Pros of cryptocurrency
Cryptocurrencies are unlike any other asset. It uses the principle of blockchain, which has made them a competitive alternative to bank transfers, electronic payment systems and even government money. Compared to existing financial instruments, cryptocurrencies have a number of advantages.
Decentralization
Most cryptocurrencies function in a decentralized manner, according to their algorithm. They are not under the control of government authorities, and all communication nodes have the same rights and are equal to each other. In networks such as Bitcoin, even the developers cannot change the algorithm.
Low transaction costs
Transactions in cryptocurrency systems are P2P, without the involvement of a central supervisory authority. Reducing the costs of maintaining the network allows for a significant reduction in transfer fees.
Unlike bank and electronic payment systems, users can set up their own commission and even send transactions without it.
Fast payments
Cryptocurrency transactions have a high processing speed. In addition, once a transaction is added to the blockchain, it becomes irreversible. The irreversibility of transactions prevents records tampering and fraud in the system.
Privacy
Privacy is one of the main advantages of cryptocurrencies. You don’t have to provide any personal information to use the system, which allows you to remain anonymous and hide your spending from the government, financial institutions or marketing companies.
You are the sole owner of your money
The crypto coins in your wallet can only be accessed by providing a private key, which is held only by the owner. This means that no one can debit coins from your account or freeze their movement.
Cryptocurrencies can be a means of protecting one’s capital. In case a bank declares bankruptcy or the government fails to perform its duties in good faith, coins on a cryptocurrency wallet will be a financial safety net.
Reliable data protection
When paying for goods and services, customers risk their personal data, which can be intercepted and later used. In cryptocurrency transactions, no personal data is transmitted to the seller, so you can be sure that the information will not fall into the hands of intruders.
Inflation-proof
Cryptocurrencies implement a sophisticated mechanism to prevent inflation. In particular, the Bitcoin network prevents inflation with several features:
A limited issuance of 21 million coins that cannot be canceled;
New coins are issued strictly every 10 minutes;
Every four years the coin issue is halved.
Every cryptocurrency network has similar methods, which makes it possible to predict in advance how many coins will exist in a certain period of time. In addition, there is no controlling body that can make the sole decision to increase the issuance.
Simple and affordable
Many people mistakenly believe that cryptocurrencies are too complicated a subject to learn and use. In fact, they are accessible to everyone. Anyone can start using cryptocurrencies, even without technical skills and without fully understanding the nuances of the system. It is enough to have a cryptocurrency wallet, get some coins and have access to the Internet.
Cryptocurrencies are open to everyone, including residents of not the most prosperous regions where other financial services (banking products, for example) are not available.
Cryptocurrency – an incentive for financial innovation
Digital coins implement a new mechanism, which is designed to solve the shortcomings of other payment systems. For example, to increase transaction speed, minimize costs, improve security, and implement the sending of micropayments to any part of the world with minimal commissions. Cryptocurrency source codes are publicly available, which means that any developer can use them to create better systems, which will inevitably lead to improved financial models.
In addition, the blockchain technology involved in most cryptocurrencies can be applied to any industry that requires data protection and storage. Research is already underway to implement it in banking, real estate, and insurance.
Disadvantages of cryptocurrencies
Having studied the advantages of cryptocurrencies, we can say unequivocally that it is a progressive technology with great potential for development. But despite all the advantages, cryptocurrencies are not without a number of disadvantages.
High volatility
According to experts, this is one of the features of cryptocurrencies, preventing their globalization. Currently, the rate of cryptocurrencies is very volatile and can change in a wide range in short intervals of time.
It is likely that the initial volatility is caused by the novelty of the asset, and as the number of users increases, the rate of cryptocurrencies will still become more stable.
Risk of hacking
Because cryptocurrencies exist in digital form, they can fall prey to cybercriminals. Cryptocurrency services must have a high level of security to prevent theft. It should be noted that this vulnerability is not caused by the features of cryptocurrencies themselves, but by the security of storing access keys.
Cryptocurrency networks are also vulnerable to the so-called 51% attack: this is when most of the network power is concentrated in the hands of one person and he has the right to make decisions about transactions on his own. This situation is fraught with double spending, interfering with other users’ transactions, and selfish mining.
Criminal use
The privacy and decentralization of cryptocurrencies has been repeatedly put to them because it makes them an attractive means of settlement for the criminal world and a vehicle for money laundering.
The most infamous example was the use of bitcoin to pay for drugs and counterfeit documents on the Deep Web trading platform. But the same applies to cash, for example, because it also takes part in criminal schemes.