Steemit Crypto Academy Contest Season 2 Week 1 - How Cryptocurrency has Shaped the Financial Realm. What is Its Future?
Hi friends, it's a new season of the steemit challenge and I'll be participating here on crypto Academy.
This is week 1 of the new season 2 and we will discuss the topic How Cryptocurrency has Shaped the Financial Realm. What is Its Future?
Cryptocurrency is no longer a new term especially to those on steemit and other decentralized social media platforms. Cryptocurrency as a word is derived from cryptography and currency
Cryptography involves sending and receiving messages that have been carefully secured or hidden via some mathematical techniques while Currency refers to a recognised medium for payments, trade and storage of finance. So, Cryptocurrency can be defined as a secured virtual currency that can be used same way as fiat currencies.
Cryptocurrency runs on decentralized blockchains which are digital distributed ledgers which take record of transactions in a secure and decentralized manner. Cryptocurrency also operates a peer to peer network where people can exchange assets directly without a Middleman.
Financial and monetary systems remain a top priority to businesses and humanity at large as it is almost impossible to run a smooth society without good finance systems. The world moved from the trade by barter system into the fiat system where currencies are printed and standardised by the government as a means of exchange. While some of this fiats are backed by tangible assets like Gold and Oil, many others are backed by trust. Either way fiats came to be accepted means of exchange but are highly centralized and controlled by banking systems and governments.
This led to people searching for other strong finance systems where assets can be in full control of their owners and this led to the blockchain systems innovation
Blockchain technology is believed to have existed long time before the first successful cryptocurrency(Bitcoin) was launched. This technology provides answer to request of many people globally and has proven to be one of the best inventions of the century.
Bitcoin was launched in 2009 as the first cryptocurrency with a Proof-of-Stake consensus protocol by Satoshi Nakamoto whose identity remains anonymous till date. Bitcoin saw waves of success after its launch as it was accepted by many and its worth grew from cents to thousands of dollars in the past decade thereby prompting the launch of several other crypto projects which have achieved successes in their respective elements.
Cryptocurrency is trust-based and its valuation depends on the worth given to it by users. It's blockchain provides the very much needed security, transparency and speed. It also ensures that the assets cannot be duplicated or manipulated.
The issue of control is also solved as blockchain operates via a number of different nodes and validators which come to consensus to approve transactions and block creation
The peer to peer functions also eradicate the place of Middleman hence allowing users to exchange assets without control or interference of banking institutions or government.
Valuability
Both cryptocurrencies and conventional currencies retain values, hence can be used as medium of exchange of goods and services as well as medium for value storage. These value can rise and fall depending on the rate of accumulation or distribution over a given period.
Acceptability
Both currencies are generally accepted as valuable assets for making payments and storing value although there are still restrictions on cryptocurrency in some countries
Breakable
Both currencies can be broken into smaller units and units can also be added to obtain higher values
| Cryptocurrencies | Conventional currencies |
|---|---|
| Cryptocurrencies operate with peer to peer system via smart contracts which allows people to exchange assets and make transactions directly without a third party | Conventional currencies rely on banking institutions for transactions to recored and authenticate the processes |
| Cryptocurrencies are decentralized. The system uses different nodes and validators in consensus to approve production of blocks and other decisions on the platform | Conventional currencies are centralized, they use government controlled banking institutions which mints, issues and make decisions on the currency |
| Cryptocurrencies are fully virtual and can only be used online via crypto wallets and exchanges | We have both digital and tangible versions of this currency |
| Cryptocurrencies use the blockchain technology as digital ledgers for recording transactions hence transparency is very high | Transactions in Conventional currencies are recorded by banking institutions using ledgers that are only accessible by the institutions hence transparency is very low |
| Crypto encourages anonymity as personal information is not required to manage crypto accounts except for KYC on centralized exchanges | Anonymity is almost impossible as personal information including ID Cards are required to manage accounts |
| Security is guaranteed due to the fact that blockchain technology is used hence its impossible to manipulate records or wallets | Security is much lower in fiat currencies because traditional recording systems are used and hence there is always possibility of security breach |
| Transactions are very fast ranging from 10minutes to as low as 3 seconds depending on the crypto network | Transactions are much slower especially for international transactions |
| Transaction fees are very low | Transaction fees are very high especially during international payments |
| Cryptocurrencies are very volatile hence demands lot of carefulness to invest or manage assets | Conventional currencies are less volatile and enjoys a better stability |
INNOVATIONS
Cryptocurrency is one of the most popular and important inventions of the century and has brought some innovations to general world finance technologies and I'll be highlighting a few below
Use of Blockchain Technology
Although Blockchain technology has been in existence before cryptocurrencies, they actually ushered in the use of blockchain technologies as digital ledgers for recording transactions and other uses. Blockchain technology has brought lots of change to the finance industry including the peer to peer function which eliminates the use of third parties.
Blockchain technology also uses cryptography and consensus algorithms to strengthen the security systems hence ensuring Immutability, speed and topnotch security
The blockchain has been adopted by many organisations for a more secure and transparent recording system.
Decentralized Systems
Decentralization is one of the bedrocks on which cryptocurrency was founded. This concept allows people full control over their assets without a central authority to govern the systems, instead different nodes come to consensus to make decisions on the blockchain as directed by majority of asset holders hence we can say we now have a kinda democratic set up. This innovation have encouraged many institutions to adopt decentralized systems of operation instead of the traditional centralized systems.
Privacy
Cryptocurrency also presents a new era of full privacy of accounts where people can't spy on other people's accounts since account information is stored on-chain and most accounts are anonymous unlike the banking system where personal information of account holders are made available for security purposes hence privacy is nonexistent.
DOWNSIDES
Anonymity
Cryptocurrency allows many accounts to be anonymous to ensure their privacy and security but this feature can easily be used by fraudsters and criminals for unchecked money laundering and other financial crimes on-chain and still be untraceable by security agencies due to the structure of blockchains
Irreversible transaction issues
Due to the fact that blockchains are immutable to encourage transparency and security this means that mistakes in transactions cannot be reversed or cancelled so its very easy to loose assets while using this platform.
Volatility and Instability
Volatility and Instability cannot be overemphasised in cryptocurrencies as it has made many people to loose lots of value on-chain. Asset prices are very unstable and always fluctuating due to the general volatility of the crypto market
Anonymity Solution
Tackling this problem can be a big deal because it is one of the major freedoms in using cryptocurrency and removing this feature will be pushing us closer the conventional system which we are trying to let go of. However in this case a feature can be developed to monitor anonymous accounts making transactions of huge values and alert the security systems so such transactions can be double-checked to know the exact systems involved in the transaction
Irreversible Transaction solution
In this area I commend some CEXes for the good job they're doing but I think transactions security should be bolstered in the blockchain such that whenever an incorrect address is entered the transaction will be stopped automatically and also there should be a short time between sending and receiving when the sender can still recheck the transaction and stop it if necessary.
Volatility and Instability solution
In this case I don't think we can do anything about volatility because its as a result of the market psychology and ratio of adoption which is not in our power to handle, we can only take advantage of this volatility and trade wisely. More stable coins should also be created as alternatives for storing value until we want to enter a trade.
Yes I do believe in the future of cryptocurrencies.
I honestly view cryptocurrency as a new era in the finance sector and this is certainly the beginning of a gradual shift from fiat to crypto. From 2009 when Bitcoin ushered in the crypto space we have seen the crypto market grow into a multi Billion dollar industry and has made many good crypto traders millionaires. Bitcoin has grown from pennies to thousands of dollars with an impressive market capitalization.
This shows crypto has lots of potentials and will surely overrun the traditional fiat currencies already in place in the nearest future.
Cryptocurrency has also made transactions and storage of value easier without interference from governments and banks hence giving true freedom to users.
The blockchain technology has also brought innovations like decentralized social media where there is true freedom of speech and zero censorship, blockchain games where people can play to earn real money and many smartcontract-powered projects
I recommend everyone especially young folks to get involved with ith cryptocurrencies and understand it very well because it's likely the world finance system pattern in the near future.
I also recommend more techniques to help with issues like loss of private keys and mistakes in transactions to reduce possible risks
Cryptocurrency to the best of my knowledge was born out of necessity to handle the setbacks of Fiat currencies and the strong control of government and banks over the assets of individuals so the bedrocks of this invention like decentralization, transparency and peer to peer systems must be guarded jealousy. There have been many restrictions on crypto by governments seeking some level of control in Crypto and to be able to breach privacy but this must not be allowed. It's still trying time for the crypto world and once we're done with this them twill be crypto to the moon
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This is a detailed presentation from you @ononiwujoel, cryptocurrency is totally decentralized with no third party or any authority command. You have stated the difference between cryptocurrency and conventional currency very well.
However, the volatility of market make cryptocurrency risky for everyone, I think they should provide solution in which a coin will not go down more than some certain price and we too should do our research proper before buying any coin.
Yeah you right, volatility is one of the major concerns in Crypto but I don't really know if it's possible to make a coin not down since it's reacting to demand and supply of the market, but if it is possible then it should be a great idea
In fact, I agree with you and I would like to say that the security and privacy of cryptocurrency is very high. But it has some negative sites. And one of its negative sites is Volatility and Instability. You had a wonderful discussion with us today about cryptocurrency.
As rightly said in your conclusion, cryptocurrency was born because of many problems associated with fiat currency. Although, we encounter some problems with cryptocurrencies but they are still under development and we have made a lot of progress in this few years of existence.