Steemit Crypto Academy Contest / S2W1 - How Cryptocurrency has Shaped the Financial Realm. What is Its Future? by @temitopef
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Good day dear Steemians. I am very happy that the engagement has begun again for the second season and happy as well that I can write again in the contest organized in the academy. The academy has put forward a topic about cryptocurrency and the future of this currency, and I will be participating in it.
Overview of Cyptocurrency
Many individuals call cryptocurrency another name, a digital currency or coin. Cryptocurrency is a type of currency that is virtual which can't be hold physically and doesn't have a physical reserve like other currency we used to know but it has real value. Cryptocurrency is built on top of the blockchain technology that also uses cryptography as a part of its security technology, hence, it takes the prefix of its name, crypto from the technology.
The story of cryptocurrency started in 2008 when Bitcoin came into existence as it was created by an unknown person, Satoshi Nakamoto. In 2009, Bitcoin began its operation when the mining of the genesis block took place to record the first transactions on the Bitcoin network in the blocks. Years later, other cryptocurrencies were also created with some with identical mode operation to the Bitcoin network while others are different.
Furthermore, cryptocurrency transactions are stored securely on the blockchain and it opens it to anyone anytime to view transactions on a network. The data of the transactions that are stored on the blockchain are not editable or changeable and that means that every record is very secured and cannot be removed by any means of hacking in favor of corrupt practices.
There are many types of cryptocurrency in the crypto space and they can be classified as Bitcoin, Altcoins- cryptocurrencies that are not Bitcoin, and Stablecoins- coins that are pegged to another fiat currency or cryptocurrency value, examples are Binance Stablecoin (BUSD), Terra Stablecoin (UST) that fell some weeks ago, Tron Stablecoin (USDD). It is worth knowing that Cryptocurrency is transparent.
Draw a Comparison between cryptocurrency and conventional currencies
I will like to define conventional currency before I draw a comparison between it and cryptocurrency,
I have written about cryptocurrency before. Conventional currency can also be called traditional currency which is the type of currency spent locally in a country for trading, they are physical types of currency.
Conventional currency is offered by the government of a country through a ministry or central body to regulate its production and manage its uses in that country and abroad over time. We can say it's an official type of currency, now I will talk about the comparison of cryptocurrency and conventional currency. Example of conventional currencies is British Pounds, US Dollar, Nigerian Naira, Indonesian Rupiah, and many others.
Comparison of Cryptocurrency and Conventional currency
Explain the distinctive innovations of cryptocurrency and its downsides
I have a strong belief that everything that has benefits is not a hundred percent perfect, there will always be their downsides. An example is the medicines we take, as much as it helps our health, it also has their side effects if consumed in excess or abused. So I will be writing about some of the innovations and downsides of digital currency.
Innovations of Cryptocurrency
Decentralization
Cryptocurrency is decentralized which allows investors to make transactions without the existence of third parties, this allows individuals to decide on a choice anytime without waiting for approval from a body. This shaped the financial realm for freedom of transactions. Transactions through other financial bodies requires waiting for approval from the central body.
Transparency
Transparency is one of the innovations of cryptocurrency, transactions of cryptocurrencies are stored on the blockchain in a transparent way which allows anyone to view the transactions that have emanated from an address on the blockchain, where the transactions came from and where the addresses also send assets to. People can easily see the details of all transactions at any time, this is not achievable with conventional bodies because they are more secretive.
High Security
Security is another innovation of cryptocurrency, transactions, and accounts of cryptocurrency are secured by cryptography which generates private keys for each account. These keys cannot be guessed by anyone and are used to unlock a cryptocurrency account and sign cryptocurrency transactions. This makes cryptocurrency secure when we compare it with traditional currencies.
Limitless Transfers
Transactions using cryptocurrency has no limit for both national and cross-national transfers as investors can make transfers of any amount all day without a limit, this is not possible using a conventional currency as there is always a daily limit of transfers from an account holding an investor's conventional currencies as controlled by the central body.
Borderless Transfers
Furthermore, cryptocurrency has the innovation of borderless transfers, no matter where someone is in the world, they can easily make transfers in minutes using cryptocurrency. International transfers using conventional currency sometimes take days which slows down the purpose but with cryptocurrency, it becomes seamless with low transaction fees.
Downsides of Cryptocurrency
High Volatility
Cryptocurrency is very volatile and risky. The value of cryptocurrency is not tied to any asset, its price is controlled by the pressure of buying and selling in the market which can make its price soar higher or sink extremely in other cases. This high volatility can lead to an unbearable loss for some traders.
Furthermore, the market of cryptocurrency is not stable and an example of that is the great instability that happened in the crypto space recently as we were asked to talk about in the last contest in the academy. Before one engages in trading cryptocurrency, it is better to understand how the whole thing works as high volatility is a big risk when the price drops.
Scalability Problems
Cryptocurrency networks are scalable but in situations where there is increased adoption of a network with increasing transactions, some networks become congested and loss of the asset occurs in some cases. An example is the Solana network that experiences congestion from time to time and loss of cryptocurrencies for some projects built on it often occur during those times. Scalability is a big downside with cryptocurrency which comes in when some networks have more users.
Regulatory Issues
The operation of cryptocurrency is not regulated by any governmental body we are used to, like the FED or Central bank or authority of a country. This means any individual willing to, can easily create a project without regulation by a body, that is no rule is guiding the operation. Furthermore, there are many true projects in the space and a lot of fake ones too that were developed to steal from crypto lovers. Regulation is a pressing issue for cryptocurrency.
How do you think major problems with cryptocurrency can be handled? Let this be a response to the downsides highlighted earlier
The question asks us to talk about how the major problems with cryptocurrency can be handled, these are the problems that I have talked about before and I will be giving answers to this now.
How High volatility can be Handled
In my own opinion, I will say volatility is a part of cryptocurrency that cannot be separated, the crypto space will always be volatile as long as the price of most cryptocurrencies is not tied to a reserve or asset. It's only left for the investors to think of ways to ensure they manage volatility the right way so that it doesn't affect their investment. Some of the ways to manage volatility to avoid loss are:
- Invest in verified projects. An investor should thoroughly research a project, the team behind it, the whitepaper, how the project plans to stabilize the project and many others before she invests in a cryptocurrency.
- Diversification of one's cryptocurrencies, that is investing in several legit projects so that she doesn't keep all her money in just one project.
- See stablecoins as alternatives for stabilizing the value of one's cryptocurrency, stablecoin is pegged at another asset, an example is BUSD pegged at $1, this could be a way to avoid the risky effect of high volatility.
How Scalability Problems can be handled
Scalability problems can arise as a result of the consensus mechanism used in a cryptocurrency project, an example is Bitcoin which uses Proof-of-Work (PoW) with more block time (10 minutes), there are issues with its scalability which led to other projects coming up with other consensus mechanisms like Proof-of-Stake (PoS) that requires less energy for validations and enhanced scalability.
Cryptocurrency projects that have issues with scalability can work on using other consensus mechanisms as a sidechain solution to improve scalability on the network. On the part of investors, they should consider choosing a project that is highly scalable so that they can have a good experience while transacting on the network choice.
How Regulatory Issues can be handled
One way to deal with regulatory issues in the crypto space is by regulating cryptocurrency in general. I understand that this could be a very hard one to do because of the creation of the cryptocurrencies, their supplies are not monitored by any governmental bodies which will make it hard. I read about how SEC had regulated one Bitcoin futures sometimes ago in the way that profits from the capital profits are taxed.
Furthermore, each country in the world that has an interest in this can also tax investors from their crypto assets that have been converted to fiat currencies. Another problem with that is if investors chose to exchange their assets through Peer-to-Peer (P2P) mode, on some exchanges an effective regulation can still be achieved if the government joins hands with exchange to tax each cryptocurrency to fiat currency.
I believe this would bring more trust to the crypto space and users can then have free access to cryptocurrency without fearing what the government can do to halt their interaction at any time, though the taxing would be hard on investors at the initial stage. In my country Nigeria, trading cryptocurrency is restricted and we have been using P2P, if one is caught, the Central Bank forcefully closes accounts.
So for me, taxation is more achievable to bring trust to the crypto space than regulation as the government cannot regulate the creation of these tokens or else if governments can invite new projects to submit an application for creating a project and be fully regulated. But these things would affect decentralization somehow.
Do you believe in the future of cryptocurrency? State your reasons. Any Recommendations?
Yes, I do believe in the future of cryptocurrency. Recently there are doubts about cryptocurrency, especially after the infamous Terra (LUNA and UST) crash which made many investors lose their money in the market of TERRA. Many governmental bodies have used that opportunity to emphasize that the whole crypto concept is a scam.
Furthermore, a lot of respected economists have stood against cryptocurrency, an example of these is Nouriel Roubini who is a professor of Economics at New York University. He was well known for predicting some projects that are not true and won't last, he has just hit on cryptocurrency as another bubble.
The source of the image
Nouriel Roubini has just declared cryptocurrency as a fake innovation that has no real value and expects it to collapse anytime soon, he believes crypto won't last. During the recent crash in the crypto space that also includes the unbelievable fall of Terra now Terra classic, a lot of people around the world have condemned cryptocurrency to be approaching its end. These things are troubling yet I believe in a future of cryptocurrency.
The Reasons why I believe in the future of Cryptocurrency
My Recommendations
Conclusion
Cryptocurrency is facing a lot of challenges at this time, especially with the crash of Terra, many lost faith, and people that are against cryptocurrency are using this to come up with words against it but I still believe in the currency that is transparent, decentralized, gives freedom of transaction and so on. I strongly believe in the future of cryptocurrency and I thank the academy for this very good topic. This is where I will be stopping for now. I invite @patience90, @dave-hanny and @jueco to participate.
Thank you for publishing an article in the Crypto Academy community today. We have accessed your article and we present the result of the assessment below
Comments/Recommendation
The issue of regulation in the crypto ecosystem has been curial to many speculators as foreign entities prey on this. Despite this, the ingenious innovations of cryptocurrency have helped create a balance in the struggle for financial power control. I for one am a strong believer in cryptocurrency potential regardless of what experienced economists say.
Total|9/10
Thank you so much for your review on my article professor, I too believe in future of cryptocurrency.
Thank you once again.
Excelente Post. Muy bien explicado. Exitos en el concurso.
I appreciate your wishes, thanks for reading.
If I will fall in love again on steemit, I would fall in love with you @temitopef. I love your understanding of this cryptocurrency of a thing.
You have a vast knowledge and you have written beautifully. I love your points my dear friend. I forgot recommendations in my post and reading yours made me aware of the the dangers of trading crypto without proper research or with all one's money with the thought that it will all be rossy.
The world is a better place with cryptocurrency. We are better persons because of Crypto. Go crypto!!! Go @temitopef.
You are so funny, so you would fall in love with me because I have some understanding about Cryptocurrency 😃, I am happy you are able to know the danger of not doing a proper research before investing your money into any cryptocurrency, and because of market volatility, we must also be careful not putting all our resources on a coin.
Thank you for your comment on my post and stay bless.
You have made an excellent presentation about cryptocurrency and you have discussed some of its excellent benefits. You have rightly said that its security is very high and its transparency is very good.
Thank you for reading, I'm glad you found my presentation excellent.
Yes you are right my dear friend because crypto market is very risky and we should do research before investing in it.
Yes it is a very good thing about crypto money. We can do p2p deals with the help of this and save our time because conventional money take a lot of time for transaction.
Thanks for sharing with us.......
We can not just enter and invest in any business with no proper research. and you are right carrying out transaction using conventional money takes time, sometimes there are limits to the amount you can send out depending on your account, going to local banking and being on queue for a long time. Cryptocurrency make transaction easy for us. Thank you for reading.