In spite of Bitcoin’s tremendous popularity, it still has its own shortcomings. There are things that make it an ideal investment, but there are also things that might push you to think twice.
However, that’s not to say that Bitcoin’s advantages are all negated by its disadvantages. You can maybe think of the following as weaknesses that make Bitcoin imperfect but also gives it more room for improvements.
In this article, we will tackle the important areas in which Bitcoin can still step up its game and be better.
Exposure to scams and frauds
Since it is the world’s most popular cryptocurrency, Bitcoin has experienced more than its fair share of item-specific scams, frauds, and attacks. Such instances range from small Ponzi schemes to huge hack attacks.
Other cryptocurrencies don’t possess the critical mass of users that are necessary to make such events profitable to criminals, meaning bad guys won’t get much out of other cryptocurrencies. Such activity is to be prosecuted by law authorities when traditional currencies and payment platforms are in the question.
Damaged reputation and usefulness
Even though there’s high visibility prosecution for most offenders, Bitcoin is still attractive to criminal and gray market participants.
Moreover, the pursuance of such illegal activities by apparently upstanding Bitcoin users is a threat to tarnish Bitcoin’s reputation. In addition, it’s still very unclear if the international legal system is properly equipped to take on the problem.
If ill-intentioned users outnumber the legitimate ones over time, and the authorities lack the means to hinder them from doing their shady business, the entire cryptocurrency system will face marginalization.
Even though Bitcoin is the most liquid cryptocurrency, it still is prone to wild price swings over short periods of time. When Mt. Gox collapsed, Bitcoin plunged more than 50 percen. After FBI announced that it would treat Bitcoin and other virtual currencies as “legitimate financial services,” it soared by a similar amount.
During the latter part of 2017, Bitcoin’s value swelled double multiple times, but it quickly halved in the first weeks of this year, erasing billions in market value nearly in just one night.
Even though this volatility can be beneficial for speculative traders, it’s not so much of good news for more conservative investors that have longer time horizons. And because Bitcoin’s buying power varies so widely from week to week, it’s a predicament to use it as a legitimate means for exchange.
No Refunds or chargebacks
This is one of the biggest Bitcoin shortcomings. It lacks a standardized policy for chargebacks or refunds, something that credit companies and online payment processors all have and cannot go without.
For example, those users who have been victimized by transaction fraud can’t request a refund via Bitcoin. As a matter of fact, the decentralized nature of Bitcoin makes it impossible for any single party to intervene between users.
In other words, even though miners are responsible for recording transactions, they are not really qualified to assess their legitimacy.
For comparison, newercryptocurrencies, like the Ripple, have chargeback and refund processes. This feature is still yet to come into Bitcoin.