There’s a relatively new digital asset in town, and its name is cryptocurrency. Or Bitcoin. Sometimes, just crypto for short. It’s a little confusing, but that hasn’t stopped millions of people from using it to spend, save, and trade, just like with real dollars. For some, the mystique may even be the draw.
Despite the growing popularity of cryptocurrency, you might still be wondering: what is it? The short answer is it’s a digital file. In theory, digital currency can be used just like dollars or other forms of currency, only there’s no physical version of it. Transactions of cryptocurrency are recorded somewhere called a blockchain. Without a central bank, bitcoins – the currency units – can be transferred back and forth between users on a network, meaning they aren’t yet regulated or controlled the way money usually is.
It’s understandable if you remain on the fence about whether this invisible currency is for you. As it becomes a more acceptable and permanent part of our financial system, here are some pros and cons to keep in mind.
Potential Upsides of Cryptocurrency
Bitcoin was created as a simpler way to send money online. Select Community Financial Services Center (CFSC) locations throughout the Midwest and beyond provide Bitcoin services, in addition to just about any financial service you might need. Bitcoin users like that it lets them avoid certain costs of typical sales and financial transactions. Let’s take a look at some other ways this virtual currency might be valuable to you:
- It has a wallet. There is now a digital wallet for storing virtual keys that give you access to it, ideal for storing large amounts of the currency. Over 100 million Bitcoin wallets are reportedly in use today. This small, handheld device also gives you the ability to track bitcoins and other cryptocurrencies.
- It has an app. “Wallets” are also available in the form of an app you can use to send and receive bitcoins without having to rely on a third party.An app is useful for storing smaller amounts as well as spending and receiving payments. Consumers can make transactions at any time, without the usual limits on purchases and withdrawals.
- It’s gained legitimacy. For years, crypto remained a vague concept to most people. Those who dabbled in it were like pioneers testing it out to see if it would work in regular transactions. Increasingly, it’s viewed as a real currency by businesses and consumers who use it.
- It has a bank, sort of. Anchorage Digital in San Francisco is the cryptocurrency’s first real, federally chartered bank. With infrastructure often comes increased legitimacy, safety, and possibly more ways to access misplaced crypto funds.
- And, hey, famous people use it. From Ashton Kutcher to Twitter CEO Jack Dorsey, many influential figures have jumped on the bandwagon, both investing in Bitcoin and using it as currency. Ok, this could be good or bad, depending on your point of view.
Potential Downsides of Cryptocurrency
There are several potential downsides, as well. Here’s the skinny on what you might not love about your new digital currency:
- Potential lack of safety. Your digital wallet may be vulnerable to hackers. There has been a spike in cryptocurrency-fueled crimes.
- Volatility. The value of cryptocurrencies can dropsuddenly, altering the value of your funds.
- Password retrieval. That lack of third-party oversight can be a double-edged sword. Everyone has forgotten a password before, and when that happens there’s usually a quick way to retrieve it or reset it online. Unless it’s the password to your Bitcoin wallet, whose fool-proof protection could also put your virtual money in peril.Users have lost access to millions of dollars due to lost passwords. When this happens, you run the risk of getting locked out of your wallet permanently with no way to recover your funds.
- Possible taxation. The Senate is considering a provision that would increase tax enforcement on crypto transactions. If you were hoping it would be a way to avoid taxes, the government may be onto you.
- Environmental concerns. There has been controversy over the amount of machinery needed to power cryptocurrency, leading to reports that Bitcoin is bad for the environment.
Learning a bit more about the pros, cons, and how Bitcoin works will help you decide whether it makes sense to be a part of this trend or simply watch from the sidelines. Purchasing Bitcoin can be done several ways, and quite simply. Many retail establishments offer Bitcoin purchases. In fact, several CFSC retail locations nationally make purchasing Bitcoin as easy as using an ATM. These retail options also offer a whole host of convenient financial and transportation services, both for you personally and for your business.
Be sure to contact your local CFSC first to make sure the service is available – or stop by and ask when cryptocurrency will be added if it’s not there already. We’re happy to help with any of your currency needs!