Another advantage of Bitcoin cryptocurrency is that transactions can not be waived unlike credit card transactions and Paypal transfers, which is controlled by a central player. In “old school” systems it happens that people who paid through the service turn to the company which controls the whole system and asks for non-approval of the payment made from their account.
Bitcoin as well as any other cryptocurrency is not controlled in a centralized way that's why it resembles the cash, which is one of the main reasons for using cryptocurrency for criminal activities. On the other hand, the control is greater in comparison to cash because all transactions in bitcoin system are visible to all participants in the this system and these transactions are archived in the so-called blockchain, which is available to all the participants.
One of the biggest problems with bitcoin is the lack of security for its users. The encryption key used to control the savings is difficult to store safely. According to a recent report from Kaspersky Lab, the number of attacks against Bitcoin tripled in 2015. A bunch of Bitcoin exchange services has been closed under unclear circumstances and users' holdings have disappeared. Even if you print out the encryption key on paper, hackers may try to access it through the slot in the computer used for printing.
Mats Henricson, chairman of the newly formed Swedish Bitcoinforeningen, points out that there are many attempts made on regular basis to increase the safety level of users. User-friendliness is another thing which is on the stage of ongoing improvement. For example, you should soon be able to provide the recipient's name instead of a cryptic address and it will be easier to make repayments and to receive signed receipts.
There are also inherent risks in bitcoin. One is that the person who controls more than half of the processing power in the bitcoin network can use its bitcoins several times.
- It is actually a pretty big problem, said Jonathan Fors, a doctoral student at Linköping University, who is focused on the cryptographic currencies.
The calculation capacity of bitcoin system is about a thousand times more powerful than the world's 500 most powerful supercomputers. The cost of building a dominant position would be very high.
Threats may occur with only a third of the network's computing power. The risk is that someone is attacking the large incumbent players to reduce the total power of the network. With less power in the network, it is easier to get a strong position. Concern about these internal problems have led to attempts to create enhanced versions of bitcoin. Litecoin right now is the strongest option.
- Some central banks are trying to put a stop to bitcoin, but I think they need to think differently. If you try to stop this you will find people a way around. The banks should be open and consider how they can take advantage of cryptocurrencies, says Robin Teigland.