Bitcoins have become a popular mode of currency transaction over the years. The article looks at the advantages as well as the disadvantages of bitcoins.
WHAT IS CRYPTOCURRENCY?
Cryptocurrency is a type of virtual or digital currency with no regulating authority per se. It works within a decentralised system where transactions are recorded and managed. The main reason cryptocurrency has gained popularity is because it helps in preventing counterfeiting and fraud schemes. A computerized database stores the transaction records safely. No physical money gets exchanged in the process.
WHAT ARE BITCOINS?
Bitcoins are a type of cryptocurrency invented in 2008 and released as an open-source software. It is the first decentralised digital currency. They are digital or virtual coins that you can send through the internet. Unlike other currencies, bitcoins are transferred directly from one person to another with the help of the internet.
Bitcoins takes the help of a source code that uses algorithms on the basis of complex mathematical and advanced computer engineering principles. They are the most popular and widely used type of cyrptocurrency.
Over the years, experts have weighed in on their benefits and concerns with bitcoins. Let us have a look.
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ADVANTAGES OF BITCOINS
The biggest advantage of bitcoins is that it is accepted by major organizations and companies. It is popular, widely recognized, and easy convertible. Over the years, bitcoins have created a brand that has a developed and efficient system. Hence, most corporations and organizations accept this mode of money transactions. One can even say that soon it will be a mainstream payment method.
Increase in Liquidity
In comparison to other cryptocurrencies, it has a greater liquidity rate. It is the most popular cryptocurrency and so, it has the higher advantage of retaining most of its value while converting it into another type of flat currency. Therefore, it can be said that it is comes the closest to traditional currency.
Another important benefit of bitcoins is that transactions are much smoother than traditional money transfers. Especially with international transfers, it is a very convenient option. And unlike other online transactions that take an international transaction fee for the transfer, bitcoins are free to send to and from wherever the bitcoin user wants.
The uniqueness of bitcoins lies in the fact that it gives the users complete anonymity. There are privacy protections installed into the bitcoin system. So transaction records are public information but the identity of the persons using it is hidden. The individuals are assigned certain codes to identify their transactions. Therefore, this helps in maintaining transparency during currency transactions.
Bitcoins are not regulated by any bank or even the state. It is decentralized and is an alternate mode of currency that moves away from the monopoly of conventional money. Therefore, there is a greater transparency with bitcoins.
DISADVANTAGES OF BITCOINS
As bitcoins are a popular cryptocurrency, their liquidity rates are high. Because of their demand, their value is susceptible to increase or decrease over a span of time. In other words, bitcoins are highly volatile as a currency. It may serve as an advantage for short-term investments but on the longer run, it cannot be used as a safe mode of money exchange.
The biggest concern that experts have with bitcoins is that there can be security breaches. With its popularity, it attracts a larger number of fraudsters and bitcoin-related schemes. Since it is an anonymous platform with a weak redressal option, it is a hotbed for financial crimes. Additionally, wallets can be corrupted with a virus or it can even get lost. This would be impossible to recover later.
Bitcoins are undoubtedly risky. And one of the reasons is that there are no options to get a refund. In case a user gets themselves embroiled in a transaction fraud, they do not have any redressal to settle the issue. The laws in relation to bitcoin are fairly niche and sketchy. Ultimately, users are responsible for their own money.
We rely on technology for everything but we forget that it is afterall, a machine. They are bound to glitch, make mistakes, and even breakdown sometimes. Similarly, the bitcoin system could also have technical flaws that can negatively impact a user or a heavy investor.
Another concern that people have in regard to bitcoins is that it has significant environmental issues. Bitcoin mining consumes huge amounts of electricity. And high energy production has a detrimental effect on the already overburdened environment.
In conclusion, bitcoins are increasingly becoming popular among companies and individuals alike. While it is a lucrative prospect, one should also be careful of the perils of technology. One must have the technical know-how to make sound investments. Because at the end of the day, it is your money on the line.
Pros and Cons of Bitcoins