6 Disadvantages of cryptocurrency
1. Fuel for illegal and immoral (financial) activity
Cryptocurrency’s so often praised privacy, might be a little too anonymous, as this makes it easier to violate the law than with other currencies.
-E.g.:
The infamous website Silk Road was shut down by the FBI back in October of 2013, as it provided tips on how to hack ATM machines, bought and sold drugs, identity documents, weapons and assassins. All this was exclusively financed though cryptocurrency transactions, thereby getting hold of 144,000 BTC worth $28 million.
2. Insufficient security
-Technical malfunctions are not excluded. If the coins are gone, there are hardly recoverable.
Linked to this, cryptocurrencies are not completely repellent to hacking attacks.
E.g.: Bitcoin has been hacked been hacked 40 times in total, sometimes making a loss of $1
million.
-Especially human failure is likely to occur when it comes to their private key. Whoever knows your private key, basically owns your wallet.
3. Increased Regulation
What might be so appealing about now, the privacy and blurred lines, will probably change in terms of law enforcement firms implementing stricter guidelines. The impact on the value of cryptocurrencies would be detrimental.
4. Extreme Volatility
The value of most cryptocurrencies fluctuates excessively. Although some people claim this volatility to decrease, once the cryptocurrency is more established, others question if this volatility qualifies cryptocurrencies as an optimal medium of exchange. Cryptocurrencies are the complete opposite of what many central banks and governments aim for: price stability.
5. Uncertainty and low acceptance
-Since many people are not aware of what cryptocurrenies are, not to mention how they work, there is a huge uncertainty around this topic, making it difficult to really enforce cryptocurrencies.
-The payment via cryptocurrencies is only partly accepted, thereby limiting its use.
6. Environmental damage - waste of resources
We live in a time in which climate change is a serious issue and resources have to be used wisely. Mining¹ contributes to this environmental problem, due to the excessive amounts of electricity wasted during the mining process. The annual use of CO² is equivalent to the use of one million transatlantic flights.
¹ The process in which members of the cryptocurrency network compete in solving complex algorithms to confirm the transactions and create bitcoins.
