CryptoAcademy || Week 14 Homework Task || For Professor @levycore || Learn About Cryptocurrency || Homework Done By @preshdan

I am indeed an very happy to be part of this week's lecture and homework task presented by Professor @levycore

The Class and Homework task by Professor @levycore is on "Learn About Cryptocurrency".

Professor @levycore has done justice to cryptocurrency in details so before I start attempting the questions, let's take a brief look at "The Conventional Financial System"

The conventional financial system is a financial system composed of banks and other financial institutions as the backbone of its operating mechanism. Each individual has at least one or presumably more than one bank account and is making use of banking services such as ATM withdrawals, financial transactions, credit card payments, etc. Banks are however influencial components as far as the overall economic scenario is concern and by means of globalization, we now have a good number of global banks that are operating in various parts of the world.

What is the fundamental difference between cryptocurrency and conventional financial systems?

• Centralized and Decentralized

The most notable difference between these two is that conventional financial system is centralized wheread cryptocurrency like Bitcoin makes use of decentralized network beyond banks or control of the government.

There is no involvement of intermediaries in cryptocurrencies when transactions are being conducted and has no need for government backup in order to be regarded as valuable. This digital currency depends on a decentralized ledger technology being maintained across several networks.

Whereas the central banks in conventional financial systems are answerable for the same money not being spent twice, in cryptocurrency system, each node is answerable to the verification and validation of transactions.

Furthermore, the cryptocurrency is an autonomous peer-to-peer transaction in which all members are equal none being superior to the other, this is not obtainable with the conventional financial system.

• Transaction time and Fees

The complete removal of the control of a centralized body in transactions also removes the fees charged and lengthened translation time. Banks and some other financial institutions charges high prices for operation carried out and most times takes a long time or even days to confirm.

Transactions on cryptocurrency are carried out over the internet with little or no charged fees. The duration for transaction confirmation is also significantly reduced and the time frame for transaction confirmation is also reduced considerably, with sanctions coming in almost instantly.

• Safety

The centralized system of the conventional finance engages the third party in order to manage one's finances. The security of finencial data here is in jeopardy as it can easily be compromised unaware to the account owner, whereas cryptocurrency system has an open door to very safe and formidable local and global transactions as the account owners are fully in charge of their finance without a third-party. The cryptocurrency system makes use of cryptography in protecting assets and to impede hacking; consequently, the peer-to-peer system of finance in cryptocurrency system which dose not dependent onto centralized body does not allow the risk of financial breach.

• Access and Anonymity

The centralized financial institutions of the conventional financial system offers credit or debit cards with owner's personal information attached to it, which are used in tracking spending and activities and also leads to theft of identity when in the wrong hands.

On the other hand, cryptocurrency financial system are completely anonymous in their transactions, having no personal information, hence there is a very slim or no chance of identity theft occurring.

Digital currency is to cryptocurrency financial system and is available and exists on the internet and also is easily accessible, whereas conventional financial system currency demands a set time to enter financial institutions.

• Transparency

In the cryptocurrency financial system, all transactions and activities are open source, a system that needs no permission or trust and carry out transactions only when all demands and criteria are satisfied. It permits users and the general public access to audit and complete transaction records performed in the platform which is a show of extreme transparency. Whereas, all transaction information as well as audit reports in the conventional financial system are kept confidential from the account holders and users which is subject to manipulation or falsification.

Why is a decentralized system needed?

Reasons for which decentralized system is needed abounds however the following are few of them:

• The decentralized system has the capacity to skillfully manage large quantity of transactions within seconds and also mutually give or informations from other blockchain networks, making sure that data are not mangled or changed in their form or structure before executing them in the process. In other words, in operating system, the cryptocurrency system guarantees extreme level of competency and trust.

• In the decentralized system, there is no need of centralized unit of authority or command for the regulating or restricting users on how to use, transact or manage their assets on the platform. Furthermore, there is no case of account blocking resulting from noncompliance to guidelines or policies as users are in full control of their account for a lifetime hence there is a guarantee of complete ownership.

• The decentralized system allows incoming users free and comfortable access to join hence, there is no rigorous, bureaucratic and wearying process as regards documentation and acquisition of KYC before the platform can be accessed.

• With the decentralized systems, assets and accounts are very well safe and secured. The decentralized system is quite formidable and not susceptible to hacking unless key or password compromise occurs on the side of the users. Nevertheless, the system guarantees 99.9% safety of assets invested.

• Malicious actors or central entities can turn off a legitimate concerns about practices or proposals that, if carried out or put into practise, can make an organization better and/or prevent negetive behavior. Peer-to-peer communication is to a great extent harder to censor; It nurtures an environment that allows for constructive feedback and meritocracy. In a considerable number of decentralized-focused ventures, management and employees enfold the effort to produce a better user experience, and to pattern protocols that roster an ecosystem.

• Furthermore I, decentralized system probably is open-source projects, in other words anyone can build apps, services and products on top of them. That increases the extent of opportunities for network growth.
  Decentralized system is not exclusively a technological approach. It is a mindset and culture that seeks not one's way, but rather searches the best way for an entire ecosystem.

Whatever affects the value of cryptocurrencies?

The following are some few factors that may have influence on the value of cryptocurrency:

• Regulations

As cryptocurrencies are ready to become more mainstream, they have high chances of coming under some kinda government regulations. The obtruding of regulations would result to digital money becoming more centralized, thereby causing a significant impact on the value of cryptocurrency.

• Costs of production

The direct cost and opportunity cost of producing cryptocurrencies are another factors that affects the value of cryptocurrencies. Obviously, the mining cost cryptocurrency like Bitcoin high. A specialized hardware system which eat up very large amount of heat in other to mine bitcoin is needed. It has been shown by research that about $400 million to $6.2 billion go into energy costs in relation to bitcoins in a year.

• Increasing Node count

Node count is another competent indicator of cryptocurrency value. Node count refers to the magnitude of the number of wallets that are active on the blockchain network, which can without difficulty be searched on the internet or the respective currency homepage - the more the nodes, the stronger the community.

In order to analyze whether a currency is priced reasonably, the node count and the sum of cryptocurrency market cap is searched for and compared with other cryptocurrencies on the same parameters. This is however, one of the ways to ascertain if a particular cryptocurrency is being overbought.

• Adoption by masses

The value of a currency can skyrocket if adopted by the masses. Due to the limited availability of the number of cryptocurrency units, the demand increases, increasing its value. Their demand and value will rise even the more if they start becoming accepted a medium of exchange.

• Market Cap

Market cap, happens to be the most straightforward coin value indicator in the market. Market cap may be calculated by multiplying the sum of coins supply with the price of each coin:
Market Cap = Sum of Coins Circulating Supply Of x Price of Each Coin.

Let's try to comprehend this with the aid of an example:

Coin A	Coin B
Amount of coins in circulation = 200,000	Amount of coins in circulation = 100,000
Price per coin = $3	Price per coin = $4
Market Cap = $600,000	Market Cap = $4,00,000

As seen in the above instance, though Coin B seem to be priced more, Coin A is leading in terms of market cap value. Consequently, we can say that market cap has an effect on the true price and or value of a cryptocurrency.

Why can't everyone be a miner?

Mining as we know is a primary way of introducing new cryptocurrency into trade. Miners enter into the activity of solving computational conundrum using high powered hard drive or computer devices, as a result are rewarded and also earn tokens. Extreme energy consumption is needed in solving complicated or tough mathematical conundrum, by those making use of high reckoning and calculating computer device to check or proof the validity of transactions particularly the Proof of Work algorithm consensus. Consequently, there is high cost of setting up equipments as well as its maintenance. Below are some considerable reasons why why everyone can't be a minner:

• Mining is however not accepted universally as a legitimate activity. For instance in my country (Nigeria), all activities relating to cryptocurrency prohibited, nevertheless, cryptocurrency users keep their P2P transaction sans the involvement of government.

• Everyone cannot be a minner resulting from the kinda equipment used in the process, these equipment or devices require a reasonable level of energy to be powered. For instance, fossil fuel is needed if bitcoin must be mined.

• Another reason why everyone cannot be a minner is system maintenance that is associated with a very high cost. This indeed is demoralising agent to those with the intention of joining the the mining group.

• ASICs are associated with a very high cost or price in terms of its setup and assembling thus, unaffordable to a reasonable number of persons.

• Mining is all about solving and providing solutions to mathematical conundrum in respect to time of which great skill or knowledge
  is indispensable. This also is a limitation to becoming a miner.

Why can cryptocurrency transactions be called more transparent?

Cryptocurrency transactions works on blockchain platform and are commonly observed to be a decentralized platform. All informations and records of cryptocurrency transactions done on the decentralized platform is recorded on a ledger or node which is subject to public view. Following are some functions that makes cryptocurrency to be called more transparent:

• All transaction data and informations are not kept confidential rather they are made subject to public view.

• All information or data stored are not subject to falsification, fix up or delete.

• Being a blockchain, it is an open source permitting the activities of judicial examinations on its transaction at any moment.

• All connected device in the universe have access to informations stored in the blockchain.

Explain how the development of cryptocurrency in your country?

My country (Nigeria) is one of the countries that; against government policy; is yielding to the activities of cryptocurrency with good number the young people profitably making ends meet from it.
The country's central bank (CBN) in February 2021, gave an oration to the banks and other financial institution in the country on the issue of their continued indulgence in all activities associated to cryptocurrency in the country, declaring it, up this time, illicit and forbidden.

Banks and other financial institutions were also charged to identify individuals, organizations, or cooperate bodies behind the transactions of cryptocurrencies going on the financial sector as more than $400 worth of crypto volumes has been discovered to have been transacted within a review period.
The lack of KYC in the blockchain industry is seen to be it's misery being anonymous and has been taken as advantage by launderers to laund money and commit other financial crimes. My country (Nigeria) is seen to at a developmental stage with potential change in administration in the nearest feature, thus hope for better opportunities exist.

Conclusion

The decentralized platform is seen to be the future of the financial system irrespective of the erupting issues at this very phase. But as the technology giant and influencial people indicate their interest in blockchain technology as well as digital ledgers, and with governments' attempts to bring cryptocurrencies to subjection by imposing regulation, cryptocurrency is one term that has come and is here to stay!

Thank you prof @levycore , this is my entry