Crypto Controversy
Cryptocurrencies have not been around for long, but boy oh boy have they caused controversy in the financial world. Crypto is a hot topic of discussion among financial influencers like Warren Buffett and Robert Kiyosaki.
So, what are the key features of cryptocurrencies? And what's the purpose of it?
FEATURES
Cryptocurrency is a system which allows you to make secure payments online, one defining feature of cryptocurrencies is that they are not issued by any central authority which, in theory, makes them immune to government interference. It is a digital currency that is secured by cryptography which makes it almost impossible to counterfeit the currency.
Another defining feature of cryptocurrencies is that they're anonymous, which means you don't have to identify yourself when you make a transaction, the decentralised network checks the transaction, verifies it then records with key systems to authenticate transactions.
Unlike fiat currencies, such as the dollar and Euros, which have an unlimited supply because central banks issue as much fiat currencies as they want, cryptocurrencies are scarce and limited in supply. Take Bitcoin as an example, it has a predetermined or limited supply of 21 million, once that limit is reached it cannot be mined. Interestingly, the scarcity of cryptocurrency is actually intentional preventing currency manipulation.
It's no secret that cryptocurrency has been extremely controversial, despite this, there are many public figures who have shown support for the digital currency. The likes of Snoop Dogg, Bill Gates, Mike Tyson and Lionel Messi have invested in cryptocurrency or endorsed it in some way.
So what are the advantages and disadvantages of using cryptocurrencies?
SPEED
No queuing in a long line at your bank on a Monday morning just to get your money.
NO TRANSACTION FEE
There are no exchange fees which is extremely favourable in comparison to the normal banking system.
NO INFLATION
Contrary to fiat currencies, politics has no influence on cryptocurrencies so there are no restrictions on payments because governments have no control over them.
IDENTITY THEFT
As convenient as it is, making payments online can be scary sometimes due to the risk of identity theft. With cryptocurrencies, payments are anonymous so your identity cannot be stolen.
Like anything, cryptocurrencies have their disadvantages too.
VOLATILE
Cryptocurrencies are volatile in nature, they are risky and unpredictable, the reason why they're so volatile is that they are limited in amount creating a lot of scepticism regarding investment.
NOT ACCEPTED EVERYWHERE
There are still many countries that have not made cryptocurrencies legal, therefore, it is not accepted everywhere.
NO REFUND
When you pay for something using either cash or debit or credit card and you're not satisfied with the product or service, you can usually the get a refund. However, with cryptocurrency currencies, that's not possible. Once payment has been made, it cannot be reversed. The only time you can get a refund is if the person agrees to it, not cool!
CANNOT BE EXCHANGED
If you think that you can buy cryptocurrencies and exchange them with fiat currencies then, think again.
Now that we've highlighted the features and identified the advantages and disadvantages of cryptocurrencies, you hopefully have a much better understanding of how they work. However, if you are considering in investing in cryptocurrencies, really do your research and take your time before you take any action, be as knowledgeable as you can do your best to identify and weigh the risks and rewards that come with such an investment
