Advantages and Disadvantages of Cryptocurrencies

Advantages and Disadvantages of Cryptocurrencies

Cryptocurrency walletThe advantages of cryptocurrencies include the following:

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1. No restrictions on mining. That is, everyone can get crypto coins by using only the power of their computer. But the volume of mining directly depends on the performance of the equipment.
2. All transactions with cryptocurrencies are conducted anonymously.
3. There is no central body of control and management, which makes it impossible to manipulate the cryptocurrency, except when a consensus is reached within the network to make specific changes.
4. Absolute transparency. Users have access to information about the capitalization of crypto coins, the current exchange rate, 5. issue size, mining difficulty and other data.
5. High network security. According to the results of the conducted studies, thanks to advanced encryption methods, it is safer to store cryptocurrencies than fiat money.
6. Low fees. In some cases, transactions are made free of charge.

Despite the foregoing, cryptocurrencies have a number of significant drawbacks:

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1. If the password to the wallet is lost, it is impossible to return the money.
2. High volatility. The cost of cryptocurrency can change within one month within 100-300%.
3. Vulnerability to public policy. A number of countries have already banned any operations with cryptocurrencies, while others are taking measures aimed at establishing control by the Central Banks over digital money.
4. Cryptocurrency mining is becoming less profitable.

You also need to take into account the direct relationship between the profitability of mining and the cryptocurrency rate, and today the cost of mining crypto coins is often comparable to the cost of electricity.

How cryptocurrencies are regulated

The concept of “cryptocurrency” and other related terms are absent in the legislation of many countries. In this regard, activities related to cryptocoins are not regulated in all countries.

In the United States, for example, an act was adopted that defines the rules for licensing operations with cryptocurrency and other related terms, but in Russia this concept has not yet been legally enshrined. The Central Bank in one of the letters said that it is forbidden to accept cryptocurrencies in the country as a means of payment, since the main law states that the only currency that can be used in Russia is the ruble.

Conclusion

Despite great skepticism about cryptocurrencies, digital money is becoming more popular all over the world, and the capitalization of individual coins is estimated at billions of dollars, but it is worth remembering that this market segment is still highly risky. It is also worth noting the high volatility of prices for cryptocurrencies, which is why the price of some coins can rise and fall by hundreds of percent in a very short time.