Cryptocurrency is a digital currency that is operated using cryptography, one of the most sophisticated encryption techniques.
Cryptocurrency has many advantages over traditional currency technology: it is fraud-proof, has no identity theft, is easy to process, and has lower transaction fees. Despite these benefits, the majority of governments are opposed to the use of cryptocurrencies. Why?
Fiat currencies are under the rule of governments. The word "fiat currency" refers to the traditional currencies issued by governments. Since the government sets the value of these compulsory coinages, they are valuable. Government-controlled central banks create or destroy funds out of thin air by using monetary policy to administer economic sovereignty. They also have power over how approved funds are moved. This makes it easier to monitor currency movements, identify illegal activity, and determine who benefits from it. This power is lost when non-government entities create their own currency.
The application of the current banking system is limited by cryptocurrency. When so-called "miners" use the power of their computers to solve complex algorithms that serve as verification for cryptocurrency transactions, the currency is created in cyberspace. The entire banking system could collapse if cryptos were widely accepted. Despite the fact that this sounds fantastic, especially in light of new banking habits, there are two sides to the coin. Who would be held liable if mortgages are hacked in the absence of banks? How can you gain interest on your savings? When an asset transfer fails, who will have guidance?
Despite the economic downturn that tarnished bankers' reputations, these active institutions have a positive side that offers timely oversight and is trustworthy in their transactions. There's also the issue of how much money banks make from the services they provide. These fees generate a significant amount of revenue and create jobs in banks all over the world.
These jobs, as well as the taxes that banks and their workers deduct from their paychecks, would vanish if banks did not exist. In a virtual universe, the money transfer company will also vanish. If cryptocurrency is widely used, no one will need Western Union or its competitors.
The most convincing disadvantage of cryptocurrencies is their price volatility. Customers would find it difficult to consider and use cryptocurrency as a result of this. It functions as a trustworthy exterminator because no one can predict how much a cryptocurrency will be worth tomorrow. The prices of most cryptocurrencies are currently unpredictable. This means that only a few people made large sums of money as the cryptocurrency (Bitcoin, for example) rose in value, whilst others lost just as much when the price fell.
Cryptocurrency's discretion, like that of cash, can be used for both legal and illegal purposes. For example, there have been serious concerns that bitcoin allows criminals to engage in illegal activities such as financing terrorists, exchanging illicit goods and services, and money laundering. Silk Road, the Deep Web marketplace that used the anonymizing TOR network and the Bitcoin payment system to allow for the peer-to-peer selling of illicit drugs and forged identity documents, is the most popular example of this.
Other popular scams in this space involve crypto "experts" who take advantage of the cryptocurrency's lack of governance to buy a large number of cheap tokens and then hype them up in the media. Their endorsement raises demand, allowing the experts to benefit handsomely from their investment, making it a one-sided profit.
The cryptosystem's architecture limits the number and speed of transactions that can be processed. Some cryptos, such as bitcoin, take a long time to process for everyday financial transactions. The number of transactions handled by bitcoin, for example, is 3-7 per second. Visa, on the other hand, will handle more than 24,000 applications in the same amount of time. Bitcoin transactions are often prohibitively expensive due to the resources needed to facilitate them. During peak times, the number of transactions produced could reach USD 25, rendering bitcoin unsuitable.
Since cryptocurrencies are only digital coins that aren't backed by the government or backed by a tangible asset, victims rarely have civil or criminal recourse. The most serious disadvantage is that no transaction can be reversed. Since the perpetrators are anonymous, they can quickly defraud their victims because their actions, such as hacking a savings or checking account, are not monitored. Individual losses totaled USD 28 million in 2016, according to the FBI's Internet Crime Complaint Center, which represents a threefold rise from 2015.
Since most cryptocurrencies are not regulated by a central authority, each person is responsible for ensuring that their account is secure and private. Nobody can help a person recover their wallet key if they lose it.
If anyone pays for a service or a product with cryptocurrency by mistake, there is no way to reverse the transaction. A transaction is formal after it has occurred. Since the transaction is binding, there is no way to undo it.
Cryptocurrency is a brilliant but inexperienced solution that has the potential to disrupt the entire financial industry. Despite the fact that there is still more to be achieved, it has attracted global interest in a short period of time. A new technology has advantages and disadvantages. To get the most out of it, we should consider all sides of the coin before making a decision. Many governments are hesitant to embrace blockchain, and only time will tell what the future holds.