One of the main achievements of the digital era was the dematerialization of physical media, which led to small silent revolutions of its respective sector. It started to happen with the emergence of streaming services, for example, which led to a significant change in the way we consume multimedia content. And then it happened with the financial market, after the emergence of cryptocurrencies.
There has been a lot of talk about cryptocurrencies and they are one of the big trends in the digital world today. However, for those who are new to these things, it can be difficult to understand everything that is going on. Not least because, when looking for answers, new questions are more likely to arise and pile up. So, let's start at the beginning: what are cryptocurrencies?
Cryptocurrencies are therefore digital currencies, which have no physical existence. In other words, they work just like any other traditional currency, such as the euro or the dollar, but only in a digital medium. Moreover, they are totally decentralized, not being issued by any government or any bank. This is possible thanks to blockchain technology, which makes it possible to guarantee that all transactions are secure, unique and, best of all, totally private, not requiring a third party. In other words, cryptocurrencies work without the need for a supervising and controlling financial entity.
Advantages of Cryptocurrencies
Understanding the concept of cryptocurrencies, it becomes easier to understand their advantages. And the first one is exactly that, the fact that they are totally secure and private, allowing users to make financial transfers without the knowledge of third parties or the control of financial and fiscal entities. At a time when our privacy and data protection is increasingly compromised, cryptocurrencies emerge as an extremely functional alternative.
The fact that they are a decentralized currency makes cryptocurrencies safe from inflation, which affects the financial markets. For example, in the case of Bitcoin, probably the most popular of these digital currencies, there is a maximum of 21 million Bitcoins in the world, which means that there is no speculation around them. That is, their value only changes according to the increase in demand, in the purest operation of the financial market of the relationship between demand and supply. That is why the price of cryptocurrencies is so fluid.
This leads to cryptocurrencies, at least for now, being a great investment opportunity, as their income can become worth much more in a short period of time. In addition, the fees associated with financial transactions with cryptocurrencies are extremely low, leading to greater savings. In other words, they are a cheaper, simpler and faster way to maximize your savings.
Disadvantages of Cryptocurrencies
However, as with everything in life, cryptocurrencies also have some disadvantages associated with them. After all, there is no tool on the financial market that does not have associated risks. The important thing is to realize them, evaluate them with awareness and seek the perfect balance between losses and gains.
Thus, the main disadvantage of cryptocurrencies has to do specifically with their high volatility. As their value is only dependent on the relationship between demand and supply, it can change quickly and unpredictably, leading to huge gains, but also potentially huge losses. This is due to a regulatory problem, as digital currencies are completely anonymous and private.
This is another major disadvantage of cryptocurrencies. Not only can this anonymity attract more dubious business, namely in the financing of terrorist activities, but there is also no possibility of refund in financial transactions, for example. Imagine you make a transaction to the wrong person by mistake. There is nothing to guarantee your money back, since there is also no regulatory body to complain to.
That's why there are several fraudsters in this sector trying to pull off fraudulent scams on the net, taking advantage of the general ignorance that still exists in this sector of activity. It is therefore even more fundamental to always adopt a sensible, reasonable and responsible attitude when you decide to act with these cryptocurrencies.