What are the advantages of bitcoin vs normal currency like USD?
What are the advantages of bitcoin vs normal currency like USD?There is no need to worry about a third party such as the "Central Bank" suddenly creating more bitcoins and flooding the market with an increased volume of bitcoin. The only way that bitcoin is generated is via solving very hard computational problems which get harder and harder to solve over time. Hence the supply of bitcoin will grow at a rate which is pre-determined and it is very unlikely the supply of bitcoin can spike up dramatically.
What is the downside of using bitcoin as a currency?There are 2 main downsides of a cryptocurrency such as bitcoin. The first major concern is the huge swing in valuation of bitcoin, as it can jump from 1 bitcoin = $1000 USD to 1 bitcoin = $2000 USD within a matter of 6 months. While this increase in valuation of bitcoin is wonderful for current bitcoin owners, this massive jump in valuation encourages speculators to hold bitcoin instead of actually using the currency in transactions. The other downside of cryptocurrency is the lack of solution for losses when a bug is found and exploited. In 2016, there was a bug found and exploited for the currency Ethereum and $50 million worth of ethereum was lost to the hacker. In the end, the majority of ethereum owners decided to freeze this money so the hacker would not be able to profit from it. While there was no monetary loss due to this event, it undermines the philosophy of cryptocurrency which is there should be no third-party intervention. Time will tell whether this type of currency will pick up among users. One of the functions of a currency is to act as a "storage of value": and this is very hard to accomplish when the price of bitcoin can vary so much.
How do we know if Bitcoin will last/just a fad?The best way to judge whether bitcoin will last is to track the number of transactions users are making with each other for legitimate purposes. Right now, bitcoin is getting a bad reputation as a currency, because it has been used for online illegal gambling and other illegal activities. The lack of tracking in bitcoin causes criminals to use this currency. The most important way to ensure bitcoin will last is to ensure bitcoin is used widely for legal transactions.