What are the advantages and disadvantages of Bitcoin?

Bitcoin has become one of the investors’ and traders’ most popular crypto assets. Although this asset is widely chosen as a crypto asset suitable for long-term investment because its value continues to increase, it  still causes debate and negative sentiment in society. Since Satoshi Nakamoto first launched it in 2009, Bitcoin has continued to grow until its asset value is now 19,165 US dollars. However, this is not the highest value it has ever reached. In March 2021, Bitcoin reached a value of 64,804 US dollars, equivalent to IDR 939,993,000. From there, you can see that the value of Bitcoin is very volatile from time to time, causing unfavourable attitudes to this asset. Nevertheless, Bitcoin still has many supporters because of the benefits it promises. For aclearer view when  assessing Bitcoin, you can see the advantages and disadvantages of owning Bitcoin assets below.

Advantages of Bitcoin

1. Anonymous and private
   

   Transactions in the Bitcoin blockchain system can be done anonymously and privately. This means that each transaction does not require the identity of its users to be revealed. Unlike bank transactions where all transactions can be tracked and identified, Bitcoin transactions cannot be identified. Someone who makes a transaction in the blockchain system will only know the Bitcoin wallet address to be used but will not know who owns the wallet .

2. Freedom of transactions
   

   Making payments or transactions through the Bitcoin system represents freedom no bank can offer. Bitcoin can be transferred to anyone, anywhere in the world, without needing a third party or adjustment to abank’s schedule. The transaction is not limited by regional restrictions or the amount of Bitcoin sent.

3. Minimal transaction fees
   

   Payment of transactions on the Bitcoin blockchain system usually costs little or no money. It depends on the priorities of the individual behind the transaction. Suppose a user wants the transaction completed faster. In that case, they have to pay a transaction fee which is still cheaper than other digital platforms.

4. Low risk for merchants
   

   Bitcoin’s transaction system is highly secure and immutable. It does not store sensitive customer data, protecting merchants from losses caused by fraud or cheating.

5. Fast transactions
   

   Bitcoin transactions are very fast when compared to the banking system. Transactions in this system occur as quickly as sending an email and can be processed within 10 minutes. In addition, users can also do transactions  instantly if they are the type of transactions that do not require confirmation. Although some banking transactions using credit or debit cards  have similar speeds, the difference lies in the costs involved. In terms of fees, Bitcoin is much cheaper than the banking system.

6. No government interference in pricing
   

   The government can determine the value of a banknote, but the government cannot determine the price movement of Bitcoin. It is because Bitcoin’s blockchain system is decentralised, and there is no third-party interference. Governments can ban the sale of Bitcoin in their country. Still,  Bitcoin remains valuable in its market and its worth cannot be determined by the government.

7. Potential for future price increases
   

   With the limited amount of Bitcoin, its value is predicted to increase in the future as the number of enthusiastsgrows. With this potential, Bitcoin can be an attractive long-term investment asset.

8. Avoiding counterfeiting with double-spending
   

   The use of banknotes is highly vulnerable to theft or counterfeiting. Technically, double-spending is when someone makes a transaction more than once with the same money. The blockchain system was created in such a way as to avoid double-spending through transactions that occur within it.

9. Avoid personal data theft
   

   Removing this threatis one of the biggest advantages of Bitcoin. An anonymous feature allows a person to make transactions on the blockchain without providing sensitive data such as their name or credit card number. From there, you can avoid the possibility of misuse of personal data shared when making transactions elsewhere.

10. Avoid inflation
    

    This one advantage givesBitcoin the name, ‘money of the future.’ It is because the system will not be affected by economic inflation. When a country’s economy slows down, it will print more money to inject funds into the economy. As a result,  the currency’s value is lower, and this is called inflation. Unlike traditional fiat money, there are only 21 million Bitcoins available. That means this cryptocurrency is not affected by inflation.

Disadvantages of Bitcoin

1. High volatility
   

   As explained above, like other crypto assets, Bitcoin has high price volatility in a short time. The value of this asset can quickly rise and fall depending on market sentiment. Many investors feel that this asset is  unsuitable for beginners who do not understand how to read crypto market movements.

2. Not fully accepted as a means of payment
   

   Despite its popularity, the use of Bitcoin as a means of payment is still minimal. Not all organisations or companies accept Bitcoin as a medium of exchange for their products or services.  This hampers the development of Bitcoin as a digital currency.

3. Still under development
   

   Until now, Bitcoin is still a system that needs to be updated. It has features that need to be developed in order to work more efficiently and last longer. This puts future changes at risk of affecting the value of the Bitcoin asset on a large scale. It is not necessarily apparent how this asset can continue to grow in the market.

4. Potential government bans
   

   Currently, in Indonesia, crypto assets such as Bitcoin can be traded as investment commodities but cannot be used as a means of payment. Although one of the central values of Bitcoin is the absence of third-party interference, the government still has the power to determine the policy of buying and selling this asset. In the future, Indonesia may decide to ban crypto trading, which could result in your assets being frozen.

5. Deflation
   

   For those unfamiliar with the term, deflation is a situation where the purchasing power of money increases over time. This happens when the amount of money in circulation is lower than the amount of goods and services available. It can have a negative impact because the purchasing power of a currency increases over time, and people will tend to save money rather than spend it, resulting in a slower economy.

6. Lack of means to recover losses
   

   When you lose access to your Bitcoin wallet, the asset is gone forever. No one can help you regain access to your Bitcoin wallet unless you have a backup key code. With this code, you can get access to the lost wallet. Unlike banks with customer service to help you if there is an access error, Bitcoin is a decentralised system, and no one can control access to it.

7. Money laundering/black market
   

   Because of its private access, Bitcoin has been used to conduct money laundering or as a means of buying and selling on the black market (illegal market) related to criminal activities or illicit buying and selling in cyberspace. This has led to a negative image of Bitcoin for some parties.

Conclusion

Ultimately, Bitcoin has its advantages and disadvantages, depending  on how one uses it.  Are you interested in using Bitcoin as an investment tool?