A cryptocurrency is a form of digital money that works without the government’s interference. The crypto uses a decentralized system that ensures security for the currency and confidentiality for the transactions. The use of crypto has brought about many benefits, and however, it has also resulted in several challenges for the users.
A cryptocurrency is a form of money that gives power to all the owners over their money. The currency belongs to everyone who owns it, with the transactions being confidential. Crypto was introduced in the year 2009. The first successful digital currency was Bitcoin. The currency has attracted users in millions over one decade that it has been in use. Crypto has enhanced transactions between many organizations due to its strong security and privacy. The government is not able to interrupt any transaction that involves Cryptocurrency. As a result, many people who want privacy prefer this form of money; Moreover, people are confident that crypto will not fall any time soon. However, there are significant concerns regarding the functionality of Cryptocurrency in regards to its durability (Bunjaku et al: 2017). The digital currency has surpassed these concerns due to its complexity in operation and how no government, bank, individual, or political issue can affect its effectiveness.
The use of digital currencies has many positive impacts. Its design and functionality ensure that the users’ needs and requirements are solved. The purpose and need for Cryptocurrency were to solve the problems that arise with traditional currencies. Many individuals and governments have tried to raise their concerns regarding how risky it is to get involved with digital money. However, the developers of cryptocurrencies create this form of money, intending to deny a single entity from controlling the money. Some of the advantages of using Cryptocurrency include safety, ease in funds transfer, affordable transaction costs, decentralized management, and full power for currency users.
Many people and organizations are moving towards using digital currency for their security. It is difficult for scammers to perform thefts involving digital currencies compared to traditional currencies. Cryptocurrencies use complex coding procedures that make it difficult to crack the codes. Cryptocurrencies are the most secure online transactions. The system for digital currencies uses many computers connected remotely, which makes tracking transactions on a blockchain entirely difficult. There are very minimum cases of scenarios where people lose digital money without failure. Most people who encounter theft in the crypto world are responsible for sharing their information with another party. The algorithm that connects users to their profiles makes use of pseudonyms. This makes it difficult to track a person’s activity or transaction history (Golosova and Andrejs: 2018). Many people are using digital currencies to hide transactions from the government. This is a positive attribute for security, but some people abuse this trait which s a challenge. However, the aspect is protecting many people’s investments that need privacy from their competitors.
It is very easy and efficient to transfer funds through digital currencies networks. The process of transferring money between users using virtual money is instant, and it only takes seconds for money to reflect on the receiver’s end. The processing speed for cryptocurrency transactions is effectively fast. The networks are fast in verifying transactions due to their high-security measures. The systems are built to work at optimal conditions. With high processors, mass storage, and efficient codes, the systems perform 100% accuracy for all processes. The digital money system is built to perform accurately regardless of the number of requests sent by users in a second. They charge a very affordable transaction fee, making cryptocurrencies suitable for many people.
Cryptocurrencies offer power to all crypto owners. Virtual money uses a decentralized concept to provide all the users with total power over their money. In digital currencies, each user is given an address that traces their money all the time. The address is only known to the user, and no other party can have that information. The network owners do not have control over their user’s information (Trushina: 2019). This is a positive attribute as it allows the owner of digital money to have total privacy over their virtual money. The networks give some developers called miners a task to store the users’ information. The miners’ task is to keep current information about the users in their hardware. They perform this task without accessing the users’ information, and in return, they are rewarded with the transaction fees that users pay.
Traditional currencies are prone to inflation, a challenge that does not affect digital money. Users of Cryptocurrency are protected from inflation that is always caused by market changes. Cryptocurrencies have high demand, enabling virtual money to keep up with market trends and rise in value. During the release of a virtual coin (Amsyar et al: 2019), demand starts on a high note and increases with time. Bitcoin released only 21 million coins in the entire world. The number of coins does not increase, but the demand for the coin continues to increase. This concept has helped the coin avoid value reduction at any given point. Bitcoin has increased win value within one decade with over 60,000% increase within 13 years. There have been a few setbacks for digital currencies, but they always overcome them and regain their usual or more value over time.
Transactions for illegal activities are a major concern that results from the use of digital currencies. It is very difficult for authorities to track data regarding an illegal transaction via virtual money. The number of people who use virtual money to pay for illegal activities is a challenge for the governments. Many people hide money using cryptocurrencies if they want to hide it from the government. This acts as a challenge in trying to control crime. Virtual money can be transferred between known criminals without the governments’ knowledge. There are also cases of terrorism funding via Cryptocurrency as it is impossible to track. People find illegal services on the dark web and make payments using virtual money.
Virtual money owners are at a constant threat of losing their money. The networks do not allow the cancellation of finished transactions. If there is a mistake in transferring funds, the money cannot be returned to the sender. The networks do not give refunds in case a user loses their money. If a user forgets the password to their addresses, also called wallets, the network cannot retrieve it for them. Such scenarios make an investment in Cryptocurrency very risky (Bunjaku et al: 2017). Scammers have been utilizing this concept to steal money from virtual money owners. They trick users into sending them money, promising a refund if they fail to deliver the services knowing that cryptocurrencies do not issue refunds.
The process of mining cryptocurrencies consumes large amounts of energy. Mining is storing and maintaining the users’ information all the time. The process requires computers with high power and capacities. These computers rely on excessive amounts of power to run. Therefore it is a challenging process for many people to become miners (Trushina: 2019). Companies from China take advantage of this aspect and set up computer stations that depend on coal energy. Individuals with less power are left out in the crypto-mining process. The virtual money networks must ensure that they help with the mining process as many people cannot become miners.
Cryptocurrencies can also get hacked, even though it’s not common. The black hat hackers can get on the network’s security by stealing the users’ access details. Hackers utilize the network’s vulnerability by getting the users’ data when the wallets get stored, temporarily exposing the user’s ID. Hackers steal digital money, and they send it to their accounts. They are aware of the no refund policy, which helps them escape the stolen virtual money. There have been several cases involving the hack of cryptocurrency companies within the past decade. These hacks result in losses of thousands of dollars to digital money users.
Cryptocurrency is a term that describes virtual money. The networks or governments do not control the money. The virtual money owners are responsible for their money. The systems are built to be secure, but it’s each user’s role to keep their profile information private. Digital money networks have been established to help solve all the problems encountered with the use of traditional currencies. Cryptocurrencies come with many advantages. However, there are still a few challenges that come with using these networks to make transactions. The advantages of using cryptocurrencies seem to outweigh the challenges of using networks. Other than security, the networks are private, efficient, and cheap, and they offer total power to the currency owners. People talk of many challenges that might occur for the currencies. But no challenge seems to stop the rapid growth of digital money.
Bunjaku, Flamur, Olivera Gjorgieva-Trajkovska, and Emilija Miteva-Kacarski. “Cryptocurrencies–advantages and disadvantages.” Journal of Economics 2.1 (2017): 31-39.
Golosova, Julija, and Andrejs Romanovs. “The advantages and disadvantages of the blockchain technology.” 2018 IEEE 6th workshop on advances in information, electronic and electrical engineering (AIEEE). IEEE, 2018.
Amsyar, Izwan, et al. “The Challenge of Cryptocurrency in the Era of the Digital Revolution: A Review of Systematic Literature.” Aptisi Transactions on Technopreneurship (ATT) 2.2 (2020): 153-159.
Trushina, K. A. “ADVANTAGES AND DISADVANTAGES OF CRYPTOCURRENCY.” Развитие цифровой экономики: теоретическая и практическая значимость для АПК. 2019.