Cryptocurrencies can be considered a safe option for doing any kind of transaction because they have made it easier to make purchases and transfer money without the involvement of a third party like a bank or a middle man. These transactions are secured by public or private keys. The transactions can be quick and anonymous and across borders, if required.
Apart from the security, the value of cryptocurrencies, especially Bitcoin, has skyrocketed in the last few years. For the first time in 2021, the price of Bitcoin raised to an unbelievable amount of $60,000.
On several occasions, Bitcoin has been compared to gold. Many investors consider Bitcoin as an asset that will grow over time, even though their value keeps fluctuating; the last couple of years have looked good for them. However, the value of cryptocurrencies is hard to explain because one of them, Dogecoin, was created as a joke and its valuation has only increased because of the support it got from big entrepreneurs and influencers.
Experts say that in some countries, cryptocurrencies will soon become the dominant form of payment.
What are the challenges that come with cryptocurrency?
Like we have mentioned before, cryptocurrencies tend to be anonymous, which appeals to criminal groups and rogue states. In addition to this, crypto-mining uses up a lot of electricity which has made people question the effect it has on the environment. Also, the rise of payments via crypto has raised doubts about the protection and security of the customers, the unpredictability of the market and the monetary policies that are carried out by central banks. Some major challenges that have come with the rise of cryptocurrency are –
- Illegal activities – Over the last few years, cybercrime has been on the rise. There are criminals who have illegally hacked the computer software of big companies and demanded money to reinstate them. They often demand the payment to be in cryptocurrency. Several illegal transactions like buying and selling of ammo are also often done via crypto.
- Harmful for the environment – Mining a cryptocurrency requires a lot of electricity and energy. The network for mining a Bitcoin consumes more energy than a lot of countries. This could have an adverse effect on the environment. It could contribute vastly to climate change. Recently, the concerns regarding the climate prompted Ethereum to move to a proof-of-stake model that requires a lot less energy.
- Unregulated money – The rise in the value of cryptocurrency indicates that transactions worth billions of dollars are taking place and especially in an unregulated sector. This raises concerns of fraud, tax evasion and cybercrime.