Crypto Academy Season 2 week 6 // Homework Submission post for Professor @levycore // Learn About Cryptocurrency

Hello Professor @levycore, I am @ononiwujoel one of your students in Crypto Academy and this is my homework submission post for Learn About Cryptocurrency assignment.

What is the main difference between cryptocurrency and the conventional financial system?

Before I go into showing difference between this two types of currencies I'll first explain what cryptocurrency is according to my knowledge on it.

Cryptocurrency is basically a virtual currency. It is the combination of the words cryptography, cryptology and currency which can also be called digital money.
Cryptocurrency is the money used in the digital world to buy goods and services and also for exchanges just like fiat currencies. And examples of popular digital coins includes Bitcoin, Etherum, Dogecoin, Litecoin, Ripple and Tron to mention but a few.

Now back to out question, the main differences between cryptocurrency and the conventional financial system are;

• Virtual vs Tangible Qualities:
  Cryptocurrency is a totally digital currency and can't be felt physically but only used as digital coins. They can be stored in Crypto wallets and traded in Crypto exchanges.
  While on the other hand, Fiat currencies can exists as physical notes and coins that can be felt and physically exchanged.

• Centralized vs Decentralized:
  Cryptocurrency is fully decentralized and every transaction or trade done with cryptocurrency is managed with the blockchain system. So this makes it possible for digital coins owners to have full control of their wallet since it is not centered around any authority or laws.
  While on the other hand, the Conventional financial system is fully centralized and controlled by governments, state laws and central banks.

• Security:
  Cryptocurrency like I mentioned before uses a brilliant technology called the blockchain system, in this system user data is stored in many servers connected by blockchain so it's almost impossible to hack cryptocurrency accounts
  While on the other hand, Fiat currencies operate with centralized systems so there is every possibility of accounts getting hacked.
  Moreover there are several cases of fiat accounts being hacked and funds stolen.

• Transparency:
  Cryptocurrency transactions and trade are more transparent because every transaction records are available for everyone to see and make reference to. So it is easy to trace transfer of assets.

• Middleman vs No Middleman:
  Trading cryptocurrency can be done directly from seller to buyer without having to go through any Middleman like banks and so there are likely no transfer charges.
  While on the other hand, Trading or exchange of Fiat currencies require the involvement of banks or other financial institutions to oversee the process and so there are likely to be transfer charges and other limitations as to policies of banks and transfer agencies.

• Supply and Inflation of Currencies:
  The conventional financial system also have a setback in the issue of supply and inflation of prices because there is no limit to the amount of currencies printed by central banks but on the other hand cryptocurrencies usually have a specific amount of coins available and this makes it easier to handle inflation of prices.

Why is decentralized system needed?

There are several reasons why many people especially traders and investors are craving for the decentralized system but the most likely of them all to my own knowledge is because they want a system that gives them full control of their funds without having to go through policies which are very stressful and discouraging in most cases especially for international trades.

Many people can tell of bad experiences from the centralized systems which includes cases like accounts getting blocked or restricted for not following the rules of the central authority.
Some accounts even get hacked and manipulated and many times funds get lost in the process before the account is corrected.
So this experiences have made many people to start seeking for an alternative that can provide sure security of funds and assurance of not being blocked or restricted by any authority and the decentralized system has provided a solution to all these issues.

I have to also mention the fact that decentralized system allows people to make trades and exchange around the clock and speed of transaction is far better than that of the centralized system.

What affects the value of cryptocurrencies?

Factors that can affect the value of cryptocurrency includes;

Demand and Supply:
Using dogecoin as a case study, If there is an increase in demand for dogecoin and it has a low supply, then the price of dogecoin will increase and same thing vice versa.

This principle applies to all cryptocurrencies, the change of prices is mostly as a result of demand, supply and scarcity of the cryptocurrency.

Popularity:
Almost every investor prefers working with a cryptocurrency that is well known and pronounced in the crypto market and when there are many people investing in a particular digital coin the price tends to increase.

Using the Bitcoin as a case study, Bitcoin has an edge over other cryptocurrencies because it is the first cryptocurrency and as such is the most popular digital coins. We can all see how the price of Bitcoin rose to several thousands of dollars from 2008 till date. So popularity is a factor that can't be overlooked.

Sentiments:
Public sentiments about cryptocurrency tokens goes a long way to influence their prices because most people use the information from the media and public as basis to determine whether to invest in a digital coin or not.

We can all see the recent social media arguments about Bitcoin and its after effects on the price of Bitcoin. So this also play a huge role in the value of cryptocurrencies.

Regulations:
Cryptocurrency is a decentralized currency, that is not managed or backed by any central authority. So the regulators had to come into the picture and administer the crypto space.
So when cryptocurrency is not encouraged by state governments, maybe by banning or restricting of cryptocurrency it tends to affect the prices negatively and also when cryptocurrency is encouraged by States and big businesses, there is an increase in prices.

Why can't everyone be a miner?

Since there is no central authority or central bank, there bound to have a way of gathering every transaction carried out with a cryptocurrency so as to create a new block. Network nodes that perform this task are known to be dubbed “miners”. Therefore, if a group of transaction is compiled into a block, it will be appended to blockchain. Hence, whoever who appends the blocks will get rewarded with some of the cryptocurrency.
But this process involves complex mathematical calculations, computers with a special specifications and several other criteria, so there are few people with the required skills and equipment to be miners.
And at such, not everyone can be a miner.

Why can cryptocurrency transactions be called more transparent?

Cryptocurrency operates on the blockchain system so every transaction made is recorded openly where everyone on the blockchain can see it. So this makes it easier to trace transactions made by anyone unlike the centralized systems used by fiat currency system where transactions can be seen by anyone except the central authority sends notification of a transaction and even as at then only the person directly involved can see the notification.

If you visit my blog on steemit, you can open my wallet and see all my transactions on steemit. Yes it is that open and transparent.

So when it comes to transparency, cryptocurrency is a good demonstration of real transparency.

Explain how the development of cryptocurrency in your country

Cryptocurrency development in my country is actually not impressive.
I live in Nigeria and here is Nigeria cryptocurrency is not trending like it is in most parts of the world.
When Bitcoin started gaining popularity in 2008 there were very few people in Nigeria that even had an idea of what cryptocurrency means and how it works and it has remained almost the same way for the past decade with few people being interested in the crypto market.

The major reason for the poor development of cryptocurrency in Nigeria is hostile government policies.
In my opinion, Nigeria government is the most hostile government to cryptocurrency because they don't only discourage cryptocurrency by not allowing any form of trading with cryptocurrency but they have also completely banned cryptocurrency in the country for reasons best known to them.
And this has made cryptocurrency traders and investors to be limited compared to their counterparts abroad.

Many firms that work with cryptocurrency no longer trade in Nigeria because of the new herculean policies of the government, moreso some cryptocurrency exchanges no longer work with us.

So this has furthermore discourage the little population interested in cryptocurrency and I can tell you that many are already venturing out for other business alternatives.

In summary, cryptocurrency development in my country is very poor mainly because of government policies and lack of enlightenment on cryptocurrency of the population.

Conclusion

Cryptocurrency is obviously the future of currencies, it is not yet fully accepted by state laws and the general public due to poor knowledge of it and what it offers but in the nearest future we are likely to see a world where there may be no fiat currencies but only digital assets.
Cryptocurrency blockchain technology have also shown what having full control of your own accounts and funds feels like and I can tell you people are now getting interested everyday.

Thanks for viewing my work and hope I met your expectations.

Cc: Professor @levycore

By@ononiwujoel