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Advantages and disadvantages of using cryptocurrency payments
Cryptocurrencies such as Bitcoin, Ether, and Doge, among others, have become part of our everyday vocabulary. These digital currencies, once dismissed and linked to illicit activities, have now become the new normal. Bitcoin, the king of cryptocurrencies, now records billions of daily transactions.
However, there are those who consider cryptocurrencies only as a financial instrument and not as money. Regardless, the number of businesses accepting Bitcoin as a payment method is increasing with each passing day. In fact, many Bitcoin casinos accept various cryptocurrencies, allowing gamblers to play Bitcoin Poker in Australia and other countries.
Today it is possible to take a vacation by paying with cryptocurrency, buy a cup of Starbucks coffee at the airport, pay for hotels and resorts, or even buy drinks from a vending machine.
Does this mean you have to accept cryptocurrencies as payment to stay relevant?
It’s not a very easy question to answer. This is due to the enormous amount of false and misleading information about cryptocurrency circulating on the Internet daily.
However, a realistic consideration of the advantages and disadvantages will allow you to determine whether they should accept cryptocurrencies as payment.
Advantages of cryptocurrencies as a means of payment despite the cryptocurrency collapse occurred in 2022Cryptocurrencies continue to be a very attractive proposition for most entrepreneurs.
Below are the most common benefits of cryptocurrency.
Decentralization
The most important advantage that can be highlighted regarding cryptocurrency is that it is not controlled by a certain financial or government organization.
This eliminates the idea of monetary monopoly and validates the concept that the value of cryptocurrency is not bound by the discretion of the central bank or any other form of authority.
Lower transaction fees
Fees for digital currency transactions are extremely low or even free at times. This is because third parties and intermediaries, such as VISA and PayPal, are cut out of this process. Furthermore, cross-border transactions with digital currency are also carried out without the need for exchange procedures with greater efficiency and lower costs.
Protection against inflation
Due to the scarcity of the currency, cryptocurrency is seen as a hedge against inflation. For example, the number of bitcoins that can be produced is limited to 21 million, and once this figure is reached, no more bitcoins will be available for mining.
Other digital currencies also use this method to limit supply and help safeguard against inflation. With limited supply, if demand for cryptocurrency increases, the value of cryptocurrencies will also increase.
Potential for huge profits
The vast majority of cryptocurrency investments are profitable, and those who invest generate significant income. From various available sources, in 2022, the global cryptocurrency market has been estimated at around $4. 67 billion, and analysts expect this figure to increase at a compound annual growth rate of 12%. The value is expected to continue to grow with greater global acceptance.
Accessibility
Cryptocurrencies increase the reach of financial services. They are built on open platforms and do not require an individual to go through a lengthy registration process and wait for approval, as with many traditional financial institutions.
Unlike accounts offered by conventional banks, opening a crypto wallet does not require providing identifying details, rigorous vetting, or even a credit check.
As for conventional forms of payment, cryptocurrency eliminates the need to deal with excessively high fees, long processing times, and third-party features of banking systems.
Transparency
Although cryptocurrency transactions involve anonymity, data recorded on a public blockchain, such as the Bitcoin and Ethereum blockchains, can be seen by anyone willing to examine it. Each cryptocurrency holder receives a public key, which can be used to recognize an investor.
This means that although the names of the investors are not disclosed, the transactions can be traced for clarity on some matters. In real-time transfers, users can track information from the blockchain using various cryptocurrency platforms.
Again, not all cryptocurrencies use public blockchain ledgers. Other registry types include private and licensed registries. Private ledgers are only open to a certain set of customers and permissioned ledgers are a mix of public and private blockchains but only allow access to those who are permitted by the chain’s administrators.
Disadvantage of cryptocurrency as a means of payment
On the bright side, ease of doing business and high return on investment in a short span of time are some of the advantages of cryptocurrencies. However, cryptocurrencies are not without their challenges. Below are some common disadvantages of cryptocurrency:
Volatility
The value of cryptocurrencies is not fixed and may regularly change. While this volatility may not be an obstacle to making quick profits, it is a serious disadvantage that can lead to huge losses in situations such as a drop in the price of cryptocurrency. These fluctuations make it a high-risk investment and payment option, therefore not suitable for those seeking a fixed income.
Bad regulation
Although the use of cryptocurrencies is legal in many developed countries, central governments do not legally recognize them. The lack of control and poor regulation in the cryptocurrency market also raise fears of fraud and market manipulation. Until federal governments ratify and supervise cryptocurrencies the same way they do fiat money, such as US dollars, there will always be greater risk related to cryptocurrencies.
Security risks
Despite adequate security measures resulting from the use of blockchain, more and more cases of insecurity and hacking incidents are occurring in the cryptocurrency space.
Hackers have targeted cryptocurrency exchange platforms and blockchain destinations for storing digital coins and tokens, which has led to huge losses for individuals and businesses. Additionally, Bitcoin involves irreversible transactions, making it difficult to track and recover money once obtained fraudulently.
Possible loss of coins
Several cryptocurrencies, including Bitcoin, require the token owner’s private key to access the virtual wallet where the tokens are stored. However, if the private key is lost or stolen, it becomes impossible to prove ownership again or recover the lost digital tokens.