WFRS0001 - Cryptocurrency: Uses, Benefits, & Limitations - Essay

This essay provides a comprehensive overview of cryptocurrency, beginning with its definition as a decentralized, encrypted, and digital medium of exchange. It distinguishes cryptocurrencies from traditional currencies by highlighting the absence of a central authority and the reliance on cryptographic algorithms for security and creation. The essay then explores various uses and applications of cryptocurrency, including low-cost, high-speed payments and private transactions, emphasizing the increasing adoption in regions like Nigeria. It further discusses the benefits of cryptocurrency, such as easy transactions and enhanced security through blockchain technology, while also addressing limitations like price volatility, lack of inherent value, and scalability issues. The essay concludes by summarizing the methods for buying, selling, and storing cryptocurrencies, highlighting the role of digital wallets and the cryptographic measures ensuring data integrity and confidentiality.

Cryptocurrency

Table of Contents
CRYPTOCURRENCY....................................................................................................................3
Thesis...........................................................................................................................................3
Definition.....................................................................................................................................4
Uses/Applications........................................................................................................................5
Benefit 1: Easy Transactions.......................................................................................................5
Limitation 1: Price Volatility and lack of inherent value............................................................6
Conclusion...................................................................................................................................7
References:..................................................................................................................................8

CRYPTOCURRENCY
Thesis
Cryptocurrency is a virtual currency, that is protected by cryptography, which makes it almost
impossible to counterfeit or spend it more than once. Many cryptocurrencies are decentralized
organizations in the light of an innovation called block chain which is a dispersed record
authorized by a different organization of computers (Boukhalfa, 2022). A characterizing
component of cryptocurrencies is that they are by and large not gave by a focal power, delivering
them hypothetically insusceptible to government obstruction or control. Today, there's many
thousands and thousands of virtual currencies available, with 10,000 expected by 2022. The
following are some of the most cryptocurrencies:
Bitcoin is the most widely used virtual currency in the world. Crypto currency is so well-known
that it was once used interchangeably with the term "virtual currency"(How Bitcoin works,
2020). However, potential investors should be aware that bitcoins were becoming extremely
expensive. The price of one Cryptocurrency in mid-2020 was $70,000.
Altcoin is a term that refers to any digital currency that is not bitcoin. Eth, one of the speediest
cryptos on the industry, is the most common in this ecosphere. There are a variety of other
altcoins available today, including Luckyblock, Shiba Inu, and Terra.
Crypto tokens - Many people are perplexed by the distinction between crypto currencies and
tokens. Coins and gift cards appear to be the same at first glance. However, there are numerous
differences between the parties. Coins can be mined, but tokens can't, and bank notes are linked
to blockchains, whereas tokens aren't. They differ in terms of the type of product they permit
customer to buy in terms of capability.
Benefits
1. Easy Transactions
2. Incredible Security
Limitations
1. Price Volatility and lack of inherent value
2. Scalability

Definition
A cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Unlike
the Australian Dollar or the Euro, there is no central authority that manages and maintains the
value of a cryptocurrency. Instead, these tasks are broadly distributed among a cryptocurrency’s
users via the internet. (Kate Ashford. 2022. What Is Cryptocurrency?). Cryptocurrencies are
created (and secured) through cryptographic algorithms that are maintained and confirmed in a
process called mining, where a network of computers or specialized hardware such as
application-specific integrated circuits (ASICs) process and validate the transactions
(Microtrend, Cryptocurrency - Definition. 2022. Cryptocurrency). Some of the popular
cryptocurrencies in the market right now are Bitcoin, Ethereum and Dogecoin. These are the
coins that most customers make money off while investing into the crypto market.
(Source: How common is crypto, 2021)
In Africa's largest economy, dependence on transfer payments and the preponderance of
mentor interest accrues has resulted in a sharp increase in virtual currency use. Nigerians have
been the most likely to say they used or bought dogecoin out of 74 countries in the Statista
Global Poll Taken (Lielacher, 2021). Nearly two third of Nigerians agreed that this was true of

them. According to Bitcoin.com, the rising cost of delivering money abroad the traditional way
has prompted many people to turn to local bitcoin exchanges that cater to foreign labourers.
Nigerians also use their smartphone to wire funds to one another and to pay for things in stores.
Enterprises in Nigeria have recently added crypto chrome extensions to their handset financing
options, giving Nigerians another manner to use the currency.
Uses/Applications
Over the past few years the uses and applications of cryptocurrency has been increasing and has
been improving the society when it comes to security and money investments. One of the most
well-known uses of cryptocurrency is for sending and receiving payments at low cost and high
speed. For example, a recent $99 million litecoin (LTC) transaction took only two and a half
minutes to process and cost the sender only $0.40 in transaction fees. (Lielacher, 2021). Another
crucial use of cryptocurrency is private transactions. Privacy-centric digital currencies such as
Monero (XMR), Zcash (ZEC), and PIVX (PIVX) enable users to make anonymous financial
transactions. (Lielacher, 2021). That implies people can bring in cash moves without disclosing
to a bank why they are sending an enormous amount of cash, what the wellsprings of the assets
are and who they are sending it to, which can postpone the exchange and include pointlessly
administrative cycles (Makarenko, 2018). Cryptocurrencies differ from ordinary currencies in
that they have specific attributes. Federalism and encryption algorithms, as the term suggests, are
the huge variations. A decentralised value of money is one that is not associated with a single
entity. That whenever a batch of transaction data is verified, for instance, bitcoins are decided to
release as a byproduct. Proof is carried out using the computational capabilities of specific data
traffic. This, along with other characteristics, creates a monetary system that is decided to share
among its users, which is among the reasons why Bitcoin does have many ardent supporters.
Benefit 1: Easy Transactions
 Crypto transactions can be made easily, at low cost, and in a manner more private than
most other transactions. Using a simple smartphone app, hardware wallet, or exchange
wallet, anyone can send and receive a variety of cryptocurrencies. (Nibley, 2021)
 Some cryptocurrencies can be bought at ATMs, that are specifically known as crypto
ATMs or as the coin name such as Bitcoin, Ethereum and much more. This majorly

benefits old generation people who are stuck to old finance methods such as going to
ATMs and using the services.
Benefit 2: Incredible Security
 Cryptocurrency is mostly based on blockchain security, which is a complete gamble
the board framework for a blockchain network, utilizing online protection systems,
confirmation administrations and best practices to lessen takes a chance against
attacks and fraud.
 Crypto security is determined in large part by hash rate. The higher the hash rate, the
more computing power it would take to compromise the network. Bitcoin is the most
secure cryptocurrency, having the highest hash rate of any network by far. (Nibley,
2021)
Limitation 1: Price Volatility and lack of inherent value
 Price volatility tied to a lack of inherit value, is a major issue to be dealt with and is one
of the specific problems to be dealt with (Nibley, 2021). Price volitation is when the
prices keep on changing due to many external factors such as interest rates, tax changes
and inflation rates, but it can also be affected by the changes in the industries and
globally and nationally.
 There is also no option to inherit the assets within cryptocurrencies, It is an important
concern, but one which can be overcome by linking the cryptocurrency value directly to
tangible and intangible assets (Boukhalfa, 2021)
Limitation 2: Scalability
 Scalability within Bitcoin means the limitations of the blockchain for the processing of
multiple transactions. The general conditions of the block size and block generation of
the Bitcoin protocol limit the average block generation time to 10 minutes and the
maximum block size to 1 megabyte. (Bitcoin Explained - Chapter 7: Bitcoins Scalability,
2020)
 Indeed, even with the miners, commissions and little estimated blocks, digital forms of
money can't guarantee the fruitful execution of an enormous number of exchanges all the

while (Makarenko, 2018). That is, on account of a huge flood of tasks, the frameworks
will be unable to adapt to traffic. For this situation, the money will encounter a transitory
power outage or basically abrogation of the whole exchange line. Such an episode will
harm the standing of the cryptographic money, and, thus, its rate.
Conclusion
From the above discussion, it is concluded that users purchase or sell cryptocurrencies from
central conversations, brokerages, and person currency owners. The simplest way to buy or sell
cryptocurrencies is through trades or platforms like Coinbase. Virtual currencies can be
deposited in digital wallets once purchased. "Hot" and "cold" digital wallets exist. Bitcoin uses
symmetric key cryptography, hash algorithms, and message authentication to ensure the
encrypted data, sincerity, and truthfulness of messages. The responsibility of providing a login
affirmation of no dual, fraud, or incorrectly attributed units of value by keeping a public ledger
of all transactions. Indeed, its encrypted communication protocols guarantee that all transfers are
recognized without revealing who is currently dealing, offering a degree of confidentiality that
national banks are unable to provide.

References:
Boukhalfa, S., 2022. What are the disadvantages of cryptocurrencies? - PreScouter - Custom
Intelligence from a Global Network of Experts. [online] PreScouter. Available at:
<https://www.prescouter.com/2019/11/disadvantages-of-cryptocurrencies/> [Accessed 23
February 2022].
How Bitcoin works.2020.[Online]Available
through:https://thefutureofbitcoins.wordpress.com/how-does-bitcoin-work/
How common is crypto.2021.[Online]Available
through:https://www.statista.com/chart/18345/crypto-currency-adoption/
Investerest.vontobel.com. 2020. Bitcoin Explained - Chapter 7: Bitcoins Scalability. [online]
Available at: <https://investerest.vontobel.com/en-dk/articles/13323/bitcoin-explained---chapter-
7-bitcoinsscalability/#:~:text=Scalability%20within%20Bitcoin%20means%20the,the
%20processing%20of%20multiple%20transactions.&text=The%20general%20conditions%20of
%20the,block%20size%20to%201%20megabyte.> [Accessed 24 February 2022].
Lielacher, A., 2021. 10 Awesome Uses of Cryptocurrency. [online] Bravenewcoin.com.
Available at: <https://bravenewcoin.com/insights/10-awesome-uses-of-cryptocurrency>
[Accessed 23 February 2022].
Makarenko, V., 2018. Why scalability is a big problem for cryptocurrency. [online] Medium.
Available at: <https://medium.com/@makvitaly/why-scalability-is-a-big-problem-for-
cryptocurrency-34f0909a757a> [Accessed 24 February 2022].
Nibley, B., 2021. 12 Benefits of Cryptocurrency in 2022. [online] sofi.com. Available at:
<https://www.sofi.com/learn/content/benefits-of-crypto/> [Accessed 23 February 2022].