Do you want to become your own bank?
Over the last couple of years the term cryptocurrency has been rapidly gaining the public eye. You might be more familiar with terms like Bitcoin, Litcoin and Ether. These are all cryptocurrencies.
In fact, there are many! Just take a quick little look
Just a simple google trend search shows you the start of the growth
But before you continue reading, I want to give a short primer of cryptocurrency
A cryptocurrency is a digital currency that is created and managed through the use of advanced encryption techniques known as cryptography. Cryptocurrency made the leap from being an academic concept to (virtual) reality with the creation of Bitcoin in 2009. While Bitcoin attracted a growing following in subsequent years, it captured significant investor and media attention in April 2013 when it peaked at a record $266 per bitcoin after surging 10-fold in the preceding two months. Bitcoin sported a market value of over $2 billion at its peak, but a 50% plunge shortly thereafter sparked a raging debate about the future of cryptocurrencies in general and Bitcoin in particular. So, will these alternative currencies eventually supplant conventional currencies and become as ubiquitous as dollars and euros someday? Or are cryptocurrencies a passing fad that will flame out before long? The answer lies with Bitcoin.
How will Cryptocurrency help you?
The world is becoming more and more economically unsafe. This is not to say we are not growing. But as Nassim Taleb states in his book. Antifragile. Our economic machine is like a glass jaw. one small punch to it and it all comes crushing down! Both long term and short term this is not good for you and all of the hard working citizen of the world.
“Fragility is the quality of things that are vulnerable to volatility.”
– Nassim Nicholas Taleb
So below, I will outline some pros and cons of us adopting a global acceptance of Cryptocuurency. And my hopes with this is…you will walk away with having found new found respect for cryptocurrency.
Pros and Cons of Cryptocurrency
The benefits of cryptocurrency over current fiat currency tech
Example: Central governments can’t take it away
Remember what happened in Cyprus in March 2013? The Central Bank wanted to take back uninsured deposits larger than $100,000 to help recapitalize itself, causing huge unrest in the local population. It originally wanted to take a percentage of deposits below that figure, eating directly into family savings. That can’t happen with cryptocurrency/bitcoin. Because the currency is decentralized, you own it. No central authority has control, and so a bank can’t take it away from you. For those who find their trust in the traditional banking system unravelling, that’s a big benefit.
Let’s take a look at some of the improvements that can be made to fiat currency by shifting towards digital cash:
Advantages of Cryptocurrency
- Fraud: Cryptocurerncies are digital and cannot be counterfeited or reversed arbitrarily by the sender, as with credit card charge-backs.
- Identity Theft: When you give your credit card to a merchant, you give him or her access to your full credit line, even if the transaction is for a small amount. Credit cards operate on a “pull” basis, where the store initiates the payment and pulls the designated amount from your account. Cryptocurrency use a “push” mechanism that allows the cryptocurrency holder to send exactly what he or she wants to the merchant or recipient with no further information
- Immediate Settlement: Purchasing real property typically involves a number of third parties (Lawyers, Notary), delays, and payment of fees. In many ways, the bitcoin/cryptocurency blockchain is like a “large property rights database,” says Gallippi. Bitcoin contracts can be designed and enforced to eliminate or add third party approvals, reference external facts, or be completed at a future date or time for a fraction of the expense and time required to complete traditional asset transfers.
- Access to Everyone: There are approximately 2.2 billion individuals with access to the Internet or mobile phones who don’t currently have access to traditional exchange systems. These individuals are primed for the Crytocurrency market. Kenya’s M-PESA system, a mobile phone-based money transfer and micros financing service recently announced a bitcoin device, with one in three Kenyans now owning a bitcoin wallet. (Let me repeat that again. 1/3)
- Lower Fees: There aren’t usually transaction fees for cryptocurrency exchanges because the miners are compensated by the network (Side note: This is the case for now). Even though there’s no bitcoin/cryptocurrency transaction fee, many expect that most users will engage a third-party service, such as Coinbase, creating and maintaining their own bitcoin wallets. These services act like Paypal does for cash or credit card users, providing the online exchange system for bitcoin, and as such, they’re likely to charge fees. It’s interesting to note that Paypal does not accept or transfer bitcoins.
“The blockchain keeps everyone honest, and a whole layer of banking bureaucracy is removed, lowering costs.” – Paul Vigna
Most important. You own it
There is no other electronic cash system in which your account isn’t owned by someone else. Take PayPal, for example: if the company decides for some reason that your account has been misused, it has the power to freeze all of the assets held in the account, without consulting you (Trust me, this has happen to me many times) It is then up to you to jump through whatever hoops are necessary to get it cleared, so that you can access your funds. With cryptocurrency, you own the private key and the corresponding public key that makes up your cryptpcurrency address. No one can take that away from you (unless you lose it yourself, or host it with a web-based wallet service that loses it for you).
The bad things about Cryptocurrency
Overall, cryptocurrencies have a long way to go before they can replace credit cards and traditional currencies as a tool for global commerce.
Bottom Line: Cryptocurrency is a baby. It will needs years and years of exposure to the global system, before the masses start accepting it.
- Fact is many people are still unaware of cryptocurrency aka Digital currency
- People need to be educated about it to be able to apply it to their lives.
- Businesses need to start accepting it
- They need to make it easier to sign up and get started.
High Risk of Loss
Timothy B. Lee, adjunct scholar at the Cato Institute and regular contributor to , identifies four reasons to be cautious about bitcoins:
- Lack of Security. There is no safety net or perfect way to protect your bitcoins from human error (passwords), technical glitches (hard drive failures, malware), or fiduciary fraud. According to an article in the UK edition of Wired, 18 of 40 web-based businesses offering to exchange bitcoins into other fiat currencies have gone out of business, with only six exchanges reimbursing their customers. The authors of the study estimate that the median lifespan of any bitcoin exchange is 381 days, with a 29.9% chance that a new exchange will close within a year of opening.
- Increased Regulation. While relatively benign guidelines are currently in place, law enforcement agencies could decide that bitcoins are a “giant money laundering scheme,” and enact more stringent regulations that would diminish the currency’s value.
- Limited Scaling. The design of the system limits the speed and number of transactions processed, making it unlikely that bitcoins will replace conventional credit card transactions.
- Lack of Applications. While acknowledging bitcoins’ popular use for illegal transactions, Lee questions how useful bitcoins really are. To be truly disruptive to existing fiat currencies or electronic payment systems, Bitcoin would need applications for low-cost international money transfers, the creation of complex electronic contracts, or use in Kickstarter-style fundraising campaigns or micropayment transfers.
There are always pros and cons to any situation in life. To be able to make a good decision, you need to weigh the good and bad thoroughly before finalizing your choice. With Cryptocurrency, it’s more about mass acceptance than technology. The technology is here. Only time will tell when the rest of the world (governments, citizens) will say… YES!