Disadvantages of Crypto
Crypto is a fairly new way to transfer wealth between people, and in some cryptos cases, it could also take lots of energy and computer resources. There are many advantages to crypto, such as decentralized applications, networks, DeX’s, DeFi’s, etc., but there are also many disadvantages when it comes to cryptocurrency use.
Cryptocurrency is easy to lose. Not in the sense that you make a bad investment or that you get hacked or scammed. Cryptocurrency wallets are more often than not are noncustodial meaning that you’re solely responsible for storing your wallet’s recovery code. Without the recovery code, you will not be able to recover your crypto if you lose access to your wallet.
There are ways to store your crypto where you will not have to store the recovery phrase however you have to put trust into the service that will be holding your crypto for you. Hacking always exists and these services are a constant target for hackers. Storing your crypto on an exchange has the same risks involved. The best option is to be the only one responsible for your wallet but store your recovery key well.
Cryptocurrency mining is known to be very power and computer resource inefficient which is used for getting new crypto and processing transactions. However, there are alternatives to their cryptos that are power and resource-hungry. For example, there is a crypto called Nano, their blockchain is almost instant and requires almost no mining (negligible, less than 10 seconds just to process the transaction).
Currently, all crypto is in its early stages and there is a lot of volatility because of that. You can lose lots of value really quickly. However, there are stable coins that are pegged to the fiat relative, for example, USDC, BUSD, USDT, some are shadier than others so if you’re planning to use these, please, please, please do your own research. The point of stable coins is to have, for example, a USD but tokenized coin which you can always exchange for USD whenever you want.
The adoption of crypto has been slow, it’s challenging the traditional fiat currencies so there are many institutions that are trying to slow it down or even block its adoption. There are some movements towards widespread adoption, however, they have to be interlinked with older technology to make them work in today’s world. For example, we see Visa cards being given out by exchanges so that you can spend crypto like it was a regular bank card, however, the entity getting paid is still getting paid in fiat, not crypto.
In the ideal society, the traditional banks and financial institutions would’ve established methods for quick conversion between the two worlds, but they’re threatened by crypto. If something threatens your survival, you’re more likely to fight against it, not let it remove you from existence. Because of this, we see countries and financial institutions trying to fight back against crypto through regulation. Crypto keeps governments and institutions that constantly print money accountable, and they do not like that.
A public ledger might not be a disadvantage in some people’s eyes but not everyone wants their spending history to be shared. There are non-public ledgers like Monero, Zcash, etc. However, currently, it’s standardized to have a public ledger. Hopefully, future changes with projects such as Manta Network make trading on DOT private, etc.
Securely Store Your Secret
There is a saying in crypto, “no secret: not your crypto.” Meaning that if you do not know the secret recovery code of the place where you store crypto, you do not own the crypto. Essentially this is the promotion of using non-custodial wallets, which ensure the highest security. It’s all on you if you lose the secret.
You can store your secrets by writing down your secret phrases, Vitalik the creator of Ethereum, does that for his main wallet. Vitalik later cut the secret phrase in half, and each half was left in different countries. Now you do not have to go to that extreme. It might be wise to have multiple copies if you do since this is the paper we’re talking about. Someone might think it’s trash and throw it away.
A great way to store crypto would be something along the lines of a Ledger, highly trusted by the crypto community. It’s another level of being a noncustodial wallet since it’s also not on your computer. It’s about the size of a USB drive. Or you can store your keys in an encrypted file. There are many ways to keep your keys secure. Explore those options if you plan to hold the crypto long-term off the exchanges.
Learn how you can get your hands on crypto here.