Cryptocurrency is an innovative digital currency. Over the years, this type of digital token has become very popular and even surpasses some national currencies in reliability. To date, there are a huge number of different cryptocurrencies. The most popular are Bitcoin, Litecoin, Narnecoine, Ripple, Peercoin, Quark, and NXT. Let's observe the features and capabilities of cryptocurrency on the example of the most popular digital token – Bitcoin.
Bitcoin is a decentralized electronic payment system is not regulated by any government or central bank. Bitcoin is usually used for electronic payment for different goods and services. One further peculiarity of Bitcoin is the total emission limit of 21 million coins.
The main advantages of Bitcoin are:
- Ease of use. Bitcoin transactions are carried out very quickly, reliably, and within the whole world. These payments are conducted without the participation of any intermediaries. Thus, the cost of transactions is reduced to a minimum. Moreover, it is not necessary to provide personal information when making financial transactions with the help of this currency.
- Increased purchasing power. The number of sellers who are willing to accept Bitcoin is growing every year. For example, in the US, even a car can be bought for Bitcoin.
- Availability of cryptocurrency at any time.
- Growth in investment. A large number of investment funds and banks of the world use Bitcoin as a means of investment.
- Cryptocurrency limitation. In general, cryptocurrency is produced in limited quantities, which draws the attention of investors and excludes the possibility of inflation thanks to excessive activity of the issuer. Thus, the cryptocurrency is noninflationary.
- There is no fee for the transfer of funds between countries.
- You can check the accuracy of your financial transactions at any time.
- Legalization. Due to the high popularity of Bitcoin, the national banks of developed countries (Germany, UK, USA, etc.) are gradually approaching the recognition of cryptocurrency.
Despite the great number of advantages of the Bitcoin cryptocurrency, it also has some disadvantages:
• Problematical transfers control. Banks and other monitoring and supervisory authorities cannot control financial transactions of cryptocurrency.
• There is no possibility to cancel the payment.
• Strong volatility. The rate of Bitcoin can change a lot just within a couple of days. Of course, the profit potential may increase significantly with large market volatility. But at the same time, the risks can become critical.
• Risk of losing investments. Since Bitcoin trading is decentralized, a fund client may lose his investments. For example, in the case of bankruptcy of Bitcoin exchanges (Mt.Gox, Flexcoin).
• Injunction on the use of Bitcoin. Some countries take actions to prevent the usage of Bitcoin, and it causes a strong deterioration in the development prospects of this type of currency. For example, China has banned the use of cryptocurrency at the legislative level.