Steemit Crypto Academy Season 5 - Homework Post for Task 5.
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Questions
- What Is Cryptocurrency and How You Would Like To See Cryptocurrency In The Future?
What Is Cryptocurrency
What's all the buzz about cryptocurrencies? What is it? And how does it work? You must have heard of Bitcoin or Ethereum right? But did you know that there are about 4000 cryptocurrencies. For us to understand what cryptocurrencies are and how it works, we'll have to briefly navigate through history to find out how the monetary system we have today came about and how it has led to this moment.
At the earliest stages of society the medium of exchange was not money as we know it today rather it was known as the " trade by barter" system.
It works like this, maybe I own a tuber of yam and another person owns a bag rice I need and he needs to tuber of yam too, we will exchange the goods so satisfy our desire . Doing so I trade is done. The problem with this system of exchange was that it wasn't fair right? I mean the values of both the tuber of yam and the bag of rice might not be the same but trade has to occur as a means of necessity..jpeg)
As society advanced we started using currencies, mostly gold silver and bronze. This currencies had value and were scarce hence people put their trust in it as a medium of exchange of goods and services. So now Instead of trading my tuber of yam for your bag of rice, i can keep my tuber of yam and buy your rice with gold or silver equivalent to it's value and you can buy something else entirely with the currency i paid you.
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Today we no longer use gold or silver as currencies, what we have now is the" fiat currency" or floating currency. Money as in paper money.Due to its inconvenience gold and silver was dropped as the medium exchange, kept in reserves and backed money, what i mean here is that for example before 1971, dollar was backed by gold, this means that the value of the United States dollar was backed by the amount of gold it possesses it it's national or federal reserve.
But that changed after 1971, today the dollar you use is not backed by gold or silver rather, it has value because the government says it has and because of the trust people have for it. The government can literally print any amount of money it wants out of thin air, after all its just paper which they and the people have given value, backed by nothing. They are many problems with the monetary system or money we use today, from inflation, to high exchange and interest rates issued by banks etc.
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Here comes cryptocurrencies. Over the past few years transactions are mostly done online. We don't really see our physical cash again. Eg, when buying something worth 10 dollars from Ebay or Amazon, what happens is that 10 dollars is deducted from your account while 10 dollars is added to their, just a transfer of numbers from one computer to another with banks acting as middle men.
With cryptocurrencies, there is no gold, silver and paper money, it is a transfer of digital assets, where every transaction is virtual without banks acting as middle men, without exorbitant exchange and interest rates which banks add. With cryptocurrencies everything is controlled by the people, it is decentralised. cryptocurrencies being decentralised means that, for example, in normal traditional banking records of transactions are stored in a ledger, this ledger is kept by the bank in question, but in the world of cryptocurrencies everyone in the network has copies of the ledgers and this makes cryptocurrencies hard to manipulate because the history and data of every transaction is there for all to see.
With cryptocurrencies everything is organised and secured through a mechanism known as Blockchain. See Blockchains as the connected records of the history of each transaction of the cryptocurrency with each block containing the transaction data of the previous block and so on. This makes cryptocurrencies extremely secure and difficult to hack.
With all its advantages, cryptocurrencies also has it's disadvantages . One notable one is it's volatility. Cryptocurrencies are so volatile that it can appreciate or depreciate at any moment, it is speculative, sometimes not predictable. A single tweet by Elon Musk can literally cause change in the crypto market, funny right? Another problem is its usage, cryptocurrencies have not been widely accepted as the replacement of the current monetary system, i mean in most places you can't buy physical products while using crypto as your mode of payment. Most companies, organisations and governments are yet to accept it some government have even banned it's usage.
How You Would Like To See Cryptocurrency In The Future?
Cryptocurrencies are widely growing, today there's about 4000 cryptocurrencies which one can invest in. As the world moves more towards digital transactions, cryptocurrencies are best fit for that. A future where cryptocurrencies are used widely to pay for, buy and sell physical products and services is not far fetched.
Well besides being secure, decentralised, void of exchange and interest rates and easy to use, cryptocurrencies in my opinion is the future of the monetary system. As inflation continue to rise and people losing trust in fiat currencies and banking systems, cryptocurrencies
will hold sway in the future. Many people invest in crypto because they hope it shoots up in value over time eg Bitcoin, Ethereum etc, which can be converted to real money or used to exchange other cryptocurrencies.
I can say with the things are going people of diverting from the age of paper money to a the age of digital money with high security, thanks to online blockchain technology. Cryptocurrency has it's benefits likewise it's drawbacks, so people should be careful and cautious in dealing with this new normal.
A big thanks to professor @stream4u for enlightening us all on this important topic. I can I say I've learned alot about Bitcoin and cryptocurrency, including public chain. Thank you.