Advantages and Disadvantages of Cryptocurrencies
Cryptocurrency has become a common phenomenon among investors worldwide. After being invented in 2009 by a group of unidentified people, the digital currency quickly made its way to the top, seeking the interest of many seasoned investors and entrepreneurs worldwide. The boost in industrialization has given room for digital transactions, fueling the need for crypto. However, the investment isn’t as reliable as the traditional bonds or gold investment.
Cryptocurrency – what is it?
Cryptocurrency, simply referred to as crypto, is virtual currency secured by blockchain technology. Blockchain is a series of transactions and other data stored in a cluster of blocks, made secure through a wide network of computer systems interlinked from various sources throughout the world.
Cryptocurrency is a virtual asset that gains its value from its nature of decentralization. This means that no government or regulation authority has control over the market and is rather controlled through the web of network online.
This is why it isn’t as reliable an investment as precious metal investments, stocks, bonds, and other traditional forms of assets.
Following are some of the common advantages and disadvantages of cryptocurrency:
Cryptocurrency – Advantages
Protected from Inflation
Inflation is the reason for many assets to lose their value over time. Cryptocurrency is immune from inflation because the value of every coin is pre-determined through the network code and can’t be changed based on an individual’s will.
So, if the demand for crypto increases in the future, the price will increase following balancing the scale of cost ratios, aiding the future market.
Private and Secure
The security of crypto assets is guaranteed. The asset is powered by blockchain, which is nearly impossible to breach. The web of networks provides distinct algorithms that help keep the blocks intact and impenetrable by an unknown network.
There are several kinds of crypto coins circulating in the market. With the help of virtual wallets, an individual may exchange their currency and increase their trade profits.
The biggest advantage of crypto is that it’s decentralized. This means that the strings of the market aren’t held by a wealthy group of investors, as is the case with other modes of assets.
Disadvantages of Cryptocurrency
The value of crypto soared in 2021, but the asset has struggled ever since the beginning of 2022. This explains the market instability of the asset, keeping it at risk. We also saw the value of the digital currency take a nosedive with a single tweet from the owner of Tesla, Elon Musk. So, rapid withdrawals may cause the currency to plummet at any time.
Crypto may be in full swing in some parts of the world, but it’s still far from being recognized in other major parts. This can lead to delays in transactions and the unavailability of the coins in other fiat currencies.
Environmental activists have raised their concerns about the adverse effect of crypto mining on the environment. Mining utilizes a huge number of natural resources, damaging the sustainability of the world.