The topic of cryptocurrency has slowly crept its way into our daily lives. From its conception years ago to its growing acceptance these days, currencies such as Bitcoin and Ethereum may be here to stay. What are the pros and cons of using cryptocurrency over fiat money (currency issued by a government to be legal tender, such as US Dollars)?
Being able to transact anonymously can be both good and bad. For the average user, using cryptocurrency can help to protect their privacy since the currency involved in the transaction is not tied to an identifiable person, unlike if credit cards or online wallets were used, where both the sender and recipient will know the identity of the other. If you are keen on purchasing something but wish to remain completely anonymous for personal reasons, cryptocurrency definitely offers a massive advantage – short of physically handing the other party paper money, which may not be possible in many cases.
Users can also generate as many cryptocurrency addresses as they wish, allowing for as much as a unique address to be used for every transaction so that nobody is able to link all the addresses to the same user.
However, as mentioned, anonymity can be a double-edged sword at times. Cryptocurrency has been used for ill intent in the past, such as to finance terrorist or criminal activities since it cannot be traced. Some organizations may not like people paying them via cryptocurrency if they wish to be able to track the people involved in their transactions – not necessarily for malicious reasons, sometimes simply to ensure they are not dealing with illegal activity. Fortunately, an increasing number of parties are coming to accept cryptocurrencies as an alternative, anonymous payment method.
Many banks and online wallets tend to limit the amount of money you can transfer in a day for various reasons, usually depending on your card or account type. However, since cryptocurrency is anonymous and transactions cannot be controlled or prevented, you can make as many transactions as you wish, without limitations as to who you send it to, the country your recipient is based in or the amount you are transacting. You can also receive unlimited payments to any cryptocurrency wallet. Every transaction is publicly recorded in the blockchain.
Have you ever run into that problem where you are trying to make a purchase online, but your credit card is not accepted, or the other user doesn’t have any means of accepting your payment over the Internet? Well, cryptocurrency does not have that limitation. As long as you have the recipient’s wallet address, you’ll be able to send currency to them no matter where they or you live.
The obvious difference between fiat money and cryptocurrency is that the former is backed up and given value by a government, while the latter holds value on its own. In this way, cryptocurrency has the exact same value at any point in time, regardless of where the user is in the world. Cryptocurrency is not under the control of any entity, country or bank, which means that there is no central authority to spell out new rules for people who own cryptocurrency. There are no limitations, no laws and no regulations associated with using cryptocurrency.
Additionally, if part of the network crashes or goes offline, the cryptocurrency system will still continue to operate independently. On the other hand, if a country’s economy collapses, the value of their currency may go down drastically, and international people holding that currency may find that it no longer has any worth.
While the value of fiat money more or less stays the same unless a country’s economy takes a turn, the value of cryptocurrency has seen some massive swings in the past few years. For instance, the price of one Bitcoin was at around US $198.51 in November 2013, and then rapidly shot up to US $946.92 just the next month in December 2013. At the start of 2019, one Bitcoin cost US $3869.47, increased to US $10599.33 in July, and is currently at US $8486.46 as of November 2019. Many corporations have hesitated dealing with cryptocurrencies due to the fact that their values are prone to fluctuating very suddenly over the course of a short time. The volatility of cryptocurrency is a major reason why it has not yet taken precedence over fiat money in our daily lives and online transactions.
With many websites offering Bitcoin transactions as an online payment method, the number of places where you can spend cryptocurrency these days is steadily increasing. Despite that, we have yet to widely adopt the use of such cryptocurrencies to replace traditional money.
There are a number of reasons for this, one being limited knowledge. The world of cryptocurrency can seem daunting to someone who is not inclined to using technology. Some people may not be aware of the advantages of using cryptocurrency or find it difficult to accept such a concept. They may need to be completely convinced to set aside traditional money in favor of cryptocurrency, as the latter may not offer that many clear advantages for them to step into a complete new ideology.
As it is, cryptocurrency has not settled down at a stable value for long, making countries hesitant to legalize it as a currency. Additionally, cryptocurrency does not have a central issuer, and as such there is no formal entity for users to turn to if they run into problems with cryptocurrency. Most places where we spend our money on a day-to-day basis do not accept payments via cryptocurrency for these reasons, making it impractical to try switching to cryptocurrency for everyday use.
You may be able to click “Refund” or request for your money back if you have erroneously made or received a payment with fiat money. However, when paying with cryptocurrency, there is no such option. If you have accidentally transferred cryptocurrency to the wrong wallet, the only thing you can do is to ask the owner of that wallet address – if you know who they are – for a refund, and if they refuse or you don’t hear anything back from them, there is nothing else you can do to get your currency back.
If you run into a dispute when transacting with someone else, traditional online wallet services such as your local bank can usually help you to look into the matter and reverse the transaction if need be. When it comes to cryptocurrency, there is no central authority and both sides are anonymous, so hitting the “Undo” button is usually not that easy – and perhaps even impossible in most cases.
On the whole, is cryptocurrency worth bothering with? Since it has been around for some years and is growing in both value and popularity, it can be difficult to imagine cryptocurrency drastically going down in value in the near future. Going by the market trends since cryptocurrency was launched, it seems that investing in it isn’t totally pointless, as the value of most cryptocurrencies have increased over time. However, as with everything else, cryptocurrency has its share of risk factors, and it is advised that one proceed with caution if they are considering investing in it.