Pros and Cons of cryptocurrency. Can you think of others?

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Pros and Cons of cryptocurrency:

Pros:

  • Decentralized. So they don’t collapse at a single point of failure.
  • Somewhat anonymous.
  • You can fly anywhere with access to your cryptocurrency.
  • It is easy and fast to transfer between parties around the world.
  • It is an easy asset to hide from creditors.
  • Some cryptocurrencies such as Bitcoin are deflationary in that the limited number of them will ultimately begin to decrease forever as passwords are lost accidentally or upon a death.
  • Inflation protection. Governments can’t print them.

Cons

  • Price volatility.
  • It takes a lot of High energy to mining for cryptocurrencies and that is bad for the environment.
  • They are backed by nothing. It was invented on a computer.
  • They have a short 14-year history as money or a store of wealth.
  • They are not supported by the banking system.
  • They are not an investment in a productive, profitable company. It’s speculation. You are speculating that someone in the future will pay more for your cryptocurrency than you bought it for. And of course that buyer has to be of the belief that he/she can one day sell it for more than they paid you for it.
  • They are competitor to the government’s currency which makes it a target for regulation and even prohibition.
  • Market manipulation by large players.
  • You can lose access to all of your cryptocurrency if you lose your passwords.
  • Transactions can’t be reversed.
  • Transactions do not come with legal protections.
  • Counterparty risk. A lot of cryptocurrency is held in exchanges like FTX which could steal from you.
  • They are not widely accepted by many merchants.
  • Digital transactions leave a trail.
  • FBI has already demonstrated it can track cryptocurrency.
  • Cryptocurrencies aren’t scarce. There are 23,000 different cryptocurrencies and this number keeps growing. Anyone can make their own.
  • Central banks are launching their own digital currencies to compete with the existing ones.
  • Calculating the capital gains tax owed each year is a nightmare.
  • A solar flare could shut down the internet and destroy cryptocurrency records instantly.
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Cons
Crypto is assigning value to something that doesn’t exist in a physical sense.

It’s a little like collectibles. Collectibles only have the value arbitrarily assigned to them.
Changes in societal values can render some collectibles a zero value. Beany Babies come to mind.

With crypto, there are a lot of people heavily invested with both money and gravitas that will fight to their death to keep it going. The crypto defenders have a religious zeal for it.
The future of crypto is not certain, but definitely will be interesting. It is easy to see governments going to crypto as the exclusive form of money because of the control they will have. But little to no chance that those governments will use any of the existing cryptos.

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Crypto is something I’m quite familiar with. I’m a founding member of The Crypto Club of The Villages FL. We meet every Saturday morning at 8am on a virtual call. If you’re interested, you can guest in. Although for the next two weeks we’re taking a hiatus due to vacations and such, so it’ll resume mid September.

A couple of issues here.

Cryptos are converting from proof of work(high energy usage) to proof of stake or in the case of Solana, proof of Time. The latter two use very little energy. I doubt that bitcoin will convert to a proof of stake any time soon, but I expect it to happen eventually.

They are not an investment in a productive, profitable company.<<

While true in the case of certain cryptos, there are cryptos that have a lot of utility. XRP, filecoin, polygon, Solana, etc, all do real world things.

Most cryptos are not decentralized. Bitcoin is, Ethereum isn’t really. It’s a spectrum, many are just centralized garbage.

As far as acceptance, you can buy pretty much anything with crypto using bitpay or similar services. As far as natively accepting coins or tokens, that is a bit harder to manage.

As far as tracking goes, everything on the blockchain is visible. You can see the transactional history all the way back to when Satoshi mined the first block. Certain coins, like Monero specifically muddy up transactions to make it impossible to see who has what and when they got it. In general though, there is literally no secrecy at all, in fact, that’s the point of blockchain technology. Everyone agrees to everything before anything transacts.

As far as a solar flare…meh. Not really. All that needs to survive is one copy of the blockchain. There is a bitcoin mining operation in mines in Norway next to a hydro plant. No amount of solar flare is ever going to EMP that copy of the blockchain.

As far as everyone making their own, that’s sorta true. You can make your own token on someone else’s blockchain, but making your own coin on your own blockchain and hosting it is not for the light of wallet. It’s costly.

The biggest issue right now is Uncle Sam and his cousin The Fed. They are mucking about trying to get control of it.

I will tell you that when the Spot ETF for bitcoin goes live, and it will, expect bitcoin to have a surge of value. Understand also that as it becomes more and more likely, that surge starts, even if it’s months ahead of the actual release. This means by the time the EFT is available to purchase, it’s already too late to get those huge gains.

Finally, my crypto story starts in 2012. I managed hundreds of PCS at our facility in New Jersey. I started adding mining clients to these machines to mine bitcoin. At some point, I “won” a block. I think at the time it was 25 BTC. Of course it happened at 8pm on a Friday. Our corporate network blocked the upload of the transaction(it could pull work, it just couldn’t push it) and by the time I got around to it, the block had cleared from someone else. Eventually I did win another block some time later. After I sold that block off, I made a hearty $85. I got a check from some guy in Arizona. Not long after, the PCs simply didn’t have enough processing power so I stopped it.

25BTC, even now…about 650k. sigh

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GREAT POST, Mark.

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Great info Mark! Crypto has always been a bit of a mystery to me so this is a great thread!

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I really don’t know squat about crypto except for the following that I would consider cons.

Not good if you invested in crypto with this guy.

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And this, especially considering that crypto is still in it’s infancy.

does cryptocurrency use a lot of energy - Google Search

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I am one of the technical experts of the club, so if you have any particular question about it, hit me, I’ll answer to the best of my ability.

If you’re looking to get your toes wet, open a Coinbase account, get your KYC done(know your customer) and buy some BTC and/or ETH. Even if it’s just $50. I’ve been advocating Coinbase as THE onramp of choice for a few reasons. The first being they are publicly traded, which leads to them being audited.

The second is that Coinbase is fairly easy to use. You don’t have to get on a trading platform and fund a trading pair to buy it. Just click and buy, done and done.

I will say that I use a “cutout” bank, ALLY and have for years. I don’t want anyone having full access to my main bank account. So I fund ALLY, then do my buys in Coinbase directly from ALLY. Easy peasy and if they get hacked or something, I’m limited to what is in that account, typically under 1k, so no big deal.

Coinbase also has good end of year reports for tax purposes. If you want to trade on different exchanges, buy some litecoin, send it to those exchanges and trade there, but Coinbase stays your Fiat onramp.

Do not hold any money in Tether. Tether is the largest stable coin but it’s run buy 12 dudes in the Bahamas and Caymen islands. It’s going to blow up eventually, but you can use it temporarily to get into a trading pair you need. Often times Tether is the only thing you can buy certain coins with, so you buy the tether and then buy what you want. Never hold tether. Never SEND tether from one exchange to another as it runs on the ETH chain and the fees will kill you. Litecoin is super cheap to send, so buy litecoin, send it to the destination then buy the tether there. It sounds more complicated than it is.

I do have accounts on number of exchanges, FTX was not one of them. I was in Crypto before FTX was even a thing, and when I see a shooting star, I’m skeptical. I also never saw what they offered that made it worth the bother.

Again, if you have any questions, I’m fairly up on the subject and I do know some others that I can reach out if I’m stumped.

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Crypto sound even more imaginary than the imaginary money their inflating to nothing right now…

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I’m thinking about investing in land, a dairy cow and a plow :stuck_out_tongue_winking_eye:

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All good things.

Having grown up near Holmes county Ohio, the Amish taught me a few lessons that stuck.

Always have a backup plan. In the Early 90s, most of the Amish were still not connected to the power grid.

By 2015, the church in some areas allowed them to connect to the grid but if the grid fails, they must have a way for life to continue as normal and they do.

When I worked for the cabinet shop/logging company our logger Harvey Miller had a house nicer than most people. Running water, flush toilets, electricity, well insulated, etc. It was a beautifully finished home.

The only issue for most people, no wires or pipes to the house. He had a well, septic, solar panels, batteries and a generator. The gasoline generator would run an air compressor to fill a 2000 gallon air tank he used to pressurize everything. He also had a backup to the gas generator. A team of horses that would drive a generator. They would walk around this thing and it geared up to the shaft driven generator.

Crypto is just another way of doing things. I’ve made some decent gains in the 21 run up. I’ve had a rug pull too, but I expected it. I just thought I’d pull my own rug before they pulled theirs and I lost. heh.

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That’s really great and practical information. Thanks,

I was a day-trader when Bitcoin was born. All of us in my day trading group thought it was joke. Obviously, the joke was on me. Hell, I could have bought 5 or more coins for $100. Even then, taking a flier on it for a measly $100 would have been nothing compared to what I regularly did day-trading. Sigh…:cry:

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There is an ETF coming (many really)and BTC will probably have a 3x short term bump. That term will start ahead of the debut.

There will be a precipitous fall at some point after and then a slow climb. If you’ve got the time, some DCA into a small position should pay off handsomely. Not investment advice here, but once adoption becomes legitimized by Black Rock and others, billions will flow into it.

I wish I still owned those old coins, I probably would have sold during the last run up. I have learned to get out when it looks like a coin or token is headed for the moon. Wait for the top to go sideways? Lol, get wrecked. Get out when the enthusiasm is high and it’s unstoppable. I learned and made decent gains on some sheetcoins. I missed the peaks but turning $60 into $800 will do every time.

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If you can’t put it in a box and bury it, it’s not money.

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I spent a little money on my property last couple years and made a pretty neat orchard. Neighbor down the way has chickens and goats. Will be trading produce hopefully by next year.

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I can put $100 worth of BTC into a cold wallet and bury it next to a $100 bill. The difference is that in 20 years the Bitcoin would be worth probably 10x or moreso and the $100 bill worth some fraction of its original value.

While gold should retain its value, it certainly hasn’t been that great of an inflation hedge. If you bought it in the late 2000s, you’re just now able to sell it for a gain. There was a grim 10 years for it.

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Your Bitcoin isn’t the thing being stored in the cold wallet.

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Con: Get hacked and lose all your crypto.

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Sorta true, you’re storing your access(private keys) to the satoshis on the wallet. The BTC/Satoshis are still where they were when you pulled them off chain. Until a quantum computer can resolve the keys(if ever), your satoshis are safe.

I agree that if you can’t stand on something and defend it with a rifle, you don’t really own it. The government has confiscated gold before and they routinely devalue the dollar, so you don’t really own anything. You can however take your private keys to the grave and right now, no one on Earth can get your bitcoin/satoshis.