“Cryptocurrencies are the new age digital currencies that have one thing in common, they were created to challenge the concept of fiat currencies and to solve the issues associated with them. The concept of decentralization is embedded deep into every cryptocurrency and thus it has been seen as beneficial in the eyes of some and dangerous in the eyes of others. Being a technology disruptor, there are various criticisms that always surround the cryptocurrency space.”
The Benefit they Bring
There are a number of benefits that the cryptocurrency and the blockchain technology has over the fiat currency and the current financial architecture around the globe. As the cryptocurrencies are a peer-to-peer network, it removes the middlemen and the third party entities ensuring fast and low cost funds transfer which fiat currencies fail to exhibit.
The cryptocurrencies are decentralized meaning there is no single authority such as a central bank controlling them, ensuring that the transactions are not limited to a geographical border and cannot be manipulated by the authority. The cryptocurrencies such as Bitcoin have limited supply making them a hedge against inflation which is one of the biggest problems of the fiat currencies.
The cryptocurrencies are far more secure than the current financial systems as the blockchain technology ensures that all the transactions are cryptographically secured and the data recorded on the blockchain is immutable and irreversible. This prevents tampering of the transactions and prevents frauds.
The Drawbacks that are looming
Though cryptocurrencies are known for their benefits, there are certain drawbacks that must be known. The cryptocurrencies are extremely volatile in nature and thus, considering them as a store of value or as a commodity to trade comes with risks that every investor must consider. Apart from volatility, the cryptocurrencies are entirely digital and their value is not backed by any commodity such as precious metals etc. Its value is completely derived by the demand and supply principle.
Though the blockchain technology ensures the cryptocurrency security, there are security risks due to the environment in which the cryptocurrency is linked to. Various vulnerabilities can be exploited through wallets, user carelessness etc while using the cryptocurrencies.
The Surrounding Criticism
The cryptocurrencies have been always criticized by the existing financial systems and governments for being used as a medium for criminal activities due to the anonymous and non-traceable nature of the cryptocurrencies. Though there have been certain instances in the past that the cryptocurrencies such as Bitcoin have been used for criminal activities, thinking of it as a completely anonymous currency is not entirely true. Bitcoin and other cryptocurrencies are pseudo anonymous as every transaction is recorded on a public ledger visible to all. The only thing is that the identity of the wallet holder is concealed. With the advancement in technology this identity can also be revealed in criminal cases.
Another criticism that surrounds cryptocurrency is that it is hype based and the bubble can burst anytime. The cryptocurrencies such as Bitcoin have been around for over a decade now and it has passed the tests of time ensuring that it is not all about hype but a solid technological base is present to ensure its bright future.
Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.
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