There are certain hidden costs involved while making payments through cryptocurrencies
Cryptocurrency has risen exponentially in popularity over the past few years. But its journey in terms of growth has been a roller-coaster ride. At times, crypto coins, like Bitcoin, and Ethereum, have shown an incredible appetite for success, but there have been times when their drive for growth has been lacking. Extreme volatility and sudden price swings happening at regular intervals are taking out lusture from the emerging sector. These are just some of the reasons that make crypto coins less adaptable to becoming a default payment mode. However, the underlying blockchain technology is promising.
Though in some countries, companies have begun accepting payments in some crypto coins, the recent crash across the market has made them reassess their decision. Take another example: El Salvador. The Central American country legalised Bitcoin in September last year and began building a war chest of cryptocurrency. The country’s President Nayib Bukele promised that Bitcoin would help rebuild the economy. But his government has reportedly lost about $40 million in the market crash since he bought the Bitcoins. Already, financial experts are worried about Salvador’s Bitcoin gamble.
There are other key (practical) reasons why Bitcoin or other crypto coins can’t become a default payment option, at least in near future, without a technology upgrade. Bitcoin transactions take around 10-15 minutes to process. The technology is built in such a way that when a crypto user makes a transaction, it has to be validated by miners. This process delays the real-time charm that we otherwise get in transacting via the current banking system. Another factor is the fee that miners charge for their service has to be paid by users. While this may not be significant, it is still more than what we pay currently to our banks.
Also, extreme volatility makes it less assuring and trustworthy. If you have Bitcoins worth Rs 10 lakh, you can buy things for that amount today. But there’s no surety that Bitcoin’s value will remain stable; it could swing either way with a huge margin.
In Spite of these shortcomings, the underlying blockchain technology is inspiring and there is a real possibility that this could be improved in future to address the challenges.
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