Over 4000 different cryptocurrencies are existing right now and their number will surely increase in the upcoming years. Freedom of spending without any control is the main reason why the cryptocurrency is becoming a viral trend among people globally. Despite getting criticism regarding uncertainties, the number of investors in crypto money is still upsurging because of its attractive returns.
Are you also planning to invest in a cryptocurrency but not sure whether it is worthy or a waste of your money? In order to understand this, you need to know both pros and cons of cryptocurrency.
Before that, let’s become more familiar with the concept of this digital money.
Understanding cryptocurrency in simple terms
As the name is illustrating, it is a kind of digital money with no physical existence and protected by a complicated 264-bit encryption code. Transactions made with cryptocurrency are recorded in a digital ledger known as “Blockchain”. This blockchain is an open-source ledger program available for everyone to access.
Basically, the purpose of cryptocurrency is to decentralize money control. Instead of relying on a banking organization or financing institution, digital money exist on a network of numerous computer systems known as nodes. Everyone connected in the blockchain will have access to track the transactions. However, alteration or removal of data is nearly impossible. Let me elaborate on the pros and cons of cryptocurrency in the points below.
Positives and negatives of cryptocurrency
Cryptocurrency is distributed through a decentralized blockchain system that is not under the control of a particular person or organisation. It helps in maintaining stability and security in the value. Unlike conventional currencies, its value remains the same throughout the world. People from any corner of the world have to pay the same amount for a commodity.
- Cover you from inflation
Cryptocurrency remains unaffected from the inflation coming in traditional currencies. While creating a cryptocurrency, its source code specifies the total number of coins. For instance, the number of Bitcoins cannot increase more than 21 million. With increase in demand for cryptocurrency, its value also upsurge.
- Highly secure
All transactions made through blockchain are much secure as compared to conventional cyber security. Data stored in blockchain cannot be manipulated which is the main reason why people are showing interest in investing more. Only the public keys of sender and receiver appear on the network of blockchain.
- Negligible transaction charges
If you compare the transaction charges of traditional money exchange with cryptocurrency, there will be a huge difference. The average transaction cost in money exchanges is 4% of total amount. On the other hand, transactions made through blockchain don’t need the approval of third parties like Visa or MasterCard.
- Easy to use for unethical activities
While making transactions through cryptocurrency, both sender and receiver will remain anonymous. This thing comes in both pros and cons of cryptocurrency. Transactions done anonymously have no record and can be used for various unethical activities.
- Data loss is money loss
It is clear that blockchain and cryptocurrency are highly secure technologies. However, it is also a big drawback. If someone loses his / her wallet’s private key, all the money in it will remain locked forever.
- Not environment friendly
Cryptocurrency mining is not environment friendly. In order to mine cryptocurrency coins, you need high and computer systems possessing the fastest processing potential. These computers consume a high amount of electricity.
The users of cryptocurrency are increasing because of its investment freedom. Before investing in it, make sure that the wallet’s key is securely kept somewhere for emergency use.