What is the fundamental difference between cryptocurrency and the conventional financial system

Cryptocurrency is a decentralized blockchain and a digitalized asset which is patterned to work as an exchange medium where the record of ownership of individual coins are stored in a database file with the use of standard cryptography to manage the establishment of additional coin, for transaction securement and the verification of coin transfer ownership. Cryptos are not like paper money which its existence is physical but they exist in a virtual form.

They are modes of payment that can be exchanged for products and services online. The transactions made with Cryptos are paid directly between the buyer and the seller, without the need for intermediaries. The record of transaction and the usage of Cryptos are managed on various blockchain platform.

Bitcoin,Litecoin,Ripple,Ethereum,Dogecoin,Cardona and others are types of Cryptos.Currently ,we have nothing less then 9,826 types of Cryptos worldwide (according to Coinmarketcap). It should be noted that there is no central authority saddled with the authority of controlling cryptocurreny such as the Central bank or the government.

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The conventional financial system

This is a body which are offered by banks and other financial institutions which are not assured by government agencies such as bank loans and bond which are issued in accordance with guidelines set by government sponsored agencies.

By this,such bond or loan can be sold in market that are secondary in nature. The conventional financial system can be related to fiat money which is a type of currency which is issued by Central bank. Fiat currency are like legal tender based on the credit of the economy.

The main difference between both is that the government issues fiat money and are regulated by the central bank while Cryptos are digitalized asset or currencies which serves as an exchange medium and are not government controlled.

Why is decentralized system needed

Decentralized system which means diffusion of power and authority make policies, strategy and decides. They are needed so that no body can influence or control the value of cryptocurrency hence, it will promote flexibility and development.

The viewing of decentralization should be a relative and not an absolute concept. This system has caught the attention of the world generally through the invention of blockchain technology like the ones

Bitcoin,Ethereum and other cryptocurrencies make use of which resulted into the ability to verify the ledger on which transactions are made on leading to no need of central banking authority

What affects the value of cryptocurrencies

The following can be seen as what affect the value of cryptocurrency:-

1 Increase in demand:- supply and demand is an important factor that affect the value of tradable things in which all digital currencies are inclusive.

For instance,if people buying Ethereum are much and other people are willing to sell, there will be an increase in price and vice versa. when the usage of a crypto increase drastically, there will be a big increase in the market capitalization as a result of this, the value of Cryptos will be affected.

2 Inflation of fiat currencies:- in this case, if there is fall in price of fiat currency,then there will be an increase in price of cryptocurrency such as bitcoin(will increase in respect to the given currency),because there will be ability to get more of such money with the Crypto(Bitcoin).

3 Cost of production:- the opportunity and direct cost associated with the production of a coin will also affect the value of cryptocurrency. For instance,the energy and resources that are put together in the mining of Bitcoin is the reason why Bitcoin has value, hence, it has a high production cost.

Why can’t everyone be a miner

Mining is a process of entry of new cryptocurrencies into circulation. Cryptocurrency mining is costly and painstaking. Everyone can't become a Miner because the process of verification of Cryptos are unknown to some people.

Why can cryptocurrency transactions be called more transparent

The transactions of cryptocurrency is transparent because of the abandonment of intermediaries but the use of blockchain technology which will automatically process,record and work on the coin owned by individual trader or investor without any manipulation of central authorities.

The blockchain users are given private keys that identifies them individually. This keys enables them to hold and transact at will. This act can be seen in financial world as the highest level of transparency. Also, the decentralized system in which cryptocurrency make use of makes it transactions to be true and fair in nature i.e transparency.

Development of cryptocurrency in Nigeria

Nigeria's interest in Cryptos especially Bitcoin got to the peak in 2020 during summer which shows itself after researching the trading volume of Bitcoin against the currency domestically used in transacting virtual currency.

Trading in Cryptocurrency occurs in Nigeria than almost any other places in the world which reflects a loss of truth in traditional forms of investment.

Research shows that out of the top 10 cryptocurrency traders in the world, Nigeria is ranked 3rd in which USA and Russia comes 1st and 2nd respectively

. Cryptocurrency has developed rapidly in Nigeria due to no need of third party financial institutes but transactions are made base on trust and evidence.

Also the Anonymity for payment nature of cryptocurrency in which users private and public keys are only required for transactions instead of the full personal particulars which are common with third party financial institutions made the development of cryptocurrency in Nigeria more efficient.

Conclusion

cryptocurrency is a very good and profitable platform in which people should invest in because of it high acceptability and transperancy compared to the conventional financial system.

The core knowledge of the cryptocurrency one wants to invest into should be known and researches should have been made in advance by the investor so as not to enter into a loss oriented trading investment.

@levycore