What are Cryptocurrencies?
Before talking about the advantages and disadvantages of cryptocurrency, it is essential to know what it really is. Cryptocurrency is a digital currency that can use as a standard currency where ever that accepts it. However it is not under the regulation of the governments or issued by the central banks. Cryptocurrency does not enjoy the same kind of stability when comparing to regular physical currencies but nowadays many people are using it for different purposes like shopping online or money transactions. Bitcoin is the first cryptocurrency to come out and because of this, it has become the de-facto crypto which is just another benefit of Bitcoin.
In reality, it is a form of digital currency that uses encrypted cryptographic technology and runs on blockchain technology. Today there are various functioning websites which allow you to convert cryptocurrency to real money and transfer it directly to your bank account or vice versa.
It doesn’t have a physical tangible form which is why it’s called digital. Unlike all other forms of currency’s, it’s intangible so you can’t touch it, smell it, or put it in a safe (kind of). This makes it hard for the older generations to take it seriously but it is being used to purchase, sell and transfer billions of dollars every single day. Many people often claim we already have different forms of currency so what are Bitcoins used for or what do people use Bitcoins for? Knowing it is a decentralized currency that no government or bank can control is a very big reason why many people are starting to use it. There are over 1200 altcoins with a lot of them being considered “shitcoins”, or in other words, useless. A lot of them have very good use-cases like privacy coins which helps mask your identity on the blockchain, supply chain cryptos which can help with supply chain operations to listing information on the blockchain, everyday currencies, and much much more.
What are the Advantages of Cryptocurrency:
The benefits of digital currency are a plethora. Not only is it good for the business or the business owner but the buyer themselves. Of course if you purchased a specific crypto and it has shot up in price, you’re buying using pennies on the dollar. In the long term, it definitely pays off. That is definitely one of the benefits of bitcoin.
- Easy access – Cryptocurrency is readily available to the general public. Almost anyone can make use of it. It is a decentralized operation and investors from all over the world have easy access to them. You can find various projects trying to raise funds through cryptocurrency. Almost anyone that can make online fund transfers can become part of such projects.
- Quick and easy payments – Making payments using cryptocurrency is very easy. You can do it in just a matter of a few seconds. It is very fast because you don’t require to feed many details, you don’t even need to enter your credit/debit card details. All you need is the address of the wallet of the person or enterprise to whom you wish to make the payment too. The amount shall credit to the receiver within few seconds to a few minutes depending on the crypto. The ease of transfer and the low transaction fees makes it very desirable.
- Fast Settlements – With cryptos, you don’t need to wait a couple days for your business to receive the money. Due to the technology cryptocurrencies are based on, the blockchain, it removes delays, payment of fees and a host of other third party approval that might have been present. For traditional businesses, there are often hiccups and bottlenecks due to the number of middlemen that you have to cut through. With cryptocurrency transactions, there is a quick settlement as the peer-to-peer nature of the networking structure cuts off the middleman.
Crypto contracts were designed to eliminate the bottlenecks that have come to characterize traditional settlement. The settlement is immediate and can be completed for a fraction of time and expense that it would have taken a traditional transfer.
- Lower Fees – We’ve all been there and sometimes it could be painful just to view your monthly account statements from your bank. You’ll often be shocked at the number of fees chalked up. Transferring money by using any other online forum or bank gateway is expensive as they levy considerable fees for the transaction. Credit card processing companies charge hefty fees. But it is not the case with cryptocurrency as the costs are nil or negligible. With credit cards or debit cards, the seller is the one paying a fee but for crypto’s, it is the buyer paying the small fee. The issue with these fees is that they often pile up and could quickly pile up. Transaction fees are very miniscule and only the buyer gets hit with it.
- Private– You don’t need to share your identity or whereabouts or the details of the transactions made between you and the beneficiary. No information is required to share with the government and the bank regarding the deal. It is truly decentralized.
- Highly secured – All your transactions will be secure as it is using NSA created cryptography. It is next to impossible for any person other than the owner of the wallet to make any payment from the wallet, unless they were hacked which there are many ways to protect yourself from.
- Remain anonymous – Some coins can help you stay anonymous but contrary to popular belief, not all of them can. Bitcoin is pseudonymous which means people won’t know exactly who you are on the blockchain but they can get some information from it.
- Identity Theft – Nobody can steal your personal information from merchants, which ensures the privacy of your sensitive data. By creating a proxy ID, you can make sure that no one knows anything about you. Among the benefits that come from using cryptocurrency is the protection of your online identity. Using the old fiat method requires providing your credit card information to a merchant who gets to access every detail through the “pull” basis where the card pulls out your details before debiting your account. With cryptocurrency transactions, it is almost impossible for your private key to be found or hacked unless you’re not smart about it. Your transaction history can be seen but only if someone has your public key. Cryptocurrency transactions are also unique each time you make them even when the parties are similar. The exchange of information uses a “push basis” which means you decide the information you want to send to the recipient unlike the “pull basis” of traditional exchange systems.
- No chargebacks – Once you made the payment, you cannot chargeback. This considerably depletes the chances of a fraud. Once the transfer has completed, it cannot reverse. Nobody can file chargeback like you can on credit cards. It has it’s cons but can be an benefit also.
- No third party – You are the master of your money. You can keep it in your wallet and use it as per your wishes. There is no third party involved like a bank on whom you need to trust.
- Facilitate International Trades – When you talk about transactions using cryptocurrencies then there are no limits. You may be in a different part of the world and the receiver might be in some other hemisphere, you can still transfer the amount without any hassle. The inter-country transaction is extremely easy with cryptocurrency because its function is not under the control of any central bank. This makes it easier for users to transact with it without having levies imposed on them or have their value reduced by exchange rates. This makes it quite suitable for cross-border transfers without any form of hindrance.
- Easy Access – Due to the medium by which cryptocurrency exist – the internet, there is greater access unlike what is prevalent in the traditional financial systems. With cryptocurrency, anyone can access it. You don’t need a business account or a withdrawal software. A mobile phone and internet is required to get started. For developing countries where there is a huge gap between those who have access to traditional exchange systems and those who don’t, cryptocurrency opens up a new world for everyone to access and benefit from.
What are the Disadvantages of Cryptocurrency
All the advantages do not mean that there are no risks involved in investing in cryptocurrencies. Just like anything else financially, they are not perfect and there are drawbacks of Bitcoin. Here we will discuss the disadvantages of cryptocurrencies:
- Difficult to understand – Cryptocurrencies are relatively new and come with a learning curve. People end up investing without proper knowledge and lose money to something they did not learn about.
- Lack of knowledge – People are not aware of how to use cryptocurrency and hence open themselves to hacker. The technology is somewhat complex and therefore one needs to be mindful of it before investing.
- Not accepted widely – Not many websites and companies accept digital currencies yet. Very few countries have legalized the use of cryptocurrencies. It makes it impractical for everyday use. Due to lack of acceptance, before buying or investing online or offline, you need to make sure that it’s accepted at that place where you want to use it. Although it is slowly getting the acceptance around the world, it will take time to take the idea entirely out of the shadows. While popular cryptocurrency such as bitcoin is currently being used in different ways, there is still a long way to go for it to be used for commerce, international bank transfers as well as electronic payments. For cryptocurrency to get to this level, smart and scalable applications will need to be built for handling the wide scale of money transfer as well as micropayment services. With Request Network is waiting to launch the miannet, adoption isn’t too far away.
- Can lose your wallet – There is a possibility of losing your wallet. If you have stored the money in the form of digital currency on your phone or computer, you better remember your password and not lose those devices. Losing your coins means you won’t be able to retrieve it, even with the help of legal assistance so that is just one of Bitcoins flaws.
- No way to reverse the payment – If you mistakenly pay someone by using cryptocurrency, then there is no way to get a refund of the amount paid. All you can do is to ask the person for a refund and if your request is turned down, then just forget about the money.
- Uncertainty & Volatility – Since cryptocurrencies are so new, they are also very volatile. This is one of the main reasons mass adoption is taking longer than it should. Many corporations don’t want to deal with a form of money that is going to go through huge swings in volatility.
- Scaling – Based on the way smart contracts are designed, there is a limit to the speed and number of transactions it can process at a time which has hindered the widespread adoption of digital currencies. With the introduction of Lightning Networks, the crypto community has put a foot in the right direction which gives breathes hope into the idea that cryptocurrency could one day replace conventional credit card transactions.
As of now, cryptocurrency has no significant reception which is a major drawback but slowly and steadily it is consolidating its position. Both developed as well as developing countries are legalizing and regulating the use of cryptocurrency in some way or another. Even countries with a high political restriction like Russia and China are trying to make it so people can be able to freely spend them. We can already see Bitcoins effect on the economy. It is very large and only growing at an outstanding rate.
Singapore and Switzerland are the most advanced countries in the use of cryptocurrency as of now. Clearly, the advantages do overcome the disadvantages and this is the reason why the base of cryptocurrency is increasing. After seeing the benefits of using cryptocurrency, people are more than willing to accept the risks involved. This article will help you to form a better perspective on its use. Like anything else, there are few shortcomings but the positive aspects outshine the drawbacks.
With everything in life, there are always pros and cons and this is why you need to weigh both actions thoroughly before making a decision. For cryptocurrency, it’s ascension has been due to its ability to initiate secure and untraceable transactions. Now, that the technology is here, only time will tell if the rest of the world will accept it.