Bitcoin Explained - Chapter 9: Advantages and disadvantages of Bitcoin

Despite its tenth anniversary, Bitcoin is still very much a mystery to many people. However, for some years now, the crypto currency has been gaining more and more attention and is an important anchor point for the development of digital payment methods. With the Bitcoin Explained series, Vontobel is trying to give all interested parties and investors an understanding of Bitcoin's various applications and technical principles and to explain them in an understandable way.

As the first bank in the German-speaking world, Vontobel is not only trying to draw attention to the possibilities and exciting development of the cryptographic market, but is also taking the initiative within the framework of its product range. With the Bitcoin Open End Tracker Certificate, the basis was already laid in October 2017 in the Swiss and German markets for giving investors the opportunity to participate in Bitcoin's performance - and this quite simply by means of a certificate in the conventional securities account.

Always stay up to date - with the help of Vontobel

With the help of the Bitcoin Explained series, it is easier for everyone to form their own opinion of Bitcoin and assess the current potential of the digital currency for themselves. In order to keep an eye on the future development of Bitcoin, the most important updates concerning Bitcoin will always be discussed in Vontobel's cryptoworld. To finish off with a brief look at Bitcoin, the last section of this series lists the most important advantages and disadvantages of Bitcoin. However, it is important to remember that Bitcoin is constantly evolving, so some of these pros and cons may be extended or removed in the future.

Disadvantages:

• Transparency - The blockchain makes it possible to track and verify all completed transactions.

• Accessibility - Bitcoin can be traded at any time with any counterpart anywhere in the world with no surcharges for cross-border transactions.

• Decentralization - The Bitcoin network operates independently of government agencies or financial institutions. Each actor within the Bitcoin network automatically guarantees the functionality of the protocol.

• Low Risk - Personal information remains concealed ensuring both parties security in the payment process. Hidden costs and false payments are immediately detected by the blockchain and cannot be covered up.

• Speed - Transactions within the Bitcoin network are processed in minutes, while traditional banks require up to several days for a single transaction.

Disadvantages:

• Legal Risks - Governments may attempt to regulate, restrict or prohibit the use and sale of Bitcoins, which has already happened in some jurisdictions.

• Volatility - Bitcoin's volatility is always in the headlines. For many traders, this is a reason not to accept Bitcoin as a means of payment out of fear of a sharp drop in prices.

• Possible funding of illegal activities - Unfortunately, Bitcoin is still used to fund illegal activities and money laundering. However, secret services around the world are expanding their expertise in cybersecurity and counteracting crypto-crime.

• Losing Keys - Because Bitcoin Wallets are so easy to use with public and private keys, one or both of these keys are often lost. American data researchers from Chainanalysis assume that between 2.8 million and 3.8 million bitcoins of the maximum 21 million bitcoins have already been lost. 

• Irreversibility - The irreversibility of Bitcoin transactions cannot always be seen as a positive aspect, but can quickly turn out to be a major problem in the event of accidents, faulty transactions or fraudulent exchange of goods.