Steemit Crypto Academy Contest / S2W1 - How Cryptocurrency has Shaped the Financial Realm. What is Its Future? BY @srrebullient

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Hello everyone, I am glad to be taking part in the second season of the SteemitCryptoAcademy engagement contest.

In this week's contest which is titled "How Cryptocurrency has Shaped the Financial Realm. What is Its Future?" is aimed at allowing us to explore and explain the various ways cryptocurrency has improved the financial realm.

OVERVIEW OF CRYPTOCURRENCY

Before we dive into cryptocurrency, I would like us to look at what currency is on its own.

Currency can be regarded as any medium through which goods and services can be exchanged. It can be in form of a paper, coin, or anything that has an attached value.

The use of currency can be traced as far back as 2000 BCE in Babylon. Where as one of the oldest form of currency known as the Mesopotamian shekel is dated as far as 5000 years ago.

Before the emergence of money, humans have been exchanging goods and services through a system known as the "barter system".

This system involves the direct exchange of goods and services whereby a person who is in need of a cup of rice but has a tuber of yam will have to go in search of one who needs a tuber of yam but has a cup of rice to spare.

This system happen to be less efficient and stressful thus making humans to look for means to store value and that brought about the emergence of "currency".

We can deduct from the above that currency is anything that is generally accepted as medium of exchange.

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CRYPTOCURRENCY

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The word cryptocurrency is a combination of two words which are "crypto" and "currency" with crypto originating from a Greek word "kryptos" which means "secret or hidden".

You can agree with me that something that is secret can also be regarded as secure thus making cryptocurrency a decentralized blockchain based digital currency.

Being decentralized tells us that it is not governed by any government or anyone and that is made possible by the blockchain system which allows a p2p transaction using the aid of smart contracts.

The cryptocurrency transactions are recorded in the blockchain which serves as a digital ledger that records transactions in a way that it is impossible to forge, delete or compromise.

This is made possible because all blockchain activities are duplicated and distributed across different network of nodes which validates and confirms the authenticity of the transaction before adding it to the block and with the cryptocurrency being built on blockchain makes its transaction very accurate, efficient, and secure.

The cryptocurrency allows a direct P2P transaction without the involvement of intermediaries (third-party) such as banks as there duties are now being done more efficiently by smart contracts thus keeping transactions totally private.

The first cryptocurrency (Bitcoin) was recorded on the 18th August 2008 by an anonymous person(s) in the name of Satoshi Nakamoto and the white paper was later released on the 31st of October later that year.

Draw a comparison between cryptocurrency and conventional currencies.

SMILARITIES

• Store of value

Cryptocurrencies and conventional currencies both serve as a store of value. They can be given out as gifts and be accepted with a lot of gratitude.

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• Divisibility

Both cryptocurrency and conventional currencies can be divided into smaller units. Eg: 1 USD can be divided into multiple cents and 1 Steem can be divided into multiple units (0.1 STEEM).

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• Medium of exchange

Similar to conventional currencies, cryptocurrencies can be used to purchase goods and pay for services.

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• Degree of value

The degree of value of cryptocurrencies and conventional currencies are both dependent on the rate of adoption. The more they are widely accepted, the more the value and vice versa.

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• Varieties

Cryptocurrencies and conventional currencies both have varieties. In conventional currencies we have the likes of USD, Naira, Yen, Dinar, GDP, Euro, etc. While in cryptocurrencies we have the likes of Bitcoin, Eth, Steem, BNB, TRX, etc.

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DIFFERENCES

CONVENTIONAL CURRENCIES	CRYPTOCURRENCIES
Conventional currencies are governed by the central authories such as the central bank	Cryptocurrencies are completely decentralized meaning that they are not governed by any central body.
Conventional currencies are less volatile thus best used for savings	Cryptocurrencies are more volatile thus best used for investment purposes.
Conventional currency transaction requires a third-party such as banks who are to verify and record various transaction details.	Cryptocurrency transaction are P2P. It do not require the involvement of a third-party because the activities of third-parties have already been nullified by the smart contracts.
Conventional transactions are recorded on computers or native ledgers thus making it possible to be compromised	Cryptocurrency transactions are recorded on the blockchain which serves as a digital ledger thus making it impossible to comprise.
Conventional currency transaction requires high fee because of the involment of third-parties which are to be selected	Cryptocurrency transactions requires no fee expect the minute amount that is paid to exchanges.
Conventional currency transaction is less slower because of the involment of a third-party (banks) who has to approve transactions before it proceeds to the intended recipient	Cryptocurrency transactions are faster because of the nullification of third-parties.

Explain the distinctive innovations of cryptocurrency and its downsides.

The various innovations of cryptocurrency has come as a result of the blockchain on which the cryptocurrency is built on. The block has allowed the various functionalities such as person-to-person transaction, permissionless access, anonymity, etc.

These innovations are unlike what we are familiar with when dealing with conventional currencies. The person-to-person transaction of cryptocurrency in as innovation which has reduced transaction cost and has also greatly increased transaction speed because there are no trusted third-parties who through series of confirmations delays transactions and increases cost.

Also the lack of involvement of a third party has made transaction more private as the details of transactions such as amount are only known to the two parties involved.

The blockchain is immutable and this also implies that transactions recorded on blockchains cannot be erased, changed or reverted.

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• Downside

The major downside of this is the very fact that mistakes are almost inevitable during transactions and with the immutability of the blockchain, there are no ways of recovering cryptocurrencies sent to the wrong recipients or any customer care or third-party witness to complain to.

The anonymity of users also makes it impossible to track the identity of whom the cryptocurrency is transferred to thus making any error in transaction very costly and painful.

How do you think major problems with cryptocurrency can be handled? Let this be a response to the downsides highlighted earlier.

This is a very critical question because the outlined downsides are actually what makes cryptocurrency different from conventional currencies such as fiat and central bank digital currencies (CBDC).

But in other to handle the above mentioned problems and still maintain the crypto nature of cryptocurrency, I suggest that there should be a maximum added time on which a sender can reverse transaction.

Due to the lack of involvement of a third-party, a cryptocurrency transaction is very fast and on average completes in a matter of seconds. This means that when we send out cryptocurrencies from our wallets, we expect the intended recipient to get it within seconds and if they don't there's high chances that a mistake must have been made during the transaction process.

If there should be a maximum added time a sender can still reverse transaction let's say within 3 minutes after sending, we can still always reverse transactions whenever the intended recipient didn't get in a matter of seconds and this will save us from a lot of lost funds.

I do not know how this can be made possible but the emergence of cryptocurrency and blockchain has proven that anything can be made possible in the world of technology.

Do you believe in the future of cryptocurrency? State your reasons. Any Recommendations?

I believe in the future of cryptocurrency.

Every aspect of like is constantly evolving and finance is not left out of the evolution.

Looking at the evolution of currency you will see that it has been following a trend. Starting from Commodity Money, to Metallic Money, to Standardized Coinage, to Representative Money, to Paper Money, to Credit Money and now the Electronic Money which has birthed cryptocurrencies.

This trend clearly shows that the digitalization of currency isn't something we shouldn't have been expecting with an advancement in technology.

Also the increase in popularity of metaverse and its further adoption by popular companies such as Facebook and Microsoft is an added plus for cryptocurrencies for in other for a digital world to properly thrive, it will require digital currencies (cryptocurrencies).

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Cryptocurrencies are volatile and as such very risky. Therefore I do not recommend for anyone as I am a financial advisor to no one. Anyone that wants to invest in cryptocurrencies should carry out their own research.

CONCLUSION

The emer3of cryptocurrency have greatly improved finance activities such as rate of transaction, privacy of transaction, security of funds, etc. In as much as this is true, there are still few downsides of cryptocurrencies because nothing is entirely perfect.