ARE WE CRAZY? Arguments against cryptocurrencies and Bitcoin.
Are we crazy? Arguments against cryptocurrencies and Bitcoin.
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Distinguishing the terms
In order to look at the potential disadvantages we will have to look at three sections:
Cryptocurrency -> is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions.
Bitcoin -> by far the biggest and most popular cryptocurrency which is almost 70% of the total valuation of cryptocurrency market. Bitcoin price movements affect all of the other cryptos.
Blockchain -> is the technology behind most cryptocurrencies. It's a database which is growing list of records, called blocks, that are linked using cryptography.
4 main Bitcoin Disadvantages
Transaction fees - Bitcoin transaction fees are still relatively high and are currently between $1-$2. At the peak in December 2017 fees reached almost $40 and the peak this year was almost $6.
Transaction speed - it currently takes between 10-20 minutes and at the peak in 2018 took several days.
Lost wallets - Most people are not ready to take full responsibility for their assets and are not able to manage their private keys securely. A lot of Bitcoin have been lost or stolen.
User friendliness - It is difficult to use Bitcoin - opening wallets, buying Bitcoins, sending Bitcoins are all tricky for new users.
Transaction fees and speed - The fees and speed are deeply connected to the volume meaning more transactions will increase both. Lightning Network is the obvious solution here and it works creating channels between users where it conduct numerous transactions outside of the main blockchain and then record them as a single one. It needs to be widely adopted however.
Lost wallets - Centralised wallets are the solution here but there is no solution for truly decentralised wallets where users are their own bank.
User friendliness - This is being constantly improved with new user friendly apps and programs being introduced. There is still room to improve here but with time it's gonna get better.
4 main Crypto Disadvantages
Government crackdown - Crypto is being constantly targeted by goverments and is still banned in many places. Goverments do not like competition and also cryptos are often used to dodge taxes.
Scams - scams are still extremely prevalent in the crypto space: phishing, 51% attacks (where networks are overtaken), scammy ICOs, hacks and stolen funds.
Usage - Crypto is still rarely used to actually buy stuff in shops, it's also rarely used to transfer value.
Number of useless cryptos - there is 2500+ cryptos, around 99% of cryptos have no value so it's easy to lose money
Government crackdown - there are many countries that embrace crypto so plenty of crypto based projects move to those. As for general crypto/user bans those are super difficult to perform.
Scams - scams will always be there. Apps providing crypto services can improve the security further to ensure the users are protected.
Usage - more shops have to accept crypto but projects like crypto debit cards or apps that let users to use crypto in every day situation are crucial here and the development goes well in those.
Number of useless cryptos - bad cryptos will die and any remining funds from those will go to more established projects.
Are the disadvantages are problem?
In my opinion the potential government crackdown is the biggest issue however in reality that would be extremely difficult to perform due to the decentalised nature, VPS and the fact that crypto projects can migrate to other countries - still any significant bans (like US) would affect the price negatively.
Most other issues like ease-of-use, safety, scam protection, use cases, speed and costs of transactions will all improve in the future once technology improves.
As for be-your-own-bank disadvantages this is the nature of cryptocurrency. Users have to manage their own keys and ensure the safety of their assets.
The future is bright
Bitcoin halving is coming next year - in the past it always resulted in significant bull runs, Ethereum 2.0 with staking feature is coming too which will allow people to stake their tokens and increase demand. The history showed growth in bubbles and it's time for a next one.
Several decentralised apps based on blockchain and cryptocurrency are coming, projects that allow real life usage of cryptocurrencies are also incoming (debit cards, NFC mobile payments). On top of that we have projects like Bakkt, Fidelity meaning more high caliber investors and less manipulation.
Scam projects from the ICO craze are dying down and with time crypto market will mature and even less scams will be done. Regulations can help with that too if needed.
There is more push for privacy and decentralisation due to censor
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