Bitcoin: all the pros and cons for beginners

Bitcoin: all the pros and cons for beginners

Bitcoin was the first cryptocurrency. It has advantages over real money that may not be immediately noticeable, as well as its disadvantages. In this article, we will tell you everything without concealment.

In 2020, the digital currency turned 11 years old. Since the introduction of the Genesis block in 2009, it has successfully risen from an unknown entity to the main electronic financial asset with a multi-million capital. Bitcoin became known as”digital gold”. Many advantages allow it to gain more and more popularity. However, when investing in these assets, a significant number of disadvantages should also be taken into account.

Advantages

Advantages

1. Decentralization

This is one of the main characteristics of any cryptocurrency. In January 2018, a record number of computers, or nodes, connected to the Bitcoin blockchain was recorded-200 thousand. Since that time, there has been a downward trend. This year, in May, we recorded a 3-year low — 47 thousand cars. In other words, fewer players take part in the validation (confirmation) of transfers, and save copies of the Bitcoin blockchain on their personal devices.


Bitcoin developer Matthew Corallo believes that at this stage, the reduction of nodes does not lead to any important problems for the network. It is important to continue checking transactions by validators and maintain a sufficient number of nodes necessary to be able to download the blockchain to your computer by joining the network users.

No authority has control over the cryptocurrency network. In 2010, Satoshi Nakamoto (the user’s pseudonym), who created bitcoins, stopped participating in the project. It was continued by individual developers supported by donates and the Bitcoin Foundation. This Foundation raises funds for grants from financial institutions.


2. Instant transfers with minimal Commission

The amount of Commission charged when transferring funds and its speed does not depend on the distance of the transaction. If you apply for a service, for example, in Western Union, the money will be forwarded in a couple of days. With Bitcoin, you can do the same in an hour. And the amount of transaction fee will not be related to the amount of the amount.

Give some examples. As recently as February, 49,922 Bitcoins ($460 million) were sent via the Bittrex crypto exchange. The entire amount went in one transfer, and the fee was $ 0.60. In January, there was a transaction in the amount of 124,946 bitcoins (approximately one billion dollars), and the user paid $ 83 for it. At the same time, bitcoin technologies are already considered outdated. Its disadvantages are compensated in altcoins, which perform such tasks much better and faster.

Recall at least the XRP token-the development of the company Ripple, originally designed to resolve difficulties in the banking sector. xRapid and other products used in the blockchain make it possible to instantly and almost for free make transfers to any distance, regardless of the amount of money transferred.

3. Stability

The main threat to all cryptocurrencies is the 51% attack. It is possible to be made when an organized group of miners controls 51% of the network. By getting a large share in one hand, you can influence transactions conducted by other users and the blockchain as a whole. Today, 1 hour of such an attack on the BTC network will cost about 433 thousand dollars (information from the crypto 51 service). This amount is determined by the asset’s hashrate.

The main part of Bitcoin’s computing power is located in China. In theory, the Chinese government could facilitate the merger of mining companies in order to seize control. But experts agree that this will never happen.

According to one of the founders of BitCluster, S. Arestov, mining companies will not agree to destroy their own source of earnings. And even if an attack occurs, it will not be able to destroy the network. In the worst case, failures will occur. Then an urgent update release will help eliminate them soon. The network functions perfectly for a long time. And today, there is no sign that stability will be shaken.

4. Deflation

The deflation of the first digital currency began to be discussed recently, in connection with the emergency measures that the fed and Central banks of significant States had to take to support the economy. At the beginning of 2020, the total balance of the United States, European countries, and Japan increased by $ 5 trillion. But the issue of digital currency cannot be increased in any way. In any case, it does not exceed 21 million coins.

This means that inflation does not affect digital money, while the dollar is issued in huge quantities. The supply of Bitcoins, on the contrary, will be reduced. Accordingly, even if demand remains at the same level, their price will increase. The price increase is set at the program level. Therefore, Bitcoins give the impression of greater value than real money.


5. Digital gold

According to experts of the financial company Grayscale, BTC can replace the gold metal as a means of storing investments. The fact is that large gold reserves are difficult to separate and transport. Electronic currency in this sense is much more convenient, so why not consider it as a modern analog? EOS founder B. Blumer has no doubts that BTC will replace gold, and this will happen in the next 20 years.

6. Simple investments

To start your own trading, you do not need to obtain business permits or any special knowledge. Just register on the crypto exchange or download a wallet. But in practice, ordinary people, not financiers, lose their money. They look like blind kittens. For example, those who invested in the XRP token at the beginning of 2018, when it was given $ 3.4, will not return the funds spent then, since the price of the coin fell by 94% (approximately $ 0.191).

7. Protection

During local economic crises, the exchange rate of BTC most often rises in these countries. For example, digital attachments are very popular in Argentina and Venezuela.

If you lose confidence in the currency of your country, people are looking for alternative options, fearing for the acquired property. Bitcoin with its abnormal volatility, does not suffer from the depreciation of banknotes. It seems like a good investment solution.


Drawbacks

 Drawbacks

1. Volatility

Despite the title of a protective asset, you can not be sure that savings in cryptocurrency will not be devalued at the moment. The price of bitcoin can suddenly fall sharply by more than 2 times. For example, in just a day on March 12-13, it suddenly fell by more than 50%, to a minimum of 3,800 US dollars.

In addition, coins can become more expensive or cheaper due to some news that is not even directly related to the cryptocurrency. In November, a year passed. After the words of Chinese President XI Jinping that blockchain (not bitcoin or cryptocurrency) is one of the important technological developments for the development of China, the price of the military — technical complex increased from 7 thousand dollars to 10 thousand dollars per day.

2. High fees for withdrawals

The above-mentioned transfer of large amounts with a low Commission applied only to transactions within the system. If you want to get cash, you will have to pay a Commission to your counterparties. At the same time, 2-5% or more is lost. Another problem is that you may be refused to exchange bitcoins for regular money simply because the exchanger does not have the necessary amount of funds. The higher the amount, the higher the probability that this will happen.

3. Government intervention

There are analysts who promise that in the future coins will cost much more, and advise you to buy them for the sake of long-term prospects. But if the state intervenes and does not allow ownership and operations with military-technical equipment, today’s investments will become illegal tomorrow. Then you will inevitably suffer losses, because it will be much more expensive and more difficult to convert it into real money.


4. Crime

BTC is used by decent citizens to invest and play on the stock exchange with cheap transactions. But users have the ability to buy drugs or hide illegal profits. Ordinary players who are not involved in dirty business take risks.

One of the ways to lose your money is to buy the “dirty currency”. Then the money may be frozen. To avoid such a turn, you should check transactions using the services intended for this purpose.

5. The complexity

BTC is a system with a complete lack of management. Therefore, currency holders are not immune from mistakes. If you forget your password, you will never get your money back. You can also permanently lose funds by sending them to the wrong address: you can’t cancel the operation. We can only hope for the integrity of the recipient.

6. Public opinion

The price of cryptocurrency directly depends on the attitude to it in society: with increasing demand, the price rises. But the promotion of electronic assets is slow due to a bad reputation. They are often used by criminals to launder money, buy drugs, and build financial pyramids. This leads to a negative perception and forces the authorities to respond by taking prohibitive measures.


7. Insecurity

Above, we attributed decentralization to the advantages of cryptocurrency. But it is also a negative characteristic, since there is no clear legislative regulation. Users affected by fraud cannot apply to the court for protection. No one knows exactly how the value of digital assets is determined. They have no legal status. Law enforcement agencies do not have instructions on how to track stolen e-currency, withdraw it, or conduct other operations.