Crypto Academy Season 2 Week 6 | Homework Post for @levycore - Learn About Cryptocurrency

I am glad to participate in this week homework. After professor @levycore prepare a very useful content, i decided to prepare this homework.

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

No fraudulent activity

If you want to transact with a traditional finance, the person have to provide personal information like name, address, phone number, and some other details. So, with internet technology, the evil user will be able to hack the account information of the traditional currency system easily. Traditional finance can suffer from double-spending, where the exact money is used for more than one transaction while cryptocurrency every transaction is recorded as blocks in a block chains. This is a large public ledger. A transaction will be saved as blocks, which comprise of transaction history, time of the transaction, and hash code of the preceding block. This will be transferred to the memory pool, from where the miners used to solve the difficult mathematical problem.

Reduce cost

In a traditional financial system, for creating a national transaction, it will take 2-3 working day, and the transaction charges will be high while in cryptocurrency system there is no transaction charges for making a national transaction and the transaction will proceed in a seconds or within 24hrs.

Flexibility

With traditional finance functioning for five days a week and limited to transaction restriction, there is a possibility of freezing of currency. There is no limit in the of amount of currencies, being, and therefore when there is inadequate currency, it will effect the buyers and sellers, which will lead to inflation. While in cryptocurrency like bitcoin there is a maximum limit of 21 million bitcoin to be,lq mined. Therefore both buyers and sellers will mine accordingly which make it not lead in inflation.

Anonymity

Bitcoin, Litecoin Ethereum, Dogecoin, and more are cryptocurrencies. US dollars, Pounds, Euro, and lot more are fiat currencies. The assure difference between them is, the traditional finance is a centralized system and cryptocurrencies are decentralised one and peer-to-peer systems. Therefore, there are no central authorities to regulate the laws and regulations on a cryptocurrency.

Why is a decentralized system needed?

Traditional finance is strictly regulated by the government authorities. Decentralisation is needed because it prevents the financial power from becoming too concentrated in some organization' hand Decentralisation of cryptocurrency is makes it trustworthy. The goals of the third party can differ from the plans of the users of the system. For instance, the users of a traditional currency would prefer that the currency not be inflated, but the government authority issuing the currency might decide to inflate it to increase the income it makes from putting currency into circulation. This is why decentralisation is very necessary to prevent some unpalatable situations.

What affects the value of cryptocurrencies?

Regulation

Different countries have been contemplating on whether or not they should be recognized as units of currency, tightly regulated or even made illegal, and new decisions are being taken and changed all the time

Values tend to react quickly to any decision about cryptocurrency regulation. For instance, when Japan declared that it was legalising Bitcoin in April 2017, the price hit $1,130, rising almost 3pc in a day. But when the regulator breaks down this also hits cryptocurrencies.

Current affairs

When investor lose their confidence in a fiat currency (currency where the value is supported by the government that issued it) because of economic or political matters, they can turn to cryptocurrency like Bitcoin or it rivals, pushing up the price.

Speculation

Cryptocurrency investor will know all about how speculation can push up the value of an asset or decrease faster. Speculative investors hope to make income out of cryptocurrencies but may buy and sell faster, unfavourably affecting the market. An investor with very huge amounts of a given currency, whose speculative trades can have a big impact on the market.

New currencies

As one cryptocurrency becomes popular, money flows into it from some other cryptocurrency which affect the value.

Why can't everyone be a miner?

There are some reasons why everyone is not a miner.

Capital Outlay
To mine, you need hardware. Hardware costs money

Efficiency
Mining is very competitive. One has to be very efficient to be able to compete with other miners because if you are not efficient enough your marginal costs per bitcion with be higher than the price of the bitcoin.

Risk
Considering the previous two-point, if bitcoin goes bust, mining gets more competitive or your electricity bill goes up, you may not be able to pay for the hardware you procure initially.

Obscurity
Most people are not familiar with how mining works, or have not even heard of it. You can't ( intentionally ) do something you have not heard of.

Bait
Those interested in investing in bitcoin might want to buy some bitcoins with dollars a better investment than mining them.

Why can cryptocurrency transactions be called more transparent?

The transparency of cryptocurrencies gives people with great trust. Knowing full well that all transactions can be monitored and activities can be monitored is important factors that differentiate it from traditional financial systems.

When someone transfers cryptocurrency to another person. Traders in the cryptocurrency network verify the cryptocurrency send transfer that was sent. All the transaction will be recorded in the blockchain network. This is transparent and can be seen by anyone.

Blockchain network was designed not to store transactions and transfers. So, it makes it open for everyone to see.

Explain how is the development of cryptocurrency in your country?

I live in Nigeria. Nigerians are very much interested in cryptocurrency. Nigeria has the second-largest Bitcoin market after the United States with more than $500 million worth of Bitcoin traded over the last five years. Though, the Central Bank of Nigeria has prohibited cryptocurrency transactions. The CBN prevents traders from buying cryptocurrency with our credit or debit cards. There has always been a way out of the restriction by switching to peer-to-peer trading which enables traders to buy and sell cryptocurrency.

Conclusion

Cryptocurrencies have been a very good alternative to invest in due to its decentralization, low inflation and faster way to transact. People are more interested to invest in many countries and many people are willing to invest in my country also because of the fast growth.

Cc:
@steemitblog
@levycore