There are not many things that made such a significant impact in the 21st century as cryptocurrencies. Nowadays, Bitcoin and Ethereum (both digital currencies) are among the most popular payment methods next to traditional currencies like the U.S. dollar or euro. This revolution in the financial industry, like any other, brought mixed results.
In this article, we list a few pros and cons of cryptocurrencies. Are they too complicated to comprehend? Should we worry about our anonymity when paying with digital currencies? These are only a few questions we answer below. So, without further ado, here is some knowledge that should give you a clearer view of cryptocurrency.
Pros of Cryptocurrency
It’s a decentralized payment system
The first thing that comes to mind when talking about cryptocurrencies is decentralization. In the same way, as email is not owned by anyone, Bitcoin and other digital currencies are not operated by banks or governments. In other words, they are peer-to-peer systems, which means that no third party can disrupt the payment process.
It’s fast and easy to use
While there are some banks that have invested in adopting blockchain technology, cryptocurrencies are still faster and more efficient in providing instant transfers worldwide. It takes just a few minutes to exchange Bitcoin for USD. In addition, both commercial and individual users can send money anywhere in the world for a minimal fee. This means that paying with digital currencies is a lot easier than with regular money, and you can even do it anonymously. Click here to buy bitcoins online via credit card.
Digital currencies are safe from central banks and governments, as we’ve already said. However, this does not mean that the technology is completely secure. There have been cases when hackers took control of the infrastructure of some exchanges and stole millions of dollars. According to some cryptocurrency experts, these cases will happen again until the community finds a solution to the problem of security. This should be the next step of development for digital currency.
Unlike traditional currencies that are backed by governments, Bitcoin is subject to market forces and speculations. It can change dramatically in value even within a day. This feature has both pros and cons. First of all, people who would like to make short-term investments can benefit from buying digital currency when it is relatively cheap and selling it when its value goes up.
On the other hand, if you try to use Bitcoin as a payment method, you should be prepared to accept a significant volatility of its value. For example, you can pay for your coffee with a piece of Bitcoin today, and it might be worth twice less tomorrow.
It’s easy to transfer
The whole point of using cryptocurrencies is to make payments online. In order to achieve this purpose, it is important to find a way to transfer them between users. This is usually done through wallets. The good thing is that you can use any wallet you want as long as it supports the cryptocurrencies you want to send or receive.
You can download a wallet from the official website of a particular cryptocurrency or use special applications for your smartphone or computer. The only requirement is that it must have a public address that you can use for sending and receiving digital currency.
Cons of Cryptocurrency
It is high-risk
As we’ve already mentioned above, cryptocurrencies are vulnerable to hacker attacks because people who manage them are not always experienced in cybersecurity issues. In addition, cryptocurrency exchanges are prone to cyber-attacks because they handle huge sums of money and store digital currencies in their servers. Unless you’re very careful when paying with cryptocurrencies, you should keep in mind that your funds can be stolen at any moment, and you will never get them back.
It’s not regulated
If you live in a country where there are no regulations for Bitcoin, you may have to deal with the consequences at some point. For example, if you sell your home in the U.S., you will have to pay capital gains tax on any profits you made when buying or selling cryptocurrency during the process. However, if you live in a country like Venezuela or China where you can use Bitcoin in shops or restaurants, you should be well aware that it is not legal tender there, and your transactions may be considered illegal as well.
The moral of the story is that if you want to pay with digital currencies, make sure you understand your country’s regulations.
It is anonymous only for a limited time
When most people think about anonymity, they believe that using digital currencies will protect them from prying eyes. While Bitcoin is considered the most anonymous of all cryptocurrencies, this is not entirely true.
Blockchain technology creates blockchain ledgers that record every single transaction ever made over the network. It basically means that your name or wallet address can be found on an online ledger using special software and tools to collect data from multiple blockchains.
So, if you want to stay anonymous while using digital currency, you should use other methods besides blockchain technology to make sure that your transactions cannot be traced back to you or your wallet address.
This means that you have to use “mixers” or “tumblers” to break down the links between your identity and your blockchain address before buying products or services in order to maintain your anonymity as much as possible.
For many people, cryptocurrencies are not user-friendly due to their complicated nature. They often don’t understand how they work or how they can benefit from using digital currencies when paying for goods or services online. Most people don’t want to know how cryptocurrency works or what they can do for them other than making payments online anonymously.
Cryptocurrency has the potential to change the way we think of money, but it is not without its flaws. It can be difficult for people who are new to cryptocurrency to understand how it works and what makes it so important. Before you decide if you want to invest in Cryptocurrency, do your due diligence and research to determine if the benefits outweigh the disadvantages.