BITCOIN AND BLOCKCHAIN FACTS
Are you curious about blockchain and cryptocurrency technologies, and the influences they have on social banking? Here are some facts about the effects of blockchain and one of the most popular cryptocurrencies, bitcoin:
Blockchain technology has several advantages such as, promoting peer-to-peer transactions among others. But it does have its fair share of challenges including limited scalability. Each transaction that goes through blockchain has to pass through every single device in the blockchain network. This limits the number of transactions that can be carried out on a daily basis.
Today the Blockchain Technology used by Bitcoin has a maximum of approximately 600.000 transactions per day.
Additionally, cryptocurrency miners, using the blockchain technology, require large amounts of electrical power to mine new coins. This raises several questions about its environmental footprint. The mining of cryptocurrencies such as bitcoin are having a major negative effect on the environment.
The new 'gold rush' to mine cryptocurrencies has resulted in a major increase of energy consumption. As bitcoin continues to rise in popularity and value, there is a greater demand for high energy processing devices used for mining.
There is a lot of volatility in the trading of Cryptocurrencies. Between November 2017 and January 2018, the price of 1 bitcoin has been fluctuating between $19,000 and less than $10,000. These volatile price changes make it very difficult to judge when and if a person should buy or sell their coins. Some people, in the fear of loosing out, have put their savings into digital currencies and lost all their money. It goes without saying that this cannot be said to be a stable and sound investment idea.
Speculating in cryptocurrencies does not come without its fair share of risks including the fact that many cryptocurrency exchanges are unregulated. The users of these exchanges can thus be subjected to exploitative currency exchange and transfer fees and many do loose their digital money to scammers, hiding behind the anonymous ‘invisibility cloak’.
With the unregulated environment that exists, criminals like hackers, scammers, money launderers and drug dealers use digital currencies such as Bitcoin and the more anonymous ones like Monero and ZCash to conduct their illegal deals. Currently, there is no way for governments or central banks to monitor transactions on Monero, as the details are encrypted and fake addresses created. This then makes it difficult for law enforcement to trace the senders of ‘suspicious’ transactions and leaves the criminal world to flourish online.
Additionally, Bitcoin and other digital coins are usually not based on any fiat currency. Thus the more people buy into speculation of these tokens, the more inflated their prices become. And in the end, this inflation spreads back to the real economy. The end result is economic instability, where those who cannot afford to buy digital currency face more expensive products and services. Socially, this only helps increase the gap between the rich and the poor.
Cryptocurrencies do have several advantages and uses, but the concerns mentioned above will need to be addressed, for a fair and transparent digital system to exist. Maybe it is time to start thinking about a stable cryptocurrency, with good governance, for the real economy!
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