Crypto Academy Week 14 - Homework Post for [@levycore]

Today’s class is about cryptocurrencies. I am new to it myself. Thanks to @levycore for this wonderful lecture.
Before we come to the homework, let's understand what cryptocurrency is.

Cryptocurrencies are digital currency that is managed by the user and there is no third party like banks or government involved in its management. Since it's not managed by these parties, it's not being affected by taxes. Its businesses are done virtual and there are no intermediaries. A seller sends the currency to the user. These transactions are possible because these currencies are run on the blockchain. blockchain makes these virtual currencies. One example is the coin market cap which has over 9826 currencies. As we have different currencies like Ghana cedi, dollar, and others we also have Bitcoin Ethereum, steem, and there as the currency of the digital market. But one disadvantage of these currencies is, they legally lichened.

Question1

Conventional Finance	Cryptocurrency
For conventional finance, central banks and government controls them	For cryptocurrencies, they are managed by all users and blockchain
In a transaction in conventional finance uses banks as their intermediary. The banks send the money, not the user.	In cryptocurrency transactions, there are no intermediaries. They send currencies directly to the person.
In conventional finance, currencies are issued by the government. When a currency goes into the market without the approval of the government, they reject it and sometimes punishes the offender (s)	In cryptocurrency, currencies are gotten from miners. They mine to increase the amount f tokens in the blockchain of which anyone can do.
In conventional finance there is transaction cost	Cryptocurrency only has maintenance cost which is used to maintain the blockchain ecosystem.

Question2

These are the reasons why I think decentralized systems should be considered.

Decentralized systems give users the chance to be able to make transactions themselves. This gives them the transparency of the transaction they are making. Contracting with the conventional real-world transactions done by banks, the banks monitor everything and tells the user it’s done. In a decentralized system, the user or asset owner makes his analysis, transacts what he wants to send, and feels comfortable because at the end of the day he is sure he did the right transaction.

In addition, a decentralized system gives the asset owner time and makes everything convenient for him. Transactions can be done anywhere which shows how convenient the decentralized system is. Let’s consider a person who is in a business deal with a friend in Ghana and no bank in your state connects these two countries. It may be possible but the procedure wouldn’t be easy. But when it’s in a decentralized system like the crypto market, you just need his access name to be able to perform that transaction. It’s simple on the decentralized market that’s why there is a need for it

Lastly, there is a need for a decentralized system because it provides a stress-free environment. There are cases where people will go to banks, be in long queues, and at the end of the day, you wouldn’t be able to perform the transaction you even came for. For a decentralized system, it gives you a stable environment in your comfort, no stress and you do your transaction free. It doesn’t take much time like going to a bank to be in long queues.

Question3

The value of cryptocurrencies is not determined by anyone but the system which is blockchain. the value of cryptocurrencies is affected by the supply and demand of tokens.

Using the supply and demand function, when there is a higher demand for the currencies. Tokens are mined into the blockchain system. There will be a time when tokens wouldn’t be present and you need one. This time you get from a find and he knows the tokens are scares. Not only for that person, but every user on the blockchain who has a token will price it high which will affect the price.

For its decrease, the low of marginal returns talks about when there is higher demand, a time will come when demand will decrease. As the demand is decreasing, the prices decrease too.

Generally, I will say the prices of cryptocurrency are determined by the demand and supply of tokens.

Question4
Cryptocurrency mining is a process that is done by using sophisticated computers. It also involves the solving of complex mathematical problems. Not only these, but it's painstaking and costly too. Before one can be a miner, one should have the money to possess these resources.

Not everyone has the time to be able to solve the mathematical problems involved. It deals with intelligence too. One can also have the intellect but lack the resources. Everyone is given the chance to be a miner. There is no restriction on who a miner is. But before you can be a miner; you should have the resources and the technical know-how.

Question5

The blockchain of cryptocurrency can be termed as transparent because it protects the user’s identity. Users cannot be linked to any public blockchain address. This makes it difficult for cybercriminals to track the transactions of users making it 100% secured and transparent.
It makes it transparent by giving every user a public address but which doesn’t identify them. You can get access to the public address, see the transactions but will not know who did that or who that public address is for.

Question6 (Ghana my country and cryptocurrency)

Image source

Ghana is in its infancy of cryptocurrency. Ghana has been part of the country that is not accepting digital currencies. According to Act 2003 (Act 662) of Ghana’s constitutions, using digital currencies as a medium of transaction is not licensed under the payment system. It, therefore, cautions people to take note of that and should not indulge in it. Even though it's not accepted in Ghana, authorities of the bank of Ghana are still in a talk to legalizing it.

Conclusion

Decentralized systems are the future of the world. They allow everyone to trade. looking at cryptocurrency which is a decentralized system, it’s a good way to invest and one must know more about it before investing. Risk aversions should be considered when dealing with cryptocurrencies.