PDF Version: Risks-Associated-With-Cryptocurrencies
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.
In the modern day world cryptography is used to create coins and secure transactions. Crypto currency is a form of digital currency that works as a medium of exchange. It runs on blockchain technology and is used to secure the transactions as well as to verify transfer of assets.
Bitcoin is the most commonly known crypto-currency which was created in 2009 by Satoshi Nakamoto. Apart from Bitcoin there are hundreds of other virtual currencies. Often referred to as Altcoin, some other crypto currencies are Ethereum’s Ether, Litecoin, Ripple, Augur etc.
What Are Crypto currencies?
‘Crypto currency’ as the name suggests is a virtual currency that uses cryptography for security reasons making it difficult to forge. What once started as a humble beginning has come a far way now as cryptocurrency have taken over the world. Everyone is talking, investing and trading in them.
Reason for Popularity of Cryptocurrencies –
Besides soaring value of Cryptocurrencies, the following reasons are propelling its popularity across the globe:
- Easy To Transfer – With crypto-currencies, it is easier to transfer funds from one party to another. The whole process is quicker and less costly as processing fee is minimal. Also, it has facilitated immediate settlements.
- Can’t be Counterfeited Easily – There is no need to worry at all as crypto-currencies are virtual. They cannot be counterfeited easily which in turn minimizes the risk of fraud.
- Access To Everyone – People who have access to internet or mobile phones can own their cryptocurrency wallet and leverage the benefit from anywhere round the world.
- Universal – Though each country is coming up with their own guidelines for Crypto-currencies, they can be operated universally as they are not bound by exchange rates, interest rates etc. of one specific country.
- Highly Secured – You are not required to share any personal or transactional details. Create a proxy ID to prevent theft of your sensitive and confidential data.
What All Can You Do With Crypto-currencies –
- Buy Goods – A lot of merchants now accept crypto-currencies as a mode of payment. So you can use them to buy goods.
- Invest – Though investing in Cryptocurrencies is considered as a risky preposition, people worldwide are putting their money in it. For some, it has proved to be a great investment opportunity as people who invested in cryptocurrencies at the right time have made millions out of it.
Future Of Crypto-currencies –
“I am personally excited for the future of cryptocurrencies and blockchain technology in general. Current innovations such as Bitcoin, Ethereum, and others are just the beginning for this technology that can help revamp many industries. There is plenty of opportunity in this space.” – Chalmers Brown, Forbes
Given the advantages and the growing popularity, cryptocurrencies have a bright future and tremendous potential of growth in near future. They have opened up a plethora of new opportunities, brought along a revolutionary change in the market and are expected to become a part of mainstream financial system very soon.
For more information, call Centex Technologies at (254) 213-4740.