Centralized and decentralized systems bring great differences, which make them very different and suitable for each person. I have read the professor's lecture, and will do my homework.
- 1. What is the fundamental difference between Cryptocurrency and the conventional financial system?
There are great differences that characterize the decentralized system as the best over the conventional financial system, first of all the decentralized system does not depend on a financial entity that controls the system, nor on rules for the use of capital or rules on how to use it, since that this system works through the blockchain network and all its transactions are registered through smart contracts. This provides the user with greater comfort when using cryptocurrencies, in the centralized system there are many restrictions for the use of our money, being our property, the financial entity for its benefit uses rules that are dictated by administrative personnel that make up this entity Many times this type of rules deprive a large part of the users of the centralized entity of financial freedom since there are many limitations.
There is more confidence in cryptocurrencies since we can use them wherever there is an available internet network, through the use of cryptocurrencies there are no hours or limits on the transaction to be carried out. You have all the freedom to make any payment to anyone you want, as long as the recipient has a wallet.
Many times there are limitations to send money abroad, since conventional financial systems have systems with large processes, time and a lot of commission to carry out, be it for a simple remittance or transfer, in the case of cryptocurrencies there is no such limitation, since decentralized systems do not depend on an institution for their use, and a payment or transfer can be sent to any part of the world, and they charge a small commission to validate the transaction through the miners, we can also use cryptocurrencies to exchange for fiat currencies of each country through the p2p platform of our wallet.
Security and transparency is something super important in cryptocurrencies, since the security in them is highly well designed so that nobody obtains your personal information, nobody can have access to your account, since each wallet has its own security method which is increasingly improved for the safety of the user, on the transparency that cryptocurrencies offer, it is really transparent because all its transactions are registered in the blockchain network and any investor can see the transaction, in whether this decentralized system will always give more freedom financial, which most of us want to implement today.
- 2. Why is a decentralized system needed?
It is necessary to continue expanding a decentralized financial system so that people around the world can carry out operations on their money freely, either to send money to relatives abroad and many centralized systems encapsulate that priority a lot, throwing them a very large margin in commissions, In addition, when we receive a considerable amount or carry out a large transaction, the centralized entity tends to preventively block the accounts for an investigation on money laundering, the centralized systems offer good security services, and whenever we need any concern, password expiration, update data or any other problem with our account, we can go to the centralized entity and solve the problem, otherwise to decentralized systems, if something happens with our accounts there is little margin of help especially with the wallets that many are centralized and can provide a margin help, but when you make a poorly made payment, you can give it up for lost, because there is no one to claim.
- 3. What affects the value of cryptocurrencies?
Cryptocurrencies are created for a project, through this many amounts of coins are created, here the project defines whether the cryptocurrencies are burned to increase their value, or they go to mining to increase their value, it depends on the amount of coins that are created, and what they will serve when the project is completed, another behavior that we must take into account to know if the value of a cryptocurrency rises or falls, is its supply and demand, and at what point the project is Currently, you see a lot of information on social networks that affects people a lot psychologically and allows them to generate panic, causing many to buy and others to sell, causing an entanglement in the market and creating variations in values in cryptocurrencies. Cryptocurrencies go up and down the most because of the financial psychology of many people.
- 4. Why can't everyone be a miner?
Cryptocurrency mining requires a lot of computational effort, acquiring expensive mining equipment with proof of work and above all it is necessary to have a lot of knowledge about cryptocurrencies and especially knowledge about the mining area, cryptocurrency mining is validation of transactions to world level that are required for the free transit of cryptocurrencies, these validations can be carried out under different validation methods, ranging from softwares, small hardware to large machines that need large amounts of money, many of these machines need a energy source large enough to function, all these methods are according to the profitability they generate money. The mining system is often centralized and has to be governed by the state rules of each country, many people do it illegally and tend to be punished for computer crimes. For this reason, not everyone can be a miner, due to its difficulty in executing mining cleanly.
- 5. Why can cryptocurrency transactions be called more transparent?
Transactions with cryptocurrencies, we say that they are transparent for the great reason that all their transactions are registered in the blockchain network openly in view of everyone who wishes to view them, also because anyone is in their free decision to carry out any type of transaction or exchange to any amount without limitations, they are transparent because each of the users has access to their money at any time as long as they have an internet network, nobody makes decisions for you when it comes to managing your money. That is why cryptocurrencies are highly transparent, but cryptocurrencies are often used for illegal purposes, for money laundering among other things.
- 6. Explain how the development of cryptocurrency in your country?
Venezuela is free to use cryptocurrencies at the national level, they accept it both in national banks and in many of the businesses nationwide, there is an additional market that is made by third parties who look for external sellers at a black market price, either To launder money or for a personal purpose, few people know how cryptocurrencies work since many do not have financial knowledge or computer knowledge to handle high-end telephones, or computers, this creates a population that is a bit ignorant in many Aspects, although now more than ever, due to technological advances and the news generated in social networks about cryptocurrencies, they are learning much more about the subject.
Mining in my country is prohibited, due to the large electricity consumption that it produces, since Venezuela is taking great care of electricity consumption due to the energy shortages that occurred years ago, apart from this, the equipment is very expensive and many do not have Like acquiring the equipment, there are several that do it illegally but this can be very dangerous.
In 2018 the national executive created a cryptocurrency called Petro, its cost is 1 barrel of oil and it is designed to pay for documentation and carry out oil negotiations abroad, it can be purchased through the majority of cryptocurrencies such as bitcoin, ethereum, etc. . but once you change it, it is difficult to change it since there is no demand to buy it. And there are withdrawal prohibitions on other cryptocurrencies, it can only be exchanged for the country's fiat currency.
The development of cryptocurrencies has currently been amplified as everyone seeks a solution to much of the problems presented by centralized entities, the solution for this is to implement the decentralized system due to the transparency it offers, the speed in exchanges, and the free circulation around the world.