Make no bones about it, when it comes to digital currencies, there are quite a few risks attached. As much as mainstream media and governments want to blow these risks out of proportion, there is a certain truth to what they are saying. But don’t be mistaken in thinking that digital currencies present more risks than any other type of investment.
The Five Risks of Virtual Currencies According to USA.gov
A few days ago, a message was posted on the USA.gov website warning people about the potential threats concerning digital currencies. It has to be said, however, that there is one important line in this message that is very positive for Bitcoin; “This digital money can be used like traditional money” is an official acknowledgement of the fact that Bitcoin is usable and a currency in its own right.
That being said, the major concern surrounding digital currencies is, apparently, the high risk of fraud. Granted, the world of Bitcoin has been the target of malicious individuals looking to scam money from other users. Whether this came in the form of HYIPs, Ponzi schemes or other investment opportunities, your recovery options are almost nonexistent.
Bitcoin remains – for the most part – unregulated todate. Certain areas of the world are trying to enforce some form of legislation and regulation, but it has proven to be difficult to apply existing regulation to a new breed of money. Additionally, there is no such thing as “funds protection” for Bitcoin users. The end user is always in control of their money, and will also bear the results of whatever happens to their money.
Perhaps the biggest concern regarding Bitcoin is the price volatility associated with this digital currency. Bitcoin price swings are occurring in a less volatile manner these days, but there are still plenty of arbitrage opportunities on a daily basis. These opportunities can be seen as both a blessing and a boon, similar to how traditional fiat currencies offer investors and day traders a chance to earn or lose big every day.
Similar to the lack of regulation and oversight of Bitcoin, companies operating in the digital currency space pose a security risk. Services can be shut down – or even vanish – at any moment, and virtual currencies can be stolen by hackers. Security remains an important focal point in the Bitcoin world, and major advancements have been made in recent times.
Last but not last, digital currencies are treated by the IRS – among other countries as well – as property, making them taxable. General tax principles applying to property transactions may apply to digital currency transactions as well, once a certain threshold has been reached. Additionally, it also depends on where these earnings are coming from, offering services or goods, running a Bitcoin company, or otherwise.
Transparency, Financial Freedom, Decentralization, No Middleman
As you may have guessed by now, those five warnings about digital currency are stemming from an “older” perspective: anything that is virtual is dangerous. Granted, the Internet has brought us many great things, and also quite a few less pleasant things. But, make no mistake about Bitcoin, the technology is here to stay, regardless of whether BTC will be used as a currency or not.
There are certain things Bitcoin offers which the current ecosystem does not. First and foremost, Bitcoin’s underlying blockchain technology acts as a public ledger, creating a whole new level of transparency we have never experienced before. And this transparency is a great cause for concern for those among us who have something to hide, who are usually the same people in charge of the current system.
By cutting out the middleman from any equation, Bitcoin is creating a truly decentralized world. Connecting people to people without relying on government, company or service to do so, creates an unprecedented feeling of freedom, and, strangely enough, security. You could go as far as saying that Bitcoin is on its way to creating a trustless society.
More importantly, Bitcoin offers a sense of freedom to anyone in the world. Bitcoin is a borderless currency, which does not discriminate based on location, gender, age, religion or beliefs. Unlike fiat currency, which needs to be exchanged at the border of most countries, Bitcoin can be spent in the same manner wherever you are.
Source: PR Newswire
Images courtesy of USA.gov and Shutterstock