The explosion of digital currencies has brought to the fore the limitations of traditional currencies, like time delays, security threats and high transaction costs. Such shortcomings are further magnified when transactions take place between two parties that are physically very far away from one another, or if the currencies involved belong to two different nations etc. So, the concept of a globally-acceptable digital currency is no doubt revolutionary and has rightly impressed entrepreneurs, economists, and IT experts. The ideal digital currency is expected to offer complete anonymity to the holder, provide him with security against frauds and thefts, and offer protection against inflation. With all these factors in mind, the Bitcoin made its appearance in 2009.
What are the pros and cons of Bitcoin trading?
While Bitcoins still have a long way to go prior to which they can be considered as the best alternative to fiat currency, there are some major benefits they offer:
- Bitcoin is a payment network and digital currency rolled into one. So, the blockchain needs the BTC to function and vice versa. There is not government official, bank, or middleman involved in the transaction. So, the Bitcoin is undeniably the first peer-to-peer decentralized currency allowing people to store and exchange coins with others, regardless of their identity and location.
- Since Bitcoins are digital they cannot be reversed arbitrarily by senders, or counterfeited.
- International money transfer using the BTC is much cheaper and quicker than it is with regular banking services.
- Bitcoins are digital assets that cannot be taken away from you forcibly. The transactions cannot be censored; this means that you cannot be forcibly prevented from conducting transactions.
- You get to spend Bitcoins just like you can spend regular money, whether from a credit card, smartphone, or desktop. Unlike the traditional currencies they are deflationary and their value is expected to appreciate by design.
- Since BTC has multi-signature authorization it implies that multiple individuals must sign off on payments guaranteeing additional security. The blockchain is a public ledger where all transactions can be viewed by everyone.
- When you provide you contact information to a merchant offering you a credit card, your data stays exposed to possible hackers and thieves who may steal your identity. However, you will never face this threat with Bitcoins as the transactions are discreet and anonymous. There is no need for submitting names; all you need are digital wallet addresses.
Bitcoin transactions however raise many red flags and it is advisable to know its shortcomings before taking the plunge:
- It is argued by experts that Bitcoins can be used for illicit and anti-social activities. In 2013, the FBI has to shut down the Silk Road made famous because of notorious activities. This was being used for selling guns and drugs, and offered tutorials to felons to hack ATMs.
- Bitcoin is known for very high volatility and risks of losses can be huge.
- Some argue about lack of security since there may be hardware glitches, human errors and fiduciary frauds.
- Since there is no governing authority there is no regulatory oversight in case things go south.
- While efforts are on to ensure Bitcoin offline payment facilities, the currency largely relies on Internet availability.