If we break down the term Cryptocurrency, we get two words – crypto and currency. Thus, cryptocurrency is nothing but a concealed form of currency. It is a form of virtual currency, operating on the basis of digital data.
Based on the premises of Blockchain, cryptocurrency operates under a decentralised control, relinquishing its ownership under any government, an individual or any private entity. All the transactions are recorded on a digital ledger, which helps verify and manage transfer of the cryptocurrency ownership.
Having Blockchain as its cornerstone, cryptocurrency is gaining traction worldwide, finding its usage in multiple domains and industries.
Despite being safeguarded by complicated protocols and the blockchain offered secured environment, the industry experts are divided on the future of cryptocurrency. Let’s see both sides of this market disrupting force.
Boon
Security – Privacy and Security are the two bedrocks of cryptocurrency. Any attack on the network and attempt to modify the blockchain would require enough computing power. The nature of Blockchain and its distributed network of computers verifying transactions makes it difficult to breach the security layer.
Accessibility – The easy and hassle-free process of opening a crypto account has helped increase its user base. One just needs an internet and smartphone/computer. Thus even people with low technical knowledge also have easy access to it.
Transaction speed and cost – High transaction speed and low transaction cost have played an immense role in the increasing usability of cryptocurrency. The need of third parties like VISA or PayPal is eliminated to verify a transaction, thus bringing the overall transaction fees paid by the user to a minimal amount.
Transparency – The publicly distributed ledger holds all the transactions and all the changes that take place. The ease of looking at the transaction data and all the changes that are happening secures it from fraudulent mishappenings.
Inflation protection – The fixed mining quantity places the inflationary part on the backseat. The prospect of depreciating of value over time gets ruled out. This puts the cryptocurrency model above the traditional currencies prevailing in the market.
Bane
Used in illegal transactions – The privacy and the security part on the other hand puts restrictions on maintaining track of the data by the government and its agencies. Its use in illegal activities like narcotics, usage on dark web etc. highlights this drawback.
Negative effect on the environment – Mining of cryptocurrencies is a very energy-intensive process in itself. It requires powerful machines and some serious energy to mine new coins.
No refunds and cancellation policies – In case of any disagreement between the parties or sending funds to the wrong address, one can do nothing about it. This liability keeps users away from transacting in cryptocurrencies.
Extremely volatile – The market of cryptocurrency thrives on speculation. One major tweet from a renowned personality can either soar the prices to new heights or can bring them to some drastic lows. Thus unlike the traditional currencies, one cannot rely on cryptocurrency for stable returns.
Regulation – Unless the technology is not regulated, is not under any supervision, no guidelines are present, there will always be the risk in investing it. A proper check has to be there, only then there will be trust in its usage and efficacy.
Knowing that cryptocurrency is a double-edged sword, its core characteristics i.e., distributed ledger, data immutability and network consensus remain intact. With time, this industry will mature and hopefully the negative aspects of it will get refined accordingly.