In the last article, we discussed the main advantages of using cryptocurrencies as it currently stands. Here, we shall march on and look at the less positive side of things. Therefore, we will be looking at the disadvantage of using cryptocurrencies.
The disadvantages of cryptocurrencies
The lack of regulation on cryptocurrencies is both a good and a bad thing. Although it allows for more freedom, it also allows shady activities to take place. Many black markets have started using cryptocurrencies in place of money for their transactions. Their anonymity means finding out who is in these markets is difficult.
Currently, there is a huge gap in governmental laws when it comes to taxing cryptos. This means that many tax evaders have started taking advantage of these loopholes. This may even apply to some companies.
Another thing to consider is that cryptocurrencies are completely digital. This means that, if there is a crash of some sort, a lot of data could be lost. This would then mean the loss of digital liquidity. Physical money is a lot more reliable from this respect. Physical money is unlikely to disappear unless someone intentionally destroys it or loses it.
High volatility is currently the most looming issue. Due to the fact that cryptocurrencies are not pegged to anything, their value is mostly speculative. This means these values vary wildly. Additionally, a few individuals tend to hold the majority of them, so they can manipulate their price.
The last few points lead to this problem. Due to their volatility, many people are unwilling to use cryptocurrencies. This means there are a lack of systems in place for crypto payments and refunds. Hopefully, as governments get more comfortable with cryptos, this problem will disappear.
Over time, hopefully, some of these issues will clear up, and cryptos will become highly practical.