The advantages and disadvantages of using Bitcoins as a currency
Bitcoin is a new form of currency and a new way to transact that had a massive kick start back in 2009. Today it is the best-known cryptocurrency that can be used to purchase goods or services online without intermediaries.
Initially, Bitcoin faced a lot of criticism from each part of the world and was considered to be a scam due to its several negative factors. But over the time when experts from various sectors started examining Bitcoin, they understood the power of digital currencies and started to look at it in a positive way. Although Bitcoin has many advantages as compared to the present system of Paper Money, it also carries various disadvantages as well.
Read on to find out about the advantages and disadvantages of using Bitcoin as a currency.
Since there are multiple redundant copies of the transactions database, no one can seize bitcoins. The most someone can do is force the user, by other means, to send them the bitcoins to someone else. This means that governments can’t freeze someone’s wealth, and thus users of Bitcoins will have complete freedom to do anything they want with their money.
No one can take your Bitcoins away from you or freeze your account, due to sheer absence of central regulating authority in the system. You own your money and control your transactions.
Paying through Bitcoin provides us the utmost freedom. Bitcoins can be sent to any person in any part of the world. No intermediaries in between. No bank holidays/strikes. No boundaries or borders. No payment limit.
There is no way for a third party to intercept transactions of Bitcoins, and therefore there is no viable way to implement a Bitcoin taxation system. The only way to pay a tax would be, if someone voluntarily sends a percentage of the amount being sent as tax.
Since no personal information is attached to your Bitcoin wallet, people do not know who purchased what. At the same time it is transparent, meaning that anyone can find information on addresses and their balances in a public ledger.
Inflation decreases the value of money and increases prices for services and goods. Central bank solves this problem usually by printing additional amount of money to fill in the gap. As the central bank has nothing to do with cryptocurrency, it can’t influence it. Supply and demand is the only regulating mechanism defining its value. Besides, 21 million digital coins can’t be exceeded. This limitation is another reason why electronic cash is inflationary.
Paying through Bitcoin has very low and sometimes no transaction fees at all. It all depends on the priority of the person. If a person wishes that his/her transaction get’s processed fast, he has to pay a transaction fees which is still very low as compared to any financial intermediary or digital wallets.
Bitcoins’ ownership address can only be changed by the owner. No one can steal Bitcoins unless they have physical access to a user’s computer, and they send the bitcoins to their account. Unlike conventional currency systems, where only a few authentication details are required to gain access to finances, this system requires physical access, which makes it much harder to steal.
Bitcoin transactions are very fast if compared to banking channels. A bitcoin transaction is as fast an e-mail and can be processed with in 10 minutes. Also it can be instantly processed if they are “zero-confirmation” transactions, meaning that the merchant takes on the risk of accepting a transaction that hasn’t yet been confirmed by the bitcoin blockchain. The confirmed transactions are those which takes 10 minutes to process.
Credit Card or digital wallet services also provide instant approved transactions services but for this the merchants providing the services usually charges a hefty fees for it, which is not in the case of Bitcoin as mentioned above too. Bitcoin has very low transaction fees even for being super fast in terms of processing.
Bitcoins are still only accepted by a very small group of online merchants. This makes it unfeasible to completely rely on Bitcoins as a currency. There is also a possibility that governments might force merchants to not use Bitcoins to ensure that users’ transactions can be tracked.
One of the cons of Bitcoins is the lack of awareness among people and also the lack of technology in many parts of the world makes it very difficult to make bitcoin a globally accepted currency. So in developed countries, there is not much problem but when it comes to developing nations’ lack of technology is a big factor against the application of bitcoin.
Bitcoin software is still in beta with many incomplete features in active development. New tools, features, and services are being developed to make Bitcoin more secure and accessible to the masses. Some of these are still not ready for everyone. Most Bitcoin businesses are new and still offer no insurance.
If a hard drive crashes, or a virus corrupts data, and the wallet file is corrupted, Bitcoins have essentially been “lost”. There is nothing that can done to recover it. These coins will be forever lost in the system. This can bankrupt a wealthy Bitcoin investor within seconds with no way form of recovery. The coins the investor owned will also be permanently gone.
Another limitation of Bitcoin is that it is not well regulated and the fact that no central bank has approved its usage makes it very difficult for people to accept or make payment in bitcoins because no matter how beneficial a thing is if it not legal then it is very difficult to make people accept the technology or new currency.
Initially bitcoins were used for money laundering and people operating in black markets, who did not want to reveal their personal information and get payment secured. In money laundering middleman/intermediaries would collect money from one source and transfer it to another source through Bitcoins.
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