In the wake of the Russia-Ukraine crisis and the continual surge in Cryptocurrency trading, The President of the United States on Wednesday, 9th March, 2022 signed an executive order for the government to look into cryptocurrencies. For you, our dear readers, we shall examine the risks and benefits of Crypto.
Benefits Of Cryptocurrencies
- Access – Anyone with Internet access and an account can use cryptocurrencies. One can trade crypto 24/7 from anywhere as they are decentralized and not restricted to one country.
- Ease of Payment – Gone are the days when one had to wait in a long queue before being able to send money to someone. With crypto, users can easily transmit payments to each other’s digital wallets in seconds with very low transaction fees, compared to banks or credit cards.
- Privacy and Security – With crypto, you are rest assured you can remain anonymous as the platforms run on blockchain technology which has proven quite secure and private. It is also worthy of note that this particular trait of crypto is the most controversial because of the government.
- Peer-to-Peer Trading – Users have control over their digital wallets and can transact with one another, anytime anywhere. Because they do not use third-party intermediaries, cryptocurrency transfers between two transacting parties are faster as compared to standard money transfers.
However, if one’s access to the wallet is lost (maybe in case of losing a phone, private key or forgotten password), it can be a major challenge.
Risks of Cryptocurrencies
- High Volatility – The volatility in the pricing of cryptocurrencies is intimidating and threatens widespread acceptance. The prices are not stable and can rise or fall anytime, leading to investors losing their money.
- Illicit Trading – One of the major reasons why governments are reluctant to accept and fully incorporate crypto is the fact that it can be easily used to facilitate illegal trading. Because of its anonymous nature, anyone can use it as a means of funding or fueling illegal businesses to avoid trace.
- Energy Consumption – Cryptocurrencies are mined through different algorithms. Mining popular cryptocurrencies requires considerable energy, sometimes as much energy as entire countries consume.
- Hacking/Scams – Cyber criminals and hackers can use crypto as a means of defrauding people.
Many investors have been victims of crypto scams through peer to peer trading and fake exchanges. Even crypto companies are not left behind as we have also had cases of cyber attacks.
We cannot deny the fact that cryptocurrencies’ advantages and benefits outweigh the risks but still, investors and users are advised to trade with caution and use verified platforms and exchanges.