Advantages and disadvantages of cryptocurrency

Using cryptocurrency has several big advantages over traditional finance. They are:

• Speed. A cryptocurrency transaction can take as little as a few minutes to confirm. Once confirmed, the receiving party is able to spend the funds however they see fit. In traditional finance, it takes at least a day for a transfer to clear.
• Lower fees. In many cases, the cost of using cryptocurrency is substantially lower than using traditional financial institutions. There’s no fee for storing cryptocurrency, for example, whereas many banks charge a monthly fee. The cost to send money to someone internationally is extremely low compared to traditional international remittance services.
• No barriers to entry. Unlike traditional finance, there’s no need to have a valid ID or go into a bank to use bitcoin. There’s no credit check. There’s no know-your-customer information you need to provide. That can be extremely attractive for the millions of unbanked people around the world.
• Security. Cryptocurrency is much more secure than holding cash or using a debit card for transactions on the internet. A hacker would need your private key to steal the bitcoin held in your wallet. Furthermore, cryptocurrency transactions are generally anonymous.

There are also some disadvantages to holding cryptocurrency. They include:

• No insurance. There’s no insurance on funds held in cryptocurrency. Funds deposited in a bank account in the U.S. are typically insured through the FDIC. If the bank loses your money, you’re covered up to $250,000 per account holder. There’s not necessarily any recourse if you or your custodian loses your cryptocurrency.
• No way to dispute transactions. If you accidentally send too much to someone, or you don’t receive what you were supposed to in exchange, there’s no way to dispute or reverse a transaction. All transactions confirmed on the blockchain are finalized. The only way to get your money back is if the other party agrees to send it to you.
• Easy to lose access to funds. If you lose your private key, you no longer have access to your funds. The private key is necessary to sign transactions and write them to the blockchain. Make sure you back up your private key in multiple places.
• High volatility. The values of many cryptocurrencies are extremely volatile. This can make it difficult to use as a means of paying for goods and services since retail prices would need to fluctuate to adjust for the volatility of the currency. It can also make it difficult to stomach as an investor when the price can easily swing more than 10% any given day.