It’s been nearly a decade since the first cryptocurrency, Bitcoin, was introduced to the world in 2009. From then onwards, Bitcoin has amassed a huge following and thousands of other cryptocurrencies emerged on the scene to join the cryptocurrency hype.
So, let’s start from the beginning by first discussing “what is a cryptocurrency?”.
Cryptocurrencies were designed with the promise and the intention to become a mainstream medium of exchange - like the traditional currencies that we use today. Cryptocurrencies are digital assets that only exist as data in computers. Accounts and transactions are protected by strong encryption which also guarantees that no one can, at will, change the value or the number of coins in circulation.
Cryptocurrencies versus traditional currencies
The main advantages of a digital currency over traditional currencies are the more efficient, faster and decentralized transactions, as well as lower costs per each transaction. To send cryptocurrency from one country to another it will take only a few seconds while to do the same in dollars using your bank it may take up to several days.
Further, a cryptocurrency cannot be manipulated by a government or central bank in any way, shape, or form. This is a key aspect that has attracted many enthusiasts - especially those who believe that governments cannot and should not be trusted.
However, as good as the positives can get, cryptocurrencies are far from perfect and there are certainly several big disadvantages.
First of all, cryptocurrencies still fail miserably at doing what they were designed to do – being a currency. Because of the huge volatility in their price, most cryptocurrencies are not an effective medium of exchange or an appropriate store of value.
Another downside that is of big concern, is the use of cryptocurrencies for illegal activities. Since digital currencies are not controlled by the government or anyone else, they provide an easy way for criminals of different sort and size to evade the law.
In addition, some of the digital coins have no option to cancel or reverse transactions (e.g. Bitcoin) which makes users vulnerable to losing their digital currency to frauds, theft or by simply mishandling it. Once the money is gone from their account, it is gone for good.
Who will be right is hard to say, especially because the technology is new and most probably will need further development and improvements before it can succeed in a big and sustainable way. Presently, cryptocurrencies are in a situation of a socio-economic experiment and are far from being a practical medium of exchange, but, nevertheless, we are all excited to see what the future holds.
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