Tired of the current banking system?
It is a known fact that the word cryptocurrency has piqued the public interest. I would assume that you are familiar with terms like Bitcoin, Etherium, and Ether. All the words mentioned are types of cryptocurrencies. As a matter of fact, there are a whole lot of cryptocurrency variations.
As a refresher, I would like to give a short definition of cryptocurrencies,
Cryptocurrencies are virtual currencies that are birthed and made possible with the aid of advanced encryption algorithms known as cryptographies. In 2009, cryptocurrencies were transformed from imaginary and conceptual technologies to being recognized and leveraged worldwide with the advent of Bitcoin. This led to opportunities that invited huge followers in the following years wherein it had a lot of investors and public recognition. In its history, Bitcoins reached a world record of over $2 billion at its prime but, unfortunately, plunged due to ongoing arguments about its stability.
Making CRYPTOCURRENCIES WORK FOR YOU
Those well versed with the dynamics of the modern economics are well are that although it is growing, it is also unpredictable. It never operates the way economists expect it to be and quite volatile in its nature. One small nudge and all comes tumbling down. This is never a good thing for those who work hard and toil night and day to ensure stability and comfort for their family.
“Fragility IS THE QUALITY OF THINGS THAT ARE VULNERABLE TO VOLATILITY.”
– NASSIM NICHOLAS TALEB
In this article. I will list down some advantages and disadvantages of allowing cryptocurrencies. I only desire that you get an idea of how cryptocurrencies work.
PROS AND CONS OF CRYPTOCURRENCY
Advantages and disadvantages of cryptocurrencies
The perks of cryptocurrencies over traditional currency system
Example: Central authority has no control over it
On in Cyprus in March 2013, The Central Bank enforced to get back uninsured deposits larger than $100,000 to rebuild its money storage, causing huge turmoil for the public. The bank aimed to take a huge cut of the savings below that amount, eating directly into family savings. With cryptocurrenies, this will never happen. For the simple fact that, monetization is decentralized. No one has control over it, and therefore a no one can take it away from you. For those who find their trust in the traditional banking system unravelling, that’s a big benefit.
Let’s take a look at some of the improvements that can be made to fiat currency by shifting towards digital cash:
ADVANTAGES OF CRYPTOCURRENCY
- Fraud: Cryptocurrencies are digital and cannot be counterfeited or reversed arbitrarily by the sender, as with credit card charge-backs.
- Identity Theft: When you give your credit card to a merchant, you give him or her access to your full credit line, even if the transaction is for a small amount. Credit cards operate on a “pull” basis, where the store initiates the payment and pulls the designated amount from your account. Cryptocurrency use a “push” mechanism that allows the cryptocurrency holder to send exactly what he or she wants to the merchant or recipient with no further information
- Immediate Settlement: Purchasing real property typically involves a number of third parties (Lawyers, Notary), delays, and payment of fees. In many ways, the bitcoin/cryptocurrency blockchain is like a “large property rights database,” says Gallippi. Bitcoin contracts can be designed and enforced to eliminate or add third party approvals, reference external facts, or be completed at a future date or time for a fraction of the expense and time required to complete traditional asset transfers.
- Access to Everyone: There are approximately 2.2 billion individuals with access to the Internet or mobile phones who don’t currently have access to traditional exchange systems. These individuals are primed for the Crytocurrency market. Kenya’s M-PESA system, a mobile phone-based money transfer and micros financing service recently announced a bitcoin device, with one in three Kenyans now owning a bitcoin wallet. (Let me repeat that again. 1/3)
- Lower Fees: There aren’t usually transaction fees for cryptocurrency exchanges because the miners are compensated by the network (Side note: This is the case for now). Even though there’s no bitcoin/cryptocurrency transaction fee, many expect that most users will engage a third-party service, such as Coinbase, creating and maintaining their own bitcoin wallets. These services act like Paypal does for cash or credit card users, providing the online exchange system for bitcoin, and as such, they’re likely to charge fees. It’s interesting to note that Paypal does not accept or transfer bitcoins.
“THE BLOCKCHAIN KEEPS EVERYONE HONEST, AND A WHOLE LAYER OF BANKING BUREAUCRACY IS REMOVED, LOWERING COSTS.” – PAUL VIGNA
MOST IMPORTANT. YOU OWN IT
There is no other electronic cash system in which your account isn’t owned by someone else. Take PayPal, for example: if the company decides for some reason that your account has been misused, it has the power to freeze all of the assets held in the account, without consulting you (Trust me, this has happened to me many times) It is then up to you to jump through whatever hoops are necessary to get it cleared, so that you can access your funds. With cryptocurrency, you own the private key and the corresponding public key that makes up your cryptocurrency address. No one can take that away from you (unless you lose it yourself, or host it with a web-based wallet service that loses it for you).
THE BAD THINGS ABOUT CRYPTOCURRENCY
Overall, cryptocurrencies have a long way to go before they can replace credit cards and traditional currencies as a tool for global commerce.
Bottom Line: Cryptocurrency is a baby. It will need years and years of exposure to the global system before the masses start accepting it.
DISADVANTAGES OF CRYPTOCURRENCY
- Fact is many people are still unaware of cryptocurrency aka Digital currency.
- People need to be educated about it to be able to apply it to their lives.
- Businesses need to start accepting it.
- They need to make it easier to sign up and get started.
HIGH RISK OF LOSS
Timothy B. Lee, an adjunct scholar at the Cato Institute and a regular contributor to Forbes.com, identifies four reasons to be cautious about bitcoins:
- Lack of Security. There is no safety net or the perfect way to protect your bitcoins from human error (passwords), technical glitches (hard drive failures, malware), or fiduciary fraud. According to an article in the UK edition of Wired, 18 of 40 web-based businesses offering to exchange bitcoins into other fiat currencies have gone out of business, with only six exchanges reimbursing their customers. The authors of the study estimate that the median lifespan of any bitcoin exchange is 381 days, with a 29.9% chance that a new exchange will close within a year of opening.
- Increased Regulation. While relatively benign guidelines are currently in place, law enforcement agencies could decide that bitcoins are a “giant money laundering scheme,” and enact more stringent regulations that would diminish the currency’s value.
- Limited Scaling. The design of the system limits the speed and number of transactions processed, making it unlikely that bitcoins will replace conventional credit card transactions.
- Lack of Applications. While acknowledging bitcoins’ popular use for illegal transactions, Lee questions how useful bitcoins really are. To be truly disruptive to existing fiat currencies or electronic payment systems, Bitcoin would need applications for low-cost international money transfers, the creation of complex electronic contracts, or use in Kickstarter-style fundraising campaigns or micropayment transfers.
There are always pros and cons to any situation in life. To be able to make a good decision, you need to weigh the good and bad thoroughly before finalizing your choice. With Cryptocurrency, it’s more about mass acceptance than technology. The technology is here. Only time will tell when the rest of the world (governments, citizens) will say… YES!