Steemit Crypto Academy Contest / S2W1 - How Cryptocurrency has Shaped the Financial Realm. What is Its Future? by @olabillions

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Overview of Cryptocurrecy

A cryptocurrecy is a data string that is encrypted and represents a unit of value. It is mostly used online because it is digitally produced. Its production comes from companies such as Bitcoin who are tasked with providing services using cryptocurrecy.

The movement of cryptocurrecy is performed using Blockchain, which is a peer-to-peer network. The blockchain acts as a ledger as it organises and monitors transactions among users of the blockchain.

They are not produced by any federal government of any country. Instead, they are produced through the blockchain network that is linked to the cryptocurrecy.

There are two ways of producing cryptocurrecy. One is through a process known as Proof-of-Work (PoW), where the network undergoes a mining process to produce the cryptocurrecy. The other is through a process known as Proof-of-Stake (PoS), where cryptocurrecy is produced as users convert paper currency to the cryptocurrecy to enable them have a stake.

One of the main qualities of a cryptocurrecy is that it is secured by cryptography. This make it hard steal and prevents double spending.

The purpose of the introduction of cryptocurrecy to the world is to solve some of the apparent challenges that come with Fiat currency.

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Comparison between Cryptocurrecy and Conventional Currency

Conventional currency and crypto currency have underlying values to them which make it possible for owner of them to pay for goods and services.

However there are some distinctions between them. We shall be looking at some of them below.

Crypto Currency

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Crypto currency is produced by a company involved in crypto currency operations. It is not controlled by any government of a Nation. It is decentralized in nature as it uses a peer-to-peer system. It has no government regulations on it (one of the reasons why many people haven't adopted it fully).

The transactions that occurs with a cryptocurrecy don't need the identities of the parties involved. Crypto currency is stored in digital wallets of the users (owners).

As cryptocurrency is hosted on a peer-to-peer system, transaction are done in a peer-to-peer manner and don't need any third parties e.g banks.

Since no third parties are involved, transactions takes place every day of the week. The cost of transactions are lower when compared with a conventional bank.

Popular crypto currency includes Bitcoin, Ethereum, Binance coin, etc.

Conventional Currency

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Conventional currency is produced and controlled by the government of a Nation. It is underpinned to a centralized system. It has regulations on it as it is heavily regulated by the government authorities in a country.

They are legal tenders in their respective countries being used. For instance, Naira is a legal tender in Nigeria.

Transactions involving conventional currency usually requires the identity of the parties behind the transaction. They currency is stored in banks and other government entities that accepts the currency.

The process for transferring conventional currency involves a third-party. This third party is usually the bank which allows transactions to flow through them.

Because banks handles transaction, operations are taken place during the working days, Monday to Friday. Then the cost of transaction are high–it is higher when done between two countries.

Popular conventional currencies includes Dollar, Euros, Pounds, etc.

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Distinctive Innovations of Crypto currency/ Its Downsides

Since the advent of crypto currency in 2009 a lot of innovations have taken place. Crypto currency has changed the way human relate with 'money'.

I would be discussing some of the distinctive Innovations of crypto currency.

1. Digitized currency:

Since the advent of crypto currency, it has brought about currency that is used digitally.

This means that crypto currency is mostly accessible on devices such as phones and laptop and needs internet to perform only operations. It is different from the Fiat (paper) money that we hold physically.

Peer-to-peer Transactions: Peer-to-peer transaction is a method by which someone can transfer funds to another person without needing an intermediary such as banks, transfer services, etc.

The invention of cryptocurrency came with a technology that allows funds to be transferred to another person easily. This is unprecedented because the traditional way has always been with the use of intermediaries.

2. Blockchain technology:

Crypto currency as we know it today wouldn't have been in existence of not for blockchain technology. The first ever crypto currency Bitcoin was launched using the Bitcoin blockchain.

Both crypto currency and blockchain goes hand in hand. Because crypto currency is a form of money that needs a secure platform to record it's existence.

A blockchain is a type of digital ledger where information can be recorded and stored in an immutable way. It is also effective as it prevents double recording which can lead to double spending.

Through the use of blockchain technology, crypto currency has been an effective and alternative form of money.

3. Tokenization:

Tokenization is the process of turning an asset into tokens. In crypto currency it is turning you Fiat currency into a token or coin. We can't make use of Fiat currency on any digital currency that is enabled by blockchain, so we have to convert them into tokens or coins.

Tokenization can also be used in other asset class such as real estate where an owner of a building can covert that building into tokens. When converted, the tokens can act as 'shares' which can be bought or sold easily.

4. Non Fungible Token (NFT):

This is a crypto currency that is 'non-fungible'. That is, it is unique and cannot be converted or replaced with something else.

It is different from other crypto currencies like Bitcoin, Litecoin, that can be exchanged with themselves or converted among themselves.

NFTs on the other hand are unique and created specifically for the creators or the users in need. It can't be exchanged for another NFT even if they have similar attributes.

They are mostly used in digital arts and collectibles.

5. Crypto currency wallets:

A crypto currency wallet is one which allows users to store and retrieve their crypto currency asset at will.

Just like Fiat currency which is stored in bank accounts, crypto currency wallets allows users to store their crypto currency safely.

You can also use the wallet to perform other functions like transfer of funds and making an order.

Downsides of Crypto currency

Crypto currency has brought about a lot of innovations and a lot of hype and commendation.

However, there are still some things to it that brings about some downsides.

We shall be looking into some of them.

1. The issue of scalability:

Scalability is a main concern because crypto currency has a lot of issues with number of transactions that can be carried out daily. This is further looked at when you see traditional giants like Visa, process much more transactions daily.

In addition to this, the speed at which the transaction takes place is also very slow in comparison to giants like Visa.

2. Susceptible to hacks:

Crypto currency is a digital form of money, because of this it is a prime target for digital hacks and cyber security breaches.

There have been a lot of situations where exchanges that store crypto currency has been hacked and millions of dollars in crypto currency has been parted with in the past. We have also seen where ICOs have breached thereby causing the investors their investments.

3. Environmental degradation:

The use of some crypto currency is not environmentally friendly. This is related to crypto currencies that uses PoW blockchain technology.

It uses a lot of electricity, which affects other users and industries. This has caused a lot of concern to the government of the day.

4. Lack of government regulations:

Crypto currency is not being regulated by an government entity. This has been a negative impact on the side of investors as they tend to see crypto currency assets as risky without the regulations from the government.

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How do you think major problems with cryptocurrency can be handled?

Looking at some of the major issues I have highlighted, here's how I think we can solve the problems.

In the issue of scalability there are new blockchain technologies that have come out and are being used. Some of them includes lightning network, sharding, etc which can help scalability.

For the issue of hack, crypto currency exchanges should use current technologies that can help combat attacks from hackers and also try to increase their cyber security.

For the issue of environmental degradation, crypto currency that uses the PoW blockchain should try to find an alternative that would help reduce the negative impact that they system is currently having on the environment.

The issue of government regulations is a sensitive one because of the nature of crypto currency. However, crypto currency experts should work with government agencies to see how best they can bring some regulations to crypto currency.

Do you believe in the future of cryptocurrency?

I believe in the future of crypto currency because a lot of development are ongoing as to improve upon the current structure of the crypto currency framework.

Even the markets are very volatile and there is little government regulations, there are lots of investors who are interested in the market especially as there are a lot of new crypto currencies that are entering the market and blossoming.

Also a lot of crypto currencies are becoming scalable whereby lots of transactions are done within a short period of time.

The total market capitalization of crypto currency is set to improve in the next coming years thereby increase from the current total market capitalization of just over $1.2T.