Pros and Cons of Bitcoin
Given that Internet technology has penetrated into nearly all the public sectors, it is unsurprising that the financial markets are displaying the same advanced. Digital currencies, Bitcoin included, are gaining huge popularity today due to various socio-economic pressures influencing various fiat currencies around the globe. Due to the decentralization of the Bitcoin network, its independence is a large incentive for those that are concerned with government influence, shutdowns, and global economic complications. This is one of the main reasons why Bitcoin is becoming the preferred currency by many. That being said, you should be well aware of the positives and negatives prior to engaging in the utilization of Bitcoin. This article serves to aid you in making a calculated decision. Because no system is perfect, Bitcoin is not safe from its own set of issues. The following lists the pros and cons of using this virtual currency.
Advantages of Bitcoin
- The first and foremost benefit to using Bitcoin in the complete freedom of payment. You do not need to be concerned with the fine-print of your financial institution, weary of hidden fees, or preoccupied with normal working hours. In fact, Bitcoin can be traded 24/7 with no delays. All you really need to know when using Bitcoin is your wallet address and your recipients address. Clicking send ensures payment arrives in just minutes.
- Each user has their own public and private key for using Bitcoin. When conducting a transaction, your only your public key is visible on the network. In addition, your private key is always kept confidential in order to retain the anonymity of your transactions.
- Any transaction costs or fees or communicated up-front when using Bitcoin as they cannot be added on to a transaction without the consent of both parties. This makes using Bitcoin more transparent and less convoluted than most financial institutions.
- The public ledger system or blockchain maintains record of every single transaction the publicly occurs using Bitcoin. The blockchain is maintained and monitored by the miners; therefore, the entire community displays system-wide level of transparency. No single person or entity is able to augment, manipulate or otherwise tamper with the public ledger without the community having knowledge of it. This means fraud or malicious activity is very difficult, if not impossible, to pull off on the Bitcoin blockchain.
- Micro-transactions are quite easy to do with Bitcoin as the smallest denomination is 1 Satoshi or one-hundred-millionth of a Bitcoin. This is a faculty you could not enjoy if you were using another form of currency.
- Unlike other online methods of payment, setting up a Bitcoin wallet is fast and easy. It only requires an email address and a private/public key to start operations immediately. Transactions can be received after a single confirmation on the blockchain and via authentication of your private key and digital signature.
Disadvantages of Bitcoin
- The fact that there is not central authority controlling the value of a single Bitcoin is one of the biggest disadvantage for this coin. Due to lack of proper valuation systems, Bitcoin can be subject to high volatility in price. In recent history, the value of a Bitcoin has gone from $200 to over $1000 in just months. This means the reverse can happen as well! This volatility can make the average person or trader uneasy when dealing with Bitcoin.
- Due to the anonymity of Bitcoin, users must be weary of illegal activity when conducting a transaction. While the blockchain itself is the cause for concern, you must maintain a healthy level of caution when trading with someone as transactions cannot be undone and you cannot necessarily track down the other person if something goes wrong such as not receiving an item your purchased.
- The scalability of Bitcoin is another issue for long-term users. As the infrastructure for this currency has not undergone any significant improvements, there is a risk that future adoption of more people could lead to a very congested and slow system.
As you have read, Bitcoin hosts its fair share of positive and negative aspects. An intelligent user should evaluate their need/requirements for using Bitcoin and answer whether or not it is right for them. Despite Bitcoin’s popularity in certain countries, it is still largely new/unknown to many people around the globe. As adoption and popularity continues to grow, Bitcoin is likely to assume immense proportions in scale. This bodes well for potential investors and current Bitcoin holders. That being said, Bitcoin as well as all cryptocurrencies share a higher level of risk due to their inherent market volatility. If you are risk averse, it is probably kosher to stay away from Bitcoin. However, those that are curious and are willing to take the risk may find that the advantages of Bitcoin or worth the risk.
Some final points are that Bitcoin users should be aware of any rules or regulations before conducting any transactions. This is mostly pointed at making sure any services are good involved in your transaction are not illegal in your jurisdiction (i.e. gambling). User’s should also investigate the authenticity of any website or service they are using for their Bitcoin transactions. As noted earlier, the anonymity of this currency lends itself to higher rates of illegal/malicious activity. Also, when learning to use Bitcoin, always test your transactions with small amounts first prior to dealing with larger transaction. This ensure you are comfortable with the system and prevents unwanted mistakes. Lastly, enjoy yourself and become part of the Bitcoin community. Many share the sentiment that this is the cutting-edge of financial and economic technology and taking part in it is taking part in the future.