cryptocurrency

The Pros and Cons of Cryptocurrency: Explained

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These days, more and more people have become interested in cryptocurrency. As it becomes predominant in many people’s lives, it is never a surprise that the need to become aware and informed has become a driving force for the continuous growth of this financial revolution. Of course, it is safe to say that there are pros and cons when dealing with digital currency, just like how physical coins have different sides. Still, giant corporations and businesses continue to look for ways to integrate this kind of technology into people’s lives while making the best out of its advantages. Through this, the notion of cryptocurrency is not getting away so soon.

Despite the ever-changing value of bitcoins and other inferior variations of cryptocurrency in the market, several are still looking for the best approaches to take advantage of the expanding influence and growing demand for this digital powerhouse. Some may be looking for a good investment opportunity, while others may just simply want to take on cryptocurrency. In such cases, it is important to be aware of both the inherent risk and the opposing sides of cryptocurrency. Below is the list of cryptocurrency’s pros and cons. This list aims to give a clear view of what to expect. Through this, a good and satisfying interaction with digital currency can be made possible.

Pros of Cryptocurrency

Whether you believe it or not, there are a lot of advantages when it comes to cryptocurrency. The designers and developers of digital currency systems have internationally integrated properties into their systems that make it an on-par and latest alternative for the traditional financial systems, such as banks and Electronic Payment Systems, that are popular these days.

Privacy

Most, if not all, cryptocurrency systems are built and developed with privacy and security in mind. Thus, users can expect that transactions are secure and private despite the anonymous data being public.

There are those who are fine with having third parties like advertisers, financial organizations, government offices, and private companies keeping detailed records of their financial histories. However, others may not be fine with it. There are numerous legitimate reasons why a person would want to keep their financial transactions private. Some examples are spouses escaping from abusive and toxic relationships, people with health conditions that require controversial medical services, and even citizens of countries with an oppressive government. In these and other related situations, a person’s security, health, and life depend on keeping finances private. Whatever the reason for wanting privacy, cryptocurrency can give it.

A Stimulus for Financial Innovation

Anything new in the financial sector is exciting, and unsurprisingly, cryptocurrency is new. Also, features like speed, usage of micro-payments, low transaction costs, and the primarily digital nature of cryptocurrency are not present in traditional financing systems. This results in thrilling and up to date business models, financial opportunities, and online business approaches that are prominent these days.

This trend will indeed become more apparent over time as the cryptocurrency gets more integrated into our daily lives. However, we have already begun to see new and upcoming projects that use cryptocurrency in the free market.

Speedy and Permanent Transactions

In using cryptocurrency, you can expect that transactions are speedy, permanent, and difficult to fake. Through this, it is easier to eliminate the bulk of prominent fraud issues that traditional financial systems like banks deal with on a regular basis. It is likely because cryptocurrency transactions are comparably quicker than the typical checks and other bank-facilitated transactions.

Besides, all cryptocurrency transactions are final and recorded in a permanent public ledger called Transaction BlockChain. This means that businesses do not need to worry about some charge-back fees by cheating customers, which was an issue with Paypal’s electronic payments systems that mostly affected small enterprises and favored large companies.

Decentralized Currency

One of the most significant advantages of cryptocurrency is that it is primarily decentralized. Most cryptocurrencies are controlled by their developers utilizing it and other people who have a particular amount of coins or by the same organization that made it come into existence—the decentralized feature aids in preventing currency monopoly. Also, to make sure that no particular organization can determine the coin flow and value, it keeps it secure and stable compared to other currencies that the government can manipulate.

Combats Poverty and Oppression

Since cryptocurrency is a decentralized currency, it makes trading anywhere in the world a more effortless endeavor. Also, it provides financial options for people in impoverished countries that do not have access to other financial services.

Many banks and financial institutions currently don’t serve poor and rural areas (especially in smaller countries). Further, many people are financially crippled by their governments’ devalued currency or frozen markets.

For example, Bitcoin can offer an alternative to the existing financial conditions that provides people who have internet access a reliable financial service. Thus, it is safe to say that cryptocurrency helps the oppressed and impoverished, as they are those who do not have any viable alternative.

In Control of Your Own Money

Users of cryptocurrency are the only ones in control of their transactions. This helps in keeping them safe. Transactions are independent of the person making them. This helps protect clients from identity theft.

There is only one way for a user to access their money, and that is through a private key. This private key is a cryptographic password that only the owner of the cash knows. This ultimately means that no bank, big corporations, or government agencies can freeze your account. Thus, by keeping a certain amount of savings in cryptocurrency, you can secure yourself financially. Even if your country’s government defaults their loans or your trusted bank fails, you have an unaffected and secured cash backup.

Not Prone to Inflation

All traditional financial systems experience inflation which is caused by the economies shifting prices and the continuous printing of more money by the government. However, most cryptocurrency like Bitcoin are not affected as much because there is only a limited amount of minable Bitcoins.

Cryptocurrency is still an emerging technology in the financial industry, making the value of numerous digital currencies as strained as possible. However, despite its volatility, the system was made to be non-inflationary for a long time. Below are the reasons that make cryptocurrency not prone to inflation:

  • Cryptocurrency has a limit on the total amount of coins that will be made.
  • In cryptocurrency, there are existing techniques and controls to be used in each protocol. Through this, we can ensure that producing new coins is controlled and predictable over time. We can predict how much of a particular cryptocurrency will exist as time passes by.
  • There is no participation by any money-issuing agency that can unfairly decide to print more money of a specific currency or pose any legal policy that reduces a currency’s value.

For example, Bitcoin was actually programmed to have a maximum of twenty million minable Bitcoins. Also, it is estimated that by 2050, the last of Bitcoins will be mined, and no more will be added to the market.

Easy Currency Exchanges

People can buy cryptocurrency using various currencies like U.S. dollars, British pounds, European euros, Japanese yen, Indian rupee, and many others. The different wallets and exchanges in cryptocurrencies aid in more straightforward currency conversion by trading across various wallets. It also requires low transaction fees.

Cons of Cryptocurrency

As with every new technology comes a list of cons that needs to be worked out. Indeed, the pros of cryptocurrency discussed above are excellent as they are. However, there must still be room to acknowledge and discuss the cons to see the different cryptocurrency sides.

Limited Acceptance

The low transaction cost can definitely add to the appeal of transacting in cryptocurrency. However, payments in cryptocurrency are still not widely accepted. There are few merchants and vendors that accept cryptocurrency. Some say that only eleven major companies refer to Bitcoin as the most accepted cryptocurrency.

Volatile Nature

Currently, the cryptocurrency market is volatile – the value of coins can change frequently and sometimes, by wide margins. In 2014, the value of cryptocurrency like Bitcoin had the highest price of one thousand U.S. dollars and the lowest price of thirty U.S. dollars. This means that even though people had earned a lot of money when the price of a cryptocurrency skyrocketed, others had lost just as much or even double when the price crashed.

With that being said, it is safe to add that as the popularity of the digital currency increases, this volatility aspect will calm down. Other experts have theorized that this primary volatility might just be a “stress testing.” Thus, these value fluctuations will just slowly level out as well as stabilize.

Possible Security Issues

The same with any emerging technology, there are people who will try to use inexperience and naivety to cheat, scam, and steal your money. This is proven to be prominent with cryptocurrencies, so it is very crucial to be aware of any security issues and safety risks.

Treating your money in cryptocurrency the same as your real money will get you on the right track, as it is easier to follow the standard security protocols of any other hard currency. When using digital currency to sell, buy, and gamble through online means, you will still need to be careful as you normally would with any investment. When dealing with online casinos, try to keep an eye on the old tricks just updated into the digital age. Never trust any advertisements that offer unrealistic and unjustified bonuses and offers. It is indeed better to take the risk, but it is best to take a calculated one. Through planning and researching, chances of unreturnable losses can be reduced.

Possible Criminal Uses

Cryptocurrency traded for legal and legitimate reasons today can fund illegal things tomorrow. In many ways, it is still the same with cash. The provided privacy of cryptocurrency can technically be used for legal and illegal purposes. An example would be the infamous Silk Road. This deep web marketplace allowed illegitimate black market transactions like the person-to-person sale of illicit drugs and many others using cryptocurrency such as Bitcoin.

Despite the fact that all financial systems run this kind of risk, cryptocurrency makes pulling off this kind of illegal exchange much simpler. Still, it is essential to note that this inherent risk is not an issue that warrants eliminating cryptocurrency. It will be like telling people to stop using cash due to criminals also using it. The cryptocurrency’s public ledger system can still help law enforcers investigate primarily unknown illegal activity.

Data Losses Can Incur Financial Losses

Developers of cryptocurrency systems wanted to provide a more or less untraceable source code, robust hacking defense, and strong authentication protocols. Thus, making it easier to place money in cryptocurrencies rather than physical money or vaults. However, if the user loses their wallet’s private key, it is impossible to get it back. The wallet will be locked along with the remaining coins, which can cause huge financial losses for the user.

Negative Environmental Effects

The infamous culprit is Bitcoin. Mining cryptocurrencies need a lot of computational power and electrical input which requires large amounts of energy. It is a highly energy-intensive endeavor. Mining Bitcoin cannot be done on ordinary and normal computers. For example, China, as one of the biggest Bitcoin miners, uses coal to generate electricity. This, thus, significantly increases China’s carbon footprint.

Conclusion

Due to the COVID-19 Pandemic, with people staying at home to follow quarantine protocols, many are looking for investments that they can make in the safety of their homes. This can explain the increasing urge to know what and how cryptocurrency works, its advantages and disadvantages, and also how to turn them in your favor. Keeping them in mind as decisions are being made is a good way to go. Through research and seeing the bigger picture, you can give yourselves a satisfying and safe dive into the world of cryptocurrency.