After I responded to a question from a member in the KW Crypto&Stock Investors community about the majors concerns from many governments around the World about the emergence of Bitcoin and other cryptocurrencies as a new form of digital money, both Marie France Chalemagne and Elidger Dauphin, who are also two prominent members of the community have posted comments to share their hesitancies about using Bitcoin as a digital money. They also inquired about my thoughts on the “pros and cons of using Bitcoin.
While I understand and share their hesitancies about the use of Bitcoin as a digital money, However, I am going to try my best here to pinpoint some of the advantages and disadvantages of using this digital asset without being an advocate or a critic of Bitcoin.
Some of the advantages and disadvantages of using Bitcoin as digital asset include but not limited to the factors that will be mentioned here:
1) As I mentioned in the previous comment, the existence of Bitcoin and other coins are promoting competition within the financial sector. When there is competition, the consumers are often the primary beneficiaries.
2) Bitcoin is a virtual currency, which limits some potential risks associated with holding large sum of money at home or carrying it out.
3) Bitcoin is decentralized, which means it is not subject to the whims or control of central banking authorities.
4) Autonomy — Compared to owning fiat money, you are able to control how you spend your money without dealing with an intermediary authority, such as banks or governments.
5) Accessibility — Bitcoin owners are able to send and receive any amount of Bitcoin with their smartphones or computers within seconds to 10 minutes at the most.
1) Scarcity — According to Bitcoin’s White Paper (the technical manifesto), there could only be 21. 00 millions of Bitcoin. Thus, this creates constant fluctuations in price due to high demands.
2) Scalability — Which refers to a company’s ability to meet larger demands by increasing its supplies. Bitcoin is far from competing in this area against the other global payment technology companies. In fact, according to many Financial expects, Visa credit card network has the ability to process 20 000 transactions per second while the Bitcoin network can only facilitate 7 or less transactions per second.
3) Environmental Impact — Bitcoin mining requires the consumption of a vast amount of electricity. In addition, many of the Bitcoin mining companies are based in China, where most power comes from dirty cold plants. As a result, this creates an environmental challenge that compromises the health of a larger proportion of the Chinese population.
4) No Refunds — The lack of standardized policies for refunds seems to be one of the biggest drawbacks of Bitcoin compared to the credit card companies or other traditional online payment methods. For example, if a uses Bitcoin to purchase a product that never gets delivered to the customer, he/she cannot request a refund through Bitcoin. However, there are some new cryptocurrencies, such as “Ripple” that have some basic but hard refund policies.
In conclusion, it is important to mention that this article is neither to promote nor to discourage the use of Bitcoin. Its purpose is to solely help Bitcoin’s users and prospective users to evaluate the pros and cons of using Bitcoin as a digital asset.