Opinion

Cryptocurrency; Should we Be Concerned About its Use or Not? 

Cryptocurrency - cfamedia

Since Bitcoin got launched over a decade ago, the field of cryptocurrencies has expanded dramatically.

If you are not, even, familiar with the workings of the currencies and the technicalities in their trading, you have, probably, heard of Bitcoin, Ethereum, Ripple, and Litecoin, among others.

A cryptocurrency is virtual, or digital money, which takes the form of tokens, or coins.

While some cryptocurrencies have ventured into the physical world, with credit cards for example, the large majority remain, entirely digital.

The ‘crypto’ word in cryptocurrency, refers to complicated cryptography, which allows for the creation and processing of digital currencies and their transactions across decentralized systems.

Cryptocurrencies are almost always designed to be free from government manipulation and control, although, as they have grown more popular, this foundational aspect of the industry has come under fire.


Also read, Bitcoin Usage Increase In Nigeria As Users Ignore CBN’s Warning


While these digital currencies can be used to buy things, much of the interest is in trading them for profit.

Pros of Cryptocurrency include the following:

Decentralization

Governments are bearing down heavily on digital currency, because it is decentralized, meaning that, it has no central authority in the way the U.S. government holds authority over the dollar.

It is, therefore, believed that crypto poses a threat to central banks and national security.

Lack of middle men

Cryptocurrencies do not make use of middlemen, so, transactions are usually easier, faster and require less, or no additional transaction fees.

The digital currencies could, also, help provide the foundation of a system that is transparent, yet secure.

Where corruption gets exposed and rampant inflation ended.


Also read, What 2020 And Beyond Hold For Transaction In Bitcoin


Huge potentials for returns

Regardless of the risks associated with the trading, the massive returns from cryptocurrency is one of its selling points.

One of the statistics that makes everyone consider investing in cryptocurrency is that, $1,000 invested in Bitcoin in 2013, would be worth over $400,000 today.

Cons of Cryptocurrency include the following:

Lack of acceptance

Some businesses fear cryptocurrency, due to the changes in value it has experienced.

This makes them reluctant to accept it, as a form of payment. If you try to pay for purchases, with cryptocurrency, you could end up getting turned down, by some businesses.

Coupled with how governments have not classified cryptocurrency as a legal tender, it is, also, no surprise that a lot of people have no idea about the benefits of cryptocurrency, let alone trading in it.

Hack risk

Even with encryption to protect cryptocurrency transactions, there have been hacks, resulting in substantial losses.

This is another huge risk of using cryptocurrency.

Passwords can get stolen, or hacked. Hardware can get corrupted or taken. Others you do business with, could be lax in their security.

This could result in losses, to your cryptocurrency during a transaction.

Constant fluctuations

It certainly does not help build trust when you can never be 100% sure of how much the crypto is going to be worth tomorrow.

This makes it quite difficult, for the users and merchants to accept and use crypto.

Below are some strategies you can adopt to protect yourself:

In-depth research

Many people have been buying cryptocurrencies, hoping that they can make easy money. It is a tempting approach, since many others have done so, successfully. Investing in something as complex as cryptocurrencies, with limited knowledge is very risky.


Also read, How To Protect Your Cryptocurrency Wallet


Basically, conduct your research and get trained by people more knowledgeable, if possible.

Training would help expose you to things like pricing, how to spread your cryptocurrency among several wallets and the general ways to protect your accounts, to avoid hacking.

Diversification

It is advisable to diversify with non-crypto assets, when you invest in cryptocurrency.

Putting all of your money into the blockchain, could yield huge losses, so, spreading your money among different asset-types, will keep you financially stable, even, in the case of a crypto crash.


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About the author

Sylvia Eguzoro

A graduate of Philosophy looking to delve into the world of business and technology.

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