Week6 Season 2 Assignment For Steemit

In continuation of the topics taught by @levycore. Thank you for the opportunity.

CRYPTOCURRENCY AND THE CONVENTIONAL FINANCIAL SYSTEM DIFFERENCES

Let's first take a look into cryptocurrency and the conventional financial system independently.

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CRYPTOCURRENCY

This is a digitalized asset which is patterned to work as exchange medium where the record of ownership of individual coins are stored in a computerized database file with the use of standard cryptography to manage the establishment of additional coin, for transaction securement and the verification of coin transfer ownership. Cryptos are not like paper money which its existence is physical but they exist in a digital form. They are modes of payment that can be exchanged for products and services online. The transactions made with Cryptos are paid directly by the buyer to the seller i.e peer-to-peer hence, no intermediaries are needed. The record of transaction and the usage of Cryptos are managed on the blockchain platform. Bitcoin,Litecoin,Ripple,Ethereum,Dogecoin,Cardona and others are types of Cryptos. Presently,we have nothing less then 9,826 types of Cryptos worldwide (according to Coinmarketcap). It should be noted that there is no central authority saddled with the authority of controlling cryptocurreny such as the Central bank.

THE CONVENTIONAL FINANCIAL SYSTEM

This is a financing body which are offered by banks and other financial institutions which are not assured by government agencies such as bank loans and bonds which are issued in accordance with guidelines set by government sponsored agencies. By this,such bond or loan can be sold in market that are secondary in nature. The conventional financial system can be related to fiat money which is a type of currency which is issued by Central bank. Fiat currency are like legal tender based on the credit of the economy.

DIFFERENCE

Verification

In the crypto world, verifications are done publicly although transaction details remain unknown nd that's because the it is decentralized in nature unlike the conventional financial system where all transactions are done physically and publicly.

Anonymous in nature

I personally likened the anonymosity of the crytocurrency to "ghost mode" where when I send or receive crytocurrency, my account and the person's account cannot be tracked, unlike the conventional financial institution where all personal details relating gto Finances are disclosed and both parties can easily be traced.

Government issuance

The main difference between both is that the government issues fiat money and are regulated by the central bank while Cryptos are digitalized asset or currency which serves as an exchange medium and are not government controlled.

It is also important to note that while transactions on the financial system can be revoked through several procedures, the opposite is the case In cryptocurrency as any successful transaction cannot be revoked. Extra caution ought to be taken while trading.

These and many more are the differences between financial system and cryptocurrency.

WHY IS DECENTRALIZED SYSTEM NEEDED?

Decentralized system which means diffusion of power and authority make policies, strategy and decision. They are needed so that no body can influence or control the value of cryptocurrency hence, it will promote flexibility and development. The viewing of decentralization should be relative and not an absolute concept.

Upgraded security

A Decentralized system operates on a higher security level than a conventional financial system and also operates on a 24 hours, 7days a week system.

Geographically advantageous

In a decentralized system, there exist no geographical barrier to trading and hence more opportunity to trade anywhere in the world.

WHAT AFFECTS THE VALUE OF CRYPTOCURRENCY?

The following can be seen as what affect the value of cryptocurrency:-

Rising demand:- supply and demand is an important factor that affect the value of tradable things in which all digital currencies are inclusive. For instance,if people buying Ethereum are much and other people are willing to sell, there will be an increase in price and vice versa. when the usage of a crypto increase drastically, there will be a big increase in the market capitalization as a result of this, the value of Cryptos will be affected.

Inflation of fiat currencies:- in this case, if there is fall in price of fiat currency,then there will be an increase in price of cryptocurrency such as bitcoin(will increase in respect to the given currency),because there will be ability to get more of such money with the Crypto(Bitcoin).

Cost of production:- the opportunity and direct cost associated with the production of a coin will also affect the value of cryptocurrency. For instance,the energy and resources that are put together in the mining of Bitcoin is the reason why Bitcoin has value, hence, it has a high production cost.

Other factors includes Regulation, mass adoption and so on.

WHY CAN'T EVERYONE BE A MINER?

Mining is a process of entry of new cryptocurrencies into circulation.

Cryptocurrency mining is costly

Painstaking and sporadically rewarding only, it requires the use of heavy instruments eg Gpu, Asic and cannot be readily affordable to everyone.

Everyone can't become a Miner because the process of verification of Cryptos are unknown to some people.

It is scarcely allowed

Because of the sensitive nature of mining, it is not allowed everywhere and by everybody. It is better it is in the hands of skilled experts who can mine it skillfully.

WHY CAN CRYPTOCURRENCY TRANSACTIONS BE CALLED MORE TRANSPARENT?

The transactions of cryptocurrency is transparent because of the abandonment of intermediaries but the use of blockchain technology which will automatically process,record and work on the coin owned by individual trader or investor without any manipulation of central authorities. The blockchain users are given public keys that identifies them individually. This keys enables them to hold and transact at will. This act can be seen in financial world as the highest level of transparency. Also, the decentralized system in which cryptocurrency make use of makes it transactions to be true and fair in nature i.e transparency.

THE DEVELOPMENT OF CRYPTOCURRENCY IN NIGERIA

Nigeria's interest in Cryptos especially Bitcoin got to the peak in 2020 during summer which shows itself after researching the trading volume of Bitcoin against the currency domestically used in transacting virtual currency. Trading in Cryptocurrency occurs in Nigeria than almost any other places in the world which reflects a loss of truth in traditional forms of investment. Research shows that out of the top 10 cryptocurrency traders in the world, Nigeria is ranked 3rd in which USA. Crypto currency trading has evolved from small to large overtime. Relatively, it has been a wave of both positive and negative prospects on the Nigerian economy . Most investors see it as a means to get high returns.

January 2017

The government of Nigeria has taken measures to to educate it's citizens on the difference between actual and guaranteed currencies and crypto currency. The central bank of Nigeria and the security exchange commission statement banning any transaction on bitcoin, warning them against bitcoin trading. The risks associated to the volatile nature of the crypto currencies.

March 2018

The CBN maintained it's stand on cryto trading and that digital assets are a sort of gamble game. After all these, the crypto currency did not go into extinction in Nigeria despite the warning . Nigeria is yet to showcase a legal framework for crypto however there is a great hope.

CONCLUSION

With the evolving global trends, Nigeria's Crypto sector will not be condemed totally but stringent measures will be part In place to curb the misuse.
Risk such as returns and volatility has to be checked by investors before investing. However, cryptocurrency is a very good and profitable platform in which people should invest in because of it high acceptability and transperancy compared to the conventional financial system. The core knowledge of the cryptocurrency one wants to invest into show be known and made clear to the potential investor.