Advantages and Disadvantages of Cryptocurrencies such as OneCoin
Cryptocurrencies such as
Advantages of cryptocurrency
A good cryptocurrency is quicker, cheaper, more private and
more secure than alternative forms of payment.
Because cryptocurrencies are typically designed in such a way
that the amount of coins produced are limited by an algorithm, no
single person, company or country can control how much is
produced. There can be no manipulation of the money supply – a
common occurrence in the case of the U.S. dollar, say, which is
controlled by the Federal Reserve. It is sometimes desirable to
adjust the money supply, of course; but when it is done badly, it
can lead to economic disaster. Some economists have argued
that the monetary policies of a centralized system helped trigger
the economic crisis of 2007-2008.
Transactions done with cryptocurrencies are usually quick – they
can take less than 10 minutes – and are certainly faster than
posting a check or dispatching an international money transfer.
Because a digital currency is based on the combination of a
user’s private and public key, no personal details are held
insecurely online and the risk of fraud is dramatically reduced.
The money stored in a cryptocurrency is also controlled entirely
by the user and is therefore untouchable by banks or
governments. That is not the case with traditional bank accounts.
In 2013, to avert financial collapse, the government of Cyprus
provoked fury when it seized funds stored in private individuals’
bank accounts. The risk of such seizure with proper-functioning
cryptocurrencies is virtually nil.
Since there are no middlemen involved in the processing and
verifying of cryptocurrency transactions, the cost of making
payments or transferring funds are lower than those found in
traditional monetary systems run by banks and other institutions.
Indeed, cryptocurrencies have the lowest money transfer fees
anywhere in the world. The fees aren’t affected by distance or
different laws and rates in different countries. This enables
remarkable ease of use, whether it is to conduct a micro
transaction or to transfer a large sum of money to someone
thousands of miles away.
When it comes to international trade, there is no need to convert
from one currency to another, which sidesteps currency fees and
further reduces the cost.
Anonymity and privacy
With the boom in online shopping, merchants are increasingly
able to track an individual’s purchases and thus build a personal
profile. This also allows complete strangers to link personal
details stored online – credit card and bank account details – to
an individuals’ name, home address and other personal data. By
contrast, digital currency transactions are secure because they
don’t carry any personal information at all.
Disadvantages of cryptocurrency
Demand for daily use is still relatively weak. Limited awareness
across the globe make real currencies much better alternatives
due to their wider acceptance of use and demand.
The value can fluctuate quite dramatically because of external
factors, including vulnerabilities in the security platform. That
unpredictability makes many people wary of using crypto-coins as
a medium of exchange.
Criminals are attracted to the decentralized financial dealings and
near-anonymous transactions that are the hallmark of any
cryptocurrencies. By using digital money to make purchases and
sales or to move their ill-gotten gains from place to place, they get
unintended protection for illicit and illegal activities. In 2013,
prosecutors shut down Silk Road, an online site where users
could anonymously buy everything from forged passports to
narcotics, and which only accepted bitcoin for payments.
As transactions are not reversible, buyers must put their complete
trust in the merchant, who in this case is the protected party in the
transaction. Given its digital nature, cryptocurrencies are also
subject to cyber-attacks – several exchanges including Mt Gox,
TradeHill Bitcoin and Bitcoinica exchange have faced similar
challenges, leading to their downfall.
Cryptocurrencies have restricted use in countries including China,
Japan, India and Indonesia. More regulation will mean the cost of
using cryptocurrencies could rise.
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