Bitcoin is the first-ever cryptocurrency and the largest among the rest of the cryptocurrencies in the world in terms of market capitalization.
Introduced to the public in 2009 by an anonymous group that goes by the name Satoshi Nakamoto, its popularity and wider acceptance have made it both a feasible medium of exchange, as well as an investable and tradable asset.
This article concisely enumerates and discusses the key advantages and disadvantages or pros and cons of Bitcoin, including its specific use-case benefits, limitations, and criticisms.
The Advantages: Pros of Bitcoin
It cannot be denied that the general advantage of this cryptocurrency centers on its popularity. However, it is also worth mentioning that it represents the advantages and specific use-case benefits of cryptocurrencies and blockchain technology.
Below are the specific advantages of this cryptocurrency:
• First-to-Market Advantage: Being a pioneer is one of the major advantages of Bitcoin because it allows early adoption while capitalizing on the hype and optimism built around the possibilities and other applications of cryptocurrencies, thereby affording it a first-to-market or first-mover advantage
• Blockchain Technology: However, a first to market advantage is only possible through proper implementation. This cryptocurrency has successfully demonstrated the feasibility of decentralized currency and the application of blockchain technology.
• Single-Minded Purpose: Several cryptocurrencies have been introduced since 2009. When compared to some of the more popular ones such as Ether of the Ethereum and Ada of the Cardano blockchain platforms, another advantage of Bitcoin is that it is created for the sole purpose of introducing a digital and centralized form of currency.
• A Note on Popularity: Through its first-mover advantage, it becomes widely popular and accepted not only by users, investors, and traders but also by merchants, other institutions, and even governments such as El Salvador.
• Established Blockchain Network: It also has the most established peer-to-peer network compared to other cryptocurrencies. This network collectively runs and maintains the blockchain. Network participants are responsible for mining new coins, validating transactions, and maintaining the decentralized or distributed digital ledger.
• Asset Appreciation: Those who have bought and held this cryptocurrency in its initial years or during market dips have made considerable profits. Note that it was worth less than USD 0.01 in May 2010 and around USD 66,000 in May 2022.
The Disadvantages: Cons of Bitcoin
Of course, this cryptocurrency has its fair share of issues and criticisms. The cons or disadvantages of Bitcoin revolve around the inherent drawbacks of cryptocurrencies, the downsides of blockchain platforms based on a proof-of-work algorithm, and its overall viability as an investable and tradeable asset.
The following are the specific disadvantages of this cryptocurrency:
• Drawbacks of Cryptocurrency: The major problems and disadvantages of cryptocurrencies include the lack of a central authority to oversee their usage, legal issues that affect their wider acceptability, difficulty to understand, limited accessibility due to dependence on digital technologies, and extreme market volatility.
• Market Volatility: The appreciation of Bitcoin is undeniably enticing. However, the fact it remains a risky investable asset because of its sensitivity to external market factors, a tendency toward speculation, and reaction to macroeconomic conditions.
• Energy Consumption: However, a specific disadvantage of Bitcoin is that it consumes a lot of power to operate and maintain its underlying blockchain. Studies showed that the blockchain exceeds the annual energy consumption of countries such as Argentina, the Philippines, and the Netherlands, among others.
• High Cost of Mining: Those who wish to earn from this cryptocurrency through blockchain mining needs to spend on powerful computer systems equipped with advanced processors, cooling systems, and energy consumption costs.
• Criticisms of Decentralization: It is also important to reiterate the issues with decentralization that also represent the criticisms of Bitcoin. These include the absence of central regulation, impossibility to reverse transactions, and anonymity of transactions that can make it hard to track dubious activities.
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