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The growth of the internet has led to the growth of digital transactions. This has limited the use of traditional currencies to do borderless transactions. Due to many limitations of traditional methods of payments like time delay, security risks, and expenses, digital transactions are highly preferred by people. The international currencies independent of banks or government and even a specific country have attracted companies, businesses, economists, and more.
People across worldwide prefer a currency that provides defense from inflation, security from theft, and anonymity to currency holders. These features lead to the introduction of digital currencies that enable the concept of cash transferred over the internet.
The most popular digital currency that came into existence and has attained outstanding growth is Bitcoins (BTC). A mysterious entity named Satoshi Nakamoto introduced bitcoin on white paper in late 2008, but it first appeared at the beginning of 2009. There are a limited number of bitcoins mined, i.e., 21 million.
Portrayal of Bitcoins
Bitcoin is a medium of exchange that allows easier, affordable, and faster options to transfer funds peer-to-peer. Technically, bitcoin is a virtual digital currency that works on blockchain technology and relies on cryptography to secure bitcoins transactions. Bitcoin is known to be the first modern currency from hundreds of cryptocurrencies available. Instant payments can be made anywhere and to anyone across the world.
Bitcoin is a decentralized currency; it means there's no involvement of third-parties like banks or central authority. No one can keep track of transactions or know the real identity of a person. The best thing about bitcoin is that the supply can never be manipulated by any individual, bank, organization, or government.
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Advantages of Bitcoin
There are hundreds of reasons why people prefer bitcoin over traditional currencies. Here, we will know the advantages of bitcoin to users:
Minimal chance of theft or attacks
Unlike banks that record all personal information of users, which is vulnerable to hacks, the bitcoin is not controlled by banks or central authority. Bitcoin allows users to have full access to their funds. Bitcoins don't have a physical appearance that makes it less vulnerable to fraud and theft. The bitcoins are stored in a digital wallet, which offers high security to bitcoins and transactions made.
Low transaction fee
In bitcoin transactions, there is no fee charged for bitcoin exchanges. There is no transaction fee because the product of bitcoin mining are offered new bitcoins as a reward for mining the bitcoins. No third-party is involved; therefore, there is no transaction fee charged, even payments that are done internationally.
Disadvantages of Bitcoin
Illegal activities
With no control of government or banks over bitcoins, there is no one to record transactions made through bitcoin. Most people tend to use bitcoin in illegal activities like buying and selling drugs, tutorials for hacking ATMs, assassins or guns for sale, etc. Bitcoins are used in various criminal activities like child pornography, stolen identities, drug sales, illegal weapons sale, prostitution, and human trafficking.
Vulnerable to theft or attacks
There are a few reasons that explain that there is a high risk of loss of bitcoin.
Restricted scaling
The bitcoin system is designed in a way to limit the rapidity and number of transactions that are processed. The restricted scaling makes it not likely that bitcoins can ever replace the traditional transactions.
Less security
Some bitcoin wallets use the internet to send and receive bitcoins; this makes the bitcoin immune to attacks. No perfect way exists to protect the bitcoins. There can be many attacks like fiduciary fraud, technical glitches, human error, and more. A bitcoin wallet consists of a private key, public key, and bitcoin address. A private key is a combination of numbers and alphabets and used to send bitcoins. If a bitcoin wallet user loses the private key, there is no way to recover the bitcoins.
Bitcoin has become the most demanded cryptocurrency, but before trading or investing in it, it is crucial to know the advantages and disadvantages. The bitcoin market's volatility scares people about investing it, but its outstanding features attract people across the world.
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