Bitcoin is a decentralized digital currency that was introduced in 2009 by an unknown person under the pseudonym Satoshi Nakamoto. This currency is not printed like euros or dollars, no one controls it, it involves no middle men for transactions, and thus requires no banks. You do not need to give your real name, and no transaction fees are needed.
You can use this currency to buy things anonymously. It makes international payments cheap and easy as it is not subject to any regulation and not tied to any particular country. Small businesses like it, as it has no credit card fees. Some people buy bitcoin as an investment, hoping it will go up in value.
From Where Can You Acquire Bitcoins
On Exchange – Various marketplaces known as “bitcoin exchanges” enable people to sell and buy bitcoins using various currencies.
Transfers – people can send bitcoins to one another through their computers or mobile apps. It is quite like sending cash digitally.
Mining – People try to mine “bitcoins” by solving complex math problems through their computers. This is the way this digital currency is created. A winner is currently offered 25 bitcoins about every 10 minutes.
After knowing about mining, you perhaps must be wondering what the pros and cons of Bitcoin are. There are many advantages that makes this currency many people’s favorite. But of course, nothing is perfect, and this currency too comes with some flaws. So lets us now get to discover both advantages and disadvantages of this decentralized digital currency.
Using this currency, you can get and send money to anyone, anytime and anywhere in the world.
Bitcoin allows you complete control on your money. This network has no central figure of authority.
You do not have to think about crossing borders, bank holidays, or any type of limitations while transferring money.
Security and Control
As users are in complete control of their transactions, it makes Bitcoin safe for the network.
No extra fees can be charged by the merchants without being noticed. Before adding any extra charges, they need to discuss the same with the consumer.
Payments can be finalized without a person needing to attach his personal details to the transaction.
Since personal information stays hidden, there are no chances of identity theft.
Bitcoin can be encrypted and backed up, ensuring safety of your precious money.
Information Remains Transparent
In the block chain, everyone can see each of the finalized transactions, though of course personal details stay hidden.
Your public address will be visible, but your personal details will not be linked to this.
Using the bitcoin block chain, anyone, at any given point of time, can easily verify transactions.
It is not possible for any person, government, or organization to manipulate the bitcoin protocol. This is because Bitcoin is cryptographically secure.
At present, either there are no fees, or extremely low fees associated with Bitcoin payments.
During transactions, a small fee can be included by the user to make the transaction faster. The higher the amount you pay, more will be the priority you get within the network, and thus faster will the transaction be processed.
Lesser Risks For The Merchants
Since it is not possible to reverse Bitcoin transactions and no personal details are attached, merchants are safe against any potential losses that may result due to fraud.
Even if fraud rates and crime rates may be high, Bitcoin enables merchants to do their business successfully. This is because the block chain or public ledger makes it almost impossible to con or cheat anyone.
Now that we are aware of the amazing advantages, we shall now get to discover some of the disadvantages. This is just to help you know what exactly you can expect with Bitcoin.
Not Widely Accepted
Bitcoins are still accepted only by a small group of online merchants. This makes it difficult to rely on it as a currency. There are also chances that governments may force merchants not to opt for this digital currency so that it is possible to track transactions of the users.
Wallets Might Get Lost
In case hard drive crashes, or virus corrupts data and the wallet file is corrupted, then Bitcoins can get lost. Nothing at all can be done to recover it. These coins will stay orphaned in the system forever. This can easily bankrupt any investor just within seconds, leaving no chances for recovery.
The Valuation Keeps Fluctuating
The value of this digital currency is constantly fluctuating as per demand. In June 2nd 2011, one Bitcoin was priced at %9.9 on a famous exchange site. Just 6 months ago, it had the value of even less than $1. Owing to this regular fluctuation, Bitcoin accepting sites will keep changing their prices. It will also result in confusion if refund for a certain product has been initiated.
No Protection for Buyers
If a person purchases goods using this digital currency, and the seller does not send the products, he cannot do anything to reverse this transaction.
Chances of Technical Flaws
The Bitcoin system can have unexploited flaws. Since this is a relatively new system, if it is adopted widely, and some flaw is discovered, it can easily give lots of wealth to the exploiter, and thus destroying the Bitcoin economy.
Built in Deflation
As the total number of bitcoins is about 21 millions, it can result in deflation. When the complete number of coins maxes out, each bitcoins will be worth even more. As bitcoins are expected to rise in value every coming day, when to spend on it becomes an important question. This can result in spending surges that will make the Bitcoin economy to alter very unpredictably and rapidly.
No Physical Form
As this type of currency does not have a physical form, they cannot be used in a physical store. It would need to be converted into other currencies. The idea of cards having bitcoin wallets has been suggested, but as there would be many competing systems, it would be difficult for merchants to support all Bitcoin cards.
No Guarantee of Valuation
As no central authority governs bitcoins, its minimum valuation cannot be guaranteed. If many merchants together decide to abandon Bitcoins and leave the system, then its valuation will decrease to a great extent, hurting the users who have invested in Bitcoins in a huge amount. The decentralized character of Bitcoins is a blessing as well as a curse.