This alternate currency may be riskier than you think.
Technology has changed how we do business. That sounds like a very obvious statement to make, considering technology is not a static thing, it’s always moving forward, evolving, developing, irreversible, irrevocable, inevitable. But the overall pace and momentum of that technological advance has increased markedly in the last two to three decades, and even more so in the last 15 years.
The Digital Revolution
Like just about every other aspect of modern life, the presence and proliferation of the internet has proven a game-changer across the board, to the point where we can barely remember what life was like prior to the total penetration by the digital world into every facet and corner of our modern-day civilization. From banking to dating, from shopping to paying bills, from instant communication to social media, there’s barely a part of our lives – be it social, personal, private, public, civic, or religious – that aren’t directly or indirectly influenced by the seeming omniscience of the world wide web.
The world of finance is certainly no exception to that rule. No longer are you restricted by visits to your local bank to check on your finances, the technological revolution has blown the doors off the banking ancien regime and forced the blazing sunlight of democratization into the musty, hallowed halls of the old guard. With a simple app on your device, you can control your bank account, investment portfolios, money transfers, payment of bills and taxation, increasing transparency while decreasing inconvenience, and all from an electronic device held in your hand or placed on your lap.
The paradigm shift in the financial world has been nothing short of magnitudinal.
The Rise Of Cryptocurrency
One of the most interesting developments of that shift has been the rise in so-called cryptocurrency. You may have heard of it referred to by its numerous names such as Bitcoin, Etherium, and Chainlink, but essentially they are all the same thing, namely a digital-based credit system used for payment.
Cryptocurrency exists simply as 1’s and 0’s in a computer database, there are no coins or banknotes, and that’s what separates cryptocurrency from more traditional hard currency. It is a medium exchange delivered entirely through an encrypted network that is free from any central authority or widespread uniform regulation. Its decentralization and anonymity protection makes it an attractive means of financial transaction for those who – for whatever reason – prefer that veil of anonymity in their monetary dealings.
While that is a definite advantage to some, nonetheless being still a relatively new advancement that has experienced a somewhat tumultuous lifespan thus far, there are definitely some pertinent and persistent disadvantages to the digital currency realm. In this article, we will list 3 primary reasons why cryptocurrency is perhaps not the best outlet for your financial affairs, its disadvantages compared to traditional currency, and why it is an unreliable service in the face of a rapidly shifting market tide.
1. Volatility
Probably the major tick against investing in or using cryptocurrency is its inherent market volatility. Unlike traditional currency, cryptocurrency is still a developing means, and still occupies only a very small niche percentage of the overall financial strata. This relatively small marketplace is very much driven by speculation, and as a result is vulnerable to sudden market shifts, jumping to great heights one day only to crash to lamentable lows another. These convulsive price fluctuations thus make cryptocurrency an unpredictable and unreliable choice.
3. Uncertain Future
Cryptocurrency has only been a viable alternative currency widely available on the marketplace since Bitcoin in 2008 and thus has not yet had the time to prove itself, either as a long-term ongoing concern or a flash-in-the-pan fad. This is an important consideration for investors who rely on stability, security, and certainty. Simply put, if that is what you seek, cryptocurrency is not for you. Gold and precious metals have been stable forms of currency for millennia, as has coins and latterly banknotes, but cryptocurrency? Nobody knows for sure if it will prove a lasting presence and until we have a clearer picture of its long-term prospects, it’s best to stick with more traditional currency options.
3. Lack of Scalability
Being an entirely online-based system, cryptocurrency has the advantage of being accessible and immediate, no matter where you are or time zone you’re in. But that is, somewhat ironically, also its major disadvantage, its Achilles’ heel as it were. As it operates on a network, the latter has only a limited capacity for transactions taking place on it, something its makers are only too keenly aware of, and have admitted as such. This limitation of scalability can not only be an inconvenience as the processing of financial transactions through the network can be slowed down considerably during peak capacity times but can also, inevitably, lead to potential financial losses for participants as time is money in the financial world. This handicap is certainly a reason not to choose cryptocurrency at present, at least not until it proves itself a reliable, stable, and lasting means, which to date it has fallen short of, on all three factors.
