Crypto Academy Season 2 Week 6 Homework Post for (@levycore) - Learn About Cryptocurrency by @sadiaanyat

This week lecture was related to crypto currencies. After reading it carefully and conducting some research over this, i am going to write my homework now.

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

There was a time when the banking system is only way to perform transactions. The banks used as the third part. As we know that the banking timing is from 9 to 5 so after that you are not enable to perform any transaction through bank(now the banking system made some development and mobile phones are able to perform transactions any time but still limited). There were a lot of restrictions and limitations in banking system. So the crypto currencies were introduced to make the transaction process rapid, easiest and decentralized.

The crypto currencies are gaining the attention day by day. The crypto assets or crypto currencies are usually defined as the digital units. These digital units are transferred between the users. All the crypto currencies are worked on the blockchain network. The blockchain is decentralized network which allow all the crypto currencies to work efficiently. The crypto currencies are transacted between users without having any third part. P2P transaction is performed.

The largest crypto currency "Bitcoin" was firstly introduced by Satoshi Nakamoto in 2008. It started using in 2009 and soon got high popularity. The basic purpose of this technology is to eliminate the need of third party in transaction. It speedup the transactions and enhance the user trust. The world is getting digitized rapidly but still many people are unaware to this invention. It has largest market capitalization and used as an online version of cash for buying and selling the goods. The transaction of bitcoin(crypto currency) are traceable and public. As bitcoin is decentralized so it cannot be hacked.

Vitalik Butren introduced another crypto currency in 2013 which is known as "Ethereum". It also work on the blockchain network and help the user o perform transaction directly without having third party. It is the second largest crypto currency whose coin is Ether. The difference between the bitcoin and ethereum is that the ethereum brought the smart contract facility with it for its users.

Today multiple crypto currencies are working and people invest their money to get the profit. Each crypto has its own market capitalization and market price. All the crypto currencies get highly effected by the market trend of Bitcoin. But the purpose of all the crypto currencies is to make the transaction process easy and fast and eliminate the third person(bank) in money transfer.

Difference between Cryptocurrency and the conventional financial system

1- Decentralized/Centralized

The biggest difference between crypto currency and conventional financial system is that the cryto currencies are decentralized and financial systems are centralized. This feature enhance the users trust over the crypto currencies in many ways.

Centralized(conventional financial system)	Decentralized(crypto currencies)
Own by a person or group of people. They manage them according to there own	Don't owned by a single person. There is no owner of the decentralized
Can be hacked as it is placed at the central point usually called server	As the data is not located at center. It is distributed over hundred of thousand user's PCs so it is not possible to hack the decentralized system.
Always need a third party to perform transaction	No third party involve
There is always a central party who have full control over the platform. The central authority even have the access to the user's personal information too.	The user has full authority on his personal information. There is no central person who have check on the user's personal information. SO the user's privacy remain confidential

2- Immutable

Second difference is that once a transaction performed over the blockchain network, it cannot be change or reversed. If user do some mistake, he is responsible for all that lose. In conventional financial system, as bank is the central party, so if something go wrong so bank is answerable to user.

3- Secure

In crypto currencies, the user has full authority on his personal information. There is no central person who have check on the user's personal information. SO the user's privacy remain confidential. but in Conventional Financial system, there is always a central party who have full control over the platform. The central authority even have the access to the user's personal information too. Moreover in conventional financial system, data is stored over the server. If server fail due to some problem, all the data will be lost if there in no backup of it. But in decentralized system(crypto currencies), the data is stored on each user's PC. If data is lost from one user PC, it can be recover from other user's PC. Data is no lost from crypto currency system.

Transparent

In conventional financial system, the transaction can only be seen by bank or by that user if he has open his bank account on mobile. But in Crypto currencies, a very unique and marvelous feature was included. That is the crypto currencies are transparent. It mean that the transactions are open to all. All the participants are able to see the transactions. The shared ledger on the network is readable by every person.

Fast

The transactions on the conventional financial systems are performed only for the specific time. There are specific days in week for performing the transaction. At weekend, the transactions are not performed. But these restrictions are not there in case of crypto currencies. Crypto currencies allow you to perform the fast transaction with no limitation of time or day. Bitcoin perform 7 transactions per second. Ethereum perform 15 transactions per second.

Supply Limit

As we know that big supply of coin generate many problems. There is no limit, rules and regulation for the supply in conventional financial system. But in crypto currencies, there is always limit of coin produced. There are total 21 million bitcoins circulation thoughout world.

Third party

In conventional financial system, a third party always involved which perform the transaction. User cannot transact the money without the middle person. But in crypto currencies, no middle part is there. User perform the transactions directly. P2P transaction take place in crypto currencies.

Future importance

As world getting digitized day by day, so the traditional financial system are losing their importance. The crypto currencies are getting the attentions of people rapidly. In future, the crypto currencies will replace the conventional financial system completely.

Why is a decentralized system needed?

The world is moving toward the digital system. The people are getting modern and want the more secure ways to safe their investment. In conventional financial system, the people are bounded. The third party have full access on their personal information. Their is limit on the amount and timing for placing a transaction. The third party always detect some money as their commission.

All these problems are solved with the decentralized system. There is no third party involve in decentralized system. User have full control and authority on his account. No other person have access to the personal data of user. In conventional system, the central party have the authority to control our account. They can even block our account. The user do not have much authority on his own account. In decentralized system, you are allowed to transfer money without any restriction of time or amount.

In decentralized system, the transactions are performed very fastly. It take few second or even less than one second to perform a transaction. The world largest crypto currency, Bitcoin perform 7 transactions per second. The second largest crypto currency, Ethereum perform 15 transactions per second. The transaction fee is also very small in decentralized system. This fee is used for the continuity of system and detected by minor. But in conventional system, the Transaction fee is high and purpose of transaction fee is to get money to become rich.

So we need a decentralized system to become digital. Decentralized system is necessary for more secure life style. It is less costly and more reliable. As life getting so fast, so only decentralized system can help us to meet this race of speed.

What affects the value of cryptocurrencies?

The crypto world is highly volatile. The change occur every second in value of crypto currencies. Many factors are there which effect the value of crypto currencies. The market price of a crypto currency go up or down by affecting multiple factors. Moreover the crypto currencies are effected highly by the market trend of bitcoin. Some important factors which effect the crypto currencies are as follow:

1- Bitcoin Price:

As we know that the first crypto currency is the bitcoin. It was introduced by Satoshi in 2008. Its price was even less than a dollar at that time. But now, it has prove itself and has become the world largest crypto currency with market price of 39,954.01$. It is on rank#1 with large market capitalization. Noe rise and fall in bitcoin price also effect the value of all the other crypto currencies.

2- Supply & Demand

The price of any crypto currency is highly effected by its total supply. We know that the inflation rate of bitcoin is very low. The total number of bitcoin which are circulating around the world is 21 millions. As we know that if supply decrease, the demand increase. So if the supply of a crypto currency is low, it will help to increase the market value of that crypto currency.

3- Crypto currencies are ban

There are many countries, including Pakistan, which do not allow its citizen to transact the money through crypto currencies. Crypto currencies are ban and restricted in many countries. This restriction sometime effect a lot the market value of a crypto currency. The market value of crypto currencies low because of these limitations.

4- Popularity:

The popularity of a coin also effect the value of crypto currencies a lot. If the crypto currency is famous, the value will be high. If crypto currency is not popular among users, its value will be low. The greater the popularity, the higher the demand.

5- Mass Adoption

If a crypto currency become enable to grasp the attention of investors, and if they start investing in that crypto, its value will be high. For example, the value of bitcoin goes high when Elon Musk invest in that coin. Such popular investors and celebrities investment effect the crypto currency price positively.

6- Social Media

Speculation is the most effective factor which decide the value of crypto currency. If The famous personalities say something about any crypto currency, their statment effect the crypto price highly.

Why can't everyone be a miner?

Mining is not a game of Kids. Mining require a mining machine and power for mining. It needed specific resource and power to do the mining. It is costly in this way. Moreover the technology involved in mining is sophisticated. It needed a high experience to do the mining successfully. Not every one can be a successful minor. Multiple techniques are there in consensus algorithm for being a good minor. The consensus algorithms vary the way of mining on the blockchain network. The consensus algorithm used for mining are PoW, PoB, PoS, and delegated PoS.

• A deep experience and resources are require to perform the mining with Proof of Work. Certain conditions are there which need to be fulfill if you want to do the mining using the PoW.

• To do the mining using the delegated PoS, all the witnesses need to have a specific strategy.

• In the last week lecture, we learn about the proof of burn. You need to send your crypto assets to an unreachable assets. If you want to do the mining using PoB, you need to sent you crypto assets to an address which is unreachable by other users.

• We read the last week lecture and get the concept of Proof of Stake. For mining using the PoS, you require to fixed your assets for some time.
  

Why can cryptocurrency transactions be called more transparent?

In traditional financial system, the whole system in monitored by a single person or by a group. The users are not able to see the transactions openly. But in decentralized system, a very good feature is added that attract the user attention to the great extent. All the participants are able to see all the transactions. No third party is involved in decentralized system. Whole control is in users hand. So it also increase the user interest on the decentralized system.

Moreover, the data in decentralized system is not stored in central place. It is stored in every pc of every participant. So it cannot be hacked. There is no chance of losing data in case of crash. All the transactions on the decentralized system are traceable. So no one on such systems can deny for that.

Development of Cryptocurrency in Pakistan

There is a huge interest in youth related to crypto currencies. Everyone wants to get digitized and moving from traditional system to crypto world. But it is our bad luck that the crypto currencies are not implementable legally in pakistan. But the work is doing by multiple people to make the crypto currencies legal in pakistan.

Conclusion

The crypto world is very vast and cannot be cover in a single assignment. Decentralized system is getting popular day by day. It change the banking system to great extent positively. It save time, cost, effort to perform Transactions. The future of crypto world is very bright. Soon it will replace the banking system.

Cc:

@steemitblog
@levycore