Steemit Crypto Academy Season 2 Homework Task For @levycore: Learn About Cryptocurrency by @kinkyamiee.

Hello everyone, happy new week. Its a fresh week in the crypto academy and i will be starting my homework task by writing about cryptocurrency. I want to thank @levycore for this great class today.

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

Conventional financial system is a type of system that makes use of traditional coins which can be used to acquire products and services. They are physical and its core is based on the location of a specific country. This system is regulated or controlled by a third party which can be the central bank or financial reserves making the system a centralized system. Users becomes part of this economic system through bonding with the system in the sense that the user goes to the bank for any transaction, thereby getting great interest rate and inflation from the system. The coins in this system is issued by the government which makes transfers of value very slow and bureaucratized. There are commission costs attached to this system making it impossible for everyone to part take in this conventional financial system.

Cryptocurrency, on the other hand is a decentralized system where users are in control of the blockchain and technology. The values are virtual, can be exchanged from one cryptocurrency to another and are used in every part of the world. Users become part of the blockchain directly without a third part that is peer-to-peer payments are done instantly. Cost of transaction is usually very low or nothing. The only influence in the cryptocurrency is the demand and supply system hence it encourages decentralized mining. Anyone is allowed to take part of this system even without an access to any financial resources.

Why is a decentralized system needed?

• Lowers risk of systemic failure
  Decentralized system is needed in the sense that it has given user the confidence and has spread worldwide. Trust is very important when it comes to a monetary system and thats what decentralised system has shown. Unlike in a centralised system that if a single failure occurs, it brings down the whole economic system, decentralised system does not come to a halt, rather when one node goes offlines, the other nodes takes over, meaning that the system is remains up and running.

• Censorship resistance fosters an open culture.
  Decentralised system encourages an environment which allows a very constructive feedback and meritocracy that is the peer-to-peer communication is very hard to censor, its very clear and open to everyone. Decentralised system focus on creating a user-friendly experience and designing a protocol that suits the ecosystem. However, the network is an open-source project that is, people are allow to build an app or product on it. Unlike in the closed system where the central organization dictate what should be built on system.

• Users can participate in a trustless system
  Decentralised system helps to solve the problem of trust in the system, in the sense that the system gives users the sole power to manage a network. Since users do not have to trust a third party for their interaction with network, a protocol has been created to prevent bad behaviour in the system.

What affects the value of cryptocurrencies?

• New currencies.
  The value of cryptocurrencies is affected by the launch of new currencies in the sense that it can have a diluting effect on currencies that have become very popular, so its very important that careful research is been carried to ensure that the user picks the best currency.

• Hacking.
  Hacking is really a big problem to cryptocurrency investors and whenever there is a hack in the system or wallet, the value of crashes. This is a practice that can not be stopped completely because as the system gets more enhanced, the hackers do too.

• Current affairs.
  Current affairs that seem not to relate to cryptocurrency can affect the share price. Alot of times, cryptocurrency has been seen as an alternative to fiat and when investors lose trust in fiat due to some economic event, they turn to cryptocurrencies, thereby making the price increase and violatile.

• Speculation.
  Speculative investors can cause the price of cryptocurrencies push up or deflate quickly in the sense that they hope to make money quickly from cryptocurrency by buying and selling quickly. This can affect the market or cause a short-term swing. This is usually done by those speculators with huge impact in the market.

• Regulation
  As we all know, the law is trying to meet up with the new development with cryptocurrency. This has made different countries dish out regulations. New regulations and decisions often affect the value of cryptocurrencies. Prices tends to change quickly when decisions are taken on cryptocurrency regulations. However, it also hits cryptocurrency hard when the regulators crash down.

Why can't everyone be a miner?

• Equipment and Power are Expensive.
  First reason why everyone cant be a miner is that the equipment and power needed for mining cryptocurrency is quite expensive. Before you can become a miner, you need a digital wallet which is a software that allows you exchange cryptocurrency with others, dedicated mining computers, mining program and electricity. They are very expensive, hence not for small users.

• Values are Volatile.
  The values of cryptocruency is no where close to being stable and the unpredictability is one of the reasons why not everyone can become a miner. So there can be lots of loses with the changes in price.

• Too Much Risk.
  Cryptocurrency mining is very expensive and this has created too much risk. A miner might invest all his time and monet and at the end, have nothing. And if this user get lucky to be sucessful in it, the price deflation could cause him to have nothing.

• Mining Pools Don’t Help.
  Mining pools has to deal with several miners sharing the same equipment and cost to mine and some have turned to this to be able to spread costs. The problem here is that, all these people get to share in the profile making them get less or nothing.

Why can cryptocurrency transactions be called more transparent?

We all know that transparency is one of the major advantage in the blockchain and through the advancement in the cryptography, it has made people trust the blockchain. The blockchain is a decentralised network and no third party is able to control this network in any way. However, the blockchain is built on a peer-to-peer network which has made the network very transparent. Now regular users that are miners could feel responsible for validating their transactions themselves. Through this network, cryptocurrency has been regarded as exceptional transparent and trustworthy.

Explain how the development of cryptocurrency in your country?

Nigeria is known to be the largest cryptocurrency market in Africa and the third country in the world. My country has been able to generate over $400million in transaction volume since 2017 till 2020. However, this successful development is as a result of the continuous cryptocurrency trading that has generated more interest for the country. The coin that has brought this development more to my country is Bitcoin which has recently passed the $60,000 mark.

In February, The Central Bank of Nigeria which was the highest banking authority in my country imposed a strict regulation on the financial institutions that the transactions of cryptocurrency has been banned and all accounts linked to crypto activities should be closed. This affect my country a little bit but my country got back on track as the peer-to-peer platforms increased by 27%.

Cryptocurrency has help to develope my country in the following ways:
-Digital payment
So many digital apps have been created that allows digital payments across the country which is faster and convenient.

• Cross border Payments and Remittances.
  Prior to the introduction of crypto, the traditional means of transactions has a lot of limitions. Cryptocurrency has been an effective solution to international payments and transactions in the sense that it saves time and cost for my country.

• Value Preservation/Inflation Protection
  Due to the high violativity of cryptocurrency, stable coins have helped my country avoid the lose to values, the introduction of the naira stable coin has really been of great help during transaction with foreign countries.

• Credit Loans.
  A Nigerian startup called Bitnob has been able to build a credit loan app know as NobCredit that enables users take loan with out selling their Bitcoin. This is really a brilliant idea because users dont get to lose their crypto and at the same get the user to invest.

Thanks for reading.