The introduction of Bitcoin to the global markets has certainly revolutionized monetary transactions and the global financial system. Thirteen years since Bitcoin’s debut, tens of thousands of new cryptocurrencies have been created, bringing many benefits to users around the world every day.
The first and fundamental benefit of cryptocurrencies is the emergence of a decentralized monetary system without the intermediation of banks and institutions and the supervision of transactions. The second benefit of some cryptocurrencies is often lower transaction fees than in traditional banking.
The last and by far the most important benefit of cryptocurrencies is the generation of profits. Many people have made fortunes in this sector and the cryptocurrency markets were worth $3 trillion by the end of 2021. By investing or speculating on cryptocurrencies, it is possible to make big money. The limited supply of countable digital currencies due to a top-down and limited number of units will lead to greater price stability in the future.
Just as the banking system, the cryptocurrency system is full of flaws and risks. Firstly, let us take a closer look at the anonymity of transactions, which is only apparent, as every transaction leaves a digital footprint in the network that can be found by government agencies such as the FBI, CIA or NSA. This opens up an opportunity of tracking the transactions of ordinary citizens under the pretext of fighting crime, destroying the foundations of cryptocurrencies whose underlying foundations include anonymity and independence from central banks or institutions.
The disadvantage of cryptocurrencies has become their use by criminals who use Bitcoin, among others, for money laundering or illegal purchases of drugs, weapons or pornography involving minors. It should be noted that there has been a recent decline in crime involving cryptocurrencies from 0.62% to 0.15% of all transactions made in 2020 -2021. Hackers have also established themselves in the cryptocurrency industry to steal and extort money.
Another disadvantage of cryptocurrencies is that the industry is developing towards centralization because, despite the absence of banking supervision, only 10% of miners are responsible for more than 90% of the mining capacity in the case of Bitcoin. As a result, the cryptocurrency mining business is concentrated in the hands of large companies because it requires a huge amount of money. Energy consumption for mining activities is at least as high as that of entire countries!
Read more in ‘Second Crypto Revolution: Build Generational Wealth With Richard Heart’s Crypto Ecosystem’