Essay on Advantages and Disadvantages of Cryptocurrency
Advantages and Disadvantages of Cryptocurrency.
Advantages of Cryptocurrency
No scope of Fraud: The cryptocurrencies are nearly impossible to counterfeit or reverse arbitrarily. It is secured by a cryptographic code. The digital ledger exists on a decentralized peer-to-peer network. Transaction logs prevent double spending, by making every transaction public which helps to determine its legitimacy. The cryptocurrency is the medium of exchange stored electronically in the blockchain, that uses encryption techniques to control the creation of monetary units. It is a permanent ledger with accurate tracking.
No Identity theft: While credit cards operate on pull mechanism where the store initiates payment and pulls the designated amount from the account, cryptocurrency uses the push mechanism which allows the cryptocurrency holder to send exactly what he or she wants to the merchant or recipient with no further information.
Immediate settlement: The biggest impediment with payment comes in case of transactional delays or other associated issues. Cryptocurrency blockchain can be called a large property rights database. While Paypal can be shut down and bank accounts can be frozen, Bitcoin holders own all the coin that they have purchased. There is no way to access a Bitcoin account by any other person, hence governments can’t take Bitcoins away. Bitcoin contracts can be designed and enforced to eliminate or add third party approvals.
Relative benefits from fiat currency: Cryptocurrencies bypass the problem of inflation that are generally controlled by nation-states’ governments. There are no limits on where one can send cryptocurrencies. Another bog advantage is transparency as the network cannot be cheated with. Transaction fees are lower as compared to SWIFT/SEPA with comfortable time. Cryptocurrency wallets cannot be frozen.
Recognition: Cryptocurrencies are not bound by any exchange rates, interest rates, transaction charges, or any other country charges, and thus there are no problems with international transactions. It operates on a universal level. Anyone with an Internet connection can purchase bitcoins. Individuals who have Internet connections and mobile phones but no association with traditional exchange systems are slated for this market. Kenya’s M-PESA system which is a mobile-phone based money transfer and micros financing service has recently announced a bitcoin services. Legalization of cryptocurrencies is taking place across the developed and developing nations.
Lower fees: The transaction fees for cryptocurrency exchanges are usually low as the miners are compensated for the network. Third party service providers such as Coinbase, may charge such minimal amount for creating and maintaining bitcoin wallets. These operate as online exchange systems such as Paypal.
Disadvantages of Cryptocurrencies
Hacking: Nearly everyone is paying third parties to handle the wallets. These wallet-service middlemen being inscrutable have become the points of failure as any hack in their systems can create huge problems.
Blockchain myths: Millions of computers that are the nodes maintaining blockchain verify the same transactions in accordance with the same rules and perform identical operations. There is no paralleling, no synergy, and no mutual assistance rather instant million fold duplication. The blockchain’s lifetime is limited to a decade under current circumstances.
Spoofing payment information and phishing: Euphemistically it has been said that what happens in blockchain stays in the blockchain. There is no grievance redressal system in case of faulty transaction or fraud. Using ordinary e-money, users can even be tricked into entering a fake website.
Hacking a payment gateway: In June 2017, a popular wallet for Ethereum Classic cryptocurrency suddenly started stealing money from users’ wallet. Hackers have used social engineering methods to convince host providers that they are domain owners after which they are capable of intercepting cash.
Insecure ICOs: Cryptocurrency markets are not regulated by any means and there are no risk assessment mechanisms, with no guarantee of return on investments. Once a hacker got access to the project website in an Initial Coin Offering (ICO), who replaced the address with this own. Within an hour, he received $8 million from 2000 participants.Tags: disadvantages of cryptocurrency