Cryptocurrencies are being celebrated so much for the benefits they have, that we are ready to overlook the dark sides of it and embrace it with all its flaws with open arms.
But that’s not how the economy works. There have criticisms around cryptocurrencies for their deeply undercover nature. Besides just this, there are many more instances that are beyond a typical comprehension when it comes to the dark side of the cryptocurrencies. Cryptocurrencies have evolved to arrive at a tipping point. While the year 2017 saw huge gains in cryptocurrencies including free online slots, the year 2018 marked a plunge in all those gains.
Matt Frankel, the contribution of renowned Fool.com, said that,
It’s completely understandable. People have lost enough money in legitimate cryptocurrencies lately. Not even counting the ICOs, the total cryptocurrency market cap has gone down by about $700 billion since the peak.
In this article, we will enlist some of the prominent and inevitable downsides of cryptocurrencies that have been given by industry experts.
- The Criminal Surge
One reason for crypto criticism and skeptic response it has received is the very nature that makes them a weapon facilitating monetary crimes and frauds.
For instance, Bitcoin ATMs or cryptocurrency ATMs do not come under the perimeters of the federal laws of anti-money laundering. Moreover, crypto transactions can dispute tax compliance. This has already been observed in the U.S., where almost half of the population owns digital assets.
Cryptocurrencies also increase the risk of illicit trades from unknown sources. Right now, 60 investigations are being carried out by the J5 group in the global crypto thefts along with avoidance of tax. Also, through the last few financial years in England, there have been investment scams inflicting damage worth 27 million pounds on victims.
- Retail Inefficiency
Cryptocurrencies are also not considered a very reliable way to trade in the retail sector. The transactions through digital assets are a blockchain-based transaction that involves a mutual agreement between the two parties and requires multiple validations and updating through the way. This renders the system slower than ever and inept for retail transactions. Moreover, cash and cards work so much faster than retailers are reluctant to opt for something new and uncertain.
- Unregulated Market
Cryptocurrencies have one major feature that makes it loved by both the general public and thieves or criminals. Cryptocurrency transactions work as an independent process without needing a banking mediator or a broker.
Hence it is very difficult to lay down rules that govern it and keep track of all the transactions. Hence under certain unfavorable cases, this would lead to a monetary loss in transactions that will be beyond traceability.
- Power Inefficiency
While we smoothly trade with cryptocurrencies, we forget that they demand resources for their functioning. One of these resources is electricity, which tends to be the priciest of all other resources. One alternative is to go completely on a renewal source consumption, but that is not possible in all cases. Hence Cryptocurrencies take a huge amount of electricity as fuel, and this reduces miner’s revenue by almost 25%. In general, it would take a minimum of $30000 worth of electricity to mine a Bitcoin. Hence to function in a world with cryptocurrencies, it would drain a lifetime of electricity without an alternative.
- Parallel Economy
The inability to track the money makes it suitable to trade illegal entities like drugs, stolen items, and many more. Moreover, the rich can use it to launder money easily. This makes it an asset for the Dark Web, ransom demands, and other illegal activities that need money. Even terrorists can operate on this money off the books. And to analyze it more closely, not even the most sophisticated security systems can battle this downside.
There is no wonder that cryptocurrencies are powerful assets anyone can own. They have great applications that have directly contributed to the economy and will continue to do so.
But it is very important that we do not ignore the defects that it has and be cautious while using them. The right information and quick reporting is something everyone should embrace while operating with cryptocurrencies. Make sure you have a grasp on the strategic importance of crypto and its potential implications for your company as well as the national economy.