Cryptocurrency has grown in popularity over the years despite the flak it has drawn from various governments and other sectors of the economy. However, it would not be too much to claim that cryptocurrency holds the key to the future, as a digital currency would emerge as one of the most important forms of transactions.
It already is to a certain extent, and there are reasons for it, especially Bitcoin, among the other cryptocurrencies.
- A few reasons for its popularity are- ANONYMITY, where users are able to spend huge sums of money on any part of the world through anonymous transactions, i.e., without attracting the attention of the government authorities and outside their purview of control.
- Another reason is STABILITY, especially w.r.t. Bitcoin (which might be more stable than the currency of many African nations), which offers stable values over other cryptocurrencies.
- SECURITY is another reason for its popularity, as transactions are encrypted and highly secure than ordinary currency transactions, and a digital heist would require a high level of expertise.
Besides, the decentralized nature of the currency has also made it a useful option for private investors who do not have to undergo complex government procedures and have complete control over their money.
Although the popularity of Bitcoin has grown phenomenally, there are certain issues associated with the use of the cryptocurrency that needs to be addressed. These are the reasons why bitcoin, despite its widespread use has not become a global currency yet, as many countries have certain reservations regarding it.
Risk of Security
The first and foremost reason is the security risks associated with Bitcoin. Bitcoin may have become popular for providing a secure means of transaction, but it is not completely immune to cyber threats.
Users always have to be alert about scams, theft, and malware, as it can happen anytime. In this era of technology, digital crime has become a constant threat.
In fact, digital currencies need greater protection from wrongdoings as one wrong step can lead to a loss in millions. On the one hand, users have greater autonomy over their money, but on the other hand, they also need to extra cautious while handling them. Hackers and cybercriminals usually install malware into the hardware that contains the Bitcoin codes and wallets, or may also gain access to the user’s wallet and remove everything it has. Threats can also be in terms of DDOS attacks during money transactions, and therefore device used for bitcoin access requires active malware and firewall security.
If the device is infected, it may lead to funds being misdirected while sending, complete loss of wallet, and in the worst case, the bitcoin being held for ransom.
In order to make Bitcoin transactions more secure, they lose their flexibility in terms of real-world operations like retail, purchase, etc. and in such cases, credit or debit cards appear as relatively convenient and safer modes.
One of the reasons for Bitcoin’s popularity is the protection of identity and decentralized usage that it offers to its users. However, this very advantage can prove to be a double-edged sword where, in the absence of government control and lack of user identity, a person can be scammed or cheated off his money. Conventional payment options like debit cards or Paypal etc. have a scope for reimbursement of the money, in case customers are cheated or face some kind of fraud.
Online portals have their policies created in a way that the rights of their consumers are protected in case they are defrauded by some party. Customers can also lodge their complaints with the Consumer Rights Protection forums or other security agencies in their respective areas. In case of transactions involving Bitcoin, hardly there are any means of getting back the money lost or even tracking the fraudster as identities are protected and very difficult to trace. This has been the primary reason why many businesses are hesitant to use Bitcoin as in the absence of any extra mode of protection, and they stand the chance of risking large sums of money. These extra means of assuring protection in Bitcoin usage is quite expensive and may not yield the profit that they can earn if they use conventional methods of transaction. Only when crypto technology will evolve to the extent that it can prevent such scams, various sections of the economy will resort to its use.
High Fluctuations in Value
Cryptocurrency, particularly Bitcoin, has evolved into an important investment tool in recent times though investment in it is underlined by certain drawbacks. One of them is the huge fluctuations in the market value of Bitcoin over the past few years, where the value may become abysmally low overnight or insanely high.
While fluctuations can be a good investment for the people who love to take the risk, but the same reason makes it impossible to become a recognized global currency.
Wide fluctuations in value make long term businesses a perilous venture, although Bitcoin enthusiasts may argue otherwise, claiming it to be more stable than the legal currency of some nations. However, cryptocurrency can never replace or act as an alternative to fiat currency; it can mainly be used as an additional means of the transaction unless it is stabilized. If the value of Bitcoin becomes highly stable, business enterprises and private individuals will be inclined to use it, especially for international trade, to get around complex government regulations. Only with stabilization of values, Bitcoin may be used as an ordinary means of payment for everyday needs like groceries or in restaurants and not just for big investments like a home or a car.
On a concluding note, we need to keep in mind the effect that economies can face if Bitcoin is accepted as a global currency. Global currencies will not face any adverse effects as such as there will not be any kind of devaluation for them. Therefore economies will largely remain unaffected and on the positive side, this would help in establishing a ‘BALANCE OF PAYMENTS’ among different countries.
Balance of Payments can cause a decline in profits for a few countries, but overall it would have a positive impact on the world economy. Therefore there should be no reason for panic or inhibition in the use of Bitcoin if proper regulations are at place. No payment method can claim to be without flaws, and so it is Bitcoin, but its advantages also need to be taken into account. A proper balance of application and regulation will help Bitcoin to become the next generation of global currency.