Why it might be too early to adopt cryptocurrency now
LAlthough investing in cryptocurrencies has become a trend, the vulnerabilities in cryptocurrency have begun surfacing too. This has raised a question in everyone’s mind – Is it too early to invest in cryptocurrencies?
vulnerabilities in cryptocurrencyBitcoin turned ten on October 31st, 2018. The cryptocurrency has made headlines on multiple occasions that brought forth its unpredictable nature. Yet, the rise of Bitcoin has inspired the creation of thousands of other cryptocurrencies.
While every tech enthusiast and investor is interested in cryptocurrencies, they also continue to have mixed opinions about them. Amid the cryptocurrency scam epidemic, while David Yermack, the chairman of New York University’s Stern School of Business, said that cryptocurrencies are going to replace national currencies, Elon Musk has criticized the vulnerabilities in cryptocurrency and their poor security protocols. So who is to be believed?
The price of Bitcoin suddenly rose to almost $20,000 and then dropped to $6,000. Due to such incidents, it is complicated for the investors to trust the ecosystem. Additionally, numerous people have no knowledge of how cryptocurrencies work, even if they own some. Thus, predicting the rise and fall in the value of cryptocurrencies is immensely complicated. Another risk of owning cryptocurrencies is that various new crypto-based companies can create their own currency only to create hype and to attract investors. But, after the investment, the price of the cryptocurrency drops, making the investor bear losses. Likewise, thousands of cryptocurrencies are made with the sole intention of scamming investors and eventually the currency dies. Hence, it becomes tricky for investors to invest in cryptocurrencies.
Scalability is one of the most debated topics when it comes to the vulnerabilities in cryptocurrency. At present, the infrastructure for cryptocurrencies is not quite mature. It is essential to understand the concept of scalability trilemma, to find the roots of the scalability problem.
The scalability trilemma states that cryptocurrencies can choose only two options between speed, decentralization, and security. The most popular cryptocurrencies, such as Bitcoin and Ethereum, have selected decentralization and security. Hence, the speed of cryptocurrency transactions is painfully slow. When compared to giants like VISA, which can do 24,000 transactions per second, Bitcoin miners can only go for 3 to 7 transactions per second. Therefore, the slow transaction speed is highly responsible for blocking the mainstream adoption of cryptocurrencies.
Absence of regulations
Another major issue is that cryptocurrencies are not regulated at all, which makes it even harder for new investors to trust the system. In fact, a lot of people find the idea of investing in cryptocurrencies exciting, only because of the lack of any stringent regulation. We need some regulation to ensure that cryptocurrencies are used ethically and to observe stability in the cryptocurrency market. Strong regulations would only make crypto coins and tokens universally acceptable.
While some countries are making regulations for safer and efficient use of cryptocurrencies, others have absolutely banned cryptocurrencies, whereas the remaining countries have no interest at all. Regulation would reduce the vulnerability in cryptocurrency and facilitate the growth of blockchain in mainstream applications.
Currently, every cryptocurrency in the market is illiquid. Hence, selling any assets without affecting the value of the currency is almost impossible for the investors. Investors can lose hundreds of dollars before they sell the currency.
Contrary to popular belief, cryptocurrencies are prone to cybersecurity breaches and hacks. For example, the Swiss blockchain company, Trade.io, has recently reported that crypto tokens worth almost $8 million have been stolen from their cold wallet. Similarly, multiple ICOs have faced issues with security breaches and hacking, which cost the investors hundreds of millions of dollars.
Another glaring issue in this regard comes from ransomware. Hackers are attacking various firms by encrypting their data and demanding a ransom in Bitcoin worth hundreds or thousands of dollars to decrypt the compromised data. In June 2017, Nayana, a South Korean web hosting organization had to pay around $1 million to decrypt the data of almost 3400 customers stored in 150 servers.
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