More and more countries are accepting virtual currencies as legal money that can be used to purchase goods and services. This digital takeover can no longer be ignored by the global financial community. And so they have turned their spotlight toward the first and current leading virtual currency: the bitcoin.
First established in 2008 and shared in 2009, bitcoin has since then surged to become one of the most controversial and popular currency. Part of the controversy stems from the fact that the inventor of it is not known. He only goes by the name Satoshi Nakamoto. In any case, he put a cap on the payment system. This essentially means that once all the bitcoins have been mined, then the generation will be over. You earn bitcoins by “mining” them or in other words, solving sequences of complex mathematical problems. Seems easy right? It’s not.
Meanwhile, the popularity of digital currency can be attributed to its unique features. First and foremost, it is decentralized. No government owns it. Unlike the dollar which is regulated by the US Federal Reserve, or the yen that corresponds to the Bank of Japan, or the euro which is administrated by the European Banking Authority. Other features include user anonymity, absence of a third party, low transaction charges, and no tax added. With all it’s great offerings, still a lot of traders and investors have aversions toward the digital money. It is understandable because as much as people want to, these features act as a double edged sword. The more advantages you think you have, the riskier it gets.
No Regulation Means No Insurance
One feature that appealed a lot of people into using bitcoin is that it’s decentralized. No one government has rule over it. However, this could also pose as a risk. Unlike banks and other financial institutions, bitcoins and other virtual currencies offer no insurance.
Although it’s hard for bitcoins to be falsified, the misinformed and naive can still be fooled. Despite all transactions being stored in a public ledger which everyone can access and the use of encryption systems, false bitcoins have actually been sold. If you are not vigilant or knowledgeable or capable enough to verify your digital currency, then you have to learn more.
It is Prone Volatility and Fluctuating Values
Given, bitcoins are still enjoying its popularity, we are not certain if it will retain this fame for long. If the countries that accept it become few, it’s value will go down until it is deemed worthless. Besides that, you still have to battle the natural volatility of the market. Bitcoin trading history show that it is prone to big swings which can be a gift or curse, depending on your ability as a trader.
There Are No Authorities
Bitcoins are at the same level of the dollar, the euro, and any other currency because it is considered as one. That means that it is a government competitor. However, as there is no regulating body that ensures the legitimacy of the use of bitcoins, experts speculate that it may be used for illegal activities.
There is A Safety Hazard
The very feature that attracts investors is also the one that may turn them away. Because bitcoins and other virtual currencies exist strictly in the digital world. Hackers, viruses, malware, and glitches, all of these things can hurt your currencies. By simply penetrating your encryption system, anyone can transfer your funds from your account to another. What’s worse is that all transactions are permanent and irreversible.
In all truth, trading bitcoins is risky but what currency isn’t? It’s up to you, to take advantage of the wonderful offerings of this digital currency or be safe and skeptical about it.