Advantages and Disadvantages of Bitcoins
Bitcoin refers to a form of electronic cash commonly known as a cryptocurrency. It is usually decentralized without the use of central banks or administrators or intermediaries. The transaction is done from user to user, and the use of network nodes does the verifications, they are recorded in public distributed ledger called a block chain. The Bitcoin was invented by a group of individuals. Bitcoin is created as the reward of the mining process, and they can be swapped for other monies, goods, and amenities. Bitcoin has been used as stock although other controlling agencies have issued investors alerts about the currency.
Various merits have been made available by the use of the electronic transfer system. The standard banking systems have not been in a position to provide advantages to their customers. Bitcoin offers a secret identity, whereby it provides security against cyber theft since it can keep one camouflage. The Bitcoin technology does not require the real names or real identities to function, people only analyze the flow of the transaction. Investors send or receive Bitcoins through the use addresses of 30 characters. There are no limitations in the use of Bitcoins. The banking systems require one to have several gatekeepers to prevent one from making transactions. However, Bitcoin technology has eliminated all that since the investor take full responsibility since there are no gatekeepers with the open soft wares can receive or send Bitcoins. Example there are no third parties involved such as banks or broker.
The Bitcoin technology is much secured, it is impossible to hack an account under the currency. The technology locks the funds under the cryptography system. Only the legit owner can use the account by sending and receiving Bitcoins as it is made by use of robust cryptography and huge numbers that are hard to hack. Technology is high-speed and global. The technology is very swift, and once the transaction is initiated it is usually transmitted instantly in the worldwide network, and the operation can be easily confirmed within several minutes.
The technology has very minimal transaction fees, foreign purchases usually involve fees and exchange costs. Bitcoins lack intermediaries such as government leading to low transaction cost. Bitcoins transfers are rapid thereby eliminating the inconvenience of typical authorization requirements and wait period. Payment convenience is enhanced since the investors can use mobile to transact when they are connected to the Internet. Investors do not have to travel to banks to store or buy products. Example, time and resources wasted in the bank queues is not wasted with this technology.
However, the Bitcoin technology also has the demerits in that, all transactions are unalterable. Once the trade has been initiated no one can reverse it. Due to this, all investors are at high risk of losing their investment if they make any mistakes in the transaction. Bitcoin technology has no safety net in case of critical sales unlike in the banking systems. Due to this, the investors have to confirm to whom they are sending money. Since Bitcoins uses secluded key encryption to authenticate proprietors and record the transactions.
The technology has insurance risks in that, investors are not insured against any loss that may arise from it. The typical bank systems are usually protected through the federal deposit corporation. The technology has substantial market risks as Bitcoin values fluctuate and technology is highly sensitive to news, where it may lead to vast volumes of buying and selling on the exchanges. For instance, in 2013 the Bitcoin fell by 61% in one day, and in 2014 their prices fell by 80%.
There are tax risks, Bitcoins technology is unentitled to be involved in tax-advantaged retreat accounts, and there are no decent, legal options to protect investments from taxation. Bitcoins technology presents regulatory risks, this technology is an opponent to the administration coinage which can be used for the black-market transaction such as illegal doings like tax evasion. Due to this, the government always try to regulate or even ban the selling or buying of Bitcoins. Example, in 2015 New York state monetary facilities established guidelines to limit organizations selling or buying Bitcoins, they include a recording of customer identity, maintain the capital reserves and must have compliance officers.
The technology possesses security risks as they are purely operated in a digital platform. Due to that, the systems are at high risks of being hacked, chances of the malware and the operational glitches. Therefore, it is possible to steal the Bitcoins. Scammers targets the currency exchanges gaining admission to thousands of accounts and digital wallets where Bitcoins were kept. For example, in 2014 Mt. Gox a Japanese exchanger was required to close down after millions of dollars’ value Bitcoins were embezzled.