PROS AND CONS OF BITCOIN
Bitcoin is a virtual currency, or cryptocurrency, that is controlled by a decentralized network of users and is not directly subject to the whims of central banking authorities or national governments. Although many types of cryptocurrencies are in use currently, Bitcoin happens to be the most popular and widely used and is the closest equivalent to traditional, state-minted currencies.
The most versatile cryptocurrency around, it can be used to purchase goods from an ever-growing list of merchants that accept Bitcoin payments. It can be exchanged with other private users as consideration for services provided or to settle outstanding debts.
Bitcoin can be swapped for other currencies, both traditional and virtual, on electronic exchanges that function similar to forex exchanges.
PROS OF BITCOIN:
- Values Anonymity:
Bitcoin users can drape themselves with the cloak of anonymity, which further strengthens the security around buyers. While transactions are made public to encourage use of the cryptocurrency, intense privacy is accorded to the individual or groups that purchase bitcoins. A buyer does not have to worry about their identity being revealed or stolen because of nearly impossible security taken to guard their identity.
- Exchanging Bitcoin for Other Currency:
Bitcoin can be used for fiat currency at variable rates. This means that a user can exchange Bitcoins for Euros, the dollar, or any other currency subjected to the exchange rates, and generally at lower transaction rates. The Bitcoin market can be liquidated for the convenience of users. This allows for profitable speculation, which, of course, relies on the fluctuations of the market.
- Private Password:
Bitcoin users are provided with one password, or a “key”, which give Bitcoin holdings a lot of value. These passwords can be stored on secure private clouds, thumb drives, or on paper, to be used during transactions taking place online. These keys are vital in operating Bitcoins, because if a key is lost, then it is gone for good, and the holdings remain in a secure limbo, inaccessible by anyone.
- Easy Payments:
Bitcoins make it very easy to use. Payments can be made using BTC all over the world. This is especially important because even if you do not have access to a banking system, you can use Bitcoins to make purchases. It is the most accessible financial system as of yet.
- The “Wallet”:
Bitcoins can be stored in “wallets” which are private clouds that also contain information that confirm the identity of a BTC user. The information stored confirms their guardians (Bitcoin user), and can be duplicated for safety reasons. Doubled wallets hold only duplicated transaction history and details of ownership, not doubled Bitcoins.
- Decentralized Currency:
The Bitcoin is a decentralized currency, meaning, its value cannot be determined by the government of any country. While it is subjected to wild fluctuations, it cannot lose or gain value at the behest of the government and any official policies.
- Gradual Acceptence of Bitcoin as a means of Purchase:
Bitcoin, for all its flaws, is slowly being accepted into mainstream financial processes as a means of currency. This makes matters easier for those who are uncomfortable with leaving a paper trail, or those that want an easily liquidated cryptocurrency.
- Ease in using Bitcoins:
Users can receive or send Bitcoins to other users. They can send BTC to any part of the world. Another advantage to this is that no prior approval is needed from any financially concerned body, say banks, or the Treasury, to use Bitcoins.
- Purchasing Bitcoins at Your Own Leisure:
Like many online transaction stores, you can buy Bitcoins from anywhere around the globe. You can even purchase Bitcoins from your own smartphone. You should have a stable internet connection to purchase Bitcoins. Personal information is not required to make any purchases, unlike banks that demand personal information to make transactions through online portals.
Cons of Bitcoin:
- Limited Currency of Bitcoin:
Bitcoins is a niche currency that is accepted by a very small group of online merchants. Therefore, it is impracticable to rely on Bitcoins as a currency. There is also this possibility of governments banning merchants from using Bitcoins to ensure that users’ transactions can be tracked.
- Bitcoins Wallets Can Be Lost:
Bitcoins is totally technology-bound. In case a hard drive crashes, or a virus corrupts data including the wallet file, Bitcoins are “lost” for good. There is no way to recover it. If there is a sudden system crash, all information is lost and a wealthy Bitcoin investor can become bankrupt within seconds with no way of recovering the lost bitcoins.
- Bitcoin Valuation Fluctuates:
The value of Bitcoins fluctuates frequently according to demand in the market and Bitcoin accepting sites need to change prices continually. This can cause immense confusion if a refund for a product is initiated..
- Risk of Undefined Technical Flaws:
The Bitcoin system is still in its nascent stage and may contain undefined flaws that can be an impediment for Bitcoin investors.
- Built in Bankruptcy:
The bitcoin system is designed to reward early adopters. Since each bitcoin will be valued higher with each passing day, the question of when to spend becomes the prime factor. This might cause sudden spending surges which will cause the Bitcoin economy to fluctuate very rapidly, and unpredictably..
- Risk in Bitcoin:
Hacking is a serious risk, since there is no way to retrieve lost or stolen bitcoins. Many buyers lose their investments on exchanges and mining losses. Exchanges are sensitive area and more likely to be hacked – despite having the protection of a smart wallet.
- No Valuation Guarantee:
Since there is no central authority governing Bitcoins, there is no way to get a concrete guarantee of its minimum valuation. It is a very volatile market. If a large group of merchants decide to give up their share of Bitcoins and leave the system, its valuation will plummet greatly which will immensely impact users who have a large amount of wealth invested in Bitcoins. The decentralized nature of bitcoin is both a boon and a curse.
For all its promise, Bitcoin has a very limited acceptability and remains a niche currency that’s wildly volatile. Besides, it is still not accepted currency in the mainstream and is not a legitimate investment or trading vehicle, as is the case with national currencies like the US dollar or UK pound.
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