What is Bitcoin?
There’s a lot of mystique swirling around Bitcoin. It has an enigmatic, John Doe-like founder, Satoshi Nakamoto. It has demonstrated startling market volatility, with prices dropping more than $3,000 per share in December 2017. It has no centralized location, bank or national affiliation, leaving many cautious investors nervous about potential ties to the black market and future financial regulations.
In the following post, we’re going to clear up some common misconceptions about Bitcoin and point out some of the cryptocurrency’s pros and cons. Read on to learn more.
Bitcoin Isn’t the Go-To Bank for Criminals
One of the first complaints you’ll hear from skeptical investors is that Bitcoin offers banking solutions to the criminal underworld. That’s not entirely accurate. While the international, decentralized cryptocurrency isn’t subject to any particular financial regulatory agency, it does utilize meticulous blockchain records to timestamp all of its transactions.
According to a recent Bloomberg report, this highly secure record keeping method represents a major turnoff for the black market because it effectively allows law enforcement to track payments, particularly in the case of ransomware. As a result, the black market has almost entirely taken its business to up-and-coming cryptocurrency competitors such as monero, ethereum, and Zcash.
Bitcoin is Extremely Useful for People in Countries with High Inflation
Bitcoin isn’t a practical currency meant for everyday use. It is, however, very useful for two specific international banking purposes. First, Bitcoin lets you move large amounts of money across international borders quickly. This process comparatively takes several weeks, even months, with a traditional bank, and it also requires you to pay substantial transfer fees.
Second, Bitcoin lets you stash money if you live in a country with staggering inflation rates. For example, wealthy people in failed states and other countries with civil unrest can purchase Bitcoin with their currency instead of keeping it in a national bank. This allows them to ultimately retain their savings instead of risking a tremendous value loss.
Security is Still a Concern
Many consumers and small businesses purchase Bitcoin through market exchanges. These third-party organizations have experienced security breaches. Specifically, the exchange called Bitfinex was hacked in 2016 and cyber thieves stole tens of millions of dollars from account holders.
Bitcoin’s digital wallets aren’t insured by the FDIC, or any other agency. That means, should a security breach occur that results in subsequent Bitcoin theft from your cloud-based account, you do not have any recourse or method to recuperate that loss.
Many account holders prefer to keep their digital wallets stored directly on a computer with single-person access. Unfortunately, it’s not uncommon for account holders to accidentally delete coins from their digital wallets.
Arguably the biggest deterrent for most investors is government distrust for the decentralized cryptocurrency. Neither the U.S. nor the E.U. currently has comprehensive cryptocurrency regulations; nor have they passed legislation that would tax Bitcoin. This lack of oversight leaves many potential investors concerned that the U.S. and other major economies will follow countries like Japan, China and Australia, which have recently passed stringent cryptocurrency regulations in response to concerns about international money laundering.
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