Cryptocurrency Overview
Various platforms are helpful in the marketplace and are viable for monetary transactions. Cryptocurrency is still young as there are motions in place to allow for the general adoption of digital currencies. Depending on the nature of projects, cryptocurrency can expand its talons to allow people to get jobs in different sectors such as writing, research, technical analysis, fundamental analysis et cetera.
Cryptocurrencies are digital tokens that are built to allow people to trade digitally. This medium operates with no central governing authority. Individuals can own cryptocurrencies that are stored on digital ledgers, regardless of their names, cryptocurrencies are not considered to be traditional cryptocurrencies per se. However, they have begun gaining traction over the years as millions of people all over the world are using digital currencies for business.
Furthermore, cryptocurrencies are not like physical currencies, and they are not controlled by a central authority like the central bank's digital currencies. However, when cryptocurrencies are minted or created, prior to their issuance, they are referred to as centralized currencies, they become decentralized after their issuance. I guess you may be inquisitive about how secure these transactions are? Cryptocurrency transactions are secured using encryptions. Since the entirety of their operations is online, these encryptions make sure of the authenticity and authorization of all transactions.
We have seen the volatile nature of cryptocurrencies. Over the years, several coins have risen and fallen affirming the opinion that not all cryptocurrency investments are risk worthy and able to guarantee you profit. This is why investors who doubt the assurance of a coin’s price, decide to use arbitrage to maximally gain the chances of making a good profit via arbitrage.
Comparison between cryptocurrency and conventional currencies.
There is some level of disparity between cryptocurrency and digital currencies now in vogue. Cryptocurrencies are decentralized. This implies that no special governing authority is in charge of monitoring and authorizing digital transactions. Participants that are chosen as node/block validators come to a consensus segmented into proof of work and proof of stake. However, every transaction is recorded on the blockchain. Let us examine some differences between cryptocurrencies and conventional currencies.
Traditional Currency
These are generally set to meet the demands required to serve as a bank reserve.
They are issued by traditional banks.
They are centralized
They are the commonest means to exchange value for.
The absence of P2P feature makes intermediaries and third parties needed.
SQL databases containing bank records can be altered easily.
Limits economic activities such as buying and selling because a country's legal tender can't be directly used in another Country.
Digital Currencies
Digital currencies are decentralized.
Owners of digital currencies can perform anonymous monetary transactions.
Cryptocurrencies are still being considered to be globally adopted as legal tenders.
The peer-to-peer feature negates the necessity for third-party intermediaries.
The building block for Cryptocurrencies being Blockchain, makes it difficult for a breach of transactional records.
Creates universal payment modes regardless of location.
Having spoken about the disparities, I would love to quickly highlight some similarities between the two. The major similarity between the two is that they both are currencies. People can use them to exchange value. Cryptocurrencies such as Bitcoin have made many millionaires. Having said all, the major thing to be aware of is that one is digital and the other is physical.
Innovations of cryptocurrency with its downside
There are several innovations in the crypto sphere. If you observe the tech space, there are many FinTech projects that are fully integrating blockchain into their modes of operation. Some of the downsides to these innovations include scalability and security. Blockchain technology has aided the operation of weak businesses. The characteristic features of blockchains make sure that all transactions are authenticated and can't be compromised due to the absence of external control centers. Furthermore, we have seen the impact of Cryptocurrency in the finance industry. In countries like Nigeria where Banks observe unannounced downtime and maintenance operations. Crypto coins have aided in helping individuals go around these lapses of delayed payments, unnecessary deductions of funds from your account, and so on.
The peer-to-peer mechanism used by cryptocurrencies is perfectly modeled at helping the system run optimally. The innovations of Cryptocurrencies transcend the finance world however, we see more of its impact in the financial sector because that's where it's more needed.
Paying merchants regardless of their location in the world has never been any easier. With digital currencies, you can pay for goods and services without encountering ridiculous charges such as you would encounter via traditional banking systems and conventional currencies.
Some of the downsides to the innovations of digital currencies include scalability. As earlier mentioned, this is the limiting factor to the smooth operation of Cryptocurrencies. These blockchains have a limited amount of transactions they can carry out per minute. With the increasing number of digital currency users, scaling Cryptocurrencies should be a priority so as to allow for multiple processed transactions in limited amounts of time
Furthermore, I already stated the fact that Cryptocurrencies permit anonymity. In other words, people can send and receive digital currencies without divulging their details. This may be good in some way but, research has proven that malicious users have taken advantage of this feature to send and receive funds discreetly in order to commit or promote some form of crime. This flows into the volatile nature of Cryptocurrencies. We have seen how volatile the market is in the past few weeks and months. Bitcoin's price has been in serious motions of uptrend and downtrend. Other altcoins and shit coins are currently being battered by the current movements of BTC. The volatility index of crypto is quite high and although crypto man guarantees some form of results, you are likely to lose your money in the twinkling of an eye.
How do you think major problems with cryptocurrency can be handled? Let this be a response to the downsides highlighted earlier.
Well, I may have few ideas on how to tackle the above listed problems. One of the ways in which we could solve the issue of scalability is by opting for better consensus mechanisms. If you observe carefully, you'll notice that the adoption of Cryptocurrencies in several countries is becoming easier. Thus, the need to improve the scalability of digital currencies. To do this, we may need to choose better consensus mechanisms. For now, bitcoin currently uses the proof of work mechanism to reach consensus however, it is slow. Users consider the PoW mechanism to be more rich in security although it is slow. The solution in view would be to operate using the proof of stake mechanism. Miners wouldn't have to solve Cryptographic algorithms using highly powered computations but consensus can be reached by the people with the highest stake in the system.
I may not have the best suggestions on how to handle the volatile nature of Cryptocurrencies however, I feel that a form of regulation could be implemented to guide against the rash action and activities of whales and market makers. This law could be created in a manner that it restricts whales from operating in ways that drive the market into bullish and bearish positions rapidly. Secondly, maybe a law or regulation designating a particular benchmark to which the price of a digital currency can fall per time. The issue isn't with the bearish and bullish movements but with the intensity of reverse actions in a few moments of time.
Do you believe in the future of cryptocurrency? State your reasons. Any Recommendations?
Yes I believe in the future of crypto. I wouldn't speak much on this because I believe everyone on this platform sustains the belief that Cryptocurrencies are going to take over the finance world in a time not too far from now. Steemit has shown over time that there are limitless possibilities enshrined in digital currencies. It made the news when El Salvador adopted bitcoin as legal tender.
There may be hiccups here and there around the operation of these currencies however, they are promising. $SHIB is being accepted in several places in the world as a means of exchanging value or services. Elon Musk keeps the social media busy with his tweets about Doge being used to buy Tesla motors and whatnot.
There have been projections regarding how much traction digital currencies would have made in some years from now ,and the numbers are looking beautiful. I personally have enjoyed blogging on steemit and being rewarded for it in all forms of ways possible. I've made new friends via this platform. I've been able to network with great minds all via blockchain technology. Yes, it has its limitations as stated earlier however, the hope is that in the nearest future, we would have been able to fully grasp the reins of crypto.
My recommendation still remains that, regardless of the Decentralized nature of the sphere, there could be some little regulating body that would secure the investments of people. We saw what happened to the Terra platform. Sadly, people who currently don't believe that Cryptocurrencies are valuable and are the future of finance would console themselves because of what happened to $LUNA. Other actions could be taken to improve on the security and scalability features of blockchains.
Conclusion
Finally, we can't really exhaust the possibilities that Cryptocurrencies stand to bring to reality but, we see that there's serious progress being made. I look forward to Cryptocurrencies doing more in the finance industry. I look forward to blockchain helping human existence in all quarters.
All the images used in this post were extracted from canva unless otherwise stated.