Cryptocurrency is
a digital version of money that takes the form of virtual tokens or coins. You
can use it to buy or sell items from people or companies that accept such
payments.
There is a range of cryptocurrencies available including, Bitcoin,
Ethereum and Litecoin, each with individual values and rules. Bitcoin is
currently the most widely used.
To make a Bitcoin payment, Bitcoins are transferred from a digital
wallet, which are obtained when you buy the currency from a crypto-exchange, to
someone else’s using an application or website and the person’s unique Bitcoin
address.
Advantages of using cryptocurrency.
Using cryptocurrency could offer opportunities for some businesses. The
benefits may include:
- A
cryptocurrency transaction is generally a quick
and straightforward process. For example, Bitcoins can be
transferred from one digital wallet to another, using only a smartphone or
computer.
- Every
cryptocurrency transaction is recorded
in a public list called the
blockchain, which is the technology that enables its existence. This makes
it possible to trace the history of Bitcoins to stop people from spending
coins they do not own, making copies or undoing transactions.
- Blockchain
aims to cut out intermediaries,
such as banks and online marketplaces, which means there are no payment
processing fees.
- Cryptocurrency
payments are becoming more widely
used, amongst large organisations, and in some sectors including
fashion and pharmaceuticals.
Disadvantages of using the cryptocurrency.
There are some business disadvantages to using the cryptocurrency:
- It
is possible to lose your virtual
wallet or delete your currency. There have also been thefts
from websites that let you store your cryptocurrency remotely.
- The value of cryptocurrencies such as Bitcoins
can change significantly, so some people do not feel it is safe to
turn 'real' money into Bitcoins.
- The
cryptocurrency market is not
regulated by the Financial Conduct Authority (FCA) so there
are no rules in place to protect your business.
- If
companies or consumers move to a new cryptocurrency from you or stop using
digital currencies entirely, it could lose
value and become worthless.
- Cryptocurrency
exchanges are vulnerable to cyber
attacks, which could lead to an irreparable loss of your
investment.
- Cryptocurrency
can be vulnerable to scams.
Scammers often use platforms like Facebook, Instagram and Twitter to trick
people into these investments. If you suspect you have been targeted, it
is important to report this to Action Fraud as soon as possible.
Cryptocurrency can be a risky investment and you should only consider investing if you are financially equipped and willing to lose any money that you put into it.
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