The PROs and CONs of Using Bitcoins

Most people know very little about Bitcoins. We know that it is a digital currency, and it is still in its infancy. While it is not the first of its kind, it is the first to gain public circulation, and slowly gaining popularity. As it gets more popular, more people will become more interested in knowing more about it.

What are the pros and cons of using Bitcoins? Here are the basics…

The PROs

1. Secure: The biggest advantage of using Bitcoins is the fact that it is a “cryptocurrency.” This means Bitcoin uses military-grade cryptography, which is one of the most secure types of code in the world.
2. Transparent: The bitcoin framework is open source. Transactions go into a public record called the blockchain. Bitcoin users can check any transaction at anytime on the blockchain. Anyone can also access the source code of Bitcoin at any time.
3. Negotiable: A bitcoin is as much a currency as the US dollar. This means that when you make a transaction in the internet with Bitcoins, it is as good as cash. It is not the same as PayPal, for example, which is a third party payment service. Bitcoins are not a service, they are commodities, and as such have value in themselves.
4. Anonymous: When you use Bitcoins, you do not have to go through a clearinghouse. You do not need to give out any type of personal or financial information because you don’t need to associate bank accounts or credit cards to use it. In other words, you minimize your exposure to identity thieves and hackers.
5. Low cost: Unlike most digital payment systems, Bitcoin transactions have lower fees or none at all. This also applies when converting Bitcoins to foreign currencies, which can be a great advantage when travelling. What’s more, merchants that accept Bitcoins cannot charge fees without your knowledge and approval.

The CONs

It is not all wine and roses with Bitcoins, however. Like any system, Bitcoin has its weaknesses.

1. Volatile: Bitcoins are a lot like stocks in a new company. Many factors can affect its value, and it is very difficult to predict anything.

This is largely because it is decentralized. Unlike traditional currencies such as the US dollar, there is no one entity such as a government controlling the value of Bitcoins. This is a good thing in some ways, but in terms of stability, not so much.

For example, in a three month period in 2015 the price of a Bitcoin fluctuated from US$209.13 (August 24) to US$ 320.16 (November 24). During that period, it went as high as $408.74 (November 4). That is nearly double from where it was in August 24. That is fine if you bought in August and sold in November, but what if you bought in November.

Two years ago, the price of one Bitcoin climbed rapidly, eventually peaking at $979.45 (November 25, 2013)!

2. Irreversible: There is no such thing as Bitcoin refund. Once you send it out, it is gone forever, unless your recipient sends it back. If you make a mistake, or you get scammed, there is no protection from the Bitcoin company (because there is no Bitcoin company).

3. No recourse: Bitcoins are unregulated, so it is pretty much wild, wild West country right now. Anything goes, and you have no one to blame. While the code is secure, it is not proof against a determined and talented hacker. What can be coded can be hacked. If you are unlucky enough to have your wallet hacked, it is goodbye to all your Bitcoins.

4. Limited use: If you want to use Bitcoins to pay for good and services, you have to find vendors that accept it. It is gaining popularity, but many establishments still keep it at arm’s length.

CONCLUSION

Like any system, there are advantages and disadvantages to Bitcoins that you should take into consideration before using it in any capacity. It is a work in progress, so there will still be quite a few bugs to fix. As the system improves and gains popularity among buyers and sellers alike, it should become more stable.

In the meantime, speculate a little of your money in Bitcoins by all means and hope it goes up instead of down. Everyone needs a little excitement now and then. However, it would not be a good idea to bet your bottom dollar (or peso in this instance) on it.