Why do people use Bitcoin?
Bitcoin is one of the most popular cryptocurrencies in circulation thanks to its strong fundamentals, cutting edge technology, and speculative value.. Traditional transfers of fiat currency and foreign purchases usually involve high exchange rates and fees which Bitcoin transfers are able to circumvent. Bitcoin transactions offer a faster processing speed and lower transaction fees as the lack of direct intermediary institutions or government involvement means that typical authorisation and requirements are almost non-existent.
Although frictionless transfers may be one of Bitcoins greatest advantages,there are a myriad of other advantages and disadvantages to such a digital currency, which will shinelight on why people use and buy bitcoin.
What are the advantages of Bitcoin?
Accessibility
The Bitcoin payment system is decentralised on a peer to peer basis, meaning that users have the ability to send and receive payments from anyone who is on the network regardless of their geographical location.
The advantage of having no borders and transcending traditional payment systems makes Bitcoin a very versatile and accessible payment method. Although accessibility is not exclusive to Bitcoin transactions and encompasses many forms of cryptocurrency, it only takes minutes to conduct a Bitcoin transfer and purchase items or services. This makes spending money from the expanding list of retailers and exchanges accepting Bitcoin payments even easier and with the added bonus of reduced fees.
Using Bitcoin as your main currency when travelling to another country is also a great way to exchange for other currencies in a simple yet effective way if you don’t want to deal with local exchanges.
Anonymity and security
The security and user anonymity of Bitcoin usage is another great advantage that fiat currencies and financial institutions cannot offer. Bitcoin users have their own, unique numerical codes and can own multiple public keys in case of potential security breaches.
Utilising the blockchain ledger system, a user is able to track all of their transactions which is perfect in protecting funds from potential claims of fraud. However, when trading, spending and buying Bitcoin there is no public tracking and transactions cannot be traced back to a specific user. Included in that, only the Bitcoin wallets owner is able to know how many Bitcoins they have in total.
Furthermore, added security measures are included in the Bitcoin network. If a user’s private keys or Bitcoin wallet address becomes public or compromised, the option for generating a new wallet address to keep information and Bitcoin safe. In comparison to traditional payments systems or traditional banking systems which have the potential to have personal information leaks, no other personal information is a requirement. In effect, it is easy for users to be completely anonymous when making payments.
Total control of your own money
Decentralised cryptocurrency and digital currencies take most government regulations and central banks out of the equation when conducting transactions. By removing these third parties it becomes harder for authorities to demand taxation, freeze or demand a user’s coins. In theory, this gives Bitcoin users total control over their coins and money as the price of each coin is not linked to government policies or regulations.
Third parties are also vulnerable to cycles of the economy meaning that runs and crashes could result in a result of their clients or users’ money. This makes Bitcoin an attractive option as user autonomy, where Bitcoin is not linked to government policies, means that a Bitcoin user is in total control of their money.
What are the disadvantages of Bitcoin?
Transactions using Bitcoin are irreversible
A characteristic of the Bitcoin blockchain is it’s immutable nature. This means that any transactions that are made on the blockchain are irreversible and final. It is not possible for a third party to amend a mistaken payment so nothing can be done if the wrong amount of Bitcoin is sent or if it is sent to the wrong recipient.
On top of sending your hard earned Bitcoin to the wrong address, if you lose your wallet or misplace your private key your Bitcoin will be lost forever.
Volatility
Inherently, Bitcoin is a scarce cryptocurrency. Bitcoin creator, Satoshi Nakamoto, set a limit of 21 million Bitcoins that could exist simultaneously which means that there are only approximately 2 million left to mine. The scarcity of Bitcoin is what makes it so valuable and therefore so volatile as the price will change depending on the demand for miners and Bitcoin alike.
Other factors which have influence over Bitcoin and it’s volatility in the market include bad press by investors and the uncertainty of its future value and uses.
Limited use
Bitcoin is becoming a more popular form of simple and easy payment across the globe. However, there is still limited use and it is still not widely accepted at smaller franchises and retailers. This not only puts a limit on where a Bitcoin user can spend their money, but also how they can use it and in what context they are able to get their full value from their investment.
Conclusion
People use Bitcoin for a myriad of purposes. Although Bitcoin offers users a new way to pay for items and services without employing a central authority, it is important to note the potentially risky investment you may be making when purchasing or trading this cryptocurrency.
