially bitcoin, people started buying then and it was around $400 dollars.

In 2019 when people started seeing the growth in price, more people started investing heavily into it, many even quit their job as started trading crypto fully. 2020 cryptocurrency growth got many people attention and the introduction of altcoin like eth, bnb, litecoin, etc.

Currebtly the central government has banned the use of cryptocurrency as a legal tender and this as made cryptocurrency trading more difficult. Nigeria holds the third place among countries with large cryptocurrency trading volume.

Conclusion

Cryptocurrency is a new medium of exchange and payment that is likely to replace the traditional fiat currency just like fiat cureency replaced the barter system.

Cryptocurrency is more secured and faster than the fiat currency system and also there are many cryptocurrency in existence with the main one which is the largest one base on market capitalization been bitcoin.

Many nigerians have seen cryptocurrency trading as a profitable investment and they are investing more of their money into this massively.

@levycore