The Bitcoin was designed to be the perfect virtual currency. Bitcoin is completely anonymous, cryptographically secure, and friction-less. It is also invisible to law enforcement as well as the taxman. It can be seen as the holy grail of payments for anyone trying to avoid bank fees while spending money domestically or abroad. On another note it is the perfect trading grounds for members of the underground economy, attempting to avoid law enforcement and prosecution.
Although there are many pros in the use of Bitcoins, there are always cons. Nothing is perfect. The strengths of Bit coin can also be considered its weaknesses. Once the money is sent, it is sent, it was designed so that there is no trust required between buyer and seller, payment was guaranteed, as soon as it enters the account, it cannot be taken back unless the seller refunds it. Not many people are willing to risk loosing millions of dollars without the chance of getting it back. The internet contains many hackers who can potentially hack into your account and rob all of your funds, leaving no way of getting your money back, unless the hacker decides to return it. The open source code for bit coin is free and public, meaning that just about every hacker and cryptographer that has access to the internet can take a shot at it. Another factor would be looking after your own coins, which is extremely risky and requires a pretty substantial level of expertise, a novice or beginner would not manage successfully or safely. On the other hand, trusting a company to look after your coins requires the very trust that Bitcoin was designed to avoid.
Pros of Bitcoin
The Bitcoin is the perfect investment for people who lost trust in the government, and prefer to secure their funds with themselves versus their country especially during economic downfall or turmoil. These assets can be the one thing to save individuals purchasing power and wealth. An example where owning bit coins instead of entrusting your money with the bank could of saved all of your money or savings would be is the events in Cyprus. There, the government, under extreme pressure from the European Union, first proposed taking all bank accounts — even the insured ones — by at least 6.75%. That didn €™t work, but now uninsured account holders at Cyprus €™s two largest banks stand to lose most of their money. It €™s a stark reminder of the dangers associated with depositing money in a bank. As a result Bitcoin has become extremely popular in Cyprus for many reasons: the government cannot confiscate your bit coins, nor prevent you from transporting them out of the country at times of economic downfall. Another example is Zimbabwe, where the price of bitcoin spiked to double the international rate after the military takeover of government. It €™s becoming the preferred way for residents of failing economies to transfer money without dealing with banks, protecting their savings from political turmoil, and avoiding the local currency when its value declines due to inflation. But as events in Zimbabwe have confirmed, bitcoin, the world €™s most popular cryptocurrency, is most attractive when confidence in institutions falls.
Bitcoins are similar to cash when it comes to anonymity, but they are superior. They take the idea a step further, and make anonymous transactions more possible than ever before. If you pay somebody in cash it is considered a transaction that falls in the underground economy, the transaction is untraceable and does not contribute to the countries GDP or economy. The downfall of cash is both parties need to be physically present at the same time in order for the transaction to take place. It is also beneficial is if both parties live in a country where the currency is an accepted unit of exchange. With bit coins, transfers can take place across continents and time zones with minimal issues, no time lags, and only very small transaction fees. No banks are involved; the central bank doesn €™t control the money supply, and no taxes are paid. Once you acquire an account with bit coins, they completely belong to you, and can be used however desired.
Bitcoins are not limited to a specific website or server like other online currencies, there is plenty of things that can be done with them. Bit coins can be converted or exchanged into many different currencies through online exchanges. They are accepted in online casinos and can be used for gambling purposes or simply used for purchasing things online, many websites accept bit coins. ‘
In the case of one trying to commit illegal purchases online without the fear of prosecution, bitcoin is certainly the form of payment the majority of venture’s would go with. For an instance if you were seeking to purchase illegal narcotics online, or hire a hit man, there is a website by the name of “The Silk Road” which offers all of these services. The only catch is that the website uses bit coin as the only form of payment/ exchange for obvious reasons. This is due to its anonymity, security, and guarantee of payment. Not only was “The Silk Road” a major hub for bit coins but also the major contributor for the massive rise in value of bit coins in 2011.
Cons of Bitcoin
Satoshi Nakamoto, the creator of Bitcoin had an extreme mistrust of the financial system, and all institutions in relation to it. This was the most important factor that led to the development of the bitcoin. He wanted to create a currency that was completely decentralized, that had no trusted parties, and depended on no bank to control it €™s fluctuation. Satoshi €™s explains his feelings and thoughts about the financial system as “The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts”. Basically if you have U.S dollars, your placing your trust on the U.S government to not destroy your wealth on the belief that they actually contain the amount of gold exchangeable for your dollar bills in the federal- reserve. Bitcoin in turn is made on mistrust, so every man for himself. You are responsible for the fate of your wealth. The down side is that whatever you lose, there is no return, it is final, there is no bank or agency, no police force, no legal system to file an investigation to in hopes for a return of your losses. Every decision, every mistake is your final choice.
Some Bitcoin companies claim that they can keep your bitcoin €™s safe, but given the fact that when a hacker is successful they can take as much as they want, and the fact that law enforcement authorities will not make any attempt to track down or catch the hacker leaves a huge gap for risk and loss, which majority of clients will not take. It is unfixable when done.
The global rate at which bitcoins are mined is pre determined and slowing down. The global supply of bitcoin will never exceed 21 million. In the beginning of 2010 there was 3 million coins floating around and about 14 million presently. In 2021 at this rate, if bitcoins are still in use, the rate of growth of bitcoins will be so low that the money supply will be unvarying, meaning that it will never go up. This leaves the risk that a central bank will just print off millions of new bitcoins thus diluting or inflating away the rest of the value of the current ones floating around.