In last couple of years, awareness about cryptocurrency (also referred as digital currency) has risen significantly. There are more than 1600 virtual currencies with Bitcoin, Ripple, Ethereum, Tether & Stellar being the most popular ones.
However, to leverage maximum benefit of this growing currency type, it is important to understand the benefits and risks associated with it.
Benefits Of Using Digital Currency
- Helps In Avoiding Fraud: This is because virtual currencies can neither be counterfeited nor reversed by the sender arbitrarily.
- Quicker Settlement: Funds on the credit card can remain locked up for some days, if a customer asks for a chargeback. This might lead to unnecessary delays in payment. So, with virtual currency like bitcoin the settlement procedure is much quicker as compared to conventional credit card settlements.
- Lower Fees: You might have to shed away a few dollars as transaction fee while making payments through credit card, specifically with international transactions. However, a much lower or sometimes no transaction fee is charged for cryptocurrency exchanges. This is because the cryptocurrency miners are compensated by the network.
- No Inflation: Cryptocurrency is not susceptible to inflation unlike physical currency which is leashed by its effects because virtual currency is governed by controlled quantity limits & algorithms in the system.
- More Confidentiality: Credit cards work on a ‘pull’ mechanism i.e. once the payment is initiated by the store, it is pulled out from your account. So, if any cash or credit transaction is made, the bank usually goes through the entire transaction history as a reference document. However, cryptocurrency transactions are much more confidential as exchange of information between the two parties is done on a ‘push’ mechanism. Thus, the recipient will receive the limited information that you wish to send. This helps in guarding off your financial history and prevents it from being exposed at various points in the transaction chain.
- Access To Everyone: Anyone, in the world, who has access to the internet or mobile phone can deal in cryptocurrencies. This has made it easier for businesses to reach out to the customers all across the globe.
Risks Associated With Digital Currency
- You Can Be Hacked: The data on the devices of people, who deal in cryptocurrency, faces the risk of being hacked. Cybercriminals often inject a virus, malware or Trojan to lay hands on your private key and steal away the virtual currency. Once you lose your private keys, the funds are gone forever.
- You Are On Your Own: If someone breaches your bank account or payment card, then the associate bank or payment company might help you recover some or all of the funds. However, in case of virtual currencies there is no help available if the money is stolen from your digital wallet.
- No Government Insurance: Your funds in a bank or credit union are insured by government i.e. The Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund protects your funds, in case the financial institute fails to pay it. However, there is no such backup available in case of virtual currencies. So, if you lose your digital money, the government won’t cover up for it.
For more information about IT Security, call Centex Technologies at (254) 213-4740.