The idea of 'cryptocurrencies' has been on the discourse since the year 1998. The first known attempt of developing a digital cryptocurrency was through B-Money and Bit Gold. Unfortunately, both coins did not see the limelight. Since then the idea got spread in an unprecedented fashion resulting in the culmination of implementing a number of ‘cryptocurrencies' titled Bitcoin, Ether etc.
Firstly, taking the case of Bitcoin, this particular cryptocurrency started its functionality from March 2010 with the transaction at an exchange rate of $0.003 USD. Ever since the inception, bitcoin went through several hikes and pitfalls. Its value almost reached around 17,900 US Dollar (as of Dec 2017) and now further dropping down to 9221.01 USD (April 2018).
Likewise, the other cryptocurrency Ether is also showing a steady increase in its market value. Presently the market is witnessing high demand in cryptocurrencies, indicating the acceptable degree of people in the cryptocurrency regime.
The unprecedented surge in the value of cryptocurrencies (Especially that of Bitcoin) has created an uproar and brought them under the scanner of authorities. It is argued that many illegal and anti-social elements can thrive under this new economy's shadow. We already witnessed the recent want to cry malware attackers demanding ransom in the form of Bitcoin. But this is only true to an extent. In contrast, the technocrats are highly favorable to cryptocurrencies as they are working in a decentralized format with no central control. It is freed from any of the existing financial establishments. The technocrats advocate and outcry for cryptocurrencies visioning them as the new age economy.
Taking the above counters into considerations, let's have a brief look at the advantages and disadvantages of cryptocurrencies.
Cryptocurrencies offer very fast transaction which is far more superior than any banking transactions of today. Bitcoin takes a maximum of 10 minutes for validating a transaction and it is about 10 seconds in Ethereum.
Cryptocurrency transactions are fully anonymous and it is not possible to identify who had done this transaction or with whom this transaction was made. The participants will be using only the network address of the sender and receiver. No identity of the corresponding participants will be published in the shared ledger.
No restriction on payments
It is the most noticeable advantage of cryptocurrency. There is no restriction on transactions. The user can send the currency at any time from anywhere to everywhere. That means no time boundaries like bank holidays.
Less /No transaction fees
The cryptocurrency transactions are normally free. Or the fee is much less than present financial transaction charges. In bitcoin, anybody can do transactions without paying any transaction fees. The user also has the option to offer transaction fees for speeding up their transaction. That is if a person is providing a transaction fee more miners will come to validate the transaction; hence the transaction gets validated fastly
Cryptocurrencies are one of the most secure currency systems available today. It has an 'immutable' property; i.e. if one transaction had occurred in the Blockchain based cryptocurrency, it turns irreversible. So the chances of fraudulent transactions are very low or we can say it is nearly impossible to execute.
A government can’t De-monetize
Most of the cryptocurrencies work as a decentralized system and its exchange rate is fixed dynamically according to the demand-supply factors. No government regulation or anything can stop or influence such independent cryptocurrencies. The only thing that a government can do is restring the conversion of cryptocurrency to a normal currency. However, they can't stop any of the transactions executed via cryptocurrencies.
Secure Payment information
Cryptocurrency transactions don't use any identity of the users. They will only use the wallet address of the sender and receiver, all other information is securely hashed and no one can retrieve it back. When someone sends a cryptocurrency to another person/entity, none of the personal information will be shared with them. Only the particular amount of bitcoin will be transferred from one account to another account.
Most of the cryptocurrencies have a fixed number of currencies in their exchequer. In case of bitcoin, it is 21 million. Once the entire thing has mined there won't be any newer bitcoins. Therefore there is no chance of inflation.
Lack of knowledge
People end up in investing with cryptocurrencies without proper background knowledge and thereby lose money to something that they did not learn about. One should understand that the technology is somewhat complex in nature and it requires a thorough understanding before we make a mind to invest.
Even though the demand for 'cryptocurrency' is steadily increasing, the point is that many governments have not given any official approval for 'cryptocurrency' transaction. For this reason, its usage is very limited confining to only some specific domains. Moreover, the 'cryptocurrencies' are still far away from the common mass.
It can be considered either as an advantage or disadvantage. Although there is a strict demand supply rule to define the exchange rate of cryptocurrencies, present market trends indicate an uncommon surge in the exchange rate of cryptocurrencies, especially that of Bitcoin. But it is believed soon that it will attain the normal pace.
Government can Ban
As we said government can't control cryptocurrencies, but they have the power to ban or illegalize the transactions. Of course, it casts a shadow over such ambitious, unfettered movements. But the idea of cryptocurrencies altogether can't be banned by the government. The latest news indicates that the governments may soon get along with the way of cryptocurrencies for running their economic system in more transparent fashion.
Deflation can happen
Cryptocurrencies are generally limited in number and its exchange rate is fully dependent upon its supply and demand. As there are only a fixed number of currencies in hand, the possibilities of deflation are greater than any other economic system. In case of bitcoin, if someone holds the bitcoin for a longer period, it gradually reduces the supply rate. With the increase in demand in such case, with reduced supply, it often results in a state of deflation.
No way to reverse the payment
If you mistakenly pay someone by using cryptocurrency, then there is no way to revert the transaction. Once a cryptocurrency transaction had taken place, it is statutory. You can’t rollback the transaction at any cost because of its permanency.
Key recovery is impossible
Since most of the cryptocurrencies don't possess a central authority for regulating, every individual is thereby responsible for keeping their account safe and private. In case of losing the wallet key, no one can help them in retrieving it.
Supports Money Laundering/Black Market
The anonymity of the cryptocurrency makes it attractive to the black market and money launderers. Since the identity is not revealed anywhere misuses are reported several times. Famous two are the “silk road” website which provides illegal drugs and other illegal items payable by bitcoin and recent want to cry cyber-attack.