WHAT IS THE DIFFERENCE BETWEEN CCCRIIIPTOCURRENCY AND THE CONVENTIONAL FINANCIAL SYSTEMS
In this article we will be discussing a major question asked by potential users of the crypto system; the difference between cryptocurrencies and conventional coins, and we would be looking at the visible differences.
Cryptocurrencies were designed to be a substitute for using the conventional payment systems
CONVENTIONAL COINS: this derived its name of Fiat Money, there are currencies that are issued by the government for instance, the Italian one and then controlled by a central authority the Bank of Italy and, more recently, the ECB.
When we talk of ordinary currencies, the reference is also to legal tender coins which can be physical coins and banknotes but also on credit, as is the case for payments with various credit cards.
CRYPTOCURRENCIES: A cryptocurrency is a decentralized and computer-generated currency that is not controlled by governments or central banks. Virtual assets that use cryptographic technology to process secure and verify transactions.
WHY IS A DECENTRALIZED SYSTEM NEEDED
The decentralized systems do not need a middle man to operate, with this you do not need to ask anybody for loan before you can have access to it, and for instance go through an investigation that will decide whether to disburse it or not.
In fact, it will be enough to load the guarantees on a special smart contract, and this will spontaneously pay the loan immediately and without the risk of receiving a refusal - provided that satisfactory guarantees are provided, and that there are other users willing to disburse the credit.
In fact, DeFi, given the total lack of intermediaries, is P2P, i.e. it puts money lenders in direct contact with aspiring debtors, for example, and using interest rates as a parameter to decide who the money lent will go to.
That is, the money made available by the lenders will be distributed to the aspiring debtors who will agree to pay higher interest, as if it were an auction. Let's take an example.
If you need a loan, with the traditional financial system you need to contact an intermediary who will evaluate the loan request, ask for guarantees, and decide whether to provide it or not.
All this is handled automatically by public computer codes, verifiable by anyone, whose behavior is perfectly predictable, fundamentally based on anonymity and basic market logic.
In short, DeFi completely eliminates the discretion of classic intermediaries, delegating the entire management of the system only and exclusively to smart contracts, which are precisely the public computer codes, verifiable by anyone, and with predictable behavior.
Of course, due to its completely disinter ediated nature, and based on rigid IT logic, the elimination of discretion also produces some limits, such as the impossibility of obtaining a loan without adequate guarantees, which moreover must be integrated into smart contract (in fact they are generally cryptocurrencies).
But this is only the first concrete step of what is proposed as a real, unstoppable revolution to create a parallel financial system capable of reaching where the traditional system has never managed to reach.
FACTORS AFFECTING THE CRYPTOCURRENCY MARKET
With thousands of cryptocurrencies in existence, understanding the cryptocurrency market can be a challenging task, especially for beginners. So here are some of the major factors affecting the cryptocurrency market.
Availability
One of the many factors that affects the crypto industry is its availability, once a cryptocurrency can be obtained easily on an exchange, it will have a positive effect on the price, especially if it happens that the coin is on a popular exchange.
Security Issues
Nobody will want to invest in something that is not safe, this has posed to be a major issue that has been affecting cryptocurrency. The cypto is meant to be safer than conventional transactions and when it fails, people will begin to realize the crypto market is not as safe as they had thought.
Financial crises
Like other investments, the crypto market is also affected by financial crisis, health problem and the likes. Economic prices have a high tendency of affecting the price of cryptocurrency.
Cost of production
Cost of production is another factor affecting the cryptocurrency market. The mining process is related not only to supply and demand but also to costs.
When it comes to Bitcoin, for example, we have to mention that the mining or mining process becomes increasingly complicated and expensive , with an expected block time of 10 minutes.
MINING?
Mining is actually a procedure used to verify if a transaction is authentic. Like we said above, the cryptocurrency is decentralized meaning that it is not controlled by anybody, this makes the task of verification genuine since it is not left to the users.
IS TO POSSIBLE FOR EVERYONE TO GO INTO MINING?
Not everyone can go into mining, mining is only beneficial for big group of users. They try to guess the right number and divide the return between themselves.
It is much more likely for you to win a lot of lotteries in one day than for you to estimate the right number required for mining the next BitCoin block.
WHY IS THE CRYPTOCURRENCY SAID TO BE TRANSPARENT
From the analysis of the cryptocurrency above, we can deduce the answer to this question, it is said to be transparent because it doesnt involve a middle man, and all the processes for transaction can be accounted for.
APPROACH TO CRYPTO-CURRENCIES IN NIGERIA
Although so many persons are investing in Nigeria, the process has been made a lot more difficult due to the ban placed by the government on crypto trading, which to me is considered not fair.
Crypto is not fraud or Ponzi scheme so I see no reason why the government will place a barn on it. One of the actions that the Nigerian government has carried out is by giving out very strong notices on the consequences of investing in crypto currency markets.
This warnings were given out by the CBN and the Securities and Exchange Commission.
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