The Pros of Bitcoin
Instead of financial mega corps setting the terms of currencies, Bitcoin adopts a universally fair system that protects fraud and other related financial misdemeanors from ever taking place. It accomplishes this by replacing the system of blind trust (used in trades done by traditional methods) with one of cryptographic proof (only transactions with complex maths algorithms allowed to go through). The crypto-currency creates an impenetrable layer of security to transactions, a feature that is not found in typical bank transactions.
With the banks and financial firms out of the way, the process of transferring and wiring money is as simple as handing someone a chest of gold. No middlemen, no extraneous processes involved. The transfers are quick and instantaneous. And since it is a virtual currency, it relies on the internet to wire money from one place to another, a process that shouldn’t take more than a few seconds to process. There’s no need to worry about unintended recipients getting hands on the digital currency, as the money is essentially nothing more than a pile of useless code. A private key is required to unlock the value.
This is a total democratization of currency, and there is a complex peer-to-peer trading network that makes trading bitcoins possible. Every computer that’s connected to the Bitcoin exchange lends its power to keep the trade going. As a reward for their participation and helping contribute to the system of Bitcoins, users are awarded Bitcoins for their own personal use. This process has been popularly dubbed ‘mining.’ Anyone with a computer can install a miner program and earn Bitcoins in return. Computers with high end graphics cards and processors are more successful in mining than the traditional PCs, making Bitcoin enthusiasts invest in upgrading rigs by the dozen.
The Cons of Bitcoin
People can mine only so many Bitcoins until they hit a dead end. And here’s why they hit the wall. Unlike traditional currencies of the world (that can be reprinted and drive inflation through the roof), Bitcoins exisit in a limited and finite amount. That was by the creator’s design, Mr. Nakamoto believed that a fair system of equity would serve the Bitcoin system better.
There are more reasons behind this too. The system is accountable to itself, rewarding honest miners rather than farming botnets that are notorious for stealing bitcoins with inhuman processing cycles. The inherent fault-resistant system that governs Bitcoins has, over a period of time, made it harder to compute. As the number of transactions involving the digital currency grow day by day, more complex albeit slower operations between transactions result.
Now it takes more processing power than before to create new Bitcoins.
As for the bigget disadvantage when using Bitcoins, many major countries of the world still remain skeptical of the new technology. Something that’s beyond the control of nation states and banking regulation can put a damper on Bitcoin’s widespread adoption. To date, only the US is leading the pack in adopting Bitcoin as a de facto currency. Many more countries have yet to follow suit.
Furthermore, there have been strings of high profile money laundering cases involving Bitcoins. The first incident to catch the headlines was the Silk Road bust, the highest profile Bitcoin ‘hack’ with $2.7 million worth of Bitcoins reportedly stolen.
Then came that the Mt. Gox hack. Mt. Gox had been once billed as the largest bitcoin exchange in the world. But after recent events that resulted in a whopping $400 million taken away by digital thieves, the world is growing uneasy at Bitcoin’s much-vaunted cryptographic measures.
And last but not the least, the Bitcoin exchange rate remains a volatile variable. Hitting highs such as $1000 one day and nose-diving to $500 the other day, Bitcoin remains in flux for the moment and its future is uncertain.
Matthew Koren is the President of Swiftly Paid, a credit card processing and payroll service provider located in Portland, OR. He runs his company, as well as partnering with a consulting practice taking businesses to market in China. You can contact him by filling out the Contact Us page, or by calling 866-402-1485, ext 750.