In the world, today cryptocurrencies, in particular, bitcoin, are fast gaining popularity. Cryptocurrencies are digital currencies that exist only in essence. They are yielded through encoding technology and it is this technology that is used to modulate bitcoin trading and subsequent verification of their transfer. The virtual nature of cryptocurrencies gives them autonomy and absolves them from any kind of regulation by the central bank. Many investors have taken advantage of this millennial milestone owing to its secure and transparent nature. However, not all of them share the same story as some have experienced losses while others have gained from it. This leaves us with the question, is cryptocurrency worth investing in?
Advantages of Investing in Cryptocurrency
One of the reasons why cryptocurrencies have gained global appeal is because of their secure nature. Cryptocurrencies are encoded into a database. For anyone to change a particular code the individual would have to fulfill certain conditions. These conditions revolve around public acknowledgment and it would, therefore, be impossible to alter any code or introduce a new one without it being traced back to you. Furthermore, the value of the coin is secured by encryption. The person who sends the coin possesses a private key that requires miners to work it out like a puzzle before the transaction is confirmed. This means that anyone who cannot work out this private key will not be able to access the coin. Confirmation of a transaction simply means that the transaction has been broadcast and it has received a node from other parties in the network. Failure to do so results in the breakdown of the system. It is in this manner that cryptocurrency gains its trust.
Cryptocurrency trading draws its legitimacy from the unanimity of the participants in its network. It has gained global approval by most leaders as a legal medium of payment. This approval has particularly posed an advantage to investors since they are more likely to garner huge profits. Banks have also approved the use of bitcoins to make payments and have even relinquished their control over any transactions that involve cryptocurrency. This has given cryptocurrency independence. Owing to this independence, transactions made by cryptocurrency are much easier. This could be attributed to the fact that they do not involve long and tedious processes like other transactions that have to be sanctioned by the central bank. Even as more people continue to trade online, it is highly likely that people with bitcoins are the ones who will be better placed to reap maximum profits.
Lower transaction fees
No transaction fees are usually charged for transactions involving cryptocurrency. This is because minors who solve the private key of the sender usually get a reward and some compensation from the network. This has made these transactions cheaper and more affordable and investors no longer have to agonize over high transaction fees that have been imposed by other modes of payment. However, most investors tend to involve third parties in bitcoin trading such as Coinbase to maintain their bitcoin wallets. In doing so, such third parties are likely to impose some fee which in most cases is quite affordable.
Disadvantages of Investing in Cryptocurrency
With the technological revolution, it would not be strange for the technology behind bitcoins to be compromised. The security offered by encryption of cryptocurrency may be breached by hackers who are always lurking for any point of weakness. This may end up costing investors huge amounts of money because prices are attached to the currencies.
Cryptocurrency exists only in essence such that there are no physical coins and notes. As a result, there is, therefore, no central place where the currency can be deposited for safe keeping. This becomes disastrous in the circumstances of the system crashing. This is because it will be very difficult to recover any balance since everything will be lost as it was not tangible. Its lack of inherent value could also result in unpredictability in pricesSee also
Lack of regulation
As much as lack of regulation of bitcoin trading by the central bank is advantageous, it also poses some disadvantages. Lack of regulation of cryptocurrency means it is not under any control or supervision. This attracts more investors thereby increasing their chances of investing in this technology. This is likely to lead to traffic in the network which is likely to slow down transactions and even pave way for fraudulent activities.
The time taken to carry out transactions via cryptocurrencies is relatively longer as compared to other means of payment such as VISA. This could be attributed to the large number of participants involved in the network. The buyer seeks to acquire coins that are already in the network. The sender of these coins possesses a private key which must be resolved by the minor before the transaction is confirmed. Other parties in the network also have to acknowledge this payment. All these processes take a relatively long time as compared to other payment processes such as VISA and MasterCard which are faster.
It is therefore evident that cryptocurrency has its hills and valleys. It is therefore upon investors to make prudent decisions to experience the benefits that are conjured up by cryptocurrency. After all, the only limit to what one can achieve is his imagination.