Steemit Crypto Academy Contest / S2W1 - How Cryptocurrency has Shaped the Financial Realm. What is Its Future? by @iamchukwudi

Overview of Cryptocurrency

Cryptocurrency is a type of digital currency in which transactions are validated and records are kept by a decentralized system rather than a centralized authority utilizing encryption technology commonly known as cryptography. In contrast to a central bank digital money, cryptocurrencies are often under decentralized control.

A cryptocurrency (or crypto, or coin) is a digital money and could functions as a means of exchange like other forms of money over a computer network and is not supported or maintained by any centralized body or authority, such as those in charge of paper currencies like the banks and governments.

Cryptocurrencies have been around longer than the majority of you reading this. David Chaum, an American cryptographer, invented ecash, an untraceable cryptographic electronic money, in 1983. He later implemented it using Digicash, an early type of encrypted electronic payments, in 1995. Before it could be transmitted to a recipient, Digicash required user software to withdraw cash from a bank and select particular encrypted keys. This made it impossible for the financial institution, the government, or any other third party to track the digital currency.

Cryptography as we know it now, on the other hand, may be traced back until 2009. Satoshi Nakamoto, a developer, established the very first decentralized cryptocurrency, Bitcoin, in 2009. Namecoin was launched in April 2011 as an attempt to construct a decentralized DNS which would render internet censorship extremely difficult. The launch of Litecoin quickly followed in October 2011, and since then, there have been thousand of coin launches. Steem was birthed 7 years later from Bitcoin launch in 2016.

Comparison between Crypto and Fiat

Cryptocurrencies are money, and the conventional currencies - Fiat - are also money, that is as much as it goes. Both forms of currency shares few similarities and some significant differences. Let's explore them.

Crypto VS Fiat: Similarities

Criteria	Crypto & Fiat
Medium of exchange	Both crypto and fiat are medium of exchanges, they are money, so you could buy different goods/services with them.
Source of acceptance	Both fiat and crypto obtain their value from public acceptance. Crypto or fiat is money because we consider them to be money.
Divisibility	Both crypto and money can be divided further than they are. They both operate some forms of unit of measurement through which they gain their numerical values and worth.
Value store	As money, both crypto and fiat can serve as a store of value.

Crypto VS Fiat: Differences

Criteria	Crypto	Fiat
Control	Crypto is decentralized, thus, there is no government/bank/institutional control	Fiats are centralized and under the control of governments, banks and other financial institutions.
Paper/physical notes	Not available	Available
Stability	Cryptocurrencies are known for being highly unstable/volatile	Compared to cryptocurrencies, fiat money are more stable and retain their value for longer
Intermediarry/Mediator	Cryptocurrencies are designed to enable Peer-to-Peer transactions, that is, user to user, no need for a third party	Transactions through fiat must be carried out through a third party.
Computational Requirements	Cryptocurrencies run of cryptographies which require high computing power	Utilizing fiat do not require high computing power

Distinctive Innovations of Cryptocurrency and its Downsides.

Crypto Innovation

The invention of cryptocurrencies came with some interesting innovations, here are some:

1. The Blockchain: A blockchain is a decentralized ledger that is maintained among computer nodes in the network. A blockchain is a database that stores data in a digital manner. Blockchains were born with cryptocurrency projects, that is why we coud consider them an integral crypto-based innovation. However, they can even be applied/used outside cryptocurrencies today. The blockchain's novelty is that it ensures the accuracy and security of a data record while also generating trust without the requirement for an intermediary.

2. Decentralized Finance (DeFi): Decentralized finance (DeFi) uses smart contracts on a blockchain to provide financial products, tools and services without the use of middlemen such as brokerage firms, exchanges, or financial institutions. People can use DeFi platforms to lend or borrow money, bet on asset price fluctuations using futures, trade bitcoins and other cryptos, build insurance against risks, and receive money in savings accounts (through mechanisms like yield farming).

3. Non-Fungible Tokens - NFTs: A non-fungible token (NFT) is a form of financial security made up of digital data recorded in a distributed ledger called a blockchain. The blockchain records the ownership of an NFT, which can be moved by the holder, enabling NFTs to be traded and exchanged. NFTs can be made by anyone and require little to no coding knowledge usually through a process called minting. Digital data such as images, films, and audio are frequently tied to NFTs.

4. Web 3.0: Web 3.0 is the next phase of the internet revolution, in which websites and applications will be empowered to be able to handle data and information in a more clever and human-like manner using advanced technologies. Decentralized protocols –which are the building elements of blockchain and crypto technology will power Web 3.0 networks, implying a strong connection and synergistic interaction Web 3.0 and cryptocurrencies.

5. Decentralized Autonomous Organizations - DAO: A decentralized autonomous organization (DAO) is a member-owned community without centralized leadership that is built by regulations conveyed as a software program which is often open, controlled by the organization's members, and not influenced by a central government. On a blockchain, a DAO's transactional records and programme rules are kept.

Downsides of Cryptocurrencies

• Inadequate policing: The world of cryptocurrency is a decentralized one, with no one in charge of what happens there. While this provides consumers with greater autonomy and privacy, it also provides a fertile environment for negative actors in the crypto world. The majority of frauds and scams are impossible to track down and prosecute.

• High volatility: Cryptocurrencies are notoriously unreliable and impossible to plan with. They are this today, but tomorrow they will have lost their current value in favor of something higher or lower.

Solution to Crypto Problems

First, I believe the problems facing crypto today can be retified but to a certain degree, and not completely.

Inadequate Policing: An attempt to solve this will change the fundamental nature and principles on which cryptocurrencies run on. So, individuals should do their best to protect themselves from bad actors in the crypto space by ensuring they store their keys properly, and adhere to all cybersecurity measures.

High volatility: Volatility is an inherent nature of crypto, so cannot be removed. However, with the adoption of stable coins, the issue of volatility for the most part can be solved. However, better stability can be achieved by providing more utility for cryptocurrencies other than the blockchain and decentralized applications.

The Future of Cryptocurrencies

I believe strongly that cryptocurrencies are going no where. They are here to stay. But the future will be more different than today. In the future, we will see a bit less decentralization as governments and regulators push for more cryptocurrency regulations.

Moreover, the future of crypto will be less about Bitcoin and other coins without utility, it will be about achieving more utility out of cryptocurrencies. The more utility a coin possess, the more likelihood of it surviving into the future.

So, I recommend that more utility be attached to cryptocurrencies, they should gain more real world usefulness, and the sky will be their beginning.

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