Crypto Academy Week 14- Homework Post for Professor @levycore on Learn about Cryptocurrencies.

Good Day Steemit users, this is my Homework Post for Professor @levycore on Learn about Cryptocurrencies. This assignment is written by @beckie96830 in partial fulfillment of the topic; Learn about Cryptocurrencies.

Introduction to Cryptocurrencies

Source

The idea of crypto currency didn't start today but as opposed to conventional financial systems it can be viewed as recent because the latter has been in existence longer. Since the inception of crypto currencies, more than half of the world presently has an idea. It didn't completely eliminate the conventional financial systems rather they work side by side with each other.

The circulation of crypto depends first solely on the government of a particular nation. Traditional or Conventional, can be used in place of each other, financial system on the other hand is a widely accepted form of transaction.

What is the fundamental difference between Cryptocurrency and the conventional financial system?

Cryptocurrencies which are also known as virtual currencies, are means in which various transactions are authorized in a decentralized platform using cryptography to ensure adequate security. The name ‘crypto’ originates from the greek word, ‘kryptós’, meaning hidden or private. The value of crypto currencies is derived from it's purchasing power and because it's operates on a decentralized platform the currencies are virtually mined and traded in the block chain. The block chain records every crypto currency transactions and these transactions can not be altered at any point in time by either the users or developers of the platform.

Source

Conventional Financial System makes up of consists banks and non-bank financial institutions. They are widely and commonly used method of financial transactions across the globe and financial world. The value used in transaction is physically printed in paper and are referred to as fiat currency. The basics of its operations includes it's instruments that facilitate it's operations and improve its services to it's client's. It's instruments includes credit/debit cards, ATM, POS, Mobile Banking, Deposits and Lending rates and a few others among others. Banks which are the core financial system is a great constituent in an economy. They can be found across nations operate at different levels with relevant authorities regulating their activities.

Why is a decentralized system needed?

Decentralisation according to Louis A. Allen refers to a long-term attempt to transfer all authority to the lowest levels possible, with the exception of that which can only be exercised at centralized locations. There are various reasons why it's needed and it's explained below;

• It relieves the stress of the administration: The burden of making decisions by the top decision makers is reduced and the mantle of power is shared among other relevant members of the system.

• It ensures diversification of activities: The activities in a decentralized system will be well diversified and the authorities wouldn't find it difficult to engage in other activities outside its scope of operation.

• It ensures efficient and effective supervision and control: In a decentralized system, everyone is equal in the sense that those that are seen as subordinates can also make decisions and carry out adequate supervision and control of activities and also make recommendations where necessary.

• It assists in fast and easy decision-making:
  Decentralisation brings about fast and easier decision-making of members based on their level of hierarchy.

What affects the value of cryptocurrencies?

Source

The value of crypto changes in the market due a number of reasons some of which includes:

• Unanticipated changes in the economy: This can arise from election conduct, death of a prominent person in the economy, pandemic, economic downturn, etc. All these vices plays an inherent role in the affecting the price of crypto currency in the market.

• Market Opinions: There are a lot market predictions and opinions publicly made by people that affects the value of crypto currency. When traders and other participants view these posts or make their various predictions, it can change their views. It raises doubt in them and a great number of users might decide to sell or buy a large volume on which the price will ultimately increase or decrease.

• Government Policy: The period my country Nigeria announced the ban of banks and other financial institutions in trading crypto currency there was a lot of panic selling for Nigerians in the market. It affected the price of various cryptos as a lot of people across the country where such ban doesn't exist where willing to buy at a relatively low rate. A lot of people lost their funds in the process. The ability of the government to accept public trading of crypto currencies can act as a determinant of the value of crypto.

• Coin Halving: This is done to reduce the circulation of a particular coin. This is done by companies who deal in crypto currencies to it's value and demand in the market. A typical case is that of Bitcoin that has been halved over the years and presently a single mine of Bitcoin is 12.5 coins as against it's quantity years ago. In 2009 when Bitcoin was first mined, one block could fetch 50 BTC. In 2012, it was halved to 25 BTC, subsequently in 2016, it was halved to 12.5 BTC which is currently in use.

• Collaboration with companies and exchanges: In recent times companies both in the financial system and other systems now partner with each other to trade crypto currencies. It can sometimes lead to the introduction of new coins that can alternatively affect the prices of existing coins in the markets because a lot of users would want to try buying the new coins at the least due to it's rate and availability in exchange platforms. Exchange platforms can also assist by listing as many coins as possible for traders to buy and sell.

Why can't everyone be a miner?

There are two categories of people in the crypto world that is the traders and the holders. These two participants coexist in the market where they can be flexible enough to do whatever they want. Some goes for the miners who mine coins.

Source

Mining constitutes of various, sometimes difficult, algorithms used to authenticate transactions in the block chain. This takes time, focus and patience of which not everyone has. That being said, below are few reasons why everyone can not be a miner.

• The cost of energy is high: Mining involves a lot of energy both physically and electronic wise. To start the mining process you have to be sure of uninterrupted power supply, high capacity computers and storage devices and a conducive environment. Limitations in any segment can frustrate a prospective miner.

• The cost of equipment is high: Recently, there is an increase in the demand of crypto currency as opposed to the limited facilities used in mining them. Equipment that can run these algorithms are usually difficult to purchase and somewhat expensive too. It's not easily available for purchase and its usually purchased by companies in the crypto currency business.

• The return of investment is sometimes low: If the coins mined doesn't show positive response in the market, this can affect the miner who probably invested more than bargained for and isn't getting a positive response. Not everyone is ready to take the risk of mining for a low rate of return and the outright competition it faces with other companies.

• The governing policy: Crypto currency isn't yet widely accepted amongst all the countries of the world. For nations that face government ban on crypto currency it would be a violation of the law engage in any transaction more or less mining crypto within the boundaries of the country.

• The ban on mining apps by Google: To mine crypto currency has been made easy recently. There are the existence of make shift apps that assist miners though it isn't completely reliable. Google banned mining, it's argument was that it can cause, in the case of mobile phones, battery damages. It can corrupt the system if a lot of mobile phones log in and start mining and it's prone to over heating.

Why can cryptocurrency transactions be called more transparent?

One thing about the transactions in the block chain is its transparency. There's always a record of each transaction publicly stored for access. However there are other reasons why crypto transactions can be more transparent;

• Its irreversibility: All transactions carried out with cryptocurrency are irreversible. This means nobody can falsify the transaction record to suit favorable conditions. This boost confidence in the mind or users, miners and others alike. Altering any transaction means having to make some other changes which takes time and almost impossible to complete.

• Its Decentralised: This simply means no person control the block chain. There is no central system that controls the block chain and users can freely perform transactions without fear of facing limitations from higher bodies in the platform. Transactions move from end to end users without passing through a chain of transaction process.

• Availabilty of various transaction records: The level of transparency crypto has even includes showing your wallet value which most users given the opportunity would love to hide. All these information are accurate recorded and made public and they can be easily tracked.

Explain how the development of cryptocurrency in your country?

The development of crypto currency in my country: Nigeria

It's on record that crypto currency started in my country as far back as in 2009 alongside the introduction of Bitcoin the first of its kind. As times evolved the adoption of crypto currencies became widely accepted and traded. February of 2017 crypto trading reached $1.3 million which happens to be the first of its kind in the country. Crypto exchanges owned by Nigerians started to spring up to help facilitate transactions in the local currency. One popularly known crypto exchange is called Roqqu.

Roqqu is founded by a Nigerian based entrepreneur called Uchenna Nnodum. It currently offers a limited number of coins of which Bitcoin, Etherum, Steem, Hive are among. It has it limitations cause of it's coin listings. Due to the recent government policy on currency it no longer buy or sell as an exchange, rather it offers it platform to merchant and traders for Peer to Peer transactions.

Statistics in the global market data tracker reports over $400 million worth of crypto currency traded in Nigeria in as at 2020. Also, my country Nigeria ranks 3rd after USA and Russia in trading cryptocurrency. Not even government regulations was able to stop trade in the country as a lot the citizens have found alternative ways to trade safely and without violating the law.

Conclusion

It is important to note the major difference between crypto currency which is decentralized and the traditional financial system which is centralized. This alone gives users a sense of security as they choose their preferred method or system.