3 Key Bitcoin Benefits and Drawbacks for Beginners
For every individual desiring to start a journey onto a new, foreign path, the importance of advance and adequate preparation cannot be overemphasized. The same principle applies to anyone who wants to start speaking the Bitcoin language.
Anyone who wants to start investing or trading Bitcoin should take time to study the cryptocurrency first [preparation], which will do them a lot of good. Apart from research on which crypto exchange best to trade Bitcoin, an aspiring investor needs to understand what he is entering.
Therefore keep scrolling, and we will see the good and bad of Bitcoin. But first, let’s take a stroll down memory lane.
History of bitcoin
Bitcoin is a virtual or digital currency, the first of its kind. Like most cryptocurrency, Bitcoin has a peer-to-peer and decentralized system, with no centralized authority like a central bank or national government controlling it.
Launched in 2009 by a mysterious programmer under the alias “Satoshi Nakomoto, Bitcoin has since been leading other cryptocurrencies collectively known as ‘altcoins.’ For the following reasons, the digital currency is also serving many users as an alternative to government flat currencies or assets like gold or silver.
Benefits Of Bitcoin
One of the problems of fiat currencies or most online transactions made through credit cards or debit cards is the exposure and lack of privacy. Private information like credit card number, expiry date, and CSV number is requested during online transactions, exposing individuals to credit card thieves.
In contrast, Bitcoin transactions require only two keys, a public key[or bitcoin address] and a private key. Only the bitcoin address is made public during the transaction while the private remains a secret, averting personal information exposure.
Also, most payments made through the bank or online are usually associated with the owners; this is different from bitcoin. Bitcoin’s built-in privacy protections make it impossible to connect transactions to their users, protecting them from thieves and hackers.
Its Decentralized nature
The decentralized nature of the Bitcoin cryptocurrency means that no governmental authority or central bank controls it. This nature also makes it impossible for the government to control individual accounts, like freezing the account.
Another good thing about Bitcoin’s decentralized nature is that the government can one day decide to demonetize or devalue its national currency, making individuals lose their financial worth and credibility. Still, it can never do that with Bitcoin.
One of the adverse effects of the Covid-19 pandemic is the loss of jobs. To reduce unemployment, the American government created a program called the Payroll Protection Plan/Program.
This program was created to help business owners maintain their businesses, and the program is still ongoing.
You might wonder how this is of any concern to Bitcoin. An actual loan did not fund the PPP; however, the federal government printed extra currencies in the central bank. Was the program successful? Yes! The program significantly increased employment. However, the economy was affecting; the additional printing reduced the value of the American currency.
Bitcoin has a limited supply of 21 million; this means more Bitcoin cannot be mined; thus, the currency can not be devalued.
Drawbacks of Bitcoin
As there is nothing in existence that 100% perfect, we are also going to study some disadvantages of Bitcoin
One feature familiar with most cryptocurrencies, especially Bitcoin, is their volatility. This volatility can create profitable trading opportunities; however, when it becomes too much, volatility can increase trading risks.
Bitcoin prices are highly volatile, and rise/go down at a very high pace. Apart from other blockchain news, the limited supply of Bitcoin and increasing demand for it causes volatility.
While the anonymity of Bitcoin protects the private information of users from cybercriminals, this feature, unfortunately, acts as a cover for money launderers and black market operators.
And it’s unclear that the is appropriately equipped to tackle the problem. If shady uses for Bitcoin outweigh legitimate ones over time, and the authorities can’t effectively stop the shenanigans, the entire system faces marginalization.
The high privacy level of bitcoin makes it difficult for the government to track down any cyber-criminal. If the illegal business done with bitcoin outnumbers the good, then the international legal system takes over the problem.
No refund or cancellation policy
There are no refunds or cancellation of transactions in Bitcoin. This fact means that anyone that mistakenly sends coins to another can neither revert such transactions nor get a refund. Such funds that are lost cannot be refunded unless the receiver decides to return.
Bitcoin indeed has some cons like high volatility, a common currency used for illegal purposes, but it is also known for its decentralized nature, anonymity, and non-inflationary.
As a beginner or even a guru, learn to treat Bitcoin as a speculative asset. When trading with it, do so cautiously, and never invest money you can’t bear to lose.