Cryptocurrency: Advantages & Disadvantages Explained
With the price spike of digital currencies such as Bitcoin in 2017, the space has begun receiving more media attention than it ever has before. Its coverage frequently takes the form of a debate, with advocates citing cryptocurrency as the clear future of money while opponents point out many flaws that have yet to be worked out. The public’s knowledge base in this area is relatively lacking, the fact that both sides use to sway general opinion toward their position.
This article serves as a primer on the arguments for and against crypto. It does not include all information on the topic; instead, it sticks with fundamental concepts to allow the layman to decide for themselves whether to support cryptocurrencies or not.
The most persuasive argument in favor of digital monies is their underlying blockchain technology. The blockchain is a decentralized public ledger displaying every transaction that has ever taken place on a given token’s network. This system enables the tracking of individual coins through every account that they have ever been in, making it very easy to track stolen coins. Backers cite this feature as proof that Bitcoin and similar currencies are hack-proof where traditional banking is not.
Hackers may also have a hard time with the lack of a central hub on which to focus a cyber attack. While the U.S. government and large banking institutions have centralized information ripe for stealing, the blockchain has no equivalent. Every block, or group of transactions on the blockchain, is checked against previous blocks to ensure that they are valid by volunteer miners who use computers to process complicated algebraic equations. With no central authority, the crypto community has total control over the digital money supply, making it a far more democratic financial system.
Digital money offers several practical advantages over more traditional currencies as well. For example, citizens of developing countries may have a hard time locating a currency with any worth in the global marketplace, effectively locking them out of it. A digital currency with universal acceptance would theoretically open the global market to every possible participant, allowing everyone to compete on an even playing field.
Some blockchains, such as the one used by Ethereum, are also programmable. That serves twin purposes: first, it enables developers interested in blockchain technology to work on a common platform with multiple applications. Second, it allows for the development of smart contracts, or electronic contracts capable of fulfilling themselves. These agreements have the potential to revolutionize the way people conduct their global business.
Finally, crypto transactions may involve less money than those reliant on fiat currencies. For instance, a Bitcoin transaction requires only a Satoshi (5,430 millionths of one Bitcoin) to process. Deals using American dollars must be worth at least $0.01, as there is no physical coin for less than that. That opens a broad range of microtransactions that are just impossible to process otherwise.
Most crypto skeptics struggle with the idea that digital currency is worth anything at all. Gold has enjoyed high value since the dawn of history, and government-issued money gets backing from that government. Bitcoin serves no practical purpose in the modern marketplace and has nothing underwriting its value, so it could theoretically become utterly worthless in a day.
Wild price fluctuations often exacerbate these fears. Even in Bitcoin’s banner 2017, there was a two-week stretch in December where it lost 25 percent of its total value. These fluctuations make it challenging for businesses to accept crypto as payment for goods and services, as the effective price can vary dramatically by the hour.
Some cryptos, including Bitcoin, are also too slow to process for everyday commercial use. For example, Bitcoin miners can handle three to seven transactions per second, compared to Visa, which can process more than 24,000 over the same period. The resources required to verify Bitcoin transactions are also cost-prohibitive at times, producing transaction fees of up to USD 25 during peak periods. That renders Bitcoin unsuitable for cheaper transactions even as it touts an ability to go less expensive than traditional monies can.
Many people do not trust the underlying code behind blockchain either. The technology was the brainchild of a person or group calling themselves Satoshi Nakamoto. Their true identity was never made public, leading many to question how much influence they might still hold over the cryptocurrency.
Other scams are also common in the space. So-called crypto experts frequently take advantage of the lack of regulation to buy a lot of a cheap token they then hype up in the media. Their recommendation causes a demand spike that allows the expert to profit handsomely from their investment. Everybody else loses their money as a part of the scheme.
The exchanges that facilitate crypto trades are also unscrupulous at times. For instance, one popular exchange called BitConnect was forced to shut down amid allegations that it was orchestrating a Ponzi scheme rather than offering a legitimate service. Even honest exchanges lack insurance, meaning that a hacker can delete anybody’s virtual assets and leave them with no method to recover their money. That is what happened to an exchange called Mount Gulg in 2014 when someone discovered $473 million worth of Bitcoin siphoned from their customers’ accounts over a period of years.
An unbiased observer is likely to conclude that digital currencies have a lot of future potential, but a lot of problems to overcome before they realize it. It’s up to you whether you think the time is now for cryptocurrencies, or if traditional money systems are safe for the time being.
- What's the Best Cryptocurrency to Invest in Today? - January 9th, 2019
- Cryptocurrency Trading Easy tips to get started | AvaTrade - January 9th, 2019
- Thailand Issues 4 Cryptocurrency Licenses, Rejects 2 ... - January 9th, 2019
- NASDAQ, Fidelity Invest in New Cryptocurrency Exchange ... - January 9th, 2019
- Cryptocurrency News | Cryptocurrency News | Blockchain ... - January 9th, 2019
- Differences Between Cryptocurrency Coins and Tokens - January 9th, 2019
- Cryptocurrency Charts - January 8th, 2019
- What is cryptocurrency? - cointelegraph.com - January 4th, 2019
- Blockchain Will Survive A Cryptocurrency Apocalypse - January 1st, 2019
- Cryptocurrency - Simple English Wikipedia, the free encyclopedia - December 25th, 2018
- Is Cryptocurrency Dead for Good? | Investopedia - December 6th, 2018
- Cryptocurrency scammers dupe Singaporeans out of $78,000 in ... - December 6th, 2018
- Invest in Cryptocurrency With Spare Change - Black Enterprise - November 28th, 2018
- What is Mining Cryptocurrency? What you need to know... - November 26th, 2018
- Saudi Arabia Will Launch Its Own Cryptocurrency in 2019 ... - November 23rd, 2018
- Bitcoin and Other Cryptocurrency Prices Are Crashing Again ... - November 17th, 2018
- Homepage - Cryptocurrency Army - November 14th, 2018
- Cryptocurrency - Simple English Wikipedia, the free ... - November 14th, 2018
- How To Create Your Own Cryptocurrency - fastcompany.com - November 14th, 2018
- Cryptocurrency price plunge worse than bursting of dotcom ... - September 18th, 2018
- Iran, North Korea and Venezuela turning to cryptocurrency ... - September 12th, 2018
- SEC halts trading in two cryptocurrency products, citing ... - September 12th, 2018
- Cryptocurrency News, ICO Reviews & Blockchain Updates ... - September 9th, 2018
- Cryptocurrency "miners," utilities look for ways to get along ... - August 29th, 2018
- Cryptocurrency: Virtual money, real power, and the fight ... - August 28th, 2018
- Pornhub Now Accepts PumaPay Cryptocurrency - August 27th, 2018
- NK hackers target Mac users with trojan cryptocurrency app ... - August 27th, 2018
- Cryptocurrency: The unlucky investors who got in at the wrong ... - August 26th, 2018
- cryptocurrency coins Archives - The Industry Spread - August 26th, 2018
- cryptocurrency Archives - Page 6 of 6 - The Industry Spread - August 26th, 2018
- Cryptocurrency investment in SMSF - hallandwilcox.com.au - August 26th, 2018
- How To Choose The Best Cryptocurrency Wallet - Crypto News AU - August 26th, 2018
- Courses | Cryptocurrency Australia - August 26th, 2018
- What Every Investor Should Know Before Buying Cryptocurrency ... - August 26th, 2018
- The biggest cryptocurrency hack in the history of blockchain - August 26th, 2018
- After the Bitcoin Boom: Hard Lessons for Cryptocurrency ... - August 21st, 2018
- Cryptocurrency Rankings | CryptoSlate - August 14th, 2018
- Bitcoin price falls after SEC postpones key ETF decision - August 12th, 2018
- Brokers Cryptocurrency Deals Are Focus of SEC Review ... - August 7th, 2018
- 7 Cryptocurrency Predictions for the Rest of 2018 - August 7th, 2018
- Have a Cryptocurrency Company? Bermuda, Malta or Gibraltar ... - July 31st, 2018
- Bitcoin price live: Latest updates as cryptocurrency ... - July 22nd, 2018
- 2018 Bahamas Blockchain & Cryptocurrency Conference - July 16th, 2018
- Best Cryptocurrency Trading Platform 2018 | Top Crypto ... - July 13th, 2018
- ATB Coin - The fastest and most secure payment system - June 19th, 2018
- An Illustrated Glossary of Cryptocurrency Slang (Infographic) - June 19th, 2018
- Apollo All-in-One Cryptocurrency - June 3rd, 2018
- Cryptocurrency News, ICO Database, Coin Rankings and ... - May 25th, 2018
- CoinLib - Cryptocurrency prices now - May 21st, 2018
- Cryptocurrency Market Capitalizations | CoinMarketCap - May 4th, 2018
- CryptoCurrency Market , Coin Prices & Charts, Crypto ... - April 28th, 2018
- Nasdaq open to cryptocurrency exchange in future, says CEO - April 27th, 2018
- The 4 Top Cryptocurrency Mining Stocks -- The Motley Fool - April 27th, 2018
- One in five financial institutions consider cryptocurrency ... - April 27th, 2018
- New hacks siphon private cryptocurrency keys from ... - April 27th, 2018
- What Is Cryptocurrency? - dummies - April 21st, 2018
- Cryptocurrency Market Surges to $365 Billion, Start of a ... - April 21st, 2018
- BTCMANAGER | Bitcoin, Blockchain & Cryptocurrency News - April 16th, 2018
- How to keep your cryptocurrency safe - CNET - April 11th, 2018
- How do I report Cryptocurrency Mining income? - TurboTax ... - April 4th, 2018
- When do you report Cryptocurrency investments? - TurboTax ... - April 4th, 2018
- Trading Cryptocurrency in 2018: The Definitive Guide - March 14th, 2018
- How would one operate a Cryptocurrency Mining Pool and ... - March 13th, 2018
- Coinbase cryptocurrency index fund - Business Insider - March 10th, 2018
- Cryptosomniac | Cryptocurrency Price Tracker - Bitcoin & Eth ... - February 24th, 2018
- Cryptocurrencies News & Prices | Markets Insider - February 22nd, 2018
- I started cryptocurrency mining at the end of 2017 and was ... - February 20th, 2018
- Cryptocurrency News - Bitcoin, Ethereum, NEO, ICO startups - February 8th, 2018
- 7 Best Cryptocurrency Exchanges to Buy/Sell Any ... - February 8th, 2018
- Electroneum. The Mobile Cryptocurrency. - February 8th, 2018
- Cryptocurrencies trading | your guide in the world of trading ... - February 5th, 2018
- Robinhood trading app introduces cryptocurrency - money.cnn.com - January 28th, 2018
- Robinhood adds zero-fee cryptocurrency trading and tracking ... - January 28th, 2018
- Cryptocurrency Price Prediction, Comparison, Analysis - January 22nd, 2018
- South Korea's major cryptocurrency exchanges ... - reuters.com - January 13th, 2018
- Bitcoin-crazy South Korea may face a ban on cryptocurrency ... - January 13th, 2018
- Cryptocurrency - IC Markets - January 13th, 2018
- Kodak launches cryptocurrency, stock pops 125% - Jan. 9, 2018 - January 10th, 2018
- The cryptocurrency bubble is strangling innovation | TechCrunch - January 9th, 2018
- Coinschedule - The best cryptocurrency ICOs (Initial Coin ... - January 8th, 2018