The first cryptocurrency that was released in the crypto world was Bitcoin. The invention of bitcoin was made in 2008 by an anonymous programmer under the alias Satoshi Nakamoto. However, even to date, no one knows the real identity of the developer of bitcoin as Satoshi disappeared in 2010, leaving the bitcoin network in the hands of its community members. Thus, Bitcoin became the first cryptocurrency that led to the tremendously growing acceptance of crypto coins as both medium of exchange and investment opportunity.
Bitcoin has become a safe way to digitally transfer money from one’s wallet to another user’s wallet without requiring approval or permission from financial institutions or banks. Cryptocurrencies like bitcoin are designed to be used as a medium of exchange like fiat currencies. Many countries have started accepting cryptocurrencies, while some have restricted the use of cryptocurrencies. Even some countries like Venezuela are using cryptocurrencies as a hedge against inflation.
What are the advantages of cryptocurrencies?
As compared to traditional currencies, cryptocurrencies offer multiple advantages that include:
Crypto investors use a digital wallet to track, access, and transfer their cryptocurrencies from one wallet to another wallet address by using a secret key. Some investors choose to store their crypto coins in crypto exchanges, but exchanges come with multiple risks. For example, bitcoin transactions are recorded in the blockchain, where numerous computers are located at different locations. Storing money with bitcoin isn’t like storing money in a bank. It is like storing money at multiple locations.
Cryptocurrencies are designed in a way to provide privacy to their users. No personal identity is shared while transferring bitcoin or other cryptocurrencies. Cryptocurrencies like Bitcoin and Ethereum offer complete privacy as these are pseudo-anonymous. Only a wallet address is linked to each wallet, but no user’s identity is connected with the wallet.
Cryptocurrencies like Ethereum have the unique feature of smart contracts that prevent duplicating cryptocurrencies which is possible in traditional currencies. Through smart contracts, users can easily manage their transactions. These contracts even allow users to replace escrow, arbiters, and financial services.
Multiple costs are linked with the transfer of cryptocurrencies, and some of these cryptocurrencies are cons. Each cryptocurrency has its transfer speed, transfer cost, and other costs associated with transferring funds. Bitcoin gets to experience when any user wants to transfer bitcoin at top priority. They have to pay extra fees to miners to verify their transactions on a priority basis.
The supply of bitcoin and many other cryptocurrencies is fixed. For example, Bitcoin’s supply is set at 21 million bitcoins and out of which 17 million coins are already in existence. The fixed supply of bitcoin increases its value and makes it similar to gold and other precious metals.
What are the disadvantages of cryptocurrencies?
Some of the disadvantages of cryptocurrencies include:
The Crypto industry is thriving, but there are thousands of cryptocurrencies that have failed terribly. Even some good coins were not able to make it to the mainstream and have been unable. Therefore, it is not easy for crypto projects to flourish and gain a good user base.
It’s been around 12 years since bitcoin exists, and people have now started accepting or using it. Still, there are only a few platforms or retailers that accept cryptocurrencies payments. Therefore, it would be best to learn about the acceptance or adoption of bitcoin before using it at any store.
Risk of regulations
Satoshi Nakamoto led the development of cryptocurrencies to replace traditional currencies. Government officials consider cryptocurrencies a threat to fiat currencies. As a result, the governments of a few countries are planning to impose restrictions and regulations on the use of cryptocurrencies and blockchain technology. However, even some finance experts and investors are planning to show their concern over the regulations imposed on cryptocurrencies that will drop the demand for cryptocurrencies.
A volatile market is one of the significant challenges or risks of the crypto market. Prices of cryptocurrencies fall and rise dramatically, and it gets difficult for investors to predict the future price movements of cryptocurrencies. To know more about volatility click here.