Bitcoin is a virtual currency, it is a peer-to-peer version of electronic cash that allows online payments to be sent directly from one party to another without going through any financial institution. Yes, today we are sharing you the most important pros and cons of Bitcoin here. Although there are more than thousands of cryptocurrencies in use today, bitcoin is by far the most widely used and most renowned cryptocurrency equivalent to the standard currencies. Whole Bitcoin units can be subdivided into decimals representing smaller units of value. Satoshi or 0.00000001 Bitcoin.
Bitcoin is the most versatile cryptocurrency around. It can be used to buy goods from the ever-growing lists of merchants that accept Bitcoin payments. It can be swapped for other currencies, both traditional and virtual on electronic exchanges that are similar to forex exchanges but unfortunate thing is that it can be used to purchase illegal goods on the dark web as well. Though the Bitcoin has increasing value more than the traditional stable national currencies, it is not the best choice as an investment. The value of Bitcoin is ever fluctuating, once it can please you with high value while other time, you might get upset with the drop.
How Bitcoin Works?
A user only sees the number of bitcoins s/he has in their wallet and the transaction results. Whatever happens is all behind the scene. The bitcoin network has a public ledger called the “block chain” which contains all the transactions ever processed. Since it is a public ledger, the mistake or fraud attempt can easily be spotted and corrected by anyone because if someone tries to change just one letter or number in the block chain, it will affect all the following blocks.
Bitcoin is a cryptocurrency, it is supported by a source code that uses highly complex military-grade encryption with complex algorithms to prevent unauthorized duplication or creation of bitcoins. It’s literally impossible to break the Bitcoin’s source code and manipulate the currency’s supply. Due to the verification process and the trading platform, it might take a while for the transaction to complete.
Pros and Cons of Bitcoin
Bitcoin has equally balanced sides of pros and cons. The Bitcoin has advantage in many conditions as they can be mined and can be used to make purchases with merchants that support Bitcoin payment. There are cons as well. The pros and cons of Bitcoins are given below.
- Greater Liquidity
As the most popular cryptocurrency by a significant margin, it has far greater liquidity than any other standard currency like US dollar and Euro. In Bitcoin, user get to keep the value for their currency. When converting from one standard currency to another, we loose substantial amount in the exchange, but in Bitcoin, user gets to retain most of its value during exchange. Bitcoin is like most of the standard currency, it cannot be bought or sold virtually in any quantity, nor U.S. Dollar or Euro could be done so.
- Increasing Wide Acceptance as Payment Option
Hundreds of merchants all across the world are accepting Bitcoin as the payment method. People who had invested in Bitcoin during the initial years of establishment, got very lucky in recent years as the value of Bitcoin grew significantly. It’s now possible to buy virtually any physical item using Bitcoin unit.
- Virtual currency is easier than regular currency
Virtual currency is easier to spend in any part of the world. There are no different currencies like the dollar, euro, pound etc., there is just single Bitcoin and it is same all over the world. While most other crypto currencies lack international re-tape, Bitcoin transaction is relatively easy as it is more popular all around the world.
- Lower Transaction Fee
Currently, there is either no transaction fee or very less transaction fee with Bitcoin payment. If you wish, you can include a small transaction fee to actually make the transaction processing faster. Compared to other virtual payments like PayPal and credit card payments, it is likely that your transaction fee never ever cross 1% of the value of a transaction.
- Privacy and Anonymity relative to traditional payment
Having money in your online bank account is no more secure. You have your identity disclosed while making any type of online payment. It is by regulations that your identity is ought to be disclosed. While the cyber-attacks are increasing every day, online accounts are likely to be protected but not from the most sophisticated hack attacks. Private merchants and public authorities can track how you spend and receive your electronics funds.
But Bitcoin’s built-in privacy protection allows users to completely keep their Bitcoin accounts separate from their public personas. It’s definitely possible to track Bitcoin flows between users, it’s very difficult to find out who those users are.
- Independent from any political Agents and Creators
Since Bitcoin is not controlled by any of the political agents or any state entity, such as the central bank, it isn’t influenced by any such political factors. Since it doesn’t fall under any political forums, it is much harder for government to even freeze or seize Bitcoin units. Due to its complete decentralized nature, popularity and liquidity, it is also not controllable by its creators.
There are only 21 million Bitcoins that will ever exist, out of which 17 million are already mined. The scarcity of Bitcoin makes it even more valuable and precious like scarce metal. Similar to Gold and other precious metals, the scarce nature of such elements are generally precious and has more value to them.
Also Read: Online Banking Pros and Cons
- Delayed transactions
The major problem with Bitcoin transaction is it is delayed. Due to many layers of security that every transaction needs to go through, the Bitcoin transaction speed is lower as compared to other cryptocurrencies like Ripple, Ethereum and many other cryptocurrencies.
Currently, Bitcoin transactions are processed at 6-7 transactions per second while centralized payment network like Visa processes 2000 transactions per second.
- Ability to purchase illegal items
The dark web lets you purchase illegal items with Bitcoins, making the illegal purchase safer which is definitely not the wisest thing to be done. Most of the users even threaten to corrode the system. If any such activity gets successful, the system might face marginalization.
- Fluctuation in market value
When established, the market value of Bitcoin was no different than any standard currency, but in recent years, the market value of Bitcoin has just grown extensively. Due to many events, the market value of Bitcoin has seen rise and fall of almost 50% well within few days. In late 2017, Bitcoin value has doubled several times, and seen significant fall during 2018 as well. So, it is definitely similar to a gamble, you really cannot predict if the price you are selling your Bitcoin is appropriate or not. Once you might agree to sell, the next moment, the value might skyrocket giving you significant loss.
- Environmental ills of Bitcoin Mining
Bitcoins aren’t bought, they are mined. Your and mine PC might not be able to mine the Bitcoin to extent. But mostly Bitcoins are mined through huge servers which consume huge electricity creating the electric power surge. Biggest of the Bitcoin mining takes place in China where most of the power is generated from dirty coal plants and horrifying smog everyday is adding to the pollution of the air, making the environment poorer and poorer.
Conclusion for Pros and Cons of Bitcoin
The list of merchants those who support Bitcoin as the payment method are increasing day by day. At this moment, you can buy plane tickets, furniture, web publishing services like WordPress, in some part of the world you can buy vehicles with Bitcoins.
However, before you just rush to get some Bitcoins for yourself, you would first want to analyze the market. The values for the Bitcoin are always fluctuating, you mind end up having loss on your side. You also need to know that Bitcoin has very long way to go before it can ever be legalized along with the standard currencies. There is no guarantee as well that it well ever not be controlled by national banks or it will be a viable alternative to the standard currencies.
So, the words you might hear is that don’t rush to get your share of Bitcoin, it is far more expensive and if you already have some, treat them as any other asset you have.