Overview

Cryptocurrency (Crypto) can provide superior value transfer and storage abilities to fiat currency (government money), but there are some clear drawbacks. I aim to give you a concise, objective analysis of the good and the bad. I think it's important to note a few things first. This write up is aimed at people with very little or no understanding of Crypto systems. I am not going to contrast fiat currency to a single Crypto system. You have probably heard of Bitcoin. It has some very desirable features, but newer systems have made some incredible advancements.

Con - if you loose your private key...

Your "wallet" is an application that allows you to view and transfer your Crypto. It lives on your phone, tablet or computer. Your private key is basically like a super strong password that your "wallet" randomly generates and stores. To transfer your Crypto (spend them) you will need your private key. If your 'wallet' is on your phone, and you loose your phone, you may have lost all the Crypto associated with that private key. Of course, you can just get your wallet to show you your private key, and you can write it down. In the event that you loose your phone (or pc or tablet) you can simply import that private key into another wallet and everything will be restored. You can also export your private key as a digital file and store it on a usb stick et cetera. The point is, it is actually possible to loose all your Crypto. With a bank, there is usually a way you can go visit them with all of your documents and id to get access to your funds. This luxury does not exist with Crypto. If you loose your private key it's goodbye Crypto.

Con - Acceptance as payment

At the moment (early 2018) you're probably going to find that your local supermarket does not accept Crypto. Most of your local stores probably won't accept Crypto. It's worth noting that although this is true, you will find that Bitcoin is accepted all over the world, and your local currency is not. The number of Crypto accepting retailers is increasing and there are systems that allow you to pay your bills with Crypto. One such system is currently functioning for BPAY bill payments in Australia. Overall, Crypto is not very well accepted as payment in early 2018. Acceptance as payment clearly has room for improvement.

Con/Pro/Pro - Privacy

Bitcoins database (it's Blockchain) is public. ALL of the transactions are stored in the Blockchain. This means that if you know Jane's Bitcoin address, you can go look up how many bitcoin Jane owns and view her transaction history. This is not good from a privacy perspective, but it's awesome from an accounting and transparency perspective. Although we can see all the bitcoin addresses, how much is in each of them and their full transaction history; we don't know who own's them. To find out who own's a certain address would take some serious investigation, and there are multiple things Jane can do (such as switching wallets) to make her spending/balance very difficult to track. In my example above I specifically referred to Bitcoin. There are now Crypto systems that offer incredible privacy. In these systems it's practically impossible to track a person's spending and balance. Zcash, Zencash, Pivx and Monero are examples of such systems.

Con/Pro - Value Stability

The value of Crypto can change rapidly (in both directions). This is not good from a currency aspect for a number of obvious reasons. It' probably the biggest negative aspect of Crypto. Many people use Crypto as a speculative asset due to their (generally) fixed max supply, but others use it as a stable currency. What! Stable? If you live in a country where hyperinflation is peaking at 500,000,000,000% then Bitcoin is a super stable currency. Unfortunately some fiat currencies have experienced crazy hyperinflation in our current era. Overall, most first world countries have currencies that are a lot more stable than Crypto, so stability is definately a drawback. It's important to understand that Fiat system's usually allow a small group of people to control the value (et cetera) of money, hence hyperinflation can (and does) occur in these systems. Hyperinflation is mathematically impossible in fixed max supply Crypto's like Bitcoin.

Pro - Transaction Fees

Crypto systems can offer transaction fees of a cent or less. Bitcoin's transaction fees did get expensive in 2017, but that's almost definitely not going to be the future for Bitcoin with upgrades such as the lightning network being built for it. There are other Cypto's that offer much lower fees anyway. The point is Crypto can offer much lower transaction fees, especially when transferring overseas.

Pro - Transaction Speed

Crypto can transfer pretty much instantly. The fastest system i've used is Pivx which transferred within a second. You might of heard that Bitcoin had some pretty slow transaction speeds during December of 2017 but this is unlikely to be the case in the future if using the Lightning network (currently being built). Even using Bitcoin now (one of the slowest Crypto systems) it is probably going to be a LOT quicker than fiat for sending money overseas. Crypto does not stall or slow down over weekends either.

Pro - Digital

Being digital offers some noteworthy advantages. Firstly you don't have to carry coins. Secondly it's a very secure way to store a ledger of who owns what. This is in part thanks to Blockchain technology. Bitcoin has simply never been hacked - just don't give anyone your private key!. Finally, a person can't fake the currency and increase the maximum supply. Counterfeit money is a problem pretty much everywhere. Counterfeits decrease the value of the currency. This problem is only going to get worse as printer technology is getting better and cheaper, while our ability to see the fine details between real and fake currency is staying the same.

Pro - Smart contracts

When I first understood smart contracts I felt like it blew my mind. Two words - "programmable money". Being able to program your money to do things under certain circumstances is definitely not a gimmick. We are definitely going to see a lot more virtual infrastructure being built that utilizes smart contracts. At the very least this new technology has already proved that it can allow popular decentralized applications such as the game 'Crypto Kitties' to function. I've just mentioned the tip of the iceberg here in relation to smart contracts. Many believe this is the most useful and exciting function of Crypto's. Ethereum was a pioneer in smart contracts, but 2018 will probably see more advanced smart contract Crypto Systems released.