Why Bitcoins may not be as amazing as we thought

The recent media buzz around Bitcoins has put a lot of focus and attention on this new and trending electronic currency. Created through the digital mining systems, Bitcoins are a form of electronic currency that attempts to bypass any government or bank control. They concept behind it is using computers to verify transactions through computations instead of having monitory transactions pass throughout the legal system. Although backed by strict rules and regulations governing the use of Bitcoins and a limited money supply, this seems to be a convenient and modern form of digital payment. In places where the bank are no longer a safe means to insure funds, Bitcoins seems like a great way for depositors at risk of having their funds confiscated to store away their wealth.  

But there are many factors that make this Bitcoin business a risky one. Let’s look at some raising concerns with this new currency trend.

  The Bitcoin system is built around the concept of anonymity. Although this idea was aimed to keep funds safe from the prying eyes of tax collectors, the potential for anonymity makes this currency ideal for terrorists, money launderers and drug smugglers.

The founder of Bitcoins himself is anonymous, known only by a pseudonym Satoshi Nakamoto. This in itself is a red flag and many may not trust their entire life savings but a mysterious computer algorithm created by an anonymous shady character.  

Another area where the Bitcoins system is highly fragile is the lack of any government regulating members in the system. This means that Bitcoins is vulnerable to fraud and abuse and can become a major magnet for computer viruses. And just like any technology it can be hacked and can break, so incase of any trouble authorities will not be too eager to help out.  

Bitcoins exchange rate is also subjected to more fluctuations than other global currencies making it a less than safe place to keep money. With the recent jump in prices, it can be safe to say that this bubble, like all others, could soon pop. In order for Bitcoin to become a legitimate payment scheme, it is important for it to show some stability in the exchange rates to make it a reliable service.  

Many past ventures to create digital money have also crashed and burned which isn't a good indicator for Bitcoins. For governments managing currency is very profitable and handing over this activity to other ventures puts them at a loss meaning governments are not very supportive of these ventures. These companies face many roadblocks set up by the government to prevent competition in their lucrative money printing business.   

Lastly, the global economic system needs to grow which means that money supply must also grow at the same rate to keep prices stable. Having a fixed money supply, which is what ventures like Bitcoin provide, is only detrimental to economic growth. As much as people wish to avoid the extra cost of having the government involved in monetary transactions, it is only sensible to have humans involved incase of any crises which is why out banking systems are the more safe and reliable choice when it comes to handling financial transactions. in short, the hype around Bitcoins may be shorter than it seems.