This post will show you the pros and cons of cryptocurrency payment.
Cryptocurrency, or virtual currency exchange methods, has seen rapid evolution in the last few years. Originally designed to eliminate financial intermediaries by direct peer-to-peer transactions, many developing countries have started adopting cryptocurrencies as an exchanging medium. Likewise, you can buy bitcoin with debit card.
Recent reports project that this market is primed to continue its revenue growth for several years to come. A recent report estimated the global cryptocurrency market size at $754.0 million in 2019, with projections of $1,758.0 million by 2027.
As cryptocurrency becomes more integrated into everyday life, consumer acceptance of digital currency continues to grow. So, what exactly are the positives and the negatives of using Bitcoin, Ethereum, Litecoin, or any of the other cryptocurrencies out there?
Let's get started with the pros and cons of cryptocurrency payment.
Table of Contents
If online privacy is important to you, then one of the main benefits that cryptocurrency offers is anonymity. Because purchases are never linked to personal identity, just like cash, a user is unable to be traced.
All of this means there is no chance of identity theft, an increasingly vital element when it comes to transactions, particularly online. Each time a user makes a purchase with a cryptocurrency, an anonymous address is generated for them.
This address will then change with each and every subsequent transaction. Of course, cryptocurrencies are not completely anonymous, but they offer a level of protection way beyond current traditional payment methods.
To many, transparency is what sets cryptocurrencies apart. All transactions using digital currency are stored using blockchain technology on a public ledger that is visible to everyone.
The information is decentralized, which means it does not rely on just a single computer to work. Therefore, all transactions are instantly visible to everyone allowing them to see that payments have been made.
So instead of using a traditional bank to transfer money, blockchain and cryptocurrencies are able to eliminate the middleman.
Compared to using traditional banking methods for transactions, the cryptocurrency exchange is extremely quick, especially when it comes to transferring high-value sums. Whereas banks can often take several days to process purchases, the speed of digital currency cuts out the middleman, changing the speed we do business.
Many online gamers value the benefits of cryptocurrencies although it is not yet widely accepted on many gaming platforms. However, you’ll notice that PayPal poker is readily available, highlighting the gap in trust between cryptocurrencies and the most trusted payment methods.
The ability to send and receive digital currencies on smartphones allows people with no access to banks or credit cards to access their ‘money’. This is particularly crucial in underdeveloped countries where infrastructure is lacking.
Allowing people to manage their finances on their phones means their ‘money’ is always available, wherever and whenever they want it. As long as there is internet access, purchasers are able to spend their money on whatever they like.
5. Low Fees
How many times have you been charged fees for transferring money by a bank or money lender? How about account maintenance, minimum balance fees, or any other fee that they can think of?
Thanks to the peer-to-peer trade of cryptocurrencies, the need for financial institutions are removed. This not only streamlines and speeds up the whole transaction process, but also vastly reduces transaction costs, irrespective of the amount involved.
Additionally, wire transfers and foreign purchases will traditionally involve fees and exchange costs, adding extra expense for travellers. However, with no intermediary institutions or government involvement, transaction costs for cryptocurrencies are kept to a minimum.
READ ALSO: 5 Secure Online Payment Services to Consider
1. Currency Fluctuations
All currencies will naturally fluctuate as investors buy and sell them. But the most valuable national currencies such as the Dollar and Sterling, are backed by Governments and bank vaults filled with gold.
Cryptocurrencies lack any such security and are therefore prone to wild market fluctuations that can wipe huge amounts off its value. These instabilities are also partly down to investors looking to make money by gambling on the price.
Such huge spikes in value can make purchasing a product prohibitive. Until cryptocurrency is more widely accepted as a method of payment and not an investment, these fluctuations will no doubt continue.
2. Lack of widespread consumer appeal
Cryptocurrency is still primarily an investment for many people and until it becomes more widespread in its appeal, then take up will suffer. Because digital currency transactions are still in their infancy, many companies simply do not offer or accept it as a form of payment.
Thanks to a more developed integration with online services, traditional methods of credit cards and cash are therefore still more popular.
The biggest challenge cryptocurrencies face is transaction speed and network load. Bitcoin, the most well-known and widely used digital currency, can only process only 5 transactions per second compared to Visa’s 1,700 transactions per second.
Sure, Crypto payments beat the banks when it comes to money transfers and large-scale purchases. But when it comes down to daily use, such as in a supermarket, it cannot compete with cash and cards.
These slow transaction speeds and a lack of scalability mean cryptocurrencies are still unsuitable for everyday use.
4. Difficult to Understand
To many people, cryptocurrency is too complex a topic for them to understand. On top of that, there are several cryptocurrency options, available making the choice even more difficult.
A lack of understanding inevitably leads to a lack of trust and ultimately a reluctance to use digital currency despite its many benefits.
As with any currency, fraud and theft is a serious concern, especially with online transactions. With digital currency currently experiencing a boom in its valuation, the incentive for criminals has increased.
Traditional methods, such as credit card payments, give customers added consumer protection against fraud and theft. While any losses incurred with digital currencies are gone forever.
The Future Of Cryptocurrency
Those are the pros and cons of cryptocurrency payment. Inevitably there are drawbacks with any technology in its infancy and these are to be expected. But as more financial institutions buy into it and companies begin to accept payments, digital currencies such as Bitcoin are here to stay.