Exploring the Pros and Cons of Cryptocurrency & Blockchain
Updated On May 27, 2023 | by Joseph Williams
The 2008 Financial Crisis, also known as the Global Financial Crisis (GFC), highlighted the need for an alternative to the traditional banking system. Hence, Satoshi Nakamoto (we still don’t know about him/her/them) created Bitcoin in 2009 and laid the foundation of Cryptocurrencies.
The Bitcoin whitepaper, titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” paved the way for the blockchain technology that cryptocurrencies rely on.
Businesses around the UK and the world are embracing this new technology. From clothing and accessories to the best UK online casinos, several businesses are now accepting Bitcoin and other popular crypto coins.
It’s been 14 years since the inception of Crypto, and it is a hot topic right now. While some of the major brands have started to accept them as payment, many are still doubtful.
Also Read:- How to Protect Cryptocurrency from Theft
In this article, we will provide you with details about the pros and cons of using Cryptocurrencies and Blockchain technology. It will help you to make an informed decision about the same.
Cryptocurrency and Blockchain: A Brief Overview
A cryptocurrency is a form of virtual currency created to function as a medium of exchange over a computer network that is independent of any central authority, such as a bank or government.
The functionality and appeal of Bitcoin, Ethereum, and other cryptocurrencies are fundamentally dependent on blockchain technology.
The ability to update a blockchain is shared among the nodes, or participants, of a public or private computer network because a blockchain is a type of distributed database or ledger. Information sharing can now be done safely, thanks to blockchain.
According to experts, blockchain technology can benefit numerous industries, supply chains, and procedures like crowdfunding and online voting.
Advantages of Using Cryptocurrency and Blockchain
- Decentralization: By eliminating the need for middlemen, blockchain technology enables direct peer-to-peer transactions. This guarantees that the transactions are more effective, quicker, and less expensive.
- Cost-effective: Cryptocurrencies can facilitate international money transfers. Transaction costs may be very low or even nonexistent as it eliminates the need for third parties like VISA to confirm transactions.
- Protection Against Inflation: In the past, several currencies have seen a gradual fall in value due to inflation. Nearly every cryptocurrency is released with a specific amount of coins at its inception (e.g., there will only ever be 21 million Bitcoin). Hence, the limited supply helps to resist inflation.
- Security: The blockchain ledger uses complex mathematical puzzles that are difficult to crack. Cryptocurrency is, therefore, much safer than standard electronic money transfers.
- Transparency: All transactions are recorded and saved on the blockchain, allowing anybody to access and verify them. This makes the process more open and responsible.
Disadvantages of Using Cryptocurrency and Blockchain
- High Energy Consumption: Cryptocurrency mining is very energy-intensive because it requires a lot of processing power and electricity.
- Regulatory Obstacles: Its use is not regulated by any laws. Governments may find it difficult to keep up with the rapidly changing technology, which could lead to regulatory challenges and uncertainty.
- Scalability Issues: The capacity of blockchain technology to handle a high volume of transactions is still in its infancy. This can lead to lengthy processing times and delays, making it challenging to scale the technology to accommodate an increasing user base.
- Vulnerable to Security Risks: On a blockchain, there is always a chance of a 51% attack, which is when one miner or a group of miners controls more than 50% of the network’s mining hash rate.
- Illegal Transactions: It’s hard for the authorities to trace down and keep tabs on the data. In the past, Bitcoin has been used as a mode of payment during many illegal deals like buying drugs on the dark web.
Cryptocurrency and Blockchain Technology are related concepts. They are extremely speculative because they are a relatively new technology, so before investing, it is important to know the risks involved.
We can anticipate more innovations and developments as technology continues to advance, which will aid in resolving these issues and ensuring the ongoing expansion and prosperity of this sector.