Advantages and Disadvantages of Cryptocurrency
The advantages are things like its decentralization, ease of access, transparency, anonymity, security, smart contracts and accessibility. The disadvantages include its volatility, comprehension, acceptance and ease of use for day to day transactions
You must understand both sides before you decide to get involved with cryptocurrency. We discuss both points in more details inside.
What are the Advantages of Cryptocurrency
Let’s break down the key advantages of cryptocurrency:
The best and most important feature of some Cryptocurrency is that it has no central authority.
The elimination of central authorities in financial transactions has caused a faster, secure, and easier mode of transaction. Bitcoin has been the most accepted cryptocurrency completes transactions without intermediaries in minutes to anywhere in the world.
Also, Cryptocurrencies like Dash and Litecoin can complete transactions faster than Bitcoin.
The excess time involves in cash transactions often affects and causes a delay in business deals, and also the charges involved in this process are excessive.
24-Hour, 7-days a Week Accessibility
Cryptocurrency has no opening and closing hour, and it doesn’t have working days.
You can transact using cryptocurrency at any time of the day and any day of the week without problems.
Unlike banks where the is an opening and closing time, you can conduct your deals at your convenient time without worries and delays
Ease of Access
Cryptocurrency is widely available to everyone. Unlike banks where you need to open an account by verifying a lot of documents.
Cryptocurrency only requires your time to set up a wallet. Some platforms will require your passport for identity verification. You can quickly get a wallet from the comfort of your home and in no time at all.
Once you have your wallet, you can access your account at any time and conduct business transactions.
For a guide on Crypto wallets, we have an article called, “What is a Cryptocurrency Wallets. How They Work and Best Wallets” to help you learn and choose the best wallet for your needs.
All transaction records are stored in an online ledger known as the Blockchain.
The Blockchain operates with an open-source code which means information (time of transactions, the volume of cryptocurrency involved) is available to any interested party.
This also ensures that records of transactions cannot be tampered with.
The security of your details is ensured with cryptocurrency. For bank financial transactions, details such as the name of the sender, name of the receiver, amount of money involved in the transactions, Location, and others are provided.
With Digital Currency (Cryptocurrency), the only information available is the volume and the time of transactions. All other information remains secure.
With cryptocurrency such as ZCash, you have the choice to make all these details private if you wish. Also, you can have multiple wallets that are not linked together this way and conduct transactions.
The cryptocurrency works with the Blockchain mechanism which protects all its information using Cryptography.
Cryptography provides high-end protection for digital currencies and transactions. Making it almost impossible to make transactions from another user’s wallet and altering stored details of transactions, respectively.
This feature is very crucial for large firms and individuals as it will help during audits. This creates a trust that no transactions can be altered and all files on details of transactions can be readily recovered from the Blockchain.
Records of transactions are spread over the nodes of all Cryptocurrency servers all over the world, making it nearly impossible to hack.
Since there are no central authorities involved in transactions, only three clients are needed to make a transaction valid: the sender, the receiver, and the miner.
Once cryptocurrency has been transferred, and payment for the Digital currency has been delivered.
A miner has the responsibility to confirm all details of transactions before it is added as a block to the Blockchain.
Fortunately, these details remain private and not available to the public. The miner confirms transactions by solving mathematical algorithms.
Usage of smart contracts
Smart contracts help to improve the cash flow in business transactions by making payment of invoices as soon as business transactions are concluded.
Instead of waiting for different authorities to verify the payment one at a time, all the layers of authority can follow up the contract as it happens and sign at once it is completed.
What are the Disadvantages of Cryptocurrency?
Now let’s look into the disadvantages of cryptocurrency.
For now, not all companies or businesses accept cryptocurrency as a valid means of payment.
If you intend to make transactions with crypto, not all companies accept them as of yet, and some still consider it a Bubble.
No Recovery in Case of Loss
There are various ways you can lose your cryptocurrency without a means of recovering once it is lost.
Unlike bank transactions where you can get support for a mistake in your cash transactions.
In crypto, it will not be rectified since there is no central authority in cryptocurrency. Once there is an error in your transaction, nothing can be done about it.
Also if you forget your account number, you can quickly recover this by lodging a complaint to the right department. In no time with a valid means of identification, you have it back.
With cryptocurrency, once you forget your wallet’s private key, you can’t recover any of your coins.
All Cryptocurrencies are very volatile, and hence their price cannot be predicted.
This is an added advantage for traders as they feed on this type of situations, but not everyone is a trader.
You can quickly lose your investment if you are not very observant of the trends. For instance, a Cryptocurrency called NEO is known as the “Chinese Etherum” had an all-time high of $196.85 per token value just a year after its launch.
At mid-2019, the same cryptocurrency has a per token value of $9.18.
We look deep into this topic and discuss the positives and negatives in getting into the market in our article called, “Should I Invest In Bitcoin. Learn, Earn and Profit.”
To some, this can be devastating if you invested at the high, but for others, they see this type of volatility as an opportunity to make a hefty return when the market turns around.
It is Difficult to Comprehend
For the not tech-savvy audience, the whole topic of Cryptocurrency, Blockchain, and Cryptography is not very easy to understand.
Due to this fact, so many of this audience is not willing to take advantage of the benefits it offers or invest in them.
Is it Safe to Invest in Cryptocurrency?
All investments are a wage against odds; a full understanding of what you are investing in and an understanding of all possible outcomes is necessary for every profitable investment.
The same applies to cryptocurrency.
A thorough understanding of the cryptocurrency you plan to invest in will go a long way. Before you invest in any Cryptocurrency, make sure to answer the following questions:
- What is the purpose of creating the cryptocurrency?
- Since its launch, how accepted has it been?
- Has it found applications in the pre-determined industries it was created to help?
- What are the possible challenges the cryptocurrency could encounter during its growth?
Be prepared in knowing all cryptocurrencies are incredibly volatile, and sometimes you gain, and other times you lose part of your investment.
What are the Risks of Cryptocurrency?
The main risk of investing in cryptocurrency is the volatility nature of the digital currency.
Also, since cryptocurrency operates with decentralization, it requires the users, miners, and investors to succeed. Without all of these three sectors, the cryptocurrency will not thrive.
The private key to your wallet should be appropriately stored as misplacing of this can lead to forfeiting all your investments.
Your wallet is also susceptible to hacking if proper security measures are not taken to secure your wallet.
Usage of Proton Mail and Proton VPN to encrypt your emails and keep your Ip address hidden will reduce the risk of hackers accessing your wallet and personal information. They do use your personal details, pictures, etc as another means to take your crypto.
Most wallets now work with Google Authenticator; this software changes the pin to your wallet every 30 seconds or so.
Authenticator is great but dealing with any amount of crypto, getting a “cold wallet” is the most secure way to protect your cryptocurrency.
This cold storage isn’t connected to the internet, reducing the risk of hacking.
Is Buying Cryptocurrency Legal?
The purchase of cryptocurrency is legal in most parts of the world. Most organizations now deal with their cash transactions using Bitcoin; a lot of apps are also created using Etherum, Cryptocurrency continues to find wide applications in so many sectors of the industry.
Final thoughts on the Pros and Cons of Cryptocurrency
There has been a growth of interest in cryptocurrency in recent times.
Cryptocurrency has managed to handle so many issues regarding day-to-day transactions. It also has some cons that must not be overlooked to understand the technology entirely.
Cryptocurrency is an online-based platform of exchange which protects its financial transactions using Cryptography and its base mechanism as Blockchain.
The most important feature of any Cryptocurrency is Decentralization which means no central authority controls it.
To learn more about cryptocurrency, check out our article, called, “How Cryptocurrency Works for Beginners | How, Why and Earn.”
With this in mind, it seems that the advantages far outweigh the disadvantages. Cryptocurrency is here to stay.
Make sure you are properly prepared by taking a look at our battle-tested Tools For Crypto when you want security, trust, and peace of mind.