What are the advantages and disadvantages of cryptocurrencies?

 After the path became paved for the creation of digital currencies, and with the technological and informational development, complex encryption protocols were born based on the principles of mathematics and advanced computer engineering that theoretically make it almost impossible to break, on which digital currency programmers relied through very complex coding systems that encrypt data transfers to secure units Its own exchange, in addition to its ability to hide the identity of its dealers, which makes transactions, transfers, and money flows anonymous, in order to achieve the principle of privacy, which has been the main endeavor since the beginning.

What are the advantages and disadvantages of digital currencies

Thus, we can say that the digital currency is a software computer program, but it is a decentralized program, that is, it is not installed or built on one particular device, but rather it is distributed, which means that it is hosted on many computers for many individuals around the world instead of hosting on a single server by a specific individual or company.

The supply and value of cryptocurrencies is controlled by the activities of its users through codes of highly complex cryptographic protocols. Every function or transaction, from how transactions are recorded to how data is stored, is boiled down to special software code that is usually stored in a type of database known as a chain. Blocks - Blockchain blockchain, which is considered as a comprehensive, distributed, protected and hidden record of all digital currency data and transactions, and by processing these algorithms in general, the digital currency is granted to the user who adds transactions to the block chain network or blockchain. The process of adding transactions to the blockchain is known as Mining . .

It remains to know that one of the most important features of most digital currencies, but not all, is that they have limited numbers of units. That is, most digital currencies were produced on the idea that they have a market cap, meaning that the process of coding the creation protocols from the beginning created a specific number of currencies And with each decryption process - or mining by adding a transaction - the number of stocks gradually decreases, and this is similar to the idea of ​​precious metals, for example, the more gold is extracted, the less reserves are stored in the ground. It becomes difficult for miners to produce digital currency units, until the upper limit is reached and minting stops completely.

To understand this in a simpler way, Bitcoin is one of the most famous digital currencies, and the highest value currently, as a digital currency that was encrypted from the beginning, provided that the code contains only 21 million pieces, and once all of them have been mined or extracted, there will be no new Bitcoins, that is, no new Bitcoins will be created. Printing new money as it happens in other regular currencies, and this means that if you own 1 bitcoin, this means that you own 1/21,000,000 of the world's total wealth of bitcoin.

Advantages of digital currencies "cryptocurrencies" 

Below we list the most important advantages of dealing in digital currencies, which have emerged with their spread in the recent period

1. Protected from loss of value, or inflation

Inflation is the scourge of the world's economies, and many regular currencies have faced and are facing the risk of inflation, but the idea that digital currencies are produced on the basis of defining a market cap for them, and a limited amount of them, increases with the high demand for them, their value in line with the market, and protects them from inflation in the long run the long

2. Self-control and sustainable maintenance

The management and maintenance of any currency is one of the main factors in its development and sustainability. In cryptocurrencies, transactions are stored by miners in the blockchain network on their computers, and in return they receive the currency itself as a reward for that. Therefore, they keep accurate and frequently updated transaction records, keeping the digital currency safe and its record decentralized.

3. Security and privacy

It can be said, based on what we mentioned in our article here from the beginning, that they were the main motivation for building digital currencies from the ground up, so the records of the blockchain network are based on different encryption algorithms that are difficult to decipher or analyze. This makes the digital currency more secure than regular electronic transactions, in addition to using pseudonyms or account numbers that are not associated with any user, account, or stored data that can be linked to a profile, in order to achieve the principle of privacy.

4. Easily exchange currencies

One of the very important advantages, which gave digital currencies a real value in the midst of physical transactions, where they can be exchanged for regular currencies as a corresponding exchange value, which means that each of them has a variable exchange rate with the major global currencies - such as the US dollar USD, the pound sterling GBP, the euro EUR or the yen The Japanese JPY - which helped in its spread, acceptance and demand as an alternative to the usual monetary transactions, and equivalent to them in value.

5. Decentralization 

Unlike regular currencies or fiat currencies controlled by governments represented by central banks, digital currencies are decentralized in nature and cannot be controlled, increased in number, stopped dealing with or made available except by those who use them and own the largest amount of them, or through the organization that created them. Or develop it before it is put on the market, which helps it to preserve it from monopoly and protect it from limiting flow or value to ensure its stability, privacy, transparency and security.

6. Low cost and speed of transfers

One of the main uses of digital currencies is money transfer, and the cost or fees of transfers are among the most important factors that are taken into consideration to judge the quality of the system or the transfer process. directly between user accounts and quickly. So we don't need third parties, such as VISA or SWIFT, to verify the transaction. This eliminates the need to pay any additional transaction fees, or wait a long time.

Disadvantages of digital currencies "cryptocurrencies" 

As it has advantages, dealing through digital currencies has some disadvantages that must be taken into consideration before dealing with or investing in them, as follows:

1. It is easy to use in illegal transactions

Absolute security and privacy, which were the most important characteristic of it, make it difficult for governments to track any user through his wallet address or know his data. illegally through a clean medium to hide its source.

2. Data loss may mean huge financial losses

The developers of digital currencies wanted to create source code with untraceable encryption algorithms and unhackable authentication protocols, with the aim of making keeping money via digital currencies more secure and confidential than traditional cash, but the flip side of this degree of privacy is that if any user loses the private key to access his wallet or his account, it cannot be restored. The wallet will remain locked to the coins in it, making it virtually lost

3. Some digital currencies cannot be exchanged for regular currencies 

Which makes it lose the advantage of exchange, as some digital currencies can only be traded against one or certain currencies. This leads to the user being forced to convert these digital currencies into one of the major currencies, such as Bitcoin or Ethereum first, then through private exchanges, and then to the currency he wants. This only applies to a few digital currencies, so additional transaction fees or commissions may be added in the process, costing unnecessary money.

4. The negative effects of mining on the environment 

Mining is a complex process that requires modern and sophisticated computers, which makes it energy-intensive. As this cannot be done on normal computers. Bitcoin miners, for example, who are in countries like China that use coal to produce electricity, their work leads to a massive increase in China's carbon footprint.

5. Cryptocurrency exchanges are vulnerable to hacking 

Despite the security and privacy of digital currencies, their trading exchanges are not that secure. Most exchanges store users' wallet data to properly operate their user ID. Professional hackers can infiltrate and access this data and also steal the digital currencies stored in it. Some exchanges, such as Bitfinex or Mt Gox, have been hacked in the past years and thousands of Bitcoin units have been stolen. Most exchanges are currently very secure, but there is always the possibility of another hack.

6. There is no refund or cancellation policy 

Financial dealings in digital currencies are like other financial transactions. If there is a dispute between the parties involved, or if someone sends money by mistake to a wrong wallet address, the sender cannot retrieve the digital currencies sent. This could be used by many scammers to extort money. Since there are no refunds or returns in the process, it can easily create a transaction whose product or services were never received.

See More :what-are-stablecoins

The difference between decryption and cryptanalysis 

Opposite to encryption is decryption, which is the return of the encrypted context to the image of the initial content in its usual context read from the public before the encryption process, and this is done using the encryption key.

With the development of mathematics, computer sciences, and communications, the encryption and decryption process has become based on complex computational algorithms that are difficult to solve. Through the known informational means that currently exist, and this is the reason why the assumption of its security and confidentiality has been proven until now.

This is known as cryptanalysis or Cryptanalysis, which means the study of decoding encryption algorithms and their applications to obtain the content and source of encrypted information or assets without access to the key required to do so.

That is, we can shorten the difference between Decryption and Cryptanalysis to the fact that decoding means returning the encrypted context of symbols to its first state using the cipher key prepared from the beginning to retranslate these symbols to what they were, while cryptanalysis is the attempt to decipher those symbols By trial and error a huge number of times to come up with a cryptographic algorithm solution to translate the encrypted symbols and know the original context without knowing the key

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