Cryptocurrency is nothing but a medium of exchange that is protected by cryptography. These are considered to a subset of the alternative currencies and given the name as digital currencies. This digital asset has been designed to provide protection for the transactions and also to help the people gain control over the additional units of currency that are newly created.
One major type of the cryptocurrency would be the Bitcoins. Introduced in the year 2009, these Bitcoins become the first decentralised cryptocurrency in the world. From there, there have been the introduction of several alternate forms of Bitcoins, called the altcoins.
You need to understand that the idea and the legality behind these cryptocurrencies change with different countries and there are no defined rules, as they keep changing time and again. There are cases where some countries have banned the usage of bitcoins and other forms of cryptocurrencies, while there are few that permit the trade and use of these coins. Adopting this type of digital currency has been seen to change within the various industries present in each of the countries.
Using the cryptocurrency
The cryptocurrencies are now primarily being used outside of the banks and governmental organisations, along with their exchange over the internet. Though this form of digital currency is in its initial stages, you can see that they are fit with certain features that make them a potential challenge to the existing modes of payments and currencies.
Today, there are more than 700 digital currencies in the market. Due to the low cost of entry and the increase in the opportunities for making profits by creating these coins, the cryptocurrencies have been able to make a substantial headway into the market right from the beginning. One major thing that influences the popularity of these digital currencies is the presence of strong networking assets of the companies creating these coins.
You need to understand that the value of the currency increases with the increase in the number of users of the currency.
Two sides of the coin
Before you move ahead to learn more about the cryptocurrencies, it is better to know the advantages and the disadvantages that you can get out of these digital currencies. With the world becoming economically unstable, it is time to choose a type of currency that will provide you with financial security along with some safety for your real savings.
The instability does not mean that we as an economy are not moving forward, but it just means that any single damage to an individual aspect can bring down the entire system within few minutes.
When you consider the advantages of using the cryptocurrency, it includes,
- Prevention of frauds
These are digital currencies, and thus, the sender will not be in a position to create counterfeits of the digital currency, unlike the things that happen with the credit cards.
- Stops identity theft
With the credit card, you would be mentioning certain information about your bank account for the company to process your transaction. While in the case of cryptocurrencies, you would just have to send in the required amount without any further information.
- Lower transaction fee
Currently, cryptocurrencies do not charge any transaction or processing fee to the customers, unlike the ones that you would have to pay while using the debit or the credit card.
- Currency access for everyone
Nearly more than half of the world’s population makes use of the internet through their system or their mobile phones and do not have access to the traditional exchange system. These people happen to be the major clients of the cryptocurrencies.
- Faster settlements
The cryptocurrency can be designed to enforce or eliminate the third party in any of the transactions, like in the case of purchasing properties. This way, the settlements can be done quickly without any delay in payments.
Coming to the disadvantages of cryptocurrency,
- No existing security
There are no existing security protocols to safeguard the cryptocurrencies from the human errors like in misplacing the password and technical glitches like the failure of the hardware or malware.
- Several regulations
Though the regulations might seem lenient to a certain extent, there is the possibility with the governing bodies to tighten the laws in the future.
- Lesser applications
With a limited number of companies resorting to these cryptocurrencies, the digital payment method seems to have lesser known applications in the world.
- Restricted scaling
As there are limits on the speed and the number of transactions, it is going to take time for these digital currencies to get a better reach than the credit cards.
As it is, you need to understand that these bitcoins and other forms of cryptocurrencies are just taking small baby steps in the world. It is a going to take a long time before the rules become defined for the people to use them in all sectors.
This post is part of our contributor series. It is written and published independently of TNW.