Last Updated on March 4, 2021 by Filip Poutintsev
Cryptocurrency, a digital or virtual currency that uses encryption (cryptography) to generate money or verify the money is taking the world by storm. The cryptocurrency that uses blockchain technology has become a global phenomenon known to most people.
When did it originate?
Despite multiple efforts at creating online currencies, the first fully decentralized digital cash system, Bitcoin, was created. Bitcoin started catching on when someone decides to sell theirs for the first time swapping 10,000 of them for 2 pizzas.
To understand cryptocurrency better, let’s first understand what Bitcoin is short.
The Story of Bitcoin
Satoshi Nakamoto, a man, a woman, or even a group? No one really knows. Nakamoto created Bitcoin and communication methods used emails and crypto forums only.
Satoshi Nakamoto was gone and what was left behind were ideas for other cyberpunks to create more such cryptocurrencies.
The crypto market has evolved but there is still a dilemma regarding whether an individual should put cryptocurrencies in the category of something unattainable and useless to put resources into or categorize it as a feasible investment option.
Advantages of Cryptocurrency
Below are some of the advantages of Cryptocurrency.
1. No Restrictions on Payment
There is freedom of payment. For individuals living under the tyranny of governments, Bitcoin can work as a significant financial tool to use as a medium of exchange without a single entity or government having control over it.
2. Maintenance of Anonymity
Many people are working towards it since the anonymity is maintained. It protects identity theft.
Personal information does not matter of wrangle since the payment can be made and finalized with the user’s virtual identity.
3. Use of Complex Algorithm
Since Bitcoin uses a complex algorithm, it cannot be manipulated by any individual, organization, a country as some crazy serious skill is required to make digital heist.
4. Speed of Exchange
How boring is it for you all to stand on line at the bank between banking hours just to get your own money? How difficult it becomes when you need money urgently but you realize it’s a public holiday?
That’s not something to worry about as cryptocurrencies offer very fast transactions. Bitcoin takes around 10 minutes of validating exchange and its less if you use other cryptocurrency techniques.
5.No Third-Party Involvement
Cryptocurrencies are also gaining popularity as there is no third party involvement or approval required. It removes delays in payments. What a great medium of exchange especially for freelancers to keep complaining about delays in payment!
6. Free/ Very Less Transaction Fee
Most cryptocurrencies transactions are normally free. Anyone can exchange without paying any exchange fees which is very beneficial compared to the normal banking system. But some also offer transactions fee to speed up their transactions.
7. No Inflation
There will be no inflation since no political forces can change the order of use of coins and mines in cryptocurrency.
Despite the many advantages it has to offer, there are certain disadvantages, it’s better to keep having knowledge about it.
Disadvantages of Cryptocurrency
While it is a relatively newer form of e-currency, it’s obvious there are disadvantages or cons of cryptocurrency. Let us have a look at a few of those in the list below.
1. Lack of Awareness/Knowledge
People are still unaware that digital currencies like Bitcoin exists. They have no or very few background knowledge regarding cryptocurrency. Cryptocurrency is a newly introduced system and it uses quite complicated blockchain technology, loads of turns and twists to learn and adapt. Without comprehending cryptocurrency, it is risky to deal with it.
2. Use of Complex Technique
It is true that the use of complex algorithms makes it rare to create digital heists, but what is the point if the worker does not know about the usefulness of this very well? It becomes very difficult for customers as well as the service providers to understand and use cryptocurrencies for transactions.
3. Highly Volatile in Nature
Since its early days, cryptocurrencies are known for having a highly volatile nature. It is unpredictable and risky to invest without understanding possible risk factors. As there is a limited amount of coins and the demand for them is increasing by each passing day. As a result, people become skeptical if they should invest in it or not.
4. Not Accepted Everywhere
Though the hype of cryptocurrency is rising each passing day, cryptocurrencies are still not accepted everywhere. Some countries around the globe have still not accepted and legalized the use of cryptocurrency, so it might still be difficult to transact money all around the world.
People still find it difficult to understand how cryptocurrencies and blockchain technology operate, so they have often become victims of theft and scams by letting other people keep a record of their bitcoins.
6. No Reverse of Payment or Recovery
Once you have made the payment, you can’t reverse it.
If you mistakenly send money to someone and then if they do not agree to refund the money, damn! you can do nothing but feel sorry for yourself.
You need to remember your account details because in case if you forget your account details, there is no way you can retrieve it. The data will be lost and the reason why you cannot get back your account is that blockchain technology uses very tight security. This loss adds up distress.
7. Black Market
As personal identity isn’t shown anywhere, anonymity can give rise to the black market. It can be a platform to conduct unlawful activities. According to www.topbrokers.trade, the infamous “dark web” marketplace Silk Road used Bitcoin, facilitating illegal drug purchases and other illicit activities before it was shut down in 2014.
8. Scaling Issue
There is a scaling issue that programmers are trying to get rid of. The problem it creates is it puts a limit on the speed of cryptocurrency transactions. They have been trying to sort out the scaling issue in the nearby future.
9. May not be Exchanged with Fiat Currency
The government can restrict to convert cryptocurrencies into fiat currencies. There is no direct exchange of Bitcoins into regular money that is being used in the market which might devalue the cryptocurrencies and also be less demanded.
As some financial experts anticipate a major change in crypto is approaching the market, it is very important to know both sides as knowledge about advantages helps you to utilize its best leverages and the knowledge of the disadvantages will help you stay away from the pitfalls.