While e-mail inter-connected the world to enable communication across the continents, Bitcoin similarly revolutionized the financial system. Bitcoin allows us sending money each other without having to use any third-party services. There are plenty of stories about bitcoin. Let’s take a look at its key pros and cons.
Pros of Bitcoin
Decentralisation: One of the main advantages of Bitcoin is that it is not controlled by any authority. No bank or government can regulate its price and circulation. There is no central authority to influence the number of issued coins. Nobody is able to fake the currency, block your account etc. Bitcoin is completely distributed in a peer-to-peer network among the users communicating directly thanks to the internet (and sometimes also face to face).
Unaffected by inflation: This advantage relates to point 1. Nobody can affect the currency by artificial intervention, devaluation or issuing new banknotes. On the contrary, thanks to a limited number of bitcoins (similarly to gold), bitcoin is not adjusted for inflation, which means that its value grows.
User anonymity: Addresses are composed of 34 random characters. Even though everybody can see who sent how many bitcoins, without knowing the owner of the address it is nearly impossible to identify this (…even though we must admit that crypto exchanges have some privilege to access lots of personal data).
Transparent blockchain: Everybody can look into a blockchain – a kind of “ledger” used by bitcoin – and trace back historical transactions. Once a block is confirmed and added to a blockchain, nobody can manipulate or change it.
Cryptography: Bitcoin network is secured through cryptography (until now impenetrable). The system is based on a proof-of-work script securing transactions from hacking and fraud playing in fact a role of a centralised authority taking care of the network’s safety. In the process of mining, powerful computing systems using arithmetic algorithms tackle various cryptographic issues. Once an issue is resolved it’s checked by other miners and the transaction is added to a blockchain.
Transactions: The number of bitcoins that can be exchanged is unlimited (or better, limited by your own budget) and can be exchanged with anybody anywhere in the world.
Fixed system: To bring the blockchain network to a collapse, all machines (PCs, mining machines plus machines with software wallet etc.) integrated within the system would have to be disabled. If only one computer with a stored transaction history survives you will be able to reuse the bitcoins for payment transactions.
Cons of Bitcoin
Volatility: The price of Bitcoin keeps changing. Not even an experienced trader is able to predict the development a few months ahead. It’s because bitcoin frequently breaks all rules known until now. Except for the big players able to heavily affect the price by investing in bitcoin in the short run or withdrawing plenty of cash (which we saw last autumn with the artificial pumping of price), Bitcoin is impacted by various statements and restrictions from the governments and banks logically the traditional opponents of alternative currencies.
No backing: The value of BTC is purely speculative and is not backed by gold or anything else. (Honestly, this applies to the majority of “fiat” currencies today). On the other hand, at times when internet technologies and companies such as Google, Facebook, Airbnb etc. are the most valued in the market a blockchain may be more beneficial for the mankind than tons of metal and paper stored in a deposit box.
Fees and time: The days when sending of bitcoins cost a couple of cents is long over. Today, mining transactions cost tens of dollars and take hours, It is a phenomenon we all have had to get used to. Fortunately, this problem is being tackled by other (alternative currencies) cryptocurrencies, whose technology is in some aspects more advanced than the one used by bitcoin.
Internet: Without internet, you will not do any transaction. However, with the worldwide expansion of wireless technologies this will soon not be a problem (except for extremely remote areas like a desert).
Theft: Similarly to various online wallets, exchanges are constantly exposed to hacker attacks and therefore not absolutely safe. Not even a super-strong password is a guarantee of 100% protection. Therefore do your best to protect yourself from theft by getting a hardware wallet.
Fraud: Bitcoin and cryptocurrencies as such may become an easy target for all sorts of drug dealers, terrorists or other dubious characters to launder their money. Compared with the size of the bitcoin global community, this is just a fraction of its users so there is no need to panic and denigrate this digital currency. Speaking about the negatives of bitcoin including potential criminal background, these are minimal compared to atrocities committed in the name of Dollar.
More information about bitcoin
- A Few Things You Should Know About BitcoinCash Hard Fork
- Cryptocurrency forks: What are the benefits for the end user?
- Bitcoin: Pros and cons
- How to Buy or Sell Bitcoin at a Bitcoin ATM
- The Three Point Checklist Before Getting into Bitcoin
- Bitcoin: Basic information before investing. What you should know (2/2)
- Bitcoin Core: Bitcoin protection and mining tool
- Bitcoin: Basic information before investing. What you should know (1/2)
- How can I trust something that doesn’t exist?
- News: Trading cryptocurrencies with binary options brokers