Around 2009 a new concept of currency was introduced. The concept seemed a little vague about the usage of this currency but two years later, Bitcoins has emerged as a fast catching trend. Proclaimed as a decentralized digital currency, more people and business have started using Bitcoins. Though the currency is still in its experimental stage regular updating and frequent tweaking is done to improve it in every way possible. Unlike other banking networks Bitcoins are not controlled by anyone. The network has a set of protocols protected by cryptography. It’s a new payment system which has no central authority other than the cryptography (open source software working with the laws of mathematics) which handles the creation and transaction, making it impossible to cheat around the system. The Bitcoins share a public ledger (block chain ledger) where every transaction is recorded making it a prominent triple entry bookkeeping system and a transparent recorder. Using the peer to peer system and a cryptographic key, transactions are processed between clients. As the key cannot be deciphered it’s a more safe form of internet cash than performing transactions with credit and debit cards.
As with every new emerging trend, the Bitcoins have advantages and disadvantages. But if the obstacles are removed, it might help re-imaging of International finance. The advantages of Bitcoins are
- The users have total control over the money, they can send and receive any amount of payments at time of the day. As these transactions are not performed by banks or organizations but between individuals its easy as sending a file.
- The transactions require no or very less money compared to other online money transfers which stick up a hefty fee, the only service in Bitcoins is done by the miners to facilitate the transaction recording on the block and that doesn’t cost much.
- This is the most secure and irreversible form of cash transactions where no personal information is traded. Most people will opt for this method as it removes major hassles involved in other transactions.
- Large markets and small businesses have widely accepted it as it helps in quicker and reliable money transfers with very little administration cost.
- When other currencies are affected by price fluctuations, the same cannot be said for Bitcoins.
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The disadvantages of Bitcoins are listed below though they can be turned around. The new rules and updates are being constantly worked on by various trusted parties to help shape this up.
- There is no guarantee and no purchasing power provided yet.
- The Bitcoin price has yet to stabilize, which can only happen when the number of users and businesses using bitcoins increase.
- Client programs used as wallets cannot guarantee or provide insurance on the Bitcoins.
- The currency has yet to mature and get a better hold on the market.