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

The professor has prepared a detailed article on cryptocurrencies this week. After reading the very useful informative course article, I decided to prepare my homework.

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

Bitcoin (cryptocurrency), developed and released by Satoshi Nakamoto, may be one of the greatest inventions in human history. Most people are not aware of this yet. The fact that it is a speculative and manipulative entity prevents us from seeing its true potential and true value. When Bitcoin is more stable, it will cause us to better understand its true value when it solves some problems. It has great differences and advantages compared to the traditional financial system. To fully grasp this, you need to send cryptocurrency to an acquaintance living on the other side of the world.

I think the main differences between cryptocurrencies and traditional systems are as follows.

Decentralization/Centralization: In my opinion, this is one of the biggest differences between cryptocurrencies and traditional finance. This is the reason why people show interest in cryptocurrencies. While there is an authority in traditional finance, there is no center in cryptocurrencies. When trading with cryptocurrencies, you do not need permission or approval from any authority. Today, there are cryptocurrency projects that are centralized, but I am not interested in them in any way, as those projects are against the spirit of cryptocurrencies.

No intermediaries / intermediaries:

There is no intermediary institution in cryptocurrencies. Transactions take place on the blockchain, are recorded. Miners confirm transactions that take place on the blockchain. Miners have nothing to do with intermediaries. Miners are needed for the existence and continuity of the system. Today, there are cryptocurrencies that are not mined, such cryptocurrencies are central. There are brokerage houses in traditional finance. We have to pay a large amount of commission to brokerage firms.

Transparency: One of the distinguishing features of cryptocurrencies from traditional finance is transparency. Thanks to blockchain technology, transfers and transactions are open to everyone. People can see all transactions clearly. In the traditional financial system, you can only see your own transactions and it is not possible to talk about transparency.

Inflation, supply:

In traditional finance, there is no regulation yet on inflation and aggregate supply. The uncertain and high inflation and supply is a big problem. In cryptocurrencies (bitcoin), inflation is generally low and the total supply is clear. Commitment to this increases the reputation of cryptocurrencies.

Transactions Faster

Transactions in cryptocurrencies are faster than traditional financial systems. In addition, transactions in cryptocurrencies take place every day of the week, at any time of the day. There is no such concept as working hours. You can make transfer transactions at any time of the year. Since we can make transfers in cryptocurrencies at any time, since it is decentralized, there is no intermediary institution, and it has blockchain technology, transactions are faster than traditional systems.

Secured:

Cryptocurrencies are more secure than financial systems due to their technology. Security issues such as hacking are very rare. Hacking and security problems are common in financial systems.

Why is a decentralized system needed?

As people become more conscious, they are looking for ways to become more liberated. They plan ways to move away from the center and authority. In decentralized systems, people feel freer and more protected. They think their funds and assets are safer. Indeed, our funds are not reliable in central systems. The authority or the center can block or freeze our funds at any time. In this situation, there is nothing we can do.

The biggest requirement of their decentralized systems is the security of our funds. Apart from that, transactions take place very quickly in decentralized systems. For example, it takes only 3 seconds to transfer Steem to someone who lives on the other side of the world on a Steem blockchain. Imagine sending money to someone on the other side of the world with a bank. Imagine how much time and cost you will arrive. What a terrible difference is there?

Transfer fees are very reasonable in decentralized systems. These fees are also paid to miners. It is necessary for the continuation of the system. In central systems, brokers take part in the system to be richer.

We need a decentralized system for a more liberal, less costly, more secure life where transactions will take place faster.

What affects the value of cryptocurrencies?

There are many factors that affect the value of cryptocurrencies. I will give most of my examples specific to bitcoin.

Self-Proving / Popularization: The most popular of cryptocurrencies is bitcoin. Bitcoin was invented 12-13 years ago and has proven itself during this time.It showed all cryptocurrency enthusiasts that this is a great system . Thanks to a great technology, Bitcoin was able to increase from the penny price to $ 65,000. The value of cryptocurrencies, which fulfill their goals in the cryptocurrency industry, is constantly increasing.

Aggregate Supply / Inflation: One important issue that increases the value of cryptocurrency is inflation and supply. Bitcoin's total supply is clear and its inflation is very low. Low inflation creates a shortage of cryptocurrencies in the market and causes the price of cryptocurrencies to increase due to the supply-demand balance.

Regulations: States have not yet taken clear steps on cryptocurrencies. They have alternatives like ban, restrict, release completely. The restrictive or prohibitive attitude of some countries sometimes significantly reduces the price of cryptocurrency.

Current events: Current events affect cryptocurrency prices. For example, the events in the US last year and the proliferation of covid19 cases increased cryptocurrency prices. The news about the finding of the Covid19 vaccine also decreased the value of the cryptocurrencies.

Big company interest: Paypal's statements about cryptocurrencies last year caused a significant increase in cryptocurrency prices. Billion dollar companies' interest in cryptocurrencies significantly increases the price of cryptocurrencies.

Speculations: Recently, this has been one of the factors that have affected the value of cryptocurrencies the most. Especially the statements of people like Elon Musk about cryptocurrencies significantly affect the price of cryptocurrency.

Why can't everyone be a miner?

Mining can vary in blockchain protocols. Mining works in different ways in consensus algorithms such as Proof of Work, Proof of Stake, Delegated Proof of Stake, and Proof of Burn.

In order to mine in the Proof of Work consensus algorithm, it is necessary to be knowledgeable and have various devices. Therefore, it is necessary to meet the necessary conditions to be a miner in blockchains where the Proof of Work consensus algorithm is used.

To be a miner in the Proof of Stake consensus algorithm, you need to lock your funds in the blockchain network. If you do not have enough assets, you are not able to become a miner.

To be a miner / witness in the DPos consensus algorithm, for example the algorithm that uses Steem governance, you must meet certain requirements. Only 21 users have the chance to witness. In addition, the witness must set up various mechanisms.

To become a miner in the Proof of Burn consensus algorithm, it is necessary to send the blockchain or another blockchain's cryptocurrency to an unreachable address. As a result, it is necessary to burn the crypto money. You can meet these conditions and become a miner.

As I explained, there are many consensus algorithms. All of them have certain criteria for being a miner. Not everyone has a chance to become a miner, as not everyone can meet these criteria.

Why can cryptocurrency transactions be called more transparent?

The transparency and decentralization of cryptocurrencies provides people with great confidence. The fact that all transfers can be monitored and all transactions are open to everyone is one of the important differences that distinguish it from traditional financial systems. This difference has been realized thanks to blockchain technology.

For example, suppose I send 0.1 BTC to the bitcoin address owned by Professor Levycore. Miners in the bitcoin network confirm and verify the bitcoin transfer I made. This transaction is immutably recorded in the bitcoin network. It can be seen by everyone in a transparent way. There are many tools on the internet to see and monitor these transfers.

I have said that anyone can see transactions in cryptocurrencies. Normal users cannot see transactions in traditional financial systems.

Since blockchain technology is not used in traditional financial systems, transactions are not transparent. In addition, its central structure prevents transparency.

Blockchain technology makes it unnecessary to store transactions and transfers in cryptocurrencies. Therefore, it is designed to make transactions open to everyone.

Explain how the development of cryptocurrency in your country?

I live in Turkey. I can say that we are the most interested in cryptocurrencies in the world. One of the reasons for this is that confidence in the Turkish lira is gradually decreasing. The Turkish lira constantly loses value against the dollar and against gold. Users in Turkey find blockchain technology reliable and prefer to invest in cryptocurrencies.

Despite the high interest in cryptocurrencies in Turkey, no regulation has yet been made in the country. Regulatory work continues and is expected to be announced in the near future. Taxation is expected to be among the regulatory issues. I do not know how the tax rate will be, but high taxes drive people away from cryptocurrencies.

But a few months ago, suddenly, at midnight, there was a small regulation regarding cryptocurrencies. The use of cryptocurrencies for payments is prohibited. For example, you cannot use cryptocurrency when buying a house or car. However, you can buy and sell cryptocurrencies on the stock exchange.

Stock exchanges were required to notify the financial police of large amounts of trades.

A while ago, the owner of Thodex, one of Turkey's popular stock exchanges, took the users' funds and fled abroad. Such a problem / incident has caused people to be wary of cryptocurrencies.

Conclusion

Cryptocurrencies have become very popular over traditional financial systems. Investors' interest is constantly increasing due to its decentralization, the absence of intermediaries in transfers, the fast execution of transactions, very low inflation, and the continuous increase in value in general.

Cc:
@steemitblog
@levycore