Advantages and Disadvantages of Cryptocurrencies such as OneCoin Advantages of cryptocurrency A good cryptocurrency is quicker, cheaper, more private and more secure than alternative forms of payment. No manipulation Because cryptocurrencies are typically designed in such a way that the amount of coins produced are limited by an algorithm, no single person, company or country can control how much is produced. There can be no manipulation of the money supply – a common occurrence in the case of the U.S. dollar, say, which is controlled by the Federal Reserve. It is sometimes desirable to adjust the money supply, of course; but when it is done badly, it can lead to economic disaster. Some economists have argued that the monetary policies of a centralized system helped trigger the economic crisis of 2007-2008. Speed Transactions done with cryptocurrencies are usually quick – they can take less than 10 minutes – and are certainly faster than posting a check or dispatching an international money transfer.
Security Because a digital currency is based on the combination of a user’s private and public key, no personal details are held insecurely online and the risk of fraud is dramatically reduced. The money stored in a cryptocurrency is also controlled entirely by the user and is therefore untouchable by banks or governments. That is not the case with traditional bank accounts. In 2013, to avert financial collapse, the government of Cyprus provoked fury when it seized funds stored in private individuals’ bank accounts. The risk of such seizure with proper-functioning cryptocurrencies is virtually nil. Lower costs Since there are no middlemen involved in the processing and verifying of cryptocurrency transactions, the cost of making payments or transferring funds are lower than those found in traditional monetary systems run by banks and other institutions. Indeed, cryptocurrencies have the lowest money transfer fees anywhere in the world. The fees aren’t affected by distance or different laws and rates in different countries. This enables remarkable ease of use, whether it is to conduct a micro transaction or to transfer a large sum of money to someone thousands of miles away. When it comes to international trade, there is no need to convert from one currency to another, which sidesteps currency fees and further reduces the cost. Anonymity and privacy With the boom in online shopping, merchants are increasingly able to track an individual’s purchases and thus build a personal profile. This also allows complete strangers to link personal details stored online – credit card and bank account details – to
an individuals’ name, home address and other personal data. By contrast, digital currency transactions are secure because they don’t carry any personal information at all.
Disadvantages of cryptocurrency Acceptance Demand for daily use is still relatively weak. Limited awareness across the globe make real currencies much better alternatives due to their wider acceptance of use and demand. Volatility The value can fluctuate quite dramatically because of external factors, including vulnerabilities in the security platform. That unpredictability makes many people wary of using crypto-coins as a medium of exchange. Legal issues Criminals are attracted to the decentralized financial dealings and near-anonymous transactions that are the hallmark of any cryptocurrencies. By using digital money to make purchases and sales or to move their ill-gotten gains from place to place, they get unintended protection for illicit and illegal activities. In 2013, prosecutors shut down Silk Road, an online site where users could anonymously buy everything from forged passports to narcotics, and which only accepted bitcoin for payments. Security issues As transactions are not reversible, buyers must put their complete trust in the merchant, who in this case is the protected party in the transaction. Given its digital nature, cryptocurrencies are also subject to cyber-attacks – several exchanges including Mt Gox,
TradeHill Bitcoin and Bitcoinica exchange have faced similar challenges, leading to their downfall. Regulations Cryptocurrencies have restricted use in countries including China, Japan, India and Indonesia. More regulation will mean the cost of using cryptocurrencies could rise.