Cryptocurrency Pros and Cons

Cryptocurrency Pros and Cons

Yin and Yang, Sun and Moon, Day and Night. We could go on and on, but you know what I mean. The presence of one characteristic makes the other relative. Would you appreciate light if there was no darkness? Enough with the philosophy. You may be wondering what this has to do with cryptocurrencies. Well, it is much more than you might think. In a world full of moons and ramboes (which is what cryptophiles look for when they take a stand), it is easier to forget the other side of the story.

So while the Internet is full of reasons to get into cryptocurrencies, today we will set aside some logic. That said, it is necessary to talk about the downsides as well. Who is ready to weigh the pros and cons of cryptocurrencies? Read on!

Advantages of Cryptocurrency: The Positive Side

Okay, let’s start with the front. Why? Because these are bigger than the negative aspects. But in the end we all have to build our own personal stories. To begin this journey, let’s first look at some of the benefits of cryptocurrencies.

A. Hedge against inflation

Before you rush to invest in the various cryptocurrencies out there, listen to what we have to say. This applies only to a limited number of currencies. Before we get into that, let’s try to decipher inflation. Governments around the world have complete control over the supply and demand of their currencies. At one time this supply depended on gold reserves, but this arrangement ended decades ago.

Now a central body, such as the Federal Reserve or the RBI, determines the amount of dollars/ruples in circulation. The decision is based on several factors. For example, the government may decide to print money to finance activities such as war, debt service, etc. Although this may seem like an innocent proposition, citizens often feel the burden of constant printing in the form of inflation.

Prices skyrocket because excess currency competes for the same limited market goods. Remember, it was never you who wanted war. At least not at the expense of your daily bread. However, because of inflation, you are trapped.

In other words, we could say that inflation is actually a measure of the decreasing value of your money.

On the other hand, what if there was a constant supply of money and no one could tamper with it at will? Over time, its value would increase as demand increased. This is exactly the behavior of gold in the real world. It is a commodity that appreciates because of its constant availability and the difficulty of mining it.

Some cryptocurrencies, such as Bitcoin, follow a similar pattern. Due to the fixed supply limit of 21 million, Bitcoin is independent of the depreciation associated with supply. One can park money in BTC and insulate oneself from the volatility of government fiat currencies.

Invest in a range of blue chip crypto coins, including Bitcoin.

B. Decentralized

Have you ever wondered why the government has no control over the supply of Bitcoin? It sounds too good to be true, doesn’t it? That is thanks to Satoshi Nakamoto, the anonymous founder of Bitcoin. He designed Bitcoin so that no individual can control it. Not even the founder of the project.

Blockchain technology allows all transactions to be handled quickly and without intermediaries. No one controls the supply or demand for your money. In fact, it is encoded in an immutable form.

Second, it also enables faster exchange of securities, as there is no friction caused by third-party verification. It also reduces the overall cost of the transaction, since the system takes care of all the details and trust.

Have you ever wondered why the government has no control over the supply of Bitcoin? It sounds too good to be true, doesn’t it? That is thanks to Satoshi Nakamoto, the anonymous founder of Bitcoin. He designed Bitcoin so that no individual can control it. Not even the founder of the project.

Blockchain technology allows all transactions to be handled quickly and without intermediaries. No one controls the supply or demand for your money. In fact, it is encoded in an immutable form.

Second, it also enables faster exchange of securities, as there is no friction caused by third-party verification. It also reduces the overall cost of the transaction, since the system takes care of all the details and trust.

C. Secure and private

Cryptocurrencies use cryptography to ensure maximum security of transactions. In addition, there is no need to perform KYC before joining a platform. All that is needed is an Internet connection and a smartphone to work with a blockchain-based application.

This allows users to maintain their privacy without compromising the security of their money. To illustrate further, web2 can also provide these functions. However, they are often mutually exclusive. You can choose between privacy (you must entrust your money to an anonymous intermediary) and security (a known and trusted intermediary will transfer your money securely, but at the expense of privacy).

Blockchains offer both these functionalities hand in hand.

D. Cost-effective mode of transaction

Your preferred bank will usually charge you a percentage of the transaction amount as a fee. They have to do this to fund the intermediaries who help process these transactions. For cryptocurrencies, particularly bitcoin, the situation is different.

Currently, the average fee per transaction in bitcoin is around $1.50. There are some anomalies when the network is congested, but on average this is a good amount to pay if you make low-to-medium value bitcoin transactions. Because it transfers your funds with minimal resistance, quickly and privately, it is the icing on the cake.

E. 24x7x365 trading

Because a huge infrastructure with multiple employees is not required to run a blockchain, it allows for uninterrupted transactions. Worldwide, stock exchanges typically operate about 240 days a year (including weekends and holidays), for about 6 to 8 hours a day.

Cryptocurrency trading, on the other hand, is always active. The infamous cryptocurrency greeting “GM” comes from this feature. GM or Good Morning means trading cryptocurrencies all over the world, at any time of the day.

F. Partial ownership: tokenisation

Cryptocurrencies offer a fantastic solution to fractional ownership in the form of tokenization.

Imagine having a real estate property. For most of us, it can be very difficult to buy land in advance. But with cryptocurrencies and the blockchain, we can split it into multiple parts (tokens) and invest in them for future appreciation.

The same goes for stocks. It is now possible to own a part of some expensive stocks using its cryptocurrency-based version.

G. Currency exchange

Have you ever traveled abroad and found yourself in a situation where the exchange rate burned your pockets? It is even worse when you find yourself in an impasse without domestic currency. Your local bank does not operate abroad because you forgot to ask their “permission” for such transactions.

What do you think? Cryptocurrencies, particularly stable currencies such as USDC and USDT, can easily solve this problem. Since borders do not restrict cryptocurrencies, you can trade in an instant without having to worry about currency conversions.

With stablecoin cryptocurrencies, you also have access to digital versions of major currencies such as the U.S. dollar, euro, Chinese yuan, Japanese yen, and Indian rupee.

Disadvantages of Cryptocurrency: The Negative Side

And then there was a dark side as well.

Well, let’s call them drawbacks that will be addressed as the technological and legal situation evolves. For now, it is extremely important to be wary of these drawbacks of cryptocurrencies before investing in them. Let’s take a look.

A. Irreversible transactions

Welcome to the world of decentralization. While decentralization brings great advantages, it often comes at the cost of a buffer in case of an error. Whereas in the traditional financial world one can turn to one’s bank in the event of a mistaken transaction, cryptocurrencies offer no such backup mechanism. There is no intermediary to rely on (see what we did there?).

So if you are a victim of a wrong transaction in the blockchain, the best thing you can do is regret it and learn from it. There is no way to undo a transaction.

B. Self-custody

Cryptocurrencies allow true ownership of your assets. No bank or government can seize/freeze your cryptocurrency portfolio. However, as you can imagine, this brings additional responsibilities. You must manage your funds more carefully.

There is no “forget password” option in case you lose your private key (equivalent to a password).in web 3.0). As a result, one needs to exercise extra caution while transacting on blockchains. \

C. Scams

The cryptocurrency space is plagued with a lot of scams.

Unsuspecting investors have fallen victim to the various devious techniques devised by these scammers, resulting in loss of capital. For example, after the huge success of the Korean series Squid Games on Netflix, many were lured by a coupon called $SQUID Coin.

Coupons went up in price like there was no tomorrow. And guess what? It didn’t exist. After the price soared to $2861 in a few days, it was reset within minutes. The founders (or scammers) raised $3.8 million.

D. Government stance

Although it is perfectly legal to buy and sell cryptocurrencies, the entire industry is waiting for comprehensive regulation to end the uncertainty in the sector. Until that happens, any government statement on cryptocurrencies will end up being speculative, leading to price volatility and doing more harm than good to retail investors.

Is Cryptocurrency a Good Investment?

So there are two ways to answer this question. The short answer is yes. A longer answer contains a number of arguments to support the claim.

In the past, technology-based start-ups have been a trend. Technology has sought to change every industry. When technology and finance met, fintech was born. And it has become one of the hottest sectors when it comes to exponential returns. Our favorite cryptocurrency is at the forefront of this innovation. The best of both worlds.

Over the past decade, Bitcoin has yielded about 8,500 percent and Ether has done even better, at about 18,000 percent. As analysts argue, these cryptocurrencies still have a lot of potential to continue to grow and expand.

Despite all the hype, only a few people understand and invest in them. As a result, mass adoption will pave the way for the next big wave of returns.

However, optimism needs to be checked periodically. Cryptocurrencies are an unstable asset. There have been instances in history where cryptocurrency prices have fallen by more than 80 percent in a week.

Therefore, it is a good idea to regularly allocate some funds in one’s portfolio to cryptocurrencies, rather than investing them all. This percentage may vary from person to person, depending on one’s risk appetite.

And if you have difficulty analyzing individual cryptocurrencies, try investing in a wider range of themes across coin suites.

Conclusion

With a solid understanding of the pros and cons of cryptocurrencies, the time is ripe to further explore and enter this field. As is often said, Web 3.0 works very well for those who diligently follow it. We may not be sure of the moon and Rambo, but a passion for life with some life-changing riches awaits. See you on the other side.

FAQ

1. Is cryptocurrency a good investment?

The operative word is “ja” and the short answer is “yes.” It is recommended that you invest a portion of your portfolio in cryptocurrencies. However, be sure to manage the risk and not invest a large portion in cryptocurrencies, because although they are profitable, they can sometimes be volatile.

or that the risks are greater and that no one invests in cryptocurrencies, because although cryptocurrencies are winners, they can be volatile.

2. What cryptocurrency is best for small businesses to invest in?

Small businesses can start investing in Bitcoin, which can serve two purposes. First, they can reap the benefits of long-term revaluation. Second, investing in cryptocurrencies gives you immediate publicity through market excitement.

3. What taxes do I pay on crypto gains?

Each country has a different tax regime for cryptocurrencies. In India, all profits are set at 30%. However, there are some details; you can find more information about cryptocurrency taxation in India here.

4. Can Bitcoin be destroyed?

Given the distributed and decentralized nature of Bitcoin, it is virtually impossible to disrupt it. The effort to attack Bitcoin has an unfavorable reward ratio. As a result, Bitcoin is the most resilient form of currency ever created.

5. Why cryptocurrency is better than cash?

Cryptocurrency is better than cash because it is deflationary (due to fixed supply), fast, decentralized and is a cheaper means of transaction. It is a superior form of money, surpassing cash on all levels.

6. Is crypto safer than a bank?

In terms of trust, cryptocurrencies are inherently untrustworthy. This means that it is not necessary to trust a third party to carry out a transaction. Instead, one relies on the code on which the cryptocurrency is based. However, in the case of banks, you are expected to give them your money. If a bank fails, so does your money.

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