Crypto Academy Week 14 - Homework Post for [@levycore] Fundamental difference between the cryptocurrencies and conventional financial system | Decentralized System
Hello everyone i hope you will be fine and enjoying good health by the grace of Almighty Allah who is most merciful and gracious to everyone.
As we know that steemit is teaching the steemians as well as all other audience about the crypto by running Steemit Crypto Academy. But there is a well opportunity for all the steemians that besides learning they can also earn by performing homework tasks.
Being a student i am also attending the lectures of the professors and today i have attended the lecture of professor @levicore about the CryptoCurrencies. The lecture is full of information about the cryptocurrencies, their work, and their advantages as well as their disadvantages. So if you want to learn about these terms and things you must attend the lecture of the professor levicore.
What is the fundamental difference between Cryptocurrency and the conventional financial system
Today Cryptocurrency has become very common everywhere and in all the areas even in each street and house the cryptocurrency talk is going on all the time. Everyone want to know about the cryptocurrency. Most of them want to invest in the cryptocurrencies and want to make money just with holding or trading cryptocurrencies. But before investing in the cryptocurrencies there is need to know about the Fundamental Difference Between The Cryptocurrencies and Conventional Currencies and their system.
First of all i want to define the term Cryptocurrency. It is the combination of two words "Crypto" and "Currency". The word crypto means digital, something which we cannot hold in our hands even we cannot feel them. This term is just for those things which just show numbers not anything else. So the term Cryptocurrency means the the currency which is digital and we cannot feel that currency not even we hold that currency in our hands. This currency is just denoted by the numbers as well as by the specific symbol and name but it does not work without any digital system. We cannot use it in our conventional financial system.
While on the other hand the term Conventional Financial System is completely different from the cryptocurrency. This is the traditional financial system in which those currencies are run which are visible and we can see and feel them. There is no need of any digital system to make these transactions visible.
The most important difference between the Cryptocurrency and the conventional financial system is that the conventional financial system is centralised and the Cryptocurrency works with completely decentralised system.
Conventional Financial System
The conventional financial system is controlled by the one and only one central authority such as central banks due to the centralised system. All the rules and regulations regarding the currency come from one platform (Central Bank).
In the conventional financial system we cannot perform our direct transactions because there is always the involvement of the third party. And in this system we have to pay taxes.
Cryptocurrency
As I have mentioned earlier that the cryptocurrencies are decentralised in which everyone has authorities and controls. The data if the cryptocurrencies is saved in the firm of the blockchain ledger which is visible to all. Anyone can access this data and get information about all the transactions.
In the cryptocurrencies as there is no any third party between the transactions so the transactions are direct. The transactions is directly done in between the sender and the receiver without any hurdle.We have to pay only the transaction fee which is very small.
| Conventional Financial System | Cryptocurrencies |
|---|---|
| This is the visible currency. | This is the virtual currency. |
| It works with the centralised system. | It works with the decentralised system. |
| This is issued by central bank. | It is produced after solving the cryptographic puzzles and calculations. |
| This currency us limited to the specific region. | This is world wide. |
| The transactions are slow. | The transactions are fastest we just have to confirm the payment. |
| All the transactions are private from the Government, central banks and tax authorities. | All the transactions are visible to the government, central banks and taxes authorities. |
Why is a decentralized system needed?
A Decentralized system is that in which all the users and workers have equal rights. It is run by the co-operation of all the community. If the founders want to introduce anything new to the platform then voting is done and results are collected to run that new thing.
Decentralized system has changed the financial problems greatly due to its wonderful benefits. Some of them are given below:
Trust Issues
Decentralized system has solved the trust issues because multiple persons manage a network. As in this system different computers and systems are connected to each other. In this system there is no risk of stealing your money by the founders as in the centralised system we cannot believe in them and we can loose our assets in the centralised system without any notification or news.
Different Nodes
In the decentralized system we are safe and sound and we cannot loose our money as all the nodes are always working for their different works. In the centralised system all the nodes are connected to a central system and if any problem occurs then all the system would be collapsed.
But in the decentralized system if any problem occurs in the nodes or anyone of all the nodes face any single issue then the whole system is not collapsed but all the other nodes do their work properly.
Fast Transactions
Another major benefit of the decentralized system is the fast transactions. As in the decentralized system no any third party involves and the transaction is completely independent. Due to this reason the transactions are very fast we can send money directly from the sender to the receiver. But in the centralised system due to the involvement of the third party banks we have to deposit our amount in the banks firstly then we can send it to others with the involvement of the bank servers.
Small Transaction Fee
The another most loved benefit of the decentralized system is the small transaction fee. The transaction fee is very small which to not affect your money. But in the centralized system the transaction fee is high because when we deposit our amount in the bank it cut some amount for holding it there as well as taxes. And similarly when we send our money from our account to the other account the again money is deducted in the form of transaction fee.
Transparent Transactions
As in the decentralized system there is no any investment of the third party so the transactions are fully fair and transparent. We do not have to pay other third parties as bribe. Because now it has become a trend that we have to pay as a bribe for big transactions. But due to the decentralized system this system of bribe has been discouraged greatly.
What affects the value of cryptocurrencies?
Crypto currency has for quite some time been an unstable market, with rises and falls of 40% or more surprisingly fast normal. Yet, with instability comes opportunity and some sharp financial backers have exploited enormous additions throughout the long term.
The worth of cryptographic forms of money like Bitcoin have as of late ascended to their highest cost in years. Here are some technical and basic factors which affect the price of the cryptocurrencies.
Regulatory changes
As new guidelines are executed, costs will in general respond immediately; when Japan reported that it was sanctioning bitcoin in April 2017, its value rose almost 3% in a day.
One thing you can rely on in the realm of crypto consistence and guideline is the manner by which capricious it is. Against illegal tax avoidance guidelines are changing constantly and organizations managing in crypto resources should be set up to move quickly, receive new norms, and shield their business from administrative investigation.
Current issues
Current issues that apparently have nothing to do with digital money can affect the offer cost. Digital money is viewed as an option in contrast to fiat cash, so when financial backers lose their trust in a fiat money due to monetary or political occasions, they can go to bitcoin or its opponents, pushing up the cost.
At the point when it was reported that Joe Biden had dominated the competition to turn into the following President of the USA and that an expected immunization to Coronavirus could be made accessible one year from now, monetary business sectors all throughout the planet revitalized with worldwide offers arriving at record highs. The equivalent can be said for crypto esteem as Bitcoin took off to its most elevated level since January 2018.
Involvement of New Currencies
Today, there are a large number of substitute cryptographic forms of money with different capacities and determinations, yet more are arising constantly. As one cash gets well known, cash streams into it from different monetary forms, influencing their cost. New monetary forms being dispatched can have a weakening impact on the worth of all cryptographic money.
Although, most cryptocurrencies are described by having a limited inventory and a lower supply can mean more appeal, consequently expanding prices.
Hacking
From bitcoin's starting to the multiplication of new cryptocurrencies today, hacking has stayed an issue for cryptocurrencies investors. Each significant hack into the framework, or into digital currency trades or wallets, has incited a value crash. As of late, an attack on the cryptocurrencies exchange Binance caused a 10.8pc accident surprisingly in minutes.
Involvement and Adoption by masses ( Whales)
The worth of a currency can shoot through the rooftop if the majority receive it. On account of the fixed number of digital currencies units accessible, the interest in that is enhanced, expanding its price. Be that as it may, in the event that they begin getting acknowledged as a mode of trade in exchanges, the interest will rise considerably further, and the value rise with no limits.
Why can't everyone be a miner?
Mining is a process in which people confirm the transactions by using their systems and they are paid by the transactions fees. As cryptocurrencies are very costly such as bitcoin do the people think to mine it except to buy it. In the mining people have to set a high powered CPU and install the other mining devices. Then they have to solve different cryptographic puzzles and different calculations to mine respective coin. But mining is not easy as people consider it.
Mining requires a lot of power consumption and fuel consumption. It is very costly. One have to set a complete project by the huge investment. Fir the mining the constant supply of electricity is required and if we do not provide it then we will not be able to make new blocks. And then we will not be able to get our share from the transaction fee.
Due to mining temperature increased rapidly if the systems and it requires high capacity cooling devices to cool down the machines. I had this experience because one of known or don to me did mining and he had to install his mining devices to a far place which is very cool. Fir this purpose he took a rented section to I stall his mining machines. Do he had to pay money for that.
And if you want to become a miner you have to install and purchase a digital wallet which connects you to the exchanges. But for this installation you have to pay at least $100 and everyone cannot support this.
So from the above discussion we can conclude everyone cannot be a miner but one who have all the facilities for the mining at low price then he can mine cryptocurrencies by mining except to buy them.
Why can cryptocurrency transactions be called more transparent?
Today many blockchain networks are going on with their respective cryptocurrencies. Blockchain technology is very amazing regarding the transactions of the cryptocurrencies.
The transactions of the cryptocurrencies are saved in a blockchain ledger. All the data is saved in the firm of ledgers and can be viewed anytime and anywhere without any restrictions. And everyone has access to this Data of transactions.
By using the block explorers we can see all the data about the transactions. We can even see the time of the transactions, sender address, receiver address, as well as the confirmations of that specific transaction.
The other main reason is that there is no any involvement of the third party in the transaction and bring a decentralized system P2P trading is done which is more transparent.
So we can say that cryptocurrencies transactions are more transparent that the conventional financial transactions.
Explain how the development of cryptocurrency in your country?
I belong to #pakistan which is s land of agriculture. Most of the people are connected with the agreement culture and have no interest in the cryptocurrencies. The main reason of this is that the lack of awareness and poverty and risk to invest in cryptocurrencies.
But day by day many people who are expert in this field are raising awareness about the crypto and people are taking interest in the cryptocurrencies. They are investing in them. And I am also advising them to invest in crypto and especially in Steem to get huge profits.
PESHAWAR: The Khyber Pakhtunkhwa government is planning to build two hydroelectric-powered pilot “mining farms” to capitalise on a bullish global cryptocurrency market, a minister overseeing a new government crypto policy told Reuters on Wednesday....Dawn News
In my country the cryptocurrencies were illegal recently the Government of KP has announced to install bitcoin mining project. They have told that soon we will launch this mining project to mine bitcoin and bitcoin produced from this project will be used to pay loans which our country has taken from the neighboring countries.
One of our famous celebrity Waqar Zaka is also teaching people about crypto and trading and recently he has also hired as a crypto expert by the KP Government.
Conclusion
The conventional financial system and cryptocurrencies are both completely opposite to each other. Conventional system is centralized and cryptocurrencies are decentralized. Due the most transparency and easiness decentralized system is needed.
And the daily viral news from the whales, interest of people, trading volume are the factors which greatly affects the price of the cryptocurrencies. People can make free cryptocurrencies by mining but it is again not easy. It is very time consuming and costly.
Due to the blockchain ledger technology and decentralization the cryptocurrencies transactions are more transparent than the conventional system which is centralized.
As cryptocurrencies are overwhelming the economic conditions greatly so every country is taking interest in the cryptocurrencies and raising awareness about this. But in some cases it is illegal.
Cc:- @levycore
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