Let’s look on the Bitcoin pros and cons
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Everything has pros and cons, right? After all, without any cons, we’d get heavily addicted to the best things in life. A little bit of “con” can act as a balance if you understand it and may not hold you back if you’re aware of it.
This chapter looks at both sides of the, um, bitcoin coin. Bitcoin pros and cons :
Adding Up the Pros of Bitcoin
Let’s look on the bright side and start by considering the pros of bitcoin.
These are my personal views about the positives of bitcoin. You may find other large plus points in using bitcoin. In fact, this chapter contains mostly opinion.
Bitcoin offers its users many advantages, but perhaps the most important one is an unprecedented level of freedom. And that freedom comes in many different ways: financial freedom from not having to rely on existing infrastructure, for sure, but also the mental freedom of being in control of your own funds and technology.
Spending bitcoin for everyday goods and services — if it were to be adopted all around the world — would be as convenient, if not more so, than using a cash or card payment is right now. But it would also be vastly different, as you’d be in control of your own funds at any given time.
No one could tell you where to store bitcoin, how to spend bitcoin, or what you could or could not do with it. The only limitations of financial freedom with bitcoin are the walls we create for ourselves. Wider adoption would see those walls come tumbling down.
Moving toward financial freedom
Banks and financial institutions have been slowly weaving a cocoon for us, tying us into using their services without any alternatives. And for most consumers, that works perfectly fine, as they are more than happy to stick to what they know. After all, if the system isn’t broken, why try to fix it, right?
But bitcoin does offer a viable alternative. But in order to achieve true financial freedom, we need to achieve a critical mass of bitcoin adoption first.
By critical mass, we mean the moment when bitcoin becomes a globally used form of technology and finance. Everyday consumers are still not aware of what bitcoin does, or how it can become a part of their everyday lives.
Whether this is from a technological, financial, or ideological point of view depends on the user. Suffice to say that bitcoin is a very “niche” market right now, and although the community keeps growing every month, it still only represents a small portion of the world’s population.
Buy a bitcoin, help civilization evolve
There are various ways as to how bitcoin and the underlying blockchain technology can help create a better financial ecosystem. If individuals in unbanked parts of the world could be paid in bitcoins and could use them to pay for their everyday needs, it would free and empower them.
As a practical example, if you worked on a vineyard in sub‐Saharan Africa and received payment in bitcoins, it would reduce the possibility of an immoral farmer paying you daily in an allowance of wine, and thus effectively be enslaving you through alcoholism to that farmer.
These tools to take control of individual lives have yet to be developed. Some possibilities would be using the blockchain technology to manage contract negotiations and have the details stored in this transparent fashion.
It could potentially be used in elections in a way that makes the voting process more transparent and less susceptible to corruption and election fraud.
The potential positive benefits of real‐world applications of the blockchain technology are really only limited by the imagination. There are clearly significant commercial applications that will be developed.
That said, the effects on the way that some of the less‐privileged members of society should gain and benefit from enhanced personal freedoms, which in turn positively reinforce many aspects of their individual lives, is without question very exciting indeed!
Financial freedom through bitcoin won’t be achieved simply by merchants becoming more willing to accept the digital currency as a payment, but also by consumers willing to use bitcoin.
Plenty of places — both online and offline — allow you to use bitcoin to pay for goods and services, but true financial freedom would require more customers and consumers willing to use bitcoin over traditional payment methods.
Most of that stems from the force of habit: The current financial infrastructure has created this for the consumer. Over the past 50 years, consumers went from being conditioned to use cash to pay for goods and services to using bank and credit cards.
The next evolutionary step will be mobile payments, which are still linked to your bank account but in the future will no longer require you to carry either cash or a card on you.
Understanding our current lack of freedom
Another problem that bitcoin faces in terms of granting people financial freedom is that most consumers do not see the problem that is staring them right in the face: The current financial infrastructure is failing.
Printing ourselves into trouble
There’s a total supply of 1 million U.S. dollars for the entire world, and the value drops to half of what it was. Every dollar is now worth 50 cents. The Federal Reserve decides to print an additional $1 million to stabilize the economy.
You would then say that, because there’s twice as much money, the value is restored to its previous level. But this is wrong. Rather than every dollar having a value of 1, as it was at the beginning, there are now $2 million in circulation to achieve the value of $1 million.
And with every dollar being worth 50 cents, $2 million adds up to $1 million again. Ouch! But with double the money supply needed to achieve the same financial value, you are only worsening the problem, rather than solving it.
Your original $1 million in circulation has not gained any value, and if the financial value were to devalue even further, the original supply would be worth even less than what it is today.
In the end, a domino effect is created where layers of debt are put on top of layers of debt until there is nothing left but empty promises. Double, triple, and quadruple ouch!
Should this cycle continue, a country could experience hyperinflation — as was the case in the German Weimar Republic in the 1920s or indeed as happened very recently in Zimbabwe from the mid-1990s until 2009.
Now, though we must all assume that the central bankers are indeed acting in the interest of the common good, it’s worth considering the potential negative effects.
If the U.S. Federal Reserve — or the European Central Bank for that matter — suddenly decides that more money needs to print “to boost the economy,” no one can stop them from doing so.
If this were to happen — again — it would not solve the existing problem of fiat currencies dropping in value, but would instead increase the amount of debt.
And the everyday consumer will pick up the bill for that debt because we’re the ones empowering these centralized bodies to make the situation even worse.
Printing additional money means more money is in circulation, which is true. But only so much value may be linked to the existing money supply, and that additional money only further devalues the existing supply.
It’s a vicious circle and one that bitcoin sits outside of. See the sidebar “Printing ourselves into trouble” for a nightmare scenario that could well come true.
Checking out the difference between bitcoin and currency freedom
The nightmare scenario created in the sidebar “Printing ourselves into trouble” brings us to one of the major differences between bitcoin and fiat currency, especially in terms of financial freedom.
The fiat currency you have in your wallet or in your bank account represents a certain value.
For example, a 20 euro bill is “worth” 20 EUR. Or that is what the financial institutions tell you anyway, as there is no way for the everyday consumer to verify how much their piece of paper is actually worth.
With bitcoin, the free market determines the price of a bitcoin, or even smallest divisible unit, called a satoshi. If the free market — which is made up by all of the bitcoin users around the world — decides that the new bitcoin price should not be the U.S. $250, but $10,000, no central authority can say this cannot happen.
Bitcoin is one of the very few transportable and borderless digital currencies that can both lose value — like fiat currency — but also gain value, like precious metals.
Granted, the bitcoin price is currently denominated in various local currencies, which is also a positive thing. Even though bitcoin itself is a borderless payment method to send and receive money, it still has to be converted to fiat currency in most countries before it becomes usable.
This level of financial freedom allows anyone in the world to send the value to anyone else on this planet, and they can convert it to fiat currency or store it in BTC, depending on their preferences.
Bitcoin removes the need for remittance services such as MoneyGram and Western Union, which not only charge high fees but also require personal information and verification every time you send or receive a payment.
Bitcoin requires no verification of identity, giving users a level of privacy protection they are not accustomed to, either through the use of cash or banking services.
Freeing your mind
On a mental level, being free from all of the obstacles put along our way by traditional financial infrastructures is a moment of sweet liberty.
In fact, you have to experience it for yourself before you can even believe it. And there are many options at your disposal to experience that freedom, ranging from paying everyday bills in bitcoin to receiving (part of) your wages in bitcoin.
All the necessary tools to cut out the middleman — banks and like‐minded institutions — are at your disposal and undergoing continuous development to improve the service they offer.
The same can be said for the ideological freedom associated with bitcoin. Even by using bitcoin as an everyday consumer, you are actively helping build and strengthen the bitcoin network.
And with more people using digital currency, there’s more interest from merchants, institutions, governments, and companies, which in turn leads to further improvements to the way in which bitcoin operates and functions — collectively known as the bitcoin protocol.
And that future development will help create a better world for everyone. Call it a butterfly effect if you will, but the best way to support bitcoin is by being an active member of the network and the ever‐growing community.
When it comes to security, bitcoin generates a lot of discussions. This is because the same aspects that give bitcoin its level of freedom also create a security concern for people. And this is a fair point, as there are security risks associated with any financial vehicle, including bitcoin.
Bitcoin is not subject to the desires and whims of central bankers who may want to devalue their currency in order for their economy to become more competitive, for example.
Thus, in purely financial terms, bitcoin potentially offers a more secure and robust system in its own right compared to traditional financial institutions.
Assuming that, with time, there is enough liquidity and a sufficient volume of trading within the bitcoin ecosystem, it should be the case that the market truly decides the value of bitcoin and that no institution or group of traders, for instance, should be able to influence the prices significantly.
Services associated with bitcoin are always on the lookout for security improvements, and future implementations of blockchain technology will only increase the overall network security.
Most individuals want to have as much control as possible over their finances, and the same is true of bitcoin users. And if the devices you do your banking on are not properly secured, no one will bail you out if you lose your money.
In the case of bitcoin, security starts with users themselves, rather than signing up for a service and trusting the service with their money. Keep in mind such services exist in the world of bitcoin as well, but they were never intended to be used in that manner.
Remember that Bitcoin is a decentralized system, and this applies to security too — you need to be aware and take control of this from the very start.
From a technological point of view, the blockchain technology that powers the bitcoin network is applicable to many different aspects of life. Most of these implementations will include a higher level of security than we are using now, and we have only just begun to uncover the potential of blockchain technology.
A simple example of how blockchain technology could improve the current security features we use on a daily basis comes in the form of passwordless login. To access most types of services or platforms, such as e-mail, you traditionally need to enter a username and a password.
Blockchain technology could make the system of usernames and passwords redundant by implementing a login system linked to the blockchain and your bitcoin wallet address. No more forgotten passwords for bitcoin users!
Beyond identity security, bitcoin is helpful to security in other ways too. Counterfeit goods are a huge thorn in the side of governments all around the world.
Whether in the form of clothing, software piracy, or even medicine, people are losing money and getting hurt because of this criminal activity.
With blockchain technology, we can track the manufacturing process of every item we purchase and verify whether or not it is genuine. Whether governments in all parts of the world would be keen to roll out such a scheme remains to be seen — let’s just say that some may be more willing than others.
The underlying technology of the bitcoin network allows us to discover and implement many new security features which we could have only dreamed of a decade ago.
But it will take time before we can harness that technological advancement, and we need more active developers looking into the possibilities. The bitcoin network is only as strong and secure as the people — both general users and developers — who are supporting it. It will require patience.
One of the biggest flaws in the current financial infrastructure is the risk of fraud and chargebacks.
Fraud comes in many forms, ranging from counterfeit cash bills to stolen credit cards, hacked PayPal accounts, and breached bank accounts. But there is also fraud on the receiving end, as some payment methods do not allow you to receive a refund.
Trusting no one
If you want to buy something online on a platform like eBay or even a regular webshop, the only likely payment options are credit cards, PayPal, or wire transfer.
Choosing a wire transfer would be the worst possible option in this case, as wire transfers are nonrefundable.
Should you send money to the bank account of the company running the webshop? You would be trusting them to be honest, acknowledge they received the funds, and ship your goods. But there is no way to ensure they will ever do so.
And if they don’t, you have no way to claim your money back, even though you are technically “protected” by your financial institution. Crazy, eh?
Using PayPal is not the safest option either. PayPal protects the seller in most cases, even though it advertises “Buyer Protection.”
Fraud from either party is possible because the seller can receive money and never ship the goods, or the buyer can receive the goods, claim they never received them, and ask for a refund anyway.
If you pay for an item and never receive it, you can open a dispute; but if the seller can provide a tracking number — even if they shipped an empty box — there is not much else a buyer can do.
Which brings us to the most insecure payment method to ever be accepted by both online and physical stores: credit cards. A credit card is a piece of plastic with a magnetic code that contains a lot of confidential personal information, such as your card number, expiration date, CVV code, and even the pin code of your card.
In some cases, all that information is stored on the chip on your credit card.
The major problem with credit cards is that you have to physically hand over the card or card details in order to make a payment.
Even though more countries will let you insert the card into a card reader, they will still take out the card and check your signature.
And you usually need to verify that signature by either signing the receipt or showing them a government‐issued ID card. Neither method is very safe and both can be seen as breaches of user privacy.
. . . apart from Bitcoin
A BTC transaction can’t be reversed. Once the funds have been sent to a different address — even if it is still waiting for network confirmations — you can’t get your money back.
This is also one of the downsides about being in control of your own finances again: There is no one to bail you out if things go awry.
Always check the payment details before executing a transaction. That being said, bitcoin’s non‐reversible aspect is a blessing for merchants who are otherwise at the mercy of traditional financial institutions.
As soon as a bitcoin payment is made, the merchant can fulfill the order without having to worry about a potential
chargeback or refund. Bitcoin does allow for merchants to refund an order in case of damaged goods, as they have the bitcoin address where the money was sent from.
Rather than relying on a credit card company or bank to process the refund, merchants can take care of this process on their own.
Plus, bitcoin transactions are credited and debited a lot faster than traditional payment methods, which is beneficial to both buyer and seller in the long run.
Bitcoin does a lot to prevent fraud for the merchant and the customer in the regular financial process. But if a user’s wallet gets breached and coins are stolen, there is very little that can be done to prevent those stolen funds from being spent by the thief.
Though such an event is technically not fraud, the merchant could be on the receiving end of fraudulently acquired coins — not that that will be visible, nor should it usually be of much concern to the merchant, as they received funds from a user and completed an order.
That said, unlike a fiat currency, there is no central regulator, and thus once again end‐users need to assume responsibility for their own security.
The biggest advantage presented by bitcoin — or to be more precise, the underlying blockchain technology — comes in the form of creating a completely transparent trading system.
For those individuals and businesses who may want to avoid transparency — such as, for instance, in the non‐declaration of various taxes, the transparency of bitcoin may be an issue.
However, not only does the blockchain act as a public ledger for every financial transaction on the bitcoin network, it can also be adapted to suit other needs such as file storage, property ownership, trading of assets, or even verifying the manufacturing process of medicine. The possibilities are really only limited to the bounds of human ingenuity.
The major focus of bitcoin and blockchain technology has always been in terms of finances. And although bitcoin lets you send money to anyone else in the world at little to no cost — and gives you the ability to track this payment to the recipient — that may not be ideal for everyone.
This is why it is so important to keep in mind that Bitcoin is much more than a payment method. For example, you can put the ownership of your car on the blockchain and have it time-stamped by the network when the block associated with your data is confirmed.
If you ever sell that car, you can digitally transfer its ownership by sending it to anyone else on the bitcoin blockchain. And once that transfer has completed and confirmed on the network, the new owner can officially lay claim to that car. No paperwork needed — just the exchange of keys and the sending of the digital asset which represents the car.
Not every consumer wants to see his or her financial details broadcasted on a public ledger for anyone to see.
That is completely understandable, but you have to keep in mind that everyone is pseudonymous on the bitcoin network — there’s no reason to think that anyone else will find out who are you if you don’t want them to.
Your wallet address is what links the transaction, but there is no name or physical location attached to the address itself.
That being said, the current financial infrastructure offers no oversight as to how bitcoin’s stored value is being used. The funds you keep in a savings account are there for you to see, represented by a list of digits in terms of what the bank owes you.
But everyone knows banks are using your money to create more money, though you have no idea how that is happening. All you know is that banks are playing with your money, and if they lose too much of it, they need to be bailed out by the government.
Or to be more precise: Everyday consumers need to bail out the banks because they lost the money we let them safeguard for us.
The transparent nature of bitcoin and blockchain technology is beneficial in so many ways to so many people. With more and more companies and developers focusing on additional uses for the blockchain outside of the financial space, you never know what might be in store next.
And if you have a good idea, why not join in, start using bitcoin, and see where it leads?
If there’s one thing about bitcoin that improves finances for people all around the world, it is that as a digital currency, bitcoin transactions invoke very low — or non‐existent — fees to move money across borders.
Hooray! This flies in the face of traditional financial infrastructure, which charges fees of up to $50 for international wire transfers, or remittance solutions such as Western Union, whose fee structure may amount to more than that depending on the amount to be sent and the location of the receiver.
You could argue that precious metals can be used as a way to transfer value across borders as well. And although there is merit to that statement, moving gold or silver around incurs other fees in terms of logistics, which usually end up more costly than the aforementioned methods.
And exactly how many gold bars do you have tucked away behind the sofa?
And this is where bitcoin is making a global impression, by taking on the current remittance market. Especially in countries where it is difficult — or sometimes even impossible — to get a bank account or credit card.
Bitcoin can make a large impact in providing citizens with an alternate form of payment that can be converted into any global currency.
Several companies are already competing in this market, targeting areas such as Africa and the Philippines. So far, these services are successful on a smaller scale, but they will likely be expanding at an exponential pace in the future once word gets out from local communities.
And there are plenty of improvements to make to this system in the future, as we are only just learning the potential
of blockchain technology.
The same principle of low fees applies to those who are receiving bitcoin, as any transaction fee associated with the transfer is paid by the sender.
This opens up a lot of ways for companies to cut down on overhead costs whenever they have to pay their employees, especially remote workers in a different country. Plus it also removes any delays in payments that can otherwise take up to several weeks to clear.
Subtracting the Cons of Bitcoin
Bitcoin is great! Yeah, okay, we all know that already. We hope you’re feeling pretty sold on the concept right now. But hold onto your hat for just one moment: In the interest of fair play, we want to highlight a few potential downsides.
Awareness and understanding
Talk to the average Joe on the street about bitcoin, and you’ll probably receive one of two possible responses:
✓ They’ve heard of bitcoin because of Silk Road, Mt. Gox, or other types of scam associated with this disruptive currency.
These types of bitcoin stories have been picked up by mainstream media all over the world.
✓ They’ve not heard of it or they know a few things but cannot put the whole concept and ideology together. Lack of mainstream exposure is one of the issues that has been plaguing bitcoin for quite some time now; its PR image caters to tech-savvy people.
Raising bitcoin’s profile
In fairness to the average Joe, the entire bitcoin concept is fairly technical, as most of the focus revolves around blockchain technology.
But you don’t need to know every nook and cranny about bitcoin in order to use it. Setting up a bitcoin wallet requires the installation of software on a computer or an app on a mobile device. There’s nothing else to it.
Still, there are a ton of people out there who have never heard of bitcoin. And even if they have — in one way or another — they may not have any interest in it. As a result, there is an educational problem with bitcoin, which causes analysts to call the technology “far ahead of its time.”
The more bitcoin enthusiasts can convince others to use it for their transactions with us, the more it will grow, and the more common knowledge of bitcoin will be.
As long as there are no more educational efforts focusing on bitcoin on a consumer level, it will never gain mainstream adoption.
The technology side is pretty well covered for now, with tons of companies working on various implementations. The time has come to educate the average people on the street on the benefits of bitcoin and why it is in their best interest to get involved. We like to think that’s where this book comes in. Share it widely!
Meeting up with bitcoin people
If you can convince someone to try bitcoin, a domino effect often follows. Spreading the word about bitcoin on a level people can understand, comprehend, and tell others is the key to gaining mass adoption in the future. All hail, bitcoin!
Unfortunately, information on bitcoin through conversation or presentation is not that easy to come by. There are several bitcoin conferences around the world every year, but ticket prices are too high for the average person to attend.
Most of the sessions are later posted online, such as on YouTube later on though, which is a good thing. Keep your eyes peeled in the online community for further news.
Luckily, there are still local bitcoin meetup groups all around the world. These kinds of meetups are a great way to get to know people with a passion for bitcoin in or nearby a major city in your area.
Plus, bitcoin meetups are free to attend as well. You can find out more about your local bitcoin group by heading over to www.meetup.com and typing bitcoin into the search box. And even if there’s no bitcoin meetup in your area, no one’s stopping you from organizing such an event yourself.
It doesn’t cost any money, and most people prefer to meet up in a public place, such as a bar or restaurant where everyone can pay separately.
Even if that place does not accept bitcoin, people will be more than happy to meet up.
One of the things a lot of people really like about bitcoin meetups is that you can attend any of these events without any prior knowledge about bitcoin. And one of the greatest moments during meetups happens when you can inform someone about all of the wonders digital currency and blockchain technology can help us achieve.
Keep in mind these explanations do not have to be technical at all for people to understand.
Bitcoin can unite people from all different aspects of life, and once you find some common ground, it becomes easy to strike up a conversation. Once you find yourself in a position where you feel you have a natural way of explaining bitcoin and digital currency to people, you can always consider giving presentations on the subject.
There are usually plenty of opportunities to become a speaker.
Granted, this is not something just anyone can do, as you have to feel comfortable speaking for larger audiences. At bitcoin meetups, these crowds are anywhere from 5 to 150 people, whereas conferences usually draw around 300–500 people.
What might be even more important than just giving a presentation is finding ways to engage your audience. This is the same for a one‐to‐one conversation as it is when addressing multiple people.
Make sure they can interact with you, rather than just sit around and listen.
Once people become interested in the concept of bitcoin, they automatically want to learn more on the subject and the underlying technology. There is so much to tell about bitcoin without even involving words like “blockchain” or “technology.” Just describe bitcoin for what it stands for, rather than what it is trying to achieve right now.
One of the core elements of any kind of payment technology is trust. If you don’t trust your bank, you will never use a bank account or a debit or credit card. You’ll keep your money in cash in a drawer somewhere.
The same can be said for Bitcoin: If you don’t trust it, you will likely stick with the financial infrastructure you are used to. “The devil you know” is quite an appropriate saying in that regard. Check out the nearby sidebar on trusting modern tech for a mind‐changing viewpoint.
Given the number of headlines concerning bitcoin and scams, hacks, illegitimate services, and whatnot, there is a huge trust issue bitcoin needs to overcome. Rather than trusting the economic value of a bitcoin individually, it is more important to put your trust in the entire bitcoin network.
That includes all associated services, companies, mining pools, and users in existence today, plus the ones that will be joining the network in the future.
Bitcoin is still in its very early stages. It has been around for a little over six years at the time of writing. As is the case with any form of payment method, adoption is slow and faces a lot of adversity and scrutiny from competitors.
One thing people tend to forget is that bitcoin is not necessarily here to replace the current payment methods but to show how things can be done differently in a more transparent manner.
You need to ask yourself the following question: “Do I trust the current payment infrastructure enough to keep my data safe at all times, not give it to third parties and protect me from financial harm?” If the answer to that question is not a resolute yes, then bitcoin is definitely worth checking out.
Even though most finances are currently being controlled by financial institutions who have failed customers time and again, we still trust them with our money. The reason for that is simple: It is convenient to use a bank account and bank card for storing and transferring money.
Because that is how we were taught to use it. It’s also true to say that banks have a virtual monopoly on what they do in providing financial services, and alternatives have historically been few and far between.
These days, there seems to be a shift in consumerism, as traditional financial institutions want to dictate how we can spend money, and more importantly, how much we can spend. In most countries, banks limit the maximum amount of money you can withdraw from an ATM to 500 euros or $750.
Granted, in the Western world, consumers have other options to pay for goods and services. Bank cards, credit cards, and even bank transfers are frequently used to pay for just about anything, and cash is slowly becoming obsolete.
But what if banks decide to limit the funds you can spend using any of those other payments as well?
Traditional financial institutions want to hold on to any funds you deposit as long as possible, so they can loan the money to other service providers and accumulate interest on it.
This is one of the reasons why wire transfers take several days to reach their destination, as every bank wants to take a cut of the fees for as long as they possibly can. Other reasons include the inherent slowness of the banking clearing platforms such as the SWIFT network.
Although the pan‐European SEPA (Single Euro Payments Area) platform has facilitated quicker wire transfers within European countries, the actual performance and functionality may rely on how the system has been implemented by individual banks.
Not that there is anything wrong with that — it’s a business model like any other. That said, the customer is the victim of these delays because late payments invoke more fees from the company waiting for its money. There are ways to speed up the process, but financial infrastructures are sticking to their old methods.
Or to be more precise, there is one way to change that system, and that is by uniting and demanding change. Wouldn’t you like to see your money stored on a public ledger, which you can check at all times and send to anyone in the world without delays or transaction costs? If the answer is yes, then bitcoin is worth checking out.
No one is saying you need to put your full trust in bitcoin from the start, as there is a lot of information to sift through. But if you are willing to keep an open mind to what bitcoin stands for and the point it is trying to get across, you can make a weighted decision on whether or not to put your trust in digital currencies.
Trusting modern technology
Trust is something that is easily given by consumers these days. We blindly trust most of the services we use on a daily basis. Social media platforms such as Facebook, Twitter, and Instagram hold a lot of our valuable data, all of which we are more than happy to give to them.
Why? Because we trust them enough with our data so that we can conveniently share it with friends and family.
But hardly anyone realizes what these companies can do with our data. When signing up for an account on any of these services, we accept their terms and conditions. And those terms and conditions usually state that they can share the data with third parties for advertising and other purposes.
Yet many who blindly trust Google, Apple, Facebook, and others end up taking a negative stance toward bitcoin. That is the major difference between services we use that do not touch our finances, compared to services that are disrupting the financial world.
Human nature makes us wary of everything that is new and brings change, as we do not like to change things all that much.
Now if the banks themselves all had a blockchain‐based transactional system, transfers anywhere within that network would be done almost instantaneously, with funds available to spend shortly thereafter.
With such a system in place, there’s no reason why a Nigerian migrant worker based in the UK couldn’t send his family back in his home country money within a couple minutes — now wouldn’t that be something!
Risk and volatility
Bitcoin is a financial tool that carries risks just like any other payment method or currency does. However, with bitcoin, those risks are slightly different from traditional currencies and payments.
Part of that comes in the form of a rather volatile price, but then again, any local currency fluctuates on a daily basis.
Bitcoin and the underlying blockchain technology reduce a lot of the risks presented by traditional payment methods. There are no chargebacks, fraud is tough due to transparency, and the transaction fees are very low compared to credit cards, wire transfers, or remittance services.
That’s not to say that there are no risks attached to bitcoin either though. It’s a new breed of technology which is part ideology and part payment method. The technology is still under development as we speak.
We are still discovering potential use cases for blockchain technology. So if you’re planning to invest in bitcoin from a technological development point of view, there is always risk involved. Even the best solutions and implementations may not be viable in the end, if nobody adopts them.
But there is a flipside to that story as well. Blockchain technology development shows lots of room for growth and creates jobs in the long run. Every new technological discovery needs people who can implement and maintain this new advancement, and preferably in a user‐friendly way.
From a technological standpoint, there is hardly any risk when investing in bitcoin itself. Investing in a company that is working on this new technology is a different matter altogether, but that principle is the same for any company you want to invest in.
Bitcoin company investments are not inherently riskier than investing in any other startup company.
When it comes to speculating on the bitcoin price, however, the story is a bit different. If you look at bitcoin from the perspective of an investment vehicle that will likely gain value, there are quite a few risks attached. Speculating on price volatility is never a good idea, and bitcoin is proving to be rather volatile on a daily basis.
Ever since its inception, economists and investors have been keeping a close eye on the bitcoin price. What started out as a worthless digital token quickly rose to something that actually held value, once the U.S. $1 mark was reached.
And even though the price continued to rise and fall until its peak of over $1,100 in 2013, many people still viewed it as fake Internet money.
To this day, bitcoin is often referred to as just that: “fake internet money.” Meanwhile, bitcoin has been making waves in the financial world. Investors from all over have been buying up bitcoin, as they feel BTC is a safer method of storing and transferring value compared to precious metals or traditional payment methods.
Limited use (for now)
Bitcoin cannot be used for every aspect of our daily lives just yet, even though you can pay with BTC for virtually anything in‐store or online.
On top of that, you can even pay regular bills in bitcoin using a third‐party service. But none of that was the intended use envisioned for bitcoin and blockchain technology: The main objective was to cut out the middleman.
It will take a few more years — at least — until merchants start pricing their goods and services in BTC value rather than using the conversion from a major currency.
But before that can happen, bitcoin needs to be adopted by the mainstream consumer, not just an “inner circle” of enthusiasts. And bitcoin can only gain mass adoption once we get more educational efforts underway in all regions of the world.
Unfortunately, most of these education efforts are U.S.‐oriented, where bitcoin will most likely not be making an impact in the immediate future.
Key areas and emerging markets such as Africa, Asia, and even Australia have been overlooked in our opinion. Even though Australia may be an odd name on that shortlist, it is an interesting area for digital currency regardless.
Asia and Africa are obvious choices, due to their remittance market potential, being underbanked, and technological prowess.
Despite all of that, bitcoin is usable as a payment method for virtually anything, though you may have to jump through some hoops.
Bitcoin debit cards are proving to be a great example, as they allow you to spend BTC wherever major credit cards are accepted.
However, that will not push merchants to accept bitcoin all of a sudden, as it is just a regular card transaction to them. And paying bills with bitcoin is possible as well, even though those services are limited to SEPA zones only for the time being.
Once again, this will not push companies to accept bitcoin all of a sudden, as they receive a regular bank transfer like they always have done. But both of these examples serve a different purpose.
SEPA zones are European countries where the SEPA protocol is used by banks and financial institutions. SEPA allows citizens to send bank transfers, denominated in euros, to other countries using the euro in a short span of time (usually one to two business days).
SEPA is a forerunner of bitcoin — a case that has the potential to change the financial system as we know it. Whereas the blockchain technology is still being fine‐tuned — and will take many more years — bitcoin can easily be converted to a different fiat currency and used to pay for goods and services.
With mobile payments becoming more widespread, bitcoin is a very strong contender. In fact, mobile bitcoin wallets were available even before most financial institutions unveiled their mobile apps.
And most of these wallets have been improved over the past few years, making the transfer of bitcoin as easy as scanning a QR code with your mobile device’s camera.
Whatever the future may hold, odds are bitcoin, or at least its blockchain technology will play a major role in it. If things go according to plan, both the blockchain and bitcoin will be the most commonly used methods to transfer money across borders at zero fees. In fact, bitcoin may become the best form of money ever invented.