Whether you call it cryptocurrency, virtual currency, or digital currency, bitcoin is a type of new currency that you should learn all you can about before you buy it, mine it, or use it to pay for products and services. There are pros and cons of using bitcoins that all users should be made aware as they move forward. Let’s look at the main ones here.
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* Security Issues – There are some issues with hacking where people have lost their bitcoins. Additionally, there have been issues of fraud where someone misrepresented themselves and were really sending you to a fraudulent website to pay money for non-existent bitcoins.
* Anonymity Protections – You can buy using your private key, which is essentially a password, up to 78 digits long (and you can have more than one). This is how you make a bitcoin transaction, and you cannot make one without your key.
* Private Keys – This was just a positive and now it’s a con. The reason is that you cannot recover your private key. If you lose it and can’t remember it, you’re out of luck because they are unrecoverable. The best place to store your key is by printing it out on paper and keeping it locked up in a file cabinet or even a safety deposit box.
* Wallets – Your bitcoins are stored in a wallet that is accessible via the cloud, an internal hard drive, or even an external storage device. You cannot save your wallet on paper, only electronically.
* Hacking – Wallets are great but if you don’t sign in often and you don’t watch your accounts, you’re making yourself vulnerable to hacking. Anytime you store anything on a computer it’s vulnerable to hacking, so it’s essential to use only super-secure servers.
* Finite Supply – This is a good thing. Fiat money (the money sponsored by governments) is not backed by anything and most money is valued based on the US Dollar. Since there are only 21 million units of bitcoin and there will never be more, it’s just like the old gold standard which is seen by some as superior than fiat money.
* Black Market Activity – Bitcoin is often used for nefarious reasons on the dark web. This means that it can have a bad reputation due to some of its users. This is a shame, because it can erode bitcoin’s reputation and value.
* It’s Unpolitical – There is no central bank, and no state agency controls bitcoin or its value. A government cannot freeze your bitcoin, and bitcoin isn’t even regulated by its creators. It just exists and can be used by the users the way they want to use it.
Understanding the myriad of issues surrounding cryptocurrencies and all the pros and cons of them is essential to know the potential risks and rewards. That way you can move forward with an understanding of what you’re doing. When you do that, you can protect yourself from fraud and make better decisions.