Steemit Crypto Academy Season 2: Learn About Cryptocurrency|Crypto Academy Week 14 - Homework Post for Professor@levycore

INTRODUCTION

Hello,friends of Steemit.
This is another week and another opportunity to participate in the steemit crypto academy homework. Many thanks to Professor @levycore for an excellent lecture delivered on Cryptocurrencies.

Here is my homework submission:

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Q1. WHAT IS THE FUNDAMENTAL DIFFERENCE BETWEEN CRYPTOCURRENCIES AND THE CONVENTIONAL FINANCIAL SYSTEM?

Cryptocurrencies are explained as a form of digital assets, created electronically and exists as data held on digital storage drives or computer system. It is based on a network that is distributed across a large number of computers.

Transactions made with cryptocurrencies does not require intermediaries or middle men, hence, the term DECENTRALIZED (simply meaning from sender to receiver). And the transactions are recorded on a system called the blockchain which is powered by individual nodes who are not controlled by a single individual or entity.

Now discussing the differences between cryptos and the conventional financial, the major one needed to take into consideration is that

• crypto transactions are DECENTRALIZED, after that, we have;
• Less policies and regulations
• Faster and efficient transactions
• Full control of your account

EXPLANATION OF THE AFOREMENTIONED DIFFERENCES ARE GIVEN BELOW:

• DECENTRALIZED MARKET: In a decentralized market, technology enables investors to deal with each other directly, the conventional financial system lacks this feature. For money to be sent through the conventional financial system, it has to pass through different third parties for approval, hence, taking time, depending on the transaction type. This unnecessary stress can be avoided as you can just make payments directly to the receiver.

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• LESS POLICIES AND REGULATIONS: In the conventional financial systems, there are some policies that one must abide by to ensure safe delivery of your funds, and failure to abide by these policies can lead to the banks blocking your accounts or cancelling transactions. Some of the policies are, daily transaction limits, anomaly in transactions too.
  These policies are absent in crypto transactions as you can make huge transactions without stress and also remain anonymous.

• FASTER AND EFFICIENT TRANSACTIONS: Since crypto transactions runs on blockchain technology, the efficiency of transactions is higher. This is because the transactions are monitored and approved by a lot of computers(nodes) all over the world, hence, faster in processing also. In conventional financial system, many of the transactions needs to be approved manually, as errors can occur and also a slow process.

• FULL CONTROL OF YOUR ACCOUNTS: When you store your cryptos in hot wallets, like the mobile wallets (e.g., Trust Wallet) and also cold wallets like the Ledger Nano-X, you have full control of your funds. And you can access your accounts anytime provided you have the required KEYS. Your money in the bank is in the control of the bank, and whenever the bank encounters certain problems, chance that you might lose your funds is really high.

Q2. WHY IS A DECENTRALIZED SYSTEM NEEDED?

Being a system that doesn’t depend on third parties like banks and governments to run transactions, as explained in the class, decentralized system is beneficial in various ways.

• Users can participate in a TRUSTLESS system: As trust in institutions is getting low as time goes on, many consumers are uncomfortable putting sensitive data, money and personal properties under the control of a central authority. “Decentralization solves trust issues by empowering multiple participants to manage a network. Users don’t have to trust a central authority.

• Better control and supervision: Decentralization ensures better control and supervision as the subordinates at the lower levels will have the authority to make independent decisions.

• Lower risks of systemic failure: Decentralization has given rise to digital currencies because of its ability to gain users confidence. In centralized technology, single points of failure can halt a network, such as when a banking website or ATM software crashes. In decentralized systems, a node that goes offline passes their workload to other nodes, which means application can remain up and running.

Q3. WHAT AFFECTS THE VALUE OF CRYPTOCURRENCIES?

The following factors affect the values of cryptocurrencies;

Taking BITCOIN as a perfect example of cryptocurrencies, what are the factors that affects Bitcoin’s price/value.

• DEMAND AND SUPPLY: The acceptance of bitcoin by users is a major factor that can affect its price. The popularity of a currency will raise its price, while on the other hand, a low demand for the currency will lower the value. In summary, an increased demand and reduced supply for a certain currency will drive up the price!

• RULES AND REGULATIONS: Because of the rapid increase in popularity of bitcoin and other cryptos, regulators are debating how to define these digital assets. While the Security and exchange commission (SEC) classifies cryptos as securities, the Commodity Futures Trading Commission (CFTC) of the United States classify cryptos as commodities, they have certain rules guiding cryptocurrencies.
  If these rules become too repressive, the value of the cryptocurrency drops. On the other hand, if they’re favorable to the crypto industry, they can act as catalyst for rapid growth. Since bitcoin is decentralized, i.e. not linked to any particular central government, regulations can have a direct effect on the price.

• POWER OF THE MEDIA: Several reports shows that the media has the greatest effect on the price of bitcoin and other cryptocurrencies.
  The general public gains a greater understanding of cryptocurrencies as a result of increased media attention. This has the ability to draw new users to cryptos.
  When a crypto investor finds new knowledge in the media, TWITTER as aa very good example, he will immediately retweet, or tell his friends, who will definitely do the same. The news will spread fast due to the power of the social media, and the price of the trending cryptocurrency will be affected. Positive media coverage of a crypto will usually results in higher prices, while negative coverage will yield the inverse result.

Q4. WHY CAN’T EVERYONE BE A MINER?

What is mining?

Mining is the process by which new cryptos are entered into circulation, but it is also a critical component of the maintenance and development of the blockchain ledger.

Why can’t everyone be a miner?

• Equipment and power are expensive: It is performed using sophisticated computers, which is very costly. The cost of specialized hardware can run from $2500 to $3500 or more. By the time you have invested that much money in equipment to mine crypto, you realize you could have simply invested instead.

• Too much risk: Because of expense of cryptocurrency mining there is simply too much risk. You could invest your time and money into mining and end up with nothing. Even if you’re lucky enough to successfully mine cryptocurrency, the price could drop. A deflated value would then leave you with a large investment in nothing.

Q5. WHY CAN CRYPTO TRANSACTIONS BE CALLED MORE TRANSPARENT?

• Cryptocurrency transactions are recorded on the BLOCKCHAIN network.
  One of the key benefits of the blockchain is transparency, as it allows consumers to hold the businesses they work with accountability for their spending.
  With the blockchain network, we can trace transactions on any wallet address and hence, know where the cryptos go, or where they come from, or how much is being transacted.
  Sites like https://xrpscan.com allows you to scan xrp transactions, https://bscscan.com allows to search the binance blockchain for transactions, https://www.blockchain.com for BTC transactions, and so on.

Q6. EXPLAIN THE DEVELOPMENT OF CRYPTO IN YOUR COUNTRY.

Nigeria is Africa’s largest economy, its most populous country, and home to one of the youngest populations in the world, due to these information Nigeria has also become the continent’s largest Bitcoin market by trading volume, according to UsefulTulips.org.

The ascent to Bitcoin prominence Is rooted in a sharp fall in remittances during the pandemic, as well as the Country’s state and the local currency, Naira, being ravaged by the twin blows of COVID-19 restrictions and plummeting oil prices.

In an effort to keep increasingly scarce US Dollars from leaving the country last year, some Nigerian banks placed curbs on offshore debit card transactions and limited cash withdrawals.
Against this backdrop, BTC and other cryptocurrencies soared in popularity since last year, as both a hedge against the eroding purchasing power of the naira, as well as a way to move money around more EASILY.

Recently, the Central Bank of Nigeria (CBN) placed a ban against the purchase of cryptocurrencies in Nigeria, though, this ban made trading of cryptocurrencies stressful, It doesn’t appear to have curbed appetites for crypto as Bitcoin trading volumes didn’t stop increasing.

Despite the CBN directive, Nigerians are determined to leverage cryptocurrencies as to maximize their earnings, especially with rising inflation and limited access to foreign exchange liquidity.

Q7. CONCLUSION

The decentralized network is huge and has a lot to offer compared to the conventional financial system, as it allows holders to express their free wills and access their funds whenever they like. Unlike the conventional financial system that incurs charges on every transaction and charges varies according to amount being transferred, crypto charges are kind of fixed for every single crypto transaction. When it comes to cryptocurrency in Nigeria, aside the ban, its going great and I’m happy that transactions are going fully digital and decentralized, less stress and frustrations. That’s progress to me.

Thanks for reading through.

Cc:
@levycore
@steemitblog