Cryptocurrency has been around for nearly nine years, but few people use it regularly. Several stores and businesses accept payments in digital currency, but many of us still prefer credit cards or good old-fashioned cash.
That’s because there’s a sensation of mistrust flowing through our country. Many believe Bitcoin, and digital currencies attract criminal behavior, but are virtual coins as bad as we say? Let’s look at some of the advantages and disadvantages Bitcoin and digital currencies bring to the table.
ADVANTAGES: Digital Currency
- THEY ASSIST DEVELOPING NATIONS
Many countries don’t possess the economic means of nations like the United States, Canada, Germany, the U.K., and Japan. When it comes to survival, they are eons behind and don’t have the finances necessary to keep people stable. Banks and governments swell with corruption, while those in charge are quick to stash money in their own pockets.
That’s where Bitcoin comes in handy. For those who don’t have reasonable access to credit, Bitcoin can be stored and used like fiat currency. While there aren’t exactly Bitcoin banks, platforms like Coinbase exist for Bitcoin owners to open virtual accounts (or “addresses” as they’re called) and store their coins, regardless of where they live or what they do.
It doesn’t matter if you’ve filed bankruptcy, have a foreclosure or had your car repossessed. Credit history doesn’t matter, and anyone can receive or send bitcoins as they see fit.
Virtual currencies are also perfect for migrant workers who send remittances back home. Sometimes, when transactions occur between borders, they are subject to certain fees and penalties. Bitcoin is not, so workers abroad can send money home without incurring losses. It’s a simple process that can bring people closer to financial stability.
- THEY’RE POTENTIAL INVESTMENTS
In many ways, digital currencies work like stocks. Depending on one’s economic state, their values go up or down. Holders likely felt the urge to scream in January 2015 when bitcoin fell below $200 after prancing around between the $400-500 range for most of 2014. Granted they didn’t panic too much and held onto their Bitcoins; holders are probably giving themselves some well-deserved applause right about now – those Bitcoins are worth nearly $1200 in 2017.
In one sense, the situation is worrisome as you never know if (or when) your coins will fall. Then again, should their value ever explode, there’s a lot of money to be had given one is patient and cautious.
- THE TECHNOLOGY IS PRETTY COOL
Whether you love it or hate it, you’ve got to admit the technology behind Bitcoin is intriguing. Bitcoin and virtual currencies exist via “blockchains,” which allow digital currency transactions to occur. Every time a payment is made or received, the blockchain records it, ensuring there’s evidence the transaction took place. To a degree, this protects one’s assets; should anything go wrong, you can go back and dispute things as needed.
Additionally, many believe Bitcoin and related currencies will move things in a whole new direction, going so far as to say traditional banking will soon be a thing of the past. While we’re far away from this point, those learning the ropes now are bound to be a little more prepared should such a drastic step ever be taken.
DISADVANTAGES: Digital Currency
As with every plan, there’s always a few kinks to be worked out. Let’s examine the “not-so-nice” side of virtual currency usage.
- IT HAS LEFT PEOPLE IN SHAMBLES
In 2014, bitcoin exchange Mt. Gox came crashing down, taking nearly half-a-billion dollars in Bitcoin with it. Customers saw most of their earnings practically disappear overnight, and to this day, the mystery surrounding its fall has never been fully solved. Police involvement becomes inevitable, and CEO Mark Karpeles did spend some time in jail, though he was released after a short time. San Francisco-based bitcoin exchange Kraken has taken the reins to assist Mt. Gox victims.
Situations like these are not uncommon. Other exchanges like Bitfinex and Bitstamp have been subjected to hacks, and have lost millions in customer funds. While some stories have positive endings, stolen coins aren’t always easy to get back.
Bitcoin and virtual currencies are not considered real money, and platforms do not offer FICO insurance like traditional banks, which means getting stolen money back can be a rough road. As mentioned above, many are concerned about the criminal activity Bitcoin is known to harvest. The sad thing is… Sometimes they’re right to worry.
- IT’S NOT AS ANONYMOUS AS SOME MIGHT THINK
The anonymity of Bitcoin is something many experts continue to tout. After all, users want their privacy, especially if they’re conducting business. The problem is, Bitcoin isn’t as anonymous as one might think.
Remember earlier we talked about the blockchain, and how it records transactions in real-time? Your name isn’t necessarily attached to a transaction when it occurs, but it’s not like things can’t be traced back to you, and this sets a lot of people on edge. Some would prefer their monetary habits stayed a secret, and while Bitcoin gets close, it doesn’t quite hit the mark.
The good news is that unless you’re planning to break the rules, you have nothing to worry about. Then again, it’s a little easy to get caught up in everything. In 2015, Ross Ulbricht received a life sentence for running an online black market known as Silk Road.
Consumers could purchase all kinds of illegal goods from drugs to firearms using Bitcoin and related currencies. Things struck badly in 2013 when Ulbricht, after being tracked for some time, was arrested by FBI agents.
…So if privacy’s your game, Bitcoin may not be the answer you’re looking for.
- IT MAY JUST BE A PHASE
Contrary to our number one “advantage,” many disagree that virtual currency is revolutionary, and claim it’s just a phase the world is going through. Despite nine years on the market, Bitcoin does face the possibility of disappearing for good at some point. After all, if not enough people are using it, how can it stay alive? It’s impossible to predict when (or if) this might happen, but should a world without Bitcoin ever exist, those invested in it could find themselves at a loss.
Some companies allow you to pay bills in Bitcoin, while others like Overstock.com give consumers the chance to buy goods with it. Many businesses have made room for Bitcoin in their financial agendas, and some citizens in America and abroad have transferred all their savings and funds into virtual coins… But what if the technology goes kaput?
It’s likely those buried deep in digital currency will get a chance to make the switch, but they’re in for a complicated, time-consuming process of transforming all their savings back into fiat money. No doubt it can be done, but there’s bound to be a few headaches along the way.