Cryptocurrency has a perception shaping or rebuilding power that may change the way we use currency or currency for purchasing goods and services or trade.
Digital currency promises to offer a smooth and faster transaction rate than traditional physical/ fiat currency.
Bitcoin became the king of all cryptocurrencies over time. It made the world of cryptocurrencies an investment-oriented platform rather than a transaction option.
However, there are several advantages of cryptocurrencies as well as some disadvantages. In this article, we will discuss the advantages and disadvantages of using cryptocurrencies.
What is Cryptocurrency?
Secured by cryptography, the virtual currency rests secured within the blockchain, a distributed ledger that a disparate network of computers enforces. Cryptocurrencies offer private ownership because of their decentralized nature.
Cryptocurrencies have no physical form; users can only use them from their computers or mobile phones. In addition, there is the authority of the government or the central banks on your cryptocurrencies.
What is Blockchain?
Blockchain is a sophisticated database end-to-end encrypted and secure that keeps the transaction records of the cryptocurrencies among peers. Blockchain stores data blocks chained across an encrypted network connected through multiple computers.
Blockchain is a very secure network. It is secure enough to claim itself to hacking, theft, or online fraud. It keeps a record of every transaction made within.
Features of Cryptocurrency
Cryptocurrencies have several identifying features. Here are the key features-
- Cryptocurrencies are digital or virtual currencies, meaning they have no physical form.
- Cryptocurrencies are decentralized in nature. There is no governing force like the government or the bank.
- The encryption technique that secures cryptocurrencies in the blockchain provides the name to this digital or virtual currency.
- The main asset of cryptocurrency is blockchain technology. It has a varied range of potential for utility in several industries.
- Cryptocurrencies have a faster transaction speed and have a constant value.
Different Types of Cryptocurrencies
There are different types of cryptocurrencies. After the emergence of bitcoin, many such digital currencies have been surfacing in the blockchain.
Some of the early emerging cryptocurrencies have turned into investment options rather than being transaction methods. For instance, bitcoin is so valuable that many investors now buy bitcoin.
Bitcoin, Ethereum, Ripple, Litecoin, Dogecoin are some of the widely uttered names in the cryptocurrency world. Bitcoin has the highest market value, while the other coins rank slightly lower.
Advantages of Cryptocurrency
The invention of this currency was to avail advantages to the users with a smooth and decentralized transaction method. Here are some advantages of using cryptocurrencies.
- You don’t need any third-party operatives to help you with transferring value. Cryptocurrencies offer p2p transactions without the use of bank or credit/debit cards.
- Compared to other transaction methods, cryptocurrencies are cheaper and faster. Cryptocurrency lets you avoid transaction fees when doing international money transfers.
- You get top-of-the-line security technology with blockchain to secure your currency and the transaction process.
- In the modern cryptocurrency system, users get a wallet or account that only the users with their private keys can access.
- Cryptocurrencies are getting more and more users every month. International traders are now at an advantage because of this.
Disadvantages of Cryptocurrency
Like the advantages, there are also some disadvantages to the use of cryptocurrencies. Here I have listed a few disadvantages of using cryptocurrencies
- It might sound silly, but you can lose your cryptocurrency wallet or delete your cryptocurrencies by mistake.
- Some reports are also there about the theft of cryptocurrencies. Such robbery occurred in the websites that offer remote storage of your cryptocurrencies.
- Cryptocurrencies are volatile. They can rise in value at any time, just like they can fall low. If you are thinking of investing, then you must reconsider and consider it attentively.
- Financial regulation authority does not regulate the cryptocurrency market. Because of that, there is no assurance for the protection of your business.
- There are many cryptocurrencies, more than thousands, in the market. Cryptocurrencies may completely lose their value if some companies and people lose interest in them.
- Cryptocurrency wallets are secure. But when you are engaging in crypto arbitrage on any exchange, they become more vulnerable to theft. There have been such incidents. We suggest you always be careful about the exchange platforms before you start trading on them.
- Cryptocurrencies are decentralized, which means the government has no liability or governance over your money. This nature is a double-edged sword. You get full ownership of your money, but there is no stabling force or backup.
- Cryptocurrencies are still not the prioritized transaction method for most of the global population.
The blockchain technology of cryptocurrencies has a lot to offer to the world. For example, some cryptocurrencies like Ethereum provide smart contracts and many applications.
Apart from the transaction and investment methods, cryptocurrencies are opening other opportunities in the digital world. So, regardless of advantages or disadvantages, it is a technology that needs progress.