Cryptocurrencies created an enormous hype over the last 12 months. As the price of Bitcoin surpassed $10.000, people realized that digital currencies are the real thing and now everybody is eager to trade and invest in cryptocurrencies. However, there are still a lot of people out there who don’t have a clue about the subject.
What exactly is the purpose of digital money? Why do governments want to destroy or control them? What makes them better or worse than traditional financial operations? Can you feel safe trading with Bitcoin or any other type of cyber money?
If you want to know the answers to these questions, you need to understand the advantages and disadvantages of digital currencies. In this article, we will show you the pros and cons of cryptocurrencies.
Top 7 Pros of Digital Currencies
Cryptocurrencies have some serious advantages over traditional means of financial operations and we will explain the most important pros in that regard.
- No central authority
The most significant advantage of all cryptocurrencies is that they are not controlled or governed by any sort of central authority, both locally and globally. First of all, it means that there is no government surveillance. Secondly, it means that you don’t have to pay taxes for financial operations. This is exactly what bothers national authorities the most because they always want to be in charge and fill their own budgets over your back.
- No banks and fees
People love cyber transactions because it enables them to avoid banks and the corresponding fees. Most of the standard money transfers are subject to bank commissions, interest rates, or fees, which is annoying and also expensive on some occasions. On the other hand, a vast majority of cryptocurrencies come with zero transaction charge, allowing investors to trade and exchange money as many times as necessary.
- Trading is available 24/7
Traditional means of doing business apply certain rules that prevent entrepreneurs from conducting or receiving payments around the clock. This has changed with the rise of digital currencies, so now you are free to buy, sell, or exchange goods 24/7. You don’t have to wait the opening time or bank providers to do your job – a cryptocurrency market never sleeps.
- You are anonymous
Bitcoin traders are anonymous, which adds to the overall feeling of freedom to do business online. It’s easy to transfer digital money from one place to another and you don’t have to hide anything from anyone. You don’t have to be afraid that someone will knock on your door just because someone from the IRS thinks that you might be doing something wrong. With cryptocurrencies, it is all up to you and your skills.
- No identity theft
The biggest cause of safety concerns in credit card transactions has been eliminated in cryptocurrency business. Namely, credit card owners often can’t control payments, especially in cases where they have to hand over the card itself. But if you use the digital money, you are your own watchdog. You get to send precise amounts to the specific client, so you don’t have to be frightened of identity theft.
- Anyone can join the game
As already noted, central authorities monitor traditional money transfers. If you want to open a regular bank account or buy something online, you need to provide banks or merchants with all sorts of private information. Some people don’t have or don’t want to give away this type of data, which makes regular currencies less accessible. Cryptocurrencies don’t pose so many administrative hurdles, making the market open to anyone with Internet access.
- Knowledge rules
A successful real-life business demands a lot of skills but also a great deal of networking and professional connections. With cryptocurrencies, you don’t need powerful friends to make a good business. On the contrary, this is the kingdom of knowledge and people who have the ‘know how’ can make a breakthrough, regardless of external circumstances.
Top 7 Cons of Digital Currencies
Now that you’ve seen what makes cryptocurrencies good, it is also time to learn what makes them risky and weak. Let’s check out the 7 most notable features in that regard.
- Lack of understanding
While it is true that people who know how cryptocurrencies work have the starting advantage, it is also true that many things in this field are still blurry and confusing. It is hard to keep the track of all information about this relatively new phenomenon. Sometimes it’s difficult to distinguish correct from false information and determine the credible experts you can trust. This leaves most users dazed and scared of making any concrete moves.
- No protection
Almost all advantages of digital currencies can also be interpreted as some sort of shortcoming. The fact that they are not subject to official regulations means that investors are not protected from potential frauds and scams. If someone rips you off or convinces you to invest in a fraudulent project, you can’t do anything about it. Your only option is to move on and be more cautious before you make another investment.
To be honest, the history of cryptocurrency is not too long. As people tend to believe some more traditional models of doing business, there are a lot of those who still suspect the purpose and the overall future of Ethereum and other virtual currencies. At the same time, even the strongest cryptocurrency of all, Bitcoin, experiences drastic ups and downs every now and then. This scares away many investors who believe that cryptocurrency market will not withstand.
- Constant attention is mandatory
Having in mind enormous fluctuations, you need to monitor the situation constantly if you don’t want to end up losing money online. The value of cryptocurrencies can increase or decrease by 5% or 10% in a matter of hours, which gives you no time to rest. You should understand when it’s the right time to buy or sell digital coins. But if you don’t, you will probably give up this business very soon.
- Illegal activities
Being anonymous brings people a great deal of relaxation but it also enables criminals to finance illegal activities using cryptocurrencies. There have already been dozens of reports claiming that criminals used Bitcoins for drug-related transactions, money laundering, and other illegal undertakings. This is one of the weakest spots in the cryptocurrency business and the reason why a large portion of potential investors stay away from it.
- Limited scaling
Even though Bitcoin and other similar currencies don’t demand too many formal procedures, the system is still strict enough to forbid the unlimited number of transactions. It also slows down the processing speed, which makes the scaling possibilities very limited. In such circumstances, it is hard to see how Bitcoin or any other digital currency could expand its reach on a global scale.
- ICO pyramid schemes
The popularity of Bitcoin gave a boost to new projects and many developers want to launch their own cryptocurrencies through Initial Coin Offering (ICO). Such campaigns are completely legit but some developers use it as a pyramid scheme to accumulate money and go away. You need to be extra careful with ICO campaigns, so make sure to do the research before investing in one of these projects.
Cryptocurrencies are the latest talk of the town among businesspeople and investors. However, a lot of them still don’t know enough about this financial trend. In this article, we showed you the most important pros and cons of cryptocurrencies. Bear our tips in mind if you want to invest in the cyber market and feel free to write us a comment if you have additional inquiries about this topic.